August

No-Fault Insurance Means No Moral Responsibility Ridgway K. Foley, Jr. 486 A closer look at some of the moral and legal implications of the "no-fault" philosophy. Book Reviews: 507 "Who's Listening?" by Leonard E. Read "The Rise of Radicalism" by Eugene Methvin Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

the Freeman A MONTHLY JOURNAL OF IDEAS ON LIBERTY IRVINGTON·ON·HUDSON, N. Y. 10533 TEL.: (914) 591·7230 LEONARD E. READ PAUL L. POIROT President, Foundation for Economic Education Managing Editor· THE F R E E MAN is published monthly by the Foundation for Economic Education, Inc., a non political, .nonprofit, educational champion of private property, the free market, the profit and loss system, and limited government. Any interested person may receive its publications for the asking. The costs of Foundation projects and services, including THE FREEMAN, are met through voluntary donations. Total expenses average $12.00 a year per person on the mailing list. Donations are· in vited in any amount-$5.00 to $10,000-as the means of maintaining and extending the Foundation's work. Copyright, 1973, The. Foundation for Economic Education, Inc. Printed in U.S.A. Additional copies, postpaid, to one address: Single copy, 50 cents; 3 for $1.00; 10 for $2.50; 25 or more, 20 cents each.

THE FREEMAN Is available on microfilm from Xerox University Microfilms, Ann Arbor, Michigan 48106. Some articles available as reprints at cost; state quantity desired. Per mission granted to reprint any article from this issue, with appropriate credit, except "How Not to Advocate a Gold Standard."

The Purposeof TrafficLaws M .C. SHUMIATCHER LIBERTY is the freedom of the in dividual - of every person - to make full use of his faculties and move where he wishes, when he wishes, how he wishes - so long as he does not harm other persons when he does so. This principle is more clearly understandable in the case of our use of motor vehicles than almost anywhere else. On the Sahara Desert or on your own farm or on the Arctic Tundra, you may drive a vehicle as, how, and where you please without regard for anyone else. You are free to maim, wound or destroy yourself if you want to. But what of others? Here, the law enters upon its appropriate role. The legisla tor sometimes be lieves that he has absolute power Dr. Shumiatcher is a prominent lawyer in Regina, Saskatchewan, well known as a lec turer, writer, defender of freedom. This· arti cle is from remarks before a recent Traffic Safety Workshop sponsored by the Saskatch ewan Safety Council.

over our persons and property. This is not so. The existence of persons and property antedated the existence of the legislator, and his function is only to concern himself with the safety of per sons and property against the as saults of aggressors. The function of law is not to regulate our con sciences, our work, our trade, our ideas, our wills, our education, our opinions, our talents or our plea sures. The true function of law is to protect the free exercise of my rights in each of these areas against infringement by any other person, and to prevent me from interfering with the free exercise of the same rights by others. Since law requires the support of force to achieve this object, its lawful domain is properly confined to those areas where the use of force is necessary. Each person has the right to use force for law ful self-defense. Therefore, collec tive force, which is only the or451 452 THE FREEMAN August ganized combination of the indi viduals' force in any society, may be lawfully used for the same pur pose, that is to say, for the de fense of the law-abiding citizen against the attacks or depreda tions of the law-breakers. The question of how far the law is able to go in any particular field de serves the careful consideration of the philosophy behind the role of the law. It requires that we con sider the purpose for which the mandatory injunction to perform or refrain from performing a par ticular act exists and the conse quences which flow from that re quirement.

Let us take the case for and against mandatory seat-belts. After all, a seat-belt is something which is designed ·principally to protect the driver of a vehicle against his own errors or faults. Assuming the purpose of the seat belt is to protect the user alone, as I believe the case to be, then why should the law require an in dividual to take steps which he, in his own judgment, good or bad, decides he ought not to take. In my view, it is not for the law to compel an individual to save either his neck or his property. If indi viduals are left to their own de vices and find that they suffer as a result of the laws of nature rather than the laws of men for acting foolishly, I believe that ultimately the message will get through to them; they will learn the error of their ways and act more provi dently in the future. Has Education a Role? Education, of course, can be a short cut to learning. It is old hat to say that the public needs more ed uca tion concerning safety.

Everyone seeks more money to educate persons on every conceiv able subject from basket weaving to nuclear fission to safety in an automobile. The faith which so many place in the miracle of edu cation can be compared only with medieval man's faith in the con cept of salvation and a life ever lasting. That was an age in which it was believed that faith would create a better and a more moral human being. Education has usurped this role and for at least two genera tions, we have come to believe that if only people were better edu cated, if only they knew more and studied more and if only they </ learned more of the facts of the world about them, they would be come better, more moral human beings. War and conflict would disappear from our society and we would forever live in peace and harmony with our fellow man. Of course, we know that this is not so. Never before in the his tory of the Western world have so 1973 THE PURPOSE OF TRAFFIC LAWS 453 many billions of money been spent in erecting the great temples ded icated to education in which mod ern man worships. The result has been not to produce graduates from our schools and universities morally superior to others, or bet ter human beings or more peaceful citizens. Quite the contrary. There is less concern for morality today, less genuine understanding of man's nature, and less peace in our homes, our cities and our so ciety generally, than ever before, whatever the educational attain ment of the public might be. To regard education as somehow pointing the way to a new mil lenium - a more reasoned attitude among individuals or a better mannered performance by drivers upon the highway - is to pin one's hopes on a hollow dream.

If education will not secure bet ter manners on the highways, then will slogans do it? It's all very well to buy and paste those bumper stickers that say, "The life you save may be your own" or "Defensive driving is the thing." But I suggest that these mean virtually nothing. What really matters is what goes on in the mind of the individual driver and what choices he makes. We Love our Cars to Death Perhaps the truth is that peo ple do not really wish to avoid death on the highways at all. In the preface to his play, Man and Superman, George Bernard Shaw suggests that man is really in love with death. He says that man spends more thought in learning how to kill, how to destroy, how to maim and wound, how to fash ion the lethal instruments of war, than he ever spent in producing or saving life. If this be so, it is little wonder that the gruesome photographs that regularly appear in the media depicting death and de struction on the highways seem to do little more than titilate the sense of morbidity. Neither they, nor the regular statistical reports of carnage by motorcar succeed in convincing drivers to show greater consideration for other users of the highway neighbor hood, or· to grow more wary of the perils that haunt it.

We know, from those clever peo ple who collect statistics and as semble them in ways that are de signed to impress or shock their readers, that Canada scores high in motor car accidents. In 1969, with 8,100,000 vehicles on the road, there were 5,696 deaths, or 27.0 deaths per hundred thousand of population. The only really in dustrialized country that racked up a higher score were our friends and cousins to the south in the United States. They were just 454 THE FREEMAN August half a point ahead of us at 27.5 deaths per hundred thousand of population. Australia was pretty high also, at 21 deaths per hun dred thousand; but countries like the United Kingdom stood at only 13.6 deaths and France - where I was always of the opinion that the wildest drivers in the world were to be found - showed only 11.3 deaths per hundred thousand of population. But what of the number of deaths per hundred thousand vehi cles on the highway? After all, population is not the important factor here. India has a very large population but very few motor vehicles; Saudi Arabia has a large population with relatively few . vehicles but a very large number of accidents - mostly with Cadil lacs - so that the population and the death .figures in a place like India or Saudi Arabia would not tell us very much about our own situation. In 1969, we witnessed 70.3 deaths per hundred thousand vehicles in Canada. Although the United States death rate from au tomobile accidents is almost iden tical with that of Canada upon a per capita basis, there were only 55 deaths per hundred thousand vehicles in that country, compared with our 70. The United Kingdom had 59 deaths per hundred thou sand vehicles, and France pro duced only 6 deaths per hundred thousand vehicles as compared with Canada's 70!

In the light of these figures, and having heard all of the pleas for an active educational program and all of the appeals for safety precautions on our highways, do we think· that anything will really be altered by these programs? I have the impression that the mes sage thus far has been that if we would only have fewer accidents we would be much better off. What of our Standards of Performance? If we really wish to improve the dismal record of performance on the highways of this country, it seems to me that we must examine our conduct and our performance and our habits there from the same point of view that we ought to be examining our activities in other fields - in the trades and occupations in which we engage, in our business practices and in our professions, and indeed, in our sports and our recreational activi ties. The standards which we have set for ourselves .in this country in each of these fields .have fallen abysmally low. For we have aban doned our search for excellence in our trades and occupations. What has become of our fine craftsmen of yesterday? Our workers in wood and silver and precious metal; our builders, our mechanics, our 1973 THE PURPOSE OF TRAFFIC LAWS 455 plumbers; those who produce the goods and offer their services to the public to meet· human needs?

What has become of their stand ards? How much can we rely upon their craftsmanship? How much are they concerned with quality? Driving is an occupation like other occupations, and indeed it is the full-time job of the taxi driver, the bus driver, the long distance trucker. What are their standards of performance? And to this question, I think our ex perience and observation must tell us that, as in other fields, they are declining. For we are rapidly abandoning our search for excel lence in our trades and our pro fessions, and those who once prided themselves for their ca pacity to produce at the highest level now have given over their efforts to other goals. The name of the game today appears to be to do the least to get the most. To give as little and to take as much as possible, and ex cellence and quality be damned. You might consider applying that slogan and those words to driving on the highway. Take as much as you can and give as little as you can - and the other fellow be damned.

Compulsion Produces Mediocrity What is most interesting to me is that, as the standards of personal excellence decline, we find that governments at every level, federal, provincial and municipal, are moving to fix the standards for the activities of men and women engaging in their busi nesses and professions with the naive expectation that this will improve human performance. Everything, from minimum wage laws to the manner in which doc tors are required to make their reports in quintuplicate for medi care commissions, is coming to be governed by laws and regulations. The result, of course, is inevita ble. Where the big stick is wielded, and government fixes minimum standards, these eventually become the maximum standards, and all who are forced to adhere to them are repelled by the concept tha t their performance is determined, not by the individual's capacity or motivation, but by the sanc tions of force.

The burdens and responsibili ties that normally rest upon the individual to perfect his tech niques and to give a fair day's work for a fair day's pay, and to produce a result in which he him self takes pride because of his craftsmanship and knowledge, these are being assumed by the state which claims a 'peculiarly omniscient capacity in the field. Government now undertakes to fix standards, to penalize those who 456 THE FREEMAN August do not measure up to them, and to make certain that each citizen gets "full value for hisnioney." But I never knew a government that was able to fix a leaky faucet, or cut ahead of hair, or grow a stalk of wheat, or milk a cow or repair a broken watch. And what is more, it seems to me that when the state holds the big stick over the individual and tells him what he mayor may not do, the result is bound to be fear, and then hos tility, and finally the kind of resig nation which convinces the indi vidual that if the only recognition he is to receive for a job well done is to avoid the penalties of the law, then whatever he will pro duce will be a model of mediocrity.

The state, in all its guises, is progressively removing the incen tives from individuals to do diffi cult jobs well. Incentives to achieve are being removed by the imposition of inordinately high taxes. On the other hand, rewards are being accorded to those who do little or nothing in a produc tive way. Uselessness, neglect, carelessness, ineptitude, sloth these are being rewarded by poIi cies geared to pay money, grant concessions and distribute praise to those who claim it as their right to take whatever they want by political blackmail if possible, and by force and violence if necessary. The welfare state dictates that no longer is achievement the passkey to reward; no longer is compe tence, or excellence or skill of any real consequence. Is it any wonder, then, that there should be a fall ing away from those high stand ards upon which a worthwhile society must depend? In the fields of recreation and sports, Canada is fast becoming a nation of cynical spectators, more interested in the spectacle of violence than in the skills of the game, be it played on the football field or on the ice.

You see, the characteristics\.that we demonstrate in our work and at our professions, in our games and sports and as spectators, are carried by us into the highways of··our land and over all the by ways of our lives. Compulsory Insurance The craftsman who isn't much interested in exceIience on his bench, is likely to be equally dis interested in excellence or profi ciency or care or good manners as a driver of an automobile. There are fewer craftsmen today because machines take care of the needs of most of us. The man today is rare who feels the responsibility of producing a product with which he can himself identify, because it is his own. So it is that the se urity that a welfare-oriented so ciety provides its citizens by way 1973 THE PURPOSE OF TRAF~IC LAWS 457 of protection removes the respon sibility of that individual for his own care and well-being. Compul sory state automobile insurance may well be an application of this same principle, leading people to say, "What difference does it make if I crumple a fender or get into trouble on the highway? It really doesn't matter. I have a govern ment package policy and I only pay $25, or $200 at the very most, and the rest of the damage I do will be looked after by the govern ment. Why should I worry?"

Protecting citizens against their own folly and stupidity condones ignorance and encourages care lessness. I am not opposed to in surance, but I am against com pulsory insurance which places no burden or onus upon the individual himself to secure it. If a man car ries insurance because the state compels him to do so, he carries it because he is told to carry it. But if he carries insurance be cause he thinks enough about the importance of his own safety and welfare and the life and safety of others as well, then he has par ticipated in the act of protecting both himself and others. He has taken the first step to take care. That step is capable of leading to other steps - to considering the dangers of high speed, the perils of heavy traffic, the consequences of drinking and driving. It will move him to consider others and to expect others to consider him. He will do so not because he is compelled to do so but because he wants to and knows why - because he has ceased to be an automaton and has become a thinking human being.

It has been said that the English defeated the Spanish Armada in Elizabeth's time, not on the sea, but on the playing fields of Eton. Whether this be true or false, the fact is that a sense of decency and fair play and of ordinary good manners are essential to any ac tivity in which men and women engage in any number. It is a lack of the ordinary sense of fair play and an ignorance of good manners that, more than any other things, are responsible for catas trophe on our roads and highways. Even lack of skill can be compen sated for by good manners. These are personal qualities. They can not be legislated. On the contrary, paraphrasing Gresham's Law that bad money drives good money out of the market, so it is my firm be lief that lega,l coercion to do good drives human desires to act fairly out of the social equation. Those traits that are causing the loss ,of lives and property on the highways today are the same traits that are making of this great country of ours a place gov erned by the platitudinous, one 458 THE FREEMAN August abandoned to the mediocre and geared to the performance and ability of the lowest common de nominator.

Needed: IIManners in the Motor Car N We are, most of us, bad drivers. We do not regard it as our duty to improve our skills. We do not take pride in our performance. We, do not consider it necessary or even desirable to play the game on the highways. Certainly, though we know a little about table manners, we still have very little interest in road manners. It is high time, I think, that a Dorothy Dix or an Emily Post add to their books on etiquette a chapter or two on "Manners in the Motor Car" - not only when parked, but when mobile. These are not matters for the law to deal with. So many people entertain the greatest expectations from the mere passage of a law. Laws are printed on paper and bound in books. They may even be read and sometimes studied and memorized. But they do not drive motor cars. It is people who drive. It is they and only they who are or can be responsible. Unless we are willing to withdraw the pro tection and the support, the direc tion and the compulsion to which laws are expected to give effect, we as individuals will be reluctant to assume our personal responsibilities. For what we are witnes sing on our highways today is an abandonment of standards of ex cellence and the renunciation of personal responsibility. This, after all, is only a reflection of the hu man scene in almost every other place in the land today.

Ours the Responsibility Why has Mr. Ralph Nader be come so popular in these times? It is because he chooses to say that motor car accidents are happen ing, not because of you or of me, because of our limitations, our ignorance, our ineptitude and our lack of skill. No, it is none of these. It is General Motors and Ford Motor Company and other big corporations who are really responsible for death and carnage on the highways. So Nader likes to make us believe. It is very much like the current attack on the cor porate welfare bums that we have been hearing so lugubriously launched by socialist candidates in the current Federal election. It is well to remember that the statists of whatever complexion have al ways sought out a plausible victim for the public to hate. It is great to reform the whole world so long as one does not have to reform himself. That's why it is always so popular to find a scapegoat, as Ralph Nader has done in the case of motor car accidents. Of course 1973 THE PURPOSE OF TRAFFIC LAWS 459 there are automobile mechanical defects which cause accidents, but I would like to suggest to you, to paraphrase Shakespeare, that The Fault dear Brutus lies not in the stars (or in the Plymouths, Buicks or Fords) but in ourselves, that we are underlings.

If it is to be found anywhere, responsibility must be found pre cisely there - in ourselves. I have said earlier that the ques tion of improved manners on the highway is not a question for the law. We have a plethora of laws, and a dearth of manners. The Saskatchewan Vehicles Act is two and a half times as thick today as it was twenty years ago and the number of accidents and deaths has increased at five times the rate at which the pages of high way legislation has grown. But there are some things that the law cannot do and that Parliament .can not do. It cannot create a great painter or a fine carpenter or a good tailor or a skillful gardener or a first class driver. Not by an act of Parliament nor by any num ber of acts of Parliament can this be done. What laws can do, however - or perhaps I should say what the ab sence or the repeal of laws can do - is to revive the natural system of rewards for performing excel lently, and of penalties for per forming negligently or for not performing at all. Unless we are will..

ing to withdraw the protection and the support of those who fail to learn to work or to act credit ably, there will be no reason why anyone should acquire any knowl edge or exert any effort to perform any act with skill or competence. We are witnessing on our high ways in Canada the abandonment of standards and the renunciation of both excellence and personal responsibility. This, unfortunate ly, is a reflection of the whole hu man scene in Canada in this day. I suggest one of the reasons for this is that we have too many laws. Who is worried about traffic laws today? We have so many laws, that as Lord Darling said, "Men would be great criminals did they need as many laws as they make." I am convinced that we really do not need all of those laws. Rather we need men and women who, as individuals, recognize their own personal responsibility to themselves and for themselves. When this is recognized, we shall be more concerned with our own personal cond uct than with the modern fetish to do good for oth ers, or to pretend that our real concern is with that anonymous amorphous distant undemanding body of beings we are pleased to call "humanity." ~ The THE DOOMSDAY CULTISTS of the rnature economy seem to be at it again. These omnipresent talismen of doom, so ea.ger to have us re turn to a pre-industrial society of agrarian primitivism, have found new fodder for their propaganda campaign.

The incentive for their most re cent burst of gloom has been the scare value of the current "energy crisis." Responding to publicized shortages in the energy field, cer tain ecologists insist we are ex ploiting our resources so rapidly that shortly there will be nothing remaining. Future generations, we are told, will surely perish unless something is done. Such pessimism has been fueled by the confusion surrounding the rather unorthodox behavior of firms which are admonishing cusMr. Anderson recently joined the staff of The Foundation for Economic Education as Executive Secretary and Director of Semi nars, following several years of college teach ing of economics and business management. 460 Crisis ROBERT G. ANDERSON tomers for excessive use of their services. Instead of seeking new customers to consume more of their services, there now is a con certed effort toward encouraging nonconsumption.

This is, to say the least, a radi cal departure from traditional marketing practices. Yet, witness the electric utility company urging customers to "turn off the lights," and the natural gas company re fusing to service new customers and reminding old ones to "turn down the thermostats." More re cently the petroleum companies, acting under orders from the Fed eral Oil Policy Committee, have adopted "voluntary-allocation plans," resulting in limiting cus tomer purchases of gasoline and early closings of retail gasoline stations. Further complicating the crisis are those ecologists, who, seeing a growing problem of pollution, hamper and harass all efforts to 1973 THE ENERGY CRISIS 461 expand supplies of energy, and plead for restrictions on the use of existing energy resources. Indeed it would seem that the enemy is the consumer, whose ex cessive wants have finally exceeded all normal limits and have threat ened to deplete a precious national inheritance. Unless these consum ers are somehow convinced to temper their consumption, there is the danger that such shortages will occur as to spell final disaster for the lot of us.

Volunteer - or Else! Numerous remedies are being advanced as popular solutions to, this crisis. The efforts by utility and petroleum companies to re strict sales voluntarily is lauded as being in "the public interest," for it is placing civic duty above mere profit-making. Through "ed ucating" the consumer to consume less, it is believed, the demand for energy resources can be lessened. Should such efforts fail, the ul timate remedy suggested is direct government regulation of con sumption by bureaucratic ration ing. Such an alternative is not idle theorizing. The Federal Govern ment has made it clear that if "voluntary" methods fail, it in tends to move in. Confronted with a picture of indivduals glutting themselves on scarce economic re sources and ravaging the earth of all its riches, there appears to be no alternative but to turn to col lective, forceful action, complete with penalties for transgressions.

The state at this point is seen as the only means available to force an adjustment to the reality of scarcity rather than endless abundance. Once again we see the threat of government intervention in order to remedy the ill effects of an ear lier government interference. The so-called "energy crisis" is a direct consequence of earlier government intrusions into the free market pricing process. To expect any good to come from further govern ment intervention at this point is to believe that a person just run down by a truck would get relief if the truck backed over him again. Market economics has always recognized the problem of scar city. Indeed, it is the sole basis for the science of economics. An individual's capacity to want is in satiable, but possessing only a limited ability to fulfill his wants, the individual is never able to sat isfy all of them. Clearly, choices must be made and resources allo cated toward the accomplishment of those chosen ends. The p,rocess by which this is done is the con cern of economics.

While a market system of eco nomic organization cannot elimi nate the problem of scarcity, it 462 THE FREEMAN August has demonstrated its superiority over all other systems of economic organization in reducing the de gree of re1ative scarci ty. The emergence of a social division of labor and concomitant price sys tem has resulted in attaining the highest degree of efficiency in al locating resources toward the sat isfaction of human wants. WitHin the framework of a market-structured society the allo cation of economic goods is accom plished through prices established by the actions of buyers and sel lers. This interaction between sup ply and demand is never static, and thus there is a continually changing price structure. As gre,ater quantities are demanded or supplies dwindle, prices tend to rise; conversely, prices tend to fall when lesser quantities are de manded or when supplies· increase.

Free market prices are constantly adj usting in order to bring toward equilibri urn these opposing forces of supply and demand. It is these free market prices that direct the actions of buyers and sellers. As long as buyers and sellers are free to act, as long as the price mechanism is unin hibited, economic goods will be al located in a fashion that will al ways assure their availability to anyone wishing to enter the mar keto Supply will always tend toward equilibrium with demand. Serving Willing Buyers This phenomenon of an equilib rium price, of course, has not eliminated the problem of scarcity. Instead, it can only assure that scarce goods will always be avail able to willing buyers. Prices serve as a means for allocating these scarce resources to those buyers who value them more highly than do others. The justice of the free market lies in the fact that the most efficient sellers will prevail in supplying scarce resources to the buyers who most urgently seek these resources over all other po tential buyers. Such a system is in a continual state of flux as new buyers and new sellers supplant one another and cause prices to correspondingly rise and fall.

The present "energy crisis" stems not from a problem of eco nomic scarcity, but instead from nonmarket forces which are inter fering with free market prices, and thus causing shortages to de velop. The problem of economic scarcity is present in nearly every situation of our lives. We are not in an "energy crisis" now because energy is scarce, but rather be cause there is a "shortage" of it. Shortages are inconceivable in a free market structure; but they do occur whenever free market methods are abandoned. The competitive actions of buy ers and sellers in a free market 1973 THE ENERGY CRISIS 463 system precludes any threat of shortages. The very essence of price allocation negates the devel opment of shortages. A greater relative scarcity of a good in a free market situation will inevita bly lead to higher prices as buyers bid against one another for the shrinking supply. For shortages to occur, some 'nonmarket force must be introduced to create the disequilibri urn.

The "energy crisis" is an ex ample of such interference. Of course energy resources are scarce; that is conceded. They al ways have been, and they always will be scarce. But the current shortages in the market have led many people to believe that we have encountered something worse than scarcity; all of a sudden there is a specter of a well running dry. Misunderstanding the Causes Popular remedies being sug gested are further confused by a misunderstanding of the causes of the problem. Certain forces which have contributed to an increase in the relative scarcity of energy, and other forces which have con tributed to an increased demand for energy, are now being blamed for causing the shortages of en ergy resources. Such is not the case, for under conditions of an unhampered market these forces would be reflected in a changing price structure. On.ly direct inter ference with free price movements can cause the shortages.

A leading example of a force not responsible for causing the energy shortage, but certainly a factor affecting its supply and de mand, is radical ecology.! Ecology is frequently blamed as the pri mary cause of the "energy crisis." As proponents for the preserva tion of natural resources, the ecol ogists have in many instances been successful in curtailing supplies of energy resources by hampering the construction of new oil refineries, electric generating plants, drilling operations, and pipe lines. Their efforts at preserving resources in their natural state, by harassment of utilities and petroleum com panies, have undoubtedly re stricted present supplies. Ironic ally, their success in forcing auto mobile manufacturers to equip engines with emission-control de vices has greatly increased the· de mand for gasoline. (Presently these devices consume an addi tional three million gallons of gas oline daily.) While a paradox can readily be seen between their efforts at pres ervation on the one hand, and the wasteful results of their efforts regarding pollution on the other 1 "A Conservationist Looks at Free dom," Leonard E. Read, The Freeman, November, 1970. 464 THE FREEMAN August hand, the fact remains that their actions cannot be held accountable for the current energy shortage.

It is certainly valid to observe tha t to the degree they have cur tailed supplies and have increased the consumption of energy, they have been a factor in causing the prices of energy resources to rise. But ecologists can no more hamper price movements than can any other private individuals. In the same context, forces such as import quotas, declining ex ploration, production controls on producing wells, tax depletion al lowances,' agreements between re fineries and dealers, and even pos sible secret cartels have been advanced as the causes of our pres ent crisis. Valid charges or not, any or all of these factors can affect only the quantities of en ergy resources supplied, and thus the ultimate market price. None of them, any more than the ecolo gist, can cause market disequili brium in the form of shortages. Shortages from Price-Fixing Shortages are a result of price fixing by government interference in the market place. Specifically, the government, through both di rect and indirect methods, has been successful in preventing the prices for energy resources to rise.

The developing energy shortage has been growing for a long period of time in the utility indus tries. The reason is obvious when we realize that direct price regu lation by government has existed far longer in this area of our en ergy resources than within the petroleum industry. State public utility commissions, the Federal Power Commission, and other government regulatory commissions have direct authority over rates charged for energy by electric power and natural gas companies. Unfortunately, these commissions mistakenly assumed low rates to be in the best inter ests of consumers of energy re sources. Under the misguided no tion that low prices for energy rather than equilibrium prices benefited the consumer, little at tention was given to the develop ing disequilibrium between energy supplies and energy demanded. For many years the disequili brium has been absorbed in the capital structures of utility com panies. This consumption of ac cumulated capital, with its ensu ing financial weakening of the utility companies, gradually af fected their capacity and willing ness to attract capital forexpan sion of their energy resources.

Production of energy became mar ginal, if not entirely uneconomic. At the same time, demand for energy at the low rates continued to expand until the inevitable dis1973 THE ENERGY CRISIS 465 equilibrium developed. Energy was being supplied in shorter quanti ties than were being demanded. Since additional quantities could not be supplied without incurring losses (at the low rates imposed on utility companies by the gov ernment commissions), these com panies had no recourse but to deny service and to urge less use by their customers. The failure of the utility indus try to meet the full market demand for energy requirements had a "spill-over" effect on the petroleum industry. Customers, fearful that electrical power and natural gas supplies would be unavailable to them, sought greater quantities of fuel oil from the petroleum in dustry to meet their energy re quirements. Two Blows at Once Unfortunately, this increased demand upon the petroleum indus try occurred at a time when price controls on their industry had just been introduced. While the method of price regulation has been less direct than that experienced in the utility industry, the problems created are similar.

After many years of a govern ment-imposed inflation of our money supply and resulting higher and higher prices, a government program of price controls was in evitably adopted. Abandoning all economic reasoning, the govern ment established a "freeze" on prices of most goods and services, including petroleum products. Throughout the various "phases" of the price-control program, pe troleum prices have not been able to reflect the changing forces of supply and demand affecting them. Few industries failed to feel the pressures of the government price freeze; but the petroleum indus try, along with other capital-inten sive industries, felt the heaviest pressure. Inflation always inflicts the severest damage on industries with a heavy capital investment in their productive processes. The capacity of such capital-in tensive industries to calculate their economic costs is seriously hamp ered by inflation. Furthermore, the erosion of capital resources by in flation discourages future produc tive efforts by such industries. Ac curate economic calculation be comes nearly impossible.

Thus, a government-imposed price freeze on the heels of a gov ernment-engineered inflation made a petroleum shortage inevitable. A . combination of factors pressuring for an upward movement of prices only worsened the disequilibrium: the peculiarly sensitive financial position of the industry to infla tionary pressures; ecological forc es affecting their capacity to in crease supplies while at the same 466 THE }4'REEMAN August time increasing the consumption of the product; and heavier con sumption on account of a diversion of demand from the natural gas and electric power industries. Obviously, had petroleum prices been completely free to respond to these changing facts and condi tions there would be no threat of shortages. However, the petroleum industry like the utility industry, having lost its entrepreneurial freedom to resolve the disequilib rium through the price mechan ism, found itself pleading with its customers to "not buy."

The IISo/u tion ll Is the Problem The real cause for concern at this point is not the "energy crisis" so much as it is the solution the government will undertake to "solve" the problem of the short ages. Rather than admit the fail ure of government price interfer ence and allow the free market to once again achieve equilibrium be tween supply and demand, the gov ernment more likely will propose the adoption of rationing. The allure of rationing seems to be based on an egalitarian ideal which rej ects the price system as a discriminatory relic of economic inequality, and thus not suitable as a means for the just allocation of resources. Regrettably, this egali tarian doctrine attracts many supporters and is one of the leading threats to the survival of in dividual liberty. The concept of rationing is predicated on an archaic and to tally refuted objective theory of value, yet its philosophical appeal has had an overwhelming influence in our political a.ffairs. The notion that an equal distribution of goods to individuals will provide equal utility is a. complete denial of mod ern theory of subjective value; but government rationing still in sists on the allocation of resources in this fashion.

If selective rationing of energy resources should materialize, the consequences are quite predicta ble. The decline of profit margins will result in a capital shift awa.y from such industries, and this will lead to additional shrinkage of supplies. Since ca.pital always moves away from low-profit indus tries and into higher-profit indus tries, future production of energy resources must decline. The low prices imposed by government edict will ultimately be meaning less as, finally, no supplies will be produced at all by private com panies. The historical response to this development has always been the same. Whenever governments have finally succeeded in making a pro ductive service completely uneco nomic for private enterprise, they assume the function for them1973 THE ENERGY CRISIS 467 selves and nationalize the indus try. (This "final solution," it might be pointed out, not only fails to solve the problem of scar city but tends rather to intensify it.) Lool< to the Marl<et The appropriate alternative to our energy crisis is. to return to free market principles. The con sequences will not be pleasant, for the most probable result will be higher prices for energy resources than exist today.

Recent price movements in those few goods that have not been cov ered by the freeze give us a good contrast to the situation with re spect to the controlled goods. For example, we have ~een as much as a fourfold increase in the prices of some agricultural products in the past yea.r because of inflation and other changes in the supply and demand picture. While such price rises have been a cause of much consternation to consumers, they have not resulted in short ages and subsequent rationing. Should supplies of these agricul tural products now increase (as well they might, because of their profitabili ty), or if demand de clines (because of consumer re sistance to the high prices), then prices will again fall in a reflec tion of market actions of buyers and sellers. While the government planners recognized the presence of these ma.rket forces in agricultural prod ucts and exempted them from di rect controls, they failed to recog nize that these same forces are at play with all economic goods and services. Instead, believing that prices of manufactured goods are somehow "administered" and im mune from the economic laws of supply and demand, the govern ment imposed the price "freeze"

upon them. As must always happen with an abandonment of economic reality, the edicts of government are fall ing victim to inexorable economic law. The ever-changing forces of supply and demand, continuing an upward pressure on the prices of energy resources, are making the "frozen prices" a relic of economic history. The growing disequilib rium between the government manipulated prices and the actual forces of supply and demand pre cipitates the inevitable shortage. If this "energy crisis" is to be resolved, there is only one alterna tive. We must return the alloca tion of scarce resources to the market. Freedom in the market place, so that the economic struc turing of society is in the hands of individuals acting as their own free agents, is the only "final solu tion." Under such a system,. the crisis of shortages is unknown. I) The MANY PEOPLE, I suspect, would rather entitle this piece, "the error of confession" than "the confes sion of error."

My thesis is that error can and should play a profound role in man's advancement toward wis dom. The~e are two doors through which the fallible individual must pass before he can behold the light of truth. The first is the discern ment (}f error; the second is the confession of the error, not only to self but to anyone influenced by his error, whether that influence extend to one or to a· few or to millions of persons. Rarely does the individual err in solitude; most of one's mistakes have a social im pact, may indeed bring harm· to others as well as to himself. So, one is socially obligated to confess as well as to correct his errors. A personal experience may help illustrate my point. In 1945 I was given the assignment of choosing 468 LEONARD E. READ two speakers to present opposing views on the U.S. foreign aid pro gram. I chose J. Reuben Clark, J f., President of the Church. of Jesus Christ of Latter-Day Saints, whose point of view coincided with mine.

The most prestigious individual I could nominate for the other side of the argument was Lord John Maynard Keynes, then on an offi cial visit to the United States. When I called on him to invite his participation, he replied, "I shall not accept your invitation, and for two reasons. First, I shall not be in this country at the. time of your meeting. And if I were here I would not accept. My mission is to obtain the British loan. Were I to stand before your audience and say what I now think, which is what I would do, I would· disparge my mission." Lord Keynes, it seemed, had changed his mind about govern ment spending. He confessed this 1973 THE CONFESSION OF ERROR 469 to himself and to me but, so far as I know, not a word of his changed position reached the hun dreds of millions who came within his orbit of enormous influence. Had he publicly confessed his error (he passed away nine months later) the reckless spending poli cies of nations all over the world might have been halted. He dis cerned his error which is the first step. But he never took the second step; he failed to make public his confession, and the light of truth did not shine forth. Lord Keynes opened but one of the two doors; and the rest of us are now the poorer for his failure to open and pass through that second door to truth.!

I would not single out the late Lord Keynes as alone in this fault. His case is simply a magnified, and thus easily observed, example of the thing I am talking about. The same inability or unwilling ness to confess error plagues most of us. Keynes' leverage over events was so great for at least two rea sons: (1) he was a prestigious professor of economics at Cam bridge University and a titled nobleman, and (2) .his error is one that all· politicians, here or else where, ardently want to believe: 1 For an enlightening account of Lord Keynes' sound money theories be fore he went "Keynesian," see "Infla tion" by John Maynard Keynes (The Freeman, April 1956). that politicians can spend the peo ple's money on anything that suits their fancy and, by so doing, as sure prosperity to the victims. Had a commoner - one without degrees and a title - made such a silly pro posal he would have been "laughed out of court."

Why the reluctance to confess error openly? Doubtless, there are more reasons than we know. Take a politician - one gaining office by promising, if elected, to do this or that for his constituents, perhaps a higher minimum wage or any of thousands of "benefits" at tax payer's expense. Later, the light dawns and he sees the error of his ways. Confess this mistake to his constituents ? Not likely! He would never be returned to office, his political power at an end. More often than not such a fateful pros pect destroys any desire or incen tive to confess error. But no one can confess an error until he sees it for what it is; and self-blindness is a trait as com mon among the electorate as among the elected. Once an error is believed and embraced as right, it is absorbed into the tissues, so to speak; it becomes a part of one's being. An immunity develops and explanations of the fallacy are warded off, not heard. Only con firmations of the error are re ceived and they become supporting evidence.· Most of us simply can470 THE FREEMAN August not stand the thought of being wrong, at least not to the point of openly confessing an error.

Often the explanation of our error is made by a political op ponent or by one having a faith or general philosophy we do not ap prove, that is, by our "enemies" persons we abhor or, at least, do not like. The very source is enough to close our eyes and mind; we will have none of it! Indeed, this lack of catholicity on the part of anyone tends to confirm him in the rightness of his mistaken views. Small chance of confessing errors thus buried in rancor! The fact that society, today, is in one of those devolutionary swings - common to history - and that countless people are propos ing remedies -of every variety and without success, suggests that the right answer has not yet been found. I venture to say that the remedy is simple; indeed, if it is not sim ple, in all probability it is not right. The first step is to remove all ob structions to the discernment of error; and the second is to confess the mistake openly. How wonder fully different would be the so cietal situation were a consider able number of us to open these two doors. It seems obvious to me that this is the way and the only way to wisdom, truth, light!

A considerable number! Yes, but a number of individuals, one by one. After all, it is not society that acts; it is only discrete hu man beings. There is no point in dwelling further on removing the obstruc tions to the discernment of error. Count him out who cannot rid himself of prej udice, bias, egotism, know-it-all-ness. Include only those who welcome exposure of error, regardless of source. The door most of us have had no practice in opening is the second: open confession of discerned error, not only to self but to all who have come under the harmful influence of the mistake. By "open confes sion," I am not referring to any maudlin wailing. Rather, I am talking about a clear explanation of one's new insight - the truth that displaces the error he had es poused and inflicted on others as well. There are two points to keep in mind. First, if the purpose of life is to grow in awareness, percep tion, consciousness, the refusal to confess error is to strangle growth; it is to nail one's self down to mediocrity, along with others under influence of one's errors. Be free!

Second, confession not only is good for the soul; it also turns out to be a joyous experience, as is any freedom from inhibitions. To prove it, try it! ~ How to Advocate a Standard PAUL STEVENS THERE ARE TWO POINTS on which probably all advocates of a gold standard agree. They are: (1) that the U.S. government should legalize gold, and (2) that govern ment should not prevent its citi zens from using gold as money if they voluntarily contract to do so. This means that banks desiring to store gold, print gold bonds, or print notes against gold should not be prevented from doing so. It means that buyers and sellers should not be prevented from con tracting in gold for the exchange of goods. These are certainly proper goals for advocates of a gold standard to pursue. Yet achviement of these goals is being undermined by statements containing a host of errors, inconsistencies, and con tradictions about gold - statements made by those very individual~ who are attempting to focus attenMr. Stevens is a freelance writer who special izes in the field of economics.

tion on gold and the virtues of a gold standard. A bad argument advocating a return to the gold standard can be more harmful to the case for gold than no argument at all. One source of such arguments is that many gold advocates look at gold through the eyes of an in vestor rather than the· eyes of an economist. Consequently, short term, superficial and sometimes misleading interest in gold is be ing encouraged at the expense of long-term education and consistent economic theory. This approach must ultimately be counter-pro ductive and self-defeating. The market is being saturated with lit erature containing misconceptions and inexact or incorrect terminol ogy. This has led to anti-gold posi tions (Le., positions inconsistent with capitalism and a free mar ket) , most of which can be traced to poorly defined concepts, discus sions drawn out of context, and misidentified cause/effect relation471 472 THE FREEMAN August ships. The following arguments, terms, and positions regarding gold, its present role in interna tional monetary matters and its proposed role in future interna tional monetary reform, have pre· sented a recurring yet self -defeat ing "defense" of gold and the gold standard.

The "Intrinsic Worth" Argument It has been said that gold has "intrinsic worth." This argument represents a theory of economics inconsistent with the free market and consequently with the gold standard. The intrinsic theory of value holds that worth or value is con tained within an object. It holds that economic goods possess .value inherently, innately, despite the market, despite supply and de mand, i.e., in spite of men's val ues, choices, and actions. Free market economists reject this argument. rf'hey hold that no man can jump outside the market and declare what a particular com modity is "worth"; that all com modities are subject to the laws of supply and demand; that in economiGs there is no such thing as "intrinsic worth", only market worth. "Worth" means "value" and value presupposes a valuer. As men's values differ and change, market values change. As supply and demand conditions change, the exchange ratios of commodities relative to one another change.

Gold is not exempt from these economic laws, and yet gold is oft en treated as if it were. By using such unscientific terms as "intrin sic worth," the gold advocate can only hurt his own case - and he has. The inability of many gold advocates to objectively answer the question, "why gold?" has led to the misunderstanding of gold and to such popular terms as "gold, the mystic metal." Gold would not be called "mys tic" if it were understood. And understanding begins with defin ing one's terms. It is only through invalid concepts such as "intrin sic worth" that absurd terms such as "mystic metal" can gain popu 1arity. The "Store of Value" Argument The argument that gold is a "store of value" is often used as a substitute for the "intrinsic worth" argument. Unless precisely qualified, the term can lead to the same errors, fallacies, and falla cious theories of the "intrinsic worth" argument. Thus, it may lead to a misunderstanding of the nature of money and of a proper theory of value.

"Store of value" is a term often used by those who argue that gold will always represent a constant 1973 HOW NOT TO ADVOCATEA GOLD STANDARD 473 value, Le., that gold is a "fixed yardstick" representing constant purchasing power. Implicit in this argument, once again, is· the idea that gold is intrinsically valuable - immune from the laws of the market. Not so. The possibilities of gold strikes, gold shortages, fiat money inflation, depression and deflation, fluctuation of industrial demand, the relative market value of other commodities, and the dif fering knowledge, values, and ex pectations of men - all these fac tors have the potential of increas ing or decreasing the value of gold for other men. Does this mean that under a gold standard the "price index" and the value of money will fluc tuate? It certainly does. But this is precisely the beauty of the free market and the case for freedom that prices are allowed to fluctuate freely, thereby corresponding to the constantly changing and di verse values of free men. The ad vocates of a free market are not Utopians - they are realists who recognize that· there are no guar antees 'of economic security in this wor ld; they are willing to accept the consequences of their actions - and to accept the verdict of a free market.

The advocates of a free market are not willing to trade their free dom for security. The "store of value" argument offers men just such a trade. While a gold stand ard does offer men more stability of value than any other free mone tary system, it does not offer men a constant value. There is no harm in stating that gold is a store of value so long as one knows and states exactly what is meant by the term - i.e., that gold has stability of value and represents perhaps the best monetary method of sav ing. In a free society, one is cer tainly free to store that which one values, so long as it is understood that the value of one's savings is not immune from the influence of the market. Thus, within the con text of a free mar ket, th'e only legitimate meaning of "store of value" is, "a commodity which is most marketable. and therefore best facilitates the exchange of goods and services."

Gold "Price" Predictions One way pro-gold advocates have been trying to attract attention to gold is by arousing investor inter est through predictions of a high er gold "price." General estimates of prices are not by themselves harmful. For example, it was a reasonable assumption that, after having been artificially held down for forty years, the "price" of gold would increase. But specific price predictions are indirectly harmful to the case for gold. The case for gold is subsumed 474 THE FREEMAN AUgU8t under the broader case for the free market. The advocates of free market economics and those econ omists concerned with economic theory take pride in the rigorous logic and objectivity of the case for the free market. But this pride is being undercut by illogical and visionary price predictions. The "price" of gold is determined by the values of those participating in the gold market. No man on earth, no group of mathematicians (no matter how many charts and graphs they employ), no computer on earth, is capable of knowing the values of all consumers and sup pliers within the market. (Russia has been trying for years to COT rectly anticipate general consumer demands and has failed.) There fore, to try to precisely predict something as specific as a price is impossible. The fact is, men's val ues are constantly changing, just as the factors of supply, demand) and cost are changing. Men cannot have precise, prior knowledge of prices, and by pretending to can only confuse and undercut the en tire concept and basis of free mar ket economic theory.

There is no place for crystal balls in science - and that includes the science of economics. Those attempting to attract attention to gold by making precise price pre dictions are contradicting and ob scuring the meaning of the free market and therefore undercut ting the case for a gold standard. The ilLegal Tender" Argument Many advocates of gold argue that if gold were made legal tender, not only would individuals be allowed to own and use gold as money, but this would necessarily lead to a gold standard. What is forgotten is that this country's legal tender laws are precisely what prevent citizens from using gold as money today. Legal tender laws established the legal preGe dent of coercive government mo nopoly over the issuance and use of Federal Reserve Notes. The free market economist does not contend that gold must be money. He contends only that money must be market-originated.

The case for the gold standard is part of the broader case for com modity money. Consistent advo cates of the gold standard hold that gold possesses those: qualities and characteristics most conducive to the function of a medium of ex change, but they do not say that gold will forever be suitable as money. Neither do they hold that gold must be-accepted as money whether men want to accept it or not. They do not ask for the police powers of state to enforce their idea of what money should be. Thus, they oppose legal tender laws.

1973 HOW NOT TO ADVOCATE A GOLD STANDARD 475 Further, legal tender laws are not necessary. All tha t is neces sary is that men possess the right of contract. For· example, if a man contracts to pay one hundred ounces of gold to another man who agrees to accept this sum in pay ment' the courts need only recog nize what has been chosen as money, and assure that the obliga tion be discharged. Legal tender laws are not what is needed to return to a gold standard. On the contrary, they are one of the major factors today preventing the world from return ing to gold. The 1I0ffidai Price of Gold ll Fetish Many advocates of gold argue that an "official price" of gold is both necessary and desirable. This posi tion accepts the premise of opponents of the gold standard: that legal tender laws should be established allowing governments to legally fix and regulate the value of money. The free market posi tion rejects this premise. It holds that the medium of exchange should be market-originated and market-regulated - not govern ment-originated and government regulated. This means that the value of money should be deter mined on the free market - not dictated by government decree.

At this point, the "official price" advocate usually says, "But if the price of gold isn't fixed, then no one will know what money is worth." And in the sense of hav ing precise, prior knowledge of gold's exchange value, this is true - just as it is true for all other commodity exchange-values. It is interesting to note that those who argue both that gold should be fixed in value and that gold is a constant store of value, hold a contradictory position in which one claim offsets the other. If gold is already a constant store of value, why should its "price" be fixed? And if it is necessary and desirable to fix the "price" of gold, then how can it be argued that gold has an intrinsically con stant value? One need not fix that which is constant, and that which one does fix cannot be defined as constant. Such inconsistency per vades pro-gold literature today. In fact, what is being advocated is that gold should be a "fixed yardstick" - a constant "store of value" - by government directive, rather than a stable store of value by market "directive." Govern ment determination to fix the pur chasing power of the monetary unit ignores, contradicts and de nies the law of the market.

Under a gold standard, no "offi cial price" of gold would exist, hence no official store of value. But this does not mean that gold offers no stability of value. On the 476 THE FREEMAN August contrary, gold has been chosen by men as a medium of exchange for over 2,500 years precisely because of its stability of value. But mar ket-determined stability must be distinguished from government "guaranteed" constancy. A "guar anteed" value is neither necessary nor possible. All that is necessary is that those who print paper claims against gold specify the quantity of gold their paper claims represent and that they adhere to their promise to pay by not un dermining their ability to convert their claims into gold - i.e., that they do not fraudulently increase their note issuance. The result would be a mild fluctuation of gold in relation to other commodities and monies. Further, to advocate "pegging"

gold to a given number of dollars would only amount to a fiction in today's inflationary climate, just as it would be a fiction to fix the price of any commodity. The free market must be allowed to deter mine the value .of gold and all money substitutes, just as it de termines the value of any and all commodities - by supply, con sumer demand, and the cost of prod uction. Just as there is no validity to the case for price con trols, there is no validity to the case for exchange controls. If men want security of pur chasing power, they need not and should not look for government guaranteed "security"; they can easily obtain security through the free market by including in all con tracts that purchases, repayments, and the like .be made in money adjusted to compensate for any changes in the value of money. Futures markets can be, and have been, established in any commod ity, money, or money substitute that men show a desire to partici pate in. Yet rarely have men sought a guaranteed protection against loss.

Those who argue for an "offi cial price" of gold can only hurt the case for a free market and therefore a gold standard. Price controls contradict a free market and therefore should be avoided. This includes control of all prices, including the "price" of money. Price controls have always been counter-productive and self-defeat ing. Worse, they establish the principle of government-provided "security" at the expense of indi vidual freedom. To argue that an "official price" of gold is necessary and desirable is to argue that the free market is not. The Devaluation Syndrome The argument that there must be and/or should be a major deval uation of the dollar is an offsboot of the "official price" argument. It accepts all the premises of that 1973 HOW NOT TO ADVOCATEA GOLD STANDARD 477 argument and therefore makes the same mistakes. But there are fur ther implications of this argument that must be examined.

First, devaluation means a re• turn to a monetary system of fixed exchange rates at a time when in flation makes it impossible to fix the value of anything, let alone the value of money. Bretton Woods is an eloquent example of what hap pens, given fixed exchange rates together with inflationary policies. It is not good enough to say, "Well, we shouldn't have inflation. Fixed exchange rates would work if gov ernment stopped printing money and adhered to the value of the monetary unit." The fact is that we do have inflation and may con tinue to have inflation for many years to come. The devaluation ar gument drops the matter out of context and reverses cause and effect by demanding a system of stable money and prices at a time when there is no reason to assume that this kind of stability is pos sible to the world. Second, the .devaluation argu ment delegates to the International Monetary Fund (IMF) the power to establish an international monetary system by law. Implicit in the devaluation argument is acceptance of the unfounded as sumption offered. by the IMF, that this time the devaluation and ex change rate realignment will be final. Many advocates of a gold standard unwittingly accept this assumption and thus believe that the way to achieve a gold standard is through a major .devaluation which would re-establish a con vertible gold dollar. This, they be lieve, is the way to eliminate in flation.

But in fact just the opposite is true. It is not a gold standard that will lead to the elimination of in flation; it is the elimination of inflation that will lead to a gold standard. To attempt to maintain an international gold standard through the IMF is impossible, given today's political context we would only end up "going off gold" again with gold getting the blame for the resulting crisis. AI low individual gold ownership and allow the use of gold and an inter national gold standard will natu rally evolve - when and only when government monetary policy be comes noninflationary. Until then, gold and exchange rates of na tional monies should be left free to seek their own levels. Fixed exchange rates will never (and should never) result from a formal international organization such as the IMF. The stability of exchange rates will be the result, not of government price-fixing, but of noninflationary adherence to the value of money - Le., the elimination of legal sanctions that 478 THE FREEMAN August permit any government agency or bank to fraudulently increase ·the money supply.

Under a gold standard in which all nations deal in weights of gold, exchange rates would necessarily be fixed by relative weight - not by law. No formal international monetary system would he neces sary and no nation would be forced into, or prevented from, us ing other monies such as silver, paper, and so forth. A gold stand ard does not require exchange rates fixed by law. It assumes only that exchange rates will be fixed as a result of adherence to the definition of money. This means that if a monetary unit is defined as one ounce of gold, it will nec essarily exchange for other mone tary units at a precise ratio - un less the monetary unit is debased and misrepresented. Thus there is no need for a for mal, Le., legal, international mone tary system. All that is needed is the free market. The way back to a gold standard is not backward toward the Bretton Woods system, but forward toward a noninfla tionary system of freely self-ad justing exchange rates in terms of currencies and gold.

Third, the argument for deval uation is inconsistent with and contradicts another main argu ment propagated today by gold advocates: that the world is headed for runaway inflation and/or depression and deflation. If it can be reasonably assumed that prices may skyrocket or plunge, as most gold advocates contend, what sense does it make to advocate raising the "price" of gold and fixing ex change rates? If it is anticipated that prices will fluctuate dramati cally, exchange rates need to be as flexible as possible to adjust quick ly to men's changing economic eval uations, to price-cost factors; and to supply and demand conditions. It makes no sense at all to advocate fixing the "price" of gold, exchange rates (or anything else ) when ex pectations are that prices will rise or fall dramatically. Such price controls are doomed to failure and can only result in dangerous eco nomic and monetary distortions that will ultimately lead to the restriction of trade and to a lower standard of living for individuals.

The IIStop Printing Moneyll Argument Inflation is the fraudulent in crease in the supply of money and credit. It is both immoral and im practical to inflate. Eventually in flation might be outlawed, but not today-and not overnight. Both rational economic analysis and his tory verify the disastrous conse quences possible given a dramatic increase or decrease in the nation's money stock. In today's context, when the 1973 HOW NOT TO ADVOCATE A GOLD STANDARD 479 whole of the American banking system and economy is geared to ward inflationary finance, it is to no one's short-term or long-term interest to advocate that govern ment should immediately stop printing money or that the infla tionary arm of government - the Federal Reserye Board - should be abolished. For, taken literally, these well-meaning intentions could result in a nightmare of eco nomic turmoil. Rather, it should be stressed that the supply of fiat money should be slowly reduced and sta bilized to correspond to increases in the gold supply, and that struc tural changes within the banking system should take place to facili tate elimination of .the artificial and arbitrary nature of note issu ance. This would reduce inflation and go a long way toward estab lishing the proper direction nec essary for a return to gold.

The case against inflation can never be stated too often and its importance to a sound monetary system can never be overempha sized. Clearly the battle against inflation must be won before the return to a gold standard can be secure. But neither can the im portance and necessity of a grad ual return to gold be overempha sized. Inflation certainly is immoral and economically impractical - but so is any proposal that aims to un leash unnecessary hardship on citi zens in the name of "morality" and "practicality." The road back to a gold standard will be long and hard, but the road should be made as smooth as possible by intelli gent guidance. Thus, advocates of a return to the gold standard should make clear their inten tions: they advocate a reduction in the fraudulent increase of the money supply - which means a reduction to the point at which this increase is based on the pro duction of a particular commodity - which means gradual departure from a government-regulated money supply and gradual return to a market-regulated money sup ply.

The "Demonetization" Threat To demonetize usually/means to remove a particular for¢ of money from circulation. In i this sense, gold has been demonetized in the U.S. for forty years. But this is not what many opponents of gold mean when they say gold should be "demonetized." They believe that, internationally, the official role of gold should be reduced and finally eliminated among govern ments; and that, nationally, gold should circulate like any other commodity. Gold advocates usually denounce this "intent to demone tize" as an attempt to undermine 480 THE FREEMAN August the principle of the gold standard in order to more effectively pursue inflationary policies. This certainly may be the intention, but in to day's context "demonetization" could be a very good thing for gold advocates and a very bad thing for the opponents of gold. Consider the following facts: (1) Gold cannot by itself pre vent inflation. If policy makers are determined to inflate, they will do so with or without gold. For the most part, the degree of inflation will depend on the lack of knowl edge or irrationality of policy mak ers and can only be combated by the knowledge and rationality of a nation's citizens.

(2) Gold has been used by gov ernments primarily to give an un warranted status and credibility to their fiat money - a status and credibility that could not be main tained if gold were "demonetized" and allowed to circulate alongside the depreciating money of govern ment. (3) If it is true that today's governments are notoriously poor money managers, why entrust them with the. maj ori ty .of the world's gold? Would it not be put to better use managed by indi viduals? Today we are farther from a gold standard than at any other time in our history. Policy makers have had decades to propagate their anti-gold theories. Most Americans have never owned gold. Thus, most Americans do not know why it should be money. It should be clear that men who do not know why gold should be money, will not demand it as such. Just as no government can prevent private ownership of gold if a ma jority of its citizens demand it, no minority group (such as the pres ent advocates of gold) can force government or citizens to return to gold if they do not desire to.

The road back to a gold stan dard is an educational one; and it may take us as many decades to return to gold as it took to aban don it. With governments as the major holders of gold in the world today, citizens derive little or none of the benefits of gold. This pre vents the kind of self-education that might occur given popular ex posure to gold. Rather .than cam paigning against "demonetization" of gold, or for legal tender gold legislation, gold advocates should seek repeal of legal tender restric tions on the use of gold in payment of private debts. In today's context, "demonetiza tion" means to return gold to indi viduals. At a time when all the evi dence points to the mismanage ment of gold by governments, when it is plain that governments are llsing gold to their citizens' disadvantage, when there is no 1973 HOW NOT TO ADVOCATE A GOLD STANDARD 481 reason to assume that policy mak ers desire or know how to return to a gold standard, why advocate a government program to return to gold? Government will be the last to realize the virtue and im portance of gold as money.

Gold has no business being in the possession of such so-called money managers. Let governments have their fiat money and receive the full responsibility and blame for their note depreciation; let individuals regain governments' gold and rediscover the benefits of gold; make the policy makers' phrase, "gold is a barbarous relic," a government position; let both gold and fiat money circulate among men and we'll then see who possesses, determines, and controls money - individuals or govern ments. "Demonetization" is no threat to Americans. Gold advocates should not fear it - they should demand it. The quickest and surest way back to a gold standard is not through the wasteland of govern ment channels, but through pri vate channels. A gold standard will evolve naturally when men are allowed to freely own and use gold, and when men desire to own and use gold as money. On Context, Cause and Effect It is important that one recog nize just how far the educational process of this country must go before a return to the gold stan dard is possible. The gold standard requires monetary stability which means that all those government domestic programs now popularly advocated, and financed through inflation, must be opposed by the majority of U.S. citizens. Further, a gold standard requires economic stability, which means all of the malinvestments, overconsumption and misallocation of resources that have resulted from years of artifi cial, government-made "booms"

and led to a multitude of economic distortions, must take their toll. This means that the anticipation of recessions, depressions, infla tion or deflation must be behind Americans and reasonable expec tations of economic stability and real growth clearly in sight. This kind of stability is a long way off - yet this is the kind of stability necessary before a gold standard can be established as a lasting monetary system. The gold stand ard could never last long without confidence in future monetary and economic stability. If those pres ently advocating gold ownership and the ownership of other invest ment hedges are doing so because they are convinced that the world is headed for great monetary and economic instability, they should be equally convinced that it still is far too soon to be advocating a 482 THE FREEMAN August full return to the gold standard. Even. more premature is the at tempt to submit specific proposals of exactly how to return to the gold, standard. This problem must be seen in context. Even assuming that men desire to return to gold, any specific plans for implement ing a return to gold will depend greatly on such factors as inter national monetary arrangements and conditions, domestic monetary and economic conditions, and the legal, financial and structural con ditions of the banking system.

These conditions change. Thus, a good proposal today may be sadly lacking a year from now. Until fundamental political changes oc cur in this country, it is unreason able for anyone to assume he must address himself to the question of specifically how to return to a gold standard. Rather, one should concern him self with eliminating those laws which are preventing men from using gold as money and attacking those policies which encourage gov ernment inflation. The legalization of gold and its use as money, an end to legal tender laws, the freedom of individuals to mint coins, and the elimination of laws that prevent banks from existing independently of the Federal Reserve System all these are valid interim measures one can advocate. But the problem of how to return to a gold standard will be solved, for the most part, through solving more fundamental problems. A full gold standard cannot re turn until economic stability re turns; we cannot return to eco nomic stability until we return to monetary stability. Monetary sta bility cannot be secured until the source, nature and immorality of inflation is exposed to and under stood by Americans. But the evils of inflation cannot be understood until individuals grasp the mean ing of money and the nature of property rights. And property rights will not be secured without a full understanding and defense of individual rights. Thus, nothing less than a return to laissez-faire capitalism and a free market will insure a return to and defense of the gold standard. Therefore, a massive and extensive educational task on the virtues of capitalism confronts all those who desire to effectively fight for a gold stand ard.

Men will want to return to gold only when they rediscover what money is, and men will not re discover what money is until they understand why what they have is not money. ~ BRIAN SUMMERS ONE of the notions commonly held by critics of the free enterprise system is that the more complex an economy becomes, the more government intervention is need ed. If this assertion, which sounds perfectly natural to many people, is in fact true, then economic free dom in America is a relic of a sim pler past. Let us examine this no tion by considering what it means for an economy to be "compli cated." Let us begin by considering a free enterprise system. In such an economy capital is privately owned and the government re stricts itself to protecting people from humanly initiated force and fraud. In this atmosphere of lais sez faire, capitalists compete with Mr. Summers is writing his Ph.D. thesis in mathematics at the State University of New York at Stony Brook.

one another for the consumer's dollar. A businessman cannot stand still for long in such a sit uation because the competition is always innovating. Innovation! This is the key to success i.n a free enterprise economy. The men who come up with and implement bet ter ideas are the men who will show profits on their capital in vestments. Thus, every day entre preneurs complicate things by marketing new products and mod ifications of old products. Who de cides which entrepreneurs will succeed and which will fail? Who decrees that capital will constantly flow toward the men with better ideas? The consumers! They are the ones who, acting in their own interests, determine the capital ist's fate by purchasing his prod ucts or passing them by. Thus do competing businessmen 483 484 THE FREEMAN August complicate the consumer's life by marketing an ever-increasing va riety of products. It may take a little longer to walk through a modern shopping center than an old-time general store, but the consumer definitely benefits from the increased assortment of goods from which to freely choose. In fact, the free market is, if any thing, more valuable to today's consumer than to his forebears.

After all, the greater the selection from which to choose, the more valuable does freedom of choice become. Progress and Change In their eagerness to market new products, capitalists have not only complicated consumers' lives, but they have also complicated their own. They have increasingly turned to technology, specializa tion, division of labor, and trade to produce their goods. The com plex economic relationships that arise are naturally best worked out by the people directly in volved. They have the best under standing of their own problems, and they have the greatest incen tive for efficiency. It is, after all, their capital that is at stake. The complications that arise in a free enterprise system result from entrepreneurs' desire to bet ter serve consumers and thereby earn a return on their time, effort, and capital investment. These complications are thus, directly or indirectly, beneficial to the buy ing public.

There are, however, poli tico economic complications that prove detrimental to the consuming pub lic. They appear when an economy moves away from laissez faire, as the American economy has done. These complications are, in fact, the very same government inter ventions that are supposed to "cure" an economy of its com plexity! As an example of how govern rnent interventions complicate rather than simplify economic af fairs, let us consider a man in the construction business. In addition to all his other concerns, he must contend with such interventions as building codes, zoning ordi nances, eminent domain, inflation (due to legal tender laws and Fed eral deficits), wage and price con trols, rent controls, credit reg ulations, inv,estment regulations, hiring "guidelines," laws that pro hibit the hiring of nonunion work ers (and the resulting strikes, slowdowns, featherbedding, in creased labor costs, and sudden shortages of materials), minimum wage laws, overtime laws, licens ing laws, blue laws, numerous taxe~ and quasi-taxes (income taxes, profits taxes, property taxes, sales taxes, social security 1973 COMPLICATIONS 485 taxes, unemployment compensa tion taxes, workmen's compensa tion insurance premiums, disabil ity insurance premiums, etc.), the mountain of paper work that the government requires of all busi nessmen and so on and on. All these complications hinder the businessman and thus create costs that must eventually be borne by the buying public.

Not only do government inter ventions create obstacles that the businessman must try to over come, but they further complicate his plans by being in a constant state of flux~ In making his cal culations, the businessman must try to predict which way the laws will turn. Unfortunately, this is The Freedom To Fail often very difficult, if not impos sible, for not only must the entre preneur deal with legislatively enacted (amended, repealed) laws, but he must also contend with ar bitrary ad hoc administrative edicts. He never knows when the President (governor, mayor) will complicate his plans with a sur prise executive order such as a sudden imposition (modification, removal) of wage and price con trols. Economic complications do not call for more government inter vention. Rather, they call for in creased freedom in which to work out the complex relationships that naturally arise in an advanced economy.

IDEAS ON LIBERTY BECAUSE FAILURE is repugnant to a welfare-oriented society, we see continued efforts made to put a floor under everything. This includes a spreading attempt to bolster up faltering busi ness firms or even whole areas or industries by government grants, loans, subsidies, defense contracts, and the like. Ironically, the greatest danger to our economic system today lies not in a direct attack on profits, but in a well,-meaning effort to insure everyone against failure. To put it bluntly, this means subsidizing inefficiency; it is the antithesis of the effective opera tion of the profit motive. Weare in danger of losing one of our greatest freedoms: the freedom to fail. Profit and loss are two sides of the same coin; take away one side and you take away the whole coin. Our great est economic asset is the right to invest private capital in the hope of making a profit, but at the risk of losing our shirt.

GEORGE CLINE SMITH ,;'i:,~J--? No-Fault Insurance ,~l .:_~ ;~'U ~::~ral Responsibility \:,ft-c:==:,,~... RIDGWAY K. FOLEY, JR. LEGAL SYSTEMS derived from the Anglo-American tradition histor ically impose liability upon a civil wrongdoer in a manner consistent with the premise that each man, being a morally responsible agent, carries with him the obligation to endure the consequences of his own choices and conduct. In legal parlance, a "tort" consists, of a civil wrong done by one man (or association of men) to another, either intentionally or negligently. Thus, if I strike you with my fist (battery) or run over your foot unintentionally with my automo bile (negligence), the law decrees that I should reimburse you, to the extent of your injury, in mon ey damages because I was deter mined, by judge or jury, 1 to be at fault and responsible for my acts. This system, which has worked Ridgway K. Foley, Jr., a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law in Portland, Oregon. Portions of this article appeared under the title "The Doc trine of Fault: The Foundation of Ex Delicto Jurisprudence" in 36 Ins. Counsel Journal (No.3) 338-346 (July 1969).

486 well historically, becomes senseless if men are viewed as creatures not exhibiting the ability to choose, if man is not a purposive, acting being. In invidious ways, the civil law reflects the statist tendency generally permeating so ciety. This essay proposes to ex pose one aspect of this illiberal trend. Introduction: Voluntary Means of Risk Distribution Considering man's almost in finite capacity to inflict devastat ing civil injury upon his fellows, with catastrophic results to the" victims and to the tortfeasor's (negligent actor's) pocketbook, it should come as no surprise that civilization has witnessed a pro fusion of risk distribution plans and techniques. Private insurance forms the most common and ac ceptable plan, from the point of view of a voluntarist society. For a stated premium, XYZ Insurance Company contracts with actor A 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 487 that if A carelessly injures an other individual while operating A's automobile, or any other mo tor vehicle, within a given period of time, XYZ will not only defend any lawsuits commenced by the injured party against A but also will pay any money judgment the victim might recover from A up to a stated limit. The type and terms of these contracts in a free society find limits only in the imagination of mankind. The XYZ Insurance Company stays in busi ness and makes a profit by choos ing its risks carefully, by prompt and fair administration of claims, and by institution of safe driver campaigns and periodic vehicle in spections. A gives up part of his stored-up value (capital) to XYZ in exchange for the promise of the latter to distribute the risk of A's momentary inadvertence among others in society. The victim ap preciates the scheme for he is much less likely to come up with an uncollectible judgment against an insurance carrier compared to an individual actor whose assets may be limited.

1. Incipient Revolution in Automobile Insurance and Tort Law These myriad private insurance plans serve a free society well. As in other enterprises, state inter vention disrupts the logic and symmetry of liberty and causes dislocation of resources. In the negligence tort insurance field, state dislocation appears most often in the form of state-man dated insurance plans where (1) - every actor is required to carry liability insurance and (2) every policy is required to contain cer tain governmentally imposed pro visions. Such policies are often termed "no-fault" insurance or "basic protection" plans. Society cannot rationally de mand that every citizen carry in surance. The typical rationale as serts protection of potential vic tims as a reason. Yet destruction of freedom represents too high a price to pay for potentialities which may never come to pass. If an actor wishes to self-insure his own conduct, he ought not be de nied this choice.

Likewise, the state should not fit each insurance policy issued onto a Procrustean bed. The beauty of private risk distribu tion, from its onset at Lloyds Cof fee House in London, rests in its infinite variety and man's ability to tailor coverage to the needs of the day. Policies impelled by the state must be ge'ared necessarily to the lowest common denomina tor, disparaging insured and vic tim alike. The actor loses because his freedom flies away and he holds a mandated policy not nec essarily representative of his 488 THE FREEMAN August needs and wants, for which he pays a premium beyond that re quired by the free market. The victim loses. because· he often finds tortfeasors covered only to the statutory minimum limits, limits which may not fully recompense him for his injuries. The last decade bears witness to increased attempts to initiate compulsory automobile liability insurance on either state or fed eral governmental levels under the euphemism of "no-fault" insur ance. The term misleads. These plans - none of the proponents seem able to agree with one an other as to names, nature, or con tent - represent an immoral and coercive inroad into one of the few remaining citadels of free choice. The plans, by whatever label, are no responsibility insur ance plans and should not he dig nified by any more prestigious label.

Because of the hodgepodge of proffered plans, "no-fault" offers a difficult test of definitional and analytical ability. Simplified, the system would require each indi vidual to carry liability insurance which would reimburse the in sured in the event of injury by another up to a specified amount for out-of-pocket .expenses (e.g., medical bills, drugs, lost wages) and (under some plans) a limited specified amount for "pain and suffering" and future loss. No re covery could be effected from the negligent actor, no matter how heinous or careless his conduct, no matter how much harm he in flicted; tort actions against a wrongdoer would be abolished. Un der the present system, the tort victim may recover both his out of-pocket losses and his general damages (pain and suffering, fu tureloss) without limit from one who causes him harm. 2. Inappropriate Reasons Advanced for "No-Fault" This essay focuses upon the myriad "no-fault" plans offered but the focus rests upon one as pect most often ignored - the phil osophical or moral reason dispar aging this intrusion into personal freedom. Nevertheless, at the gen esis it seems appropriate to devote cursory attention to some of the reasons most commonly advanced in support of "no-fault" insurance plans. 2 (A) Unclog the Court: Propo nents of no-fault argue that auto mobile injury litigation clogs the courts, resulting in unconscion able delays, and that a new and speedy system is required. This claim lacks veracity. Overcrowding generally results from inefficient administration of justice, lazy judges, delaying counsel, and the great volume of nonautomobile 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 489 claims including Workmen's Com pensation appeals, criminal cases and the like. About 90 per cent of all automobile claims are settled without suit and less than 2 per cent proceed to verdict; approxi mately 15 per cent of the court's time is concerned with vehicle liti gation. 3 Antitrust cases and pro tracted criminal proceedings eat up much greater amounts of jurid ical time. Moreover, substitution of no-fault does not guarantee the end of controversy - victims will still contest about existence and extent of coverage, much as has occurred in Workmen's Compen sation litigation 4 in the past half century. Compensation proceed ings are normally contested out side the regular court system (with only appeals to the courts remaining) but the iceberg below the waterline manifests a plethora of hearing officers, evaluators, and investigative personnel, quite as tedious, slow, and cumbersome a system as the worst courts of gen eral jurisdiction. One need only look to Multnomah County, Ore gon, serving a metropolitan area of approximately one million per sons, to put the lie to this argu ment: the average length of time between filing a case and time of trial rarely exceeds 4 or 5 months.

Speedy justice can be done with out jarring the system or de nigrating indi vidual liberty. (B) InsuranC1e Rates Must Be Reduced: Proponents claim that rising insurance premiums can be lowered by no-fault plans. Since cost increases largely reflect a gov ernmental increase in the money supply and increased jury awards which reflect, in turn, the infla tionary trend, this reason lacks merit. Furthermore, states with modi fied no-fault plans experie.nce no dramatic cost reduction. Massa chusetts, the first state to adopt such a scheme, "has suffered a severe economic recession as a re sult of this socialization of auto mobile liability insurance" accord ing to Kathleen Ryan Dacey, As sistant District Attorney for Suf folk County. 5 Moreover, the Mas sach usetts experience demon stra tes once again that "there ain't no such thing as a free lunch": the burden has been shifted and costs continue to sky rocket concomitant with increased losses .and governmentally spon sored inflation. Losses may be shifted between kinds of insurance carriers (e.g., from auto liability insurers to health and accident in surers) but someone pays the piper under no-fault. 6 (C) ~Pault System Discriminates Between Victims: ProP9nents con tend that in roughly equivalent cases, some claimants recover sub stantial payments, while others re490 THE FREEMAN August ceive little or nothing. Yet this fact, if true, does not justify trash-canning a system which re spects moral choice and has worked well for decades. The entire prem ise of this argument fails for, properly viewed, the cases cannot be roughly equivalent or they would have been treated as such.

The parties, or the judge, or the jury, decided that case A deserved one treatment and case B deserved another. The charm of a flexible system lies in its adaptability and the fact that it works well in a majority of situations. (D) The La,wyers Get Rich in the Fault System: Proponents claim that most claimants' cases in the fault milieu proceed under a contingent fee arrangement where the lawyer takes a percent age of the award if successful and nothing if the case is lost. Actu ally, the plaintiff's lawyer may suffer an out-of-pocket loss when he ~dvances costs for deposition reporters and expert witnesses for an impecunious client. 7 More saliently, the-contingent fee system effectively opens the door for claimants to participate in the system even if they lack funds. Absent such a plan, some injured persons would be forced to deal with their adversaries sans lawyers. Here, they diffuse the risk of loss by employing a professional who takes part of the risk. And, almost every lawyer around (and there are a great many around these days) would be more than happy to accept em ployment in bodily inj ury cases on a straight-time basis where the client pays the lawyer, win or lose, on an hourly' basis for the time actually expended on his behalf.

(E) Is the Fault System Ineffi cient? Proponents argue that the inefficiency and high overhead of the fault sytem costs too much, and too little of the claim dollar filters down for the victim. In the first place, the same can be said for much more complex kinds of legal claims: security law violations, professional malprac tice, products liability claims. Why single out automobile bodily in jury claims for different tre'at ment? In the second place, recorded history does not provide a single example of a governmental insti tution which operated a more effi cient and less costly operation than a private concern; there is no need to expect lightning to strike the automobile insurance field. Recur to Workmen's Com pensation claims: any fair anal ysis over the years will reveal that the overhead has not decreased with the imposition of the'govern ment system.

1973 NO-F'AULT INSURANCE MEANS NO MORAL RESPONSIBILITY 491 3. Advantage of the Present System. 8 An individual may seek insur ance or not as he sees fit. No-fault would negate this freedom of choice. An injured party may recover for his or her total loss - for all expenses, for p,ermanent injuries, for disfigurement, for grief. No fault would impose a rigid and limi ted recovery. Fault concepts recompense all persons whether employed or not. One who is not working may re cover little or nothing under many no-fault plans; the retiree, the housewife, the college student, all are penalized. The current system tends to charge premiums and distribute risk based on likelihood of harm. No-fault not only encourages bad driving and negligent conduct but also shifts the bad driver's cost to the good driver. It discrimi nates against commercial vehicle owners, against the lower salaried persons who cannot afford max imum insurance coverage, and against those producers who earn more than the maximum. In short, it discriminates against all who fail to fit Procrustes' bed.

Today, one can present his claim in court, favored with a constitu tional right to trial by jury. N0 fault would take away the right to have one's peers decide blame worthiness. 4. Retention of the Fault Concept A Nloral Reason The reasons advanced for no fault will not withstand rigorous scrutiny. A system which has withstood the test of time, one which serves a civilization well in most cases, should not be summar ily discarded. Yet beyond these rea.sonsexists a much more com pelling rationale impelling reten tion of the present system of per sonal responsibility - a moral rea son which supplies the justifica tion for placing the burden upon the a.ctor. The .remainder of this article considers various aspects of this rationale. As discussed at the outset, a plethora of currently emerging plans seek to revolutionize the set tlement of automobile accident claims and, incidentally, to ravage traditional tort concepts. These suggestions vary in detail but are linked by two comluon denomina tors: a drastic alteration of tort law by substitution of liability without fault (enterprise liabil ity) , and imposition of new, in voluntary methods of doing busi ness upon the insurance industry.

While the panoply proffered by the theorists of change contain many prop'osals which are beyond the scope of this paper (alteration of the doctrine of contributory negligence, change of the collat eral source rule, compulsory "ba492 THE FREEMAN August sic protection" insurance with op tional overlays for additional pro tection are common incidents) literature in the field abounds for the interested reader. 9 5. Check Your Premises: Beware 01 Professors Bearing Plans The concept of fault must be retained; it would be folly to alter the foundations of our tort sys tem. The attack levied is nothing less than an assault upon the fund amental axioms of individual lib erty. The fault system ultimately rests upon the tenet. of individual responsibility for personal action. If an individual is capable of self determination, and is limited only by his finiteness and the conse quences of his own volition, then it follows that the results of hu man conduct must be visited upon the actor. If one fails to conduct his activities carefully, and as a result injures another, the negli gent actor should reimburse the victim for his loss.

These, then are the premises of the fault system of ex delicto jur isprudence : man is a thinking, acting, creative being. lO Since no sound basis exists to exalt one man's judgment over that of an other where the choice pertains to the affairs of the latter, fairness and common sense demand that, as far as possible, each person be allowed to determine his own des tiny. To this end, man reaches his highest level of creativity and pro ductivity when his creative proc esses are unhampered by external restraints imposed by other men, acting singly or cooperatively. The free man, however, must bear the burden of his liberty, by ac cepting the legal, as well as the axiological, burden for his con duct. Self-determination requires self-restraint and personal re sponsibili ty.ll Oddly, the casualty insurance industry itself is rent asunder by countervailing tenets and inharmo nious plans for change, specifi cally in the field of automobile lia bility insurance prot~ction.l2 Elim ination of the fault concept and substitution of compulsory state sanctioned insurance will destroy an industry which must ultimate ly thrive or wither upon the basic precepts of private property, lim ited government, free enterprise and individual responsibility. A voluntarist system permits the in surer to utilize its ingenuity in private risk diffusion by encour aging tailored coverage to fit spe cific individual needs.

6. Limitations Inherent and Apparent Two inquiries stand forth: (1) Does any justification exist for treating aut'omobile accident claims differently from other civil 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 493 injury claims? (2) Would removal of the fault doctrine also obviate deterrence to irresponsible con duct? Empirical justification was sought for support or assault on these propositions. The undertak ing proved fruitless, although there is general evidence available that legal sanctions do affect hu man behavior in the "desired" (coerced) direction.l 3 One search es in vain for reports, studies, charts, graphs, statistics or anal yses which "prove" that sanctions under the fault system deter mis conduct or that automobile acci dent cases merit disparate treat ment from other accidents. Moreover, a review of the lead ing proponents of enterprise lia bility and "basic insurance pro tection" reveals a similar lack of usable empirical 'data; the advo cates of change are no better pre pared to support their contentions than are defenders of the faith.

As a result, each advocate must assert his proposition and curry support by arguments. Included in the rationale are deductions ema nating from assumed empirical proof of the underlying pillars of both doctrine and anti -doctrine. For example, Flemming James, Jr 0' denigrates personal blame worthiness in the field of acci dents. 14 However, the psychologi cal studies cited in support of his grandiose comments are limited in value, diluted by age, and subject to criticism as to their underlying premises. 15 In final analysis, the issues pre sented may not lend themselves to "proof" under our present state of knowledge. But that does not in hibit a choice, for the opposing arguments can be analyzed with a view to determine which empirical assumptions most nearly accord with reality .16 7. Differential Treatment Justified? No sound reason exists for frag menting tort law into accident categories.

If negligence "torts" are pos.. ited as conduct of the same generic type, then no logical reason ap pears for segregation and discrim ination between the negligent au tomobile operator and the negli gent homeowner who fails to main tain his back steps. Certainly, as Prosser has indi cated' definition and classification of "torts" is not so simple; in deed, it might be less complicated to compartmentalize the various torts as fields of law instead of parts of the same field.17 Notwith standing this insight, there is no substantial difference between negligence torts; there is no valid reason to distinguish between neg ligent operation of an automobile, negligent omission to repair the 494 THE FREEMAN August back steps, and negligent ignition of a neighbor's hay field. If there is no substantial dis tinction between various kinds of negligent conduct, then each tort feasor should be treated identi cally, and not favored or disfa vored merely because he happens to drive an automobile. Equal treatment of tortfeasors and vic tims in negligence cas.es is de manded if the statement "we are a government of laws, not of men"

is more than a mere shibboleth, and if "equal protection of the laws" possesses any substantive meaning. From the victim's perspective, there is nothing inherently differ ent whether he is injured by auto, by tripping down some stairs, or by a negligently caused conflagra tion. If a tortfeasor's conduct is no more nor less reprehensible and the opportunity for harm to the victim is substantially identical, no logical reason appears for dis criminatory treatment. No reason exists supporting dif ferentiation between automobile accidents and other claims. There is no difference meriting diverse treatment from the perspective of victim or· tortfeasor ..Indeed, it seems unjust and nonegalitarian to accord different sanctions un der different rules based only on the instrumentality of the acci dent. Nonetheless, there have been proponents of separatism. The ad vocates of the Keeton-O'Connell type plans, in various guises, fit this mold. One of the more candid writers is Professor Flemming, who advocates retention of the present system for the "residuary area of inj ury incidental to ordi nary, commonplace activities."ls In this posture he aligns himself with Professor Ehrenzweig, who favors continued conventional neg ligence rules for "backyard cases"

involving little people.19 No attempt will be made at this juncture to delineate the various social insurance plans, since each varies with the program of the au thor . Generally, the avant-ga,rde tendency is to carve out particu lar areas for specific rules, and to leave a residual area for the "little people" to be governed by "con ventional" (semantically unclear) negligence concepts. Among the areas most commonly segregated for special attention are automo bile accident claims and product liability actions. What basis exists for specify ing that products liability or au tomobile ,accident claims shall con stitute the areas for blanket "com pensation without fault" treat ment? In all substantial premises, the justification is identical to the rationale of "enterprise liability." The arguments advanced (includ1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 495 ing appropriate variations) are nothing less than the juridical equivalent of the fuzzy political thinking which dominates statist political philosophies.

In brief, the enterprise liability proponents suggest that in speci fied categories (e.g., auto accident and products liability) the victim is unable to protect himself (a questionable premise considering the availability of individual insur ance plans 20 and the ability of the individual to avoid dangerous situ ations), and the enterprise inevi...; tably takes its toll of human sacri fices; therefore, having made the determination that it is a socially utilitarian enterprise with bene fits accruing to the enterprise and "society," the enterprise or so ciety (Le., "the not-at-fault por tions of society who pay taxes") should foot the bill for the unfor tunate victim. Large enterprises are able to diffuse losses into rela tively palatable chunks, through liability insurance or because of mere size. The cost is allocated to the overhead of the business (but the advocates forget conveniently that the ultimate payment is made by the consumer). The innocent victim 21 may have to seek welfare or leave his family destitute through no fault of his own unless the enterprise or society pays him.

Isn't it better that someone else (or many someone elses) pick up $5 (or $50, or $5,000) to amelio rate his loss? Let's all distribute the risk (let's all soak the rich). The mind boggles at the falla cies of enterprise liability. A com plete dissection of' the deception requires effort beyond the tem poral and spatial limitations of the treatise. 22 Some of the more flagrant trickeries in "enterprise liability" are obvious: (1) Is the victim "innocent"? Is it not just as likely that in a given number of cases the injured party is at least partially at fault? Perhaps he was participating in a dangerous but socially useful ac tivity too; shouldn't he pay for his loss because it is part of his "over head" and should be economically allocated? In only a few cases are we able to make the-assumption that the claimant is truly inno cent; only in these cases is the term "victim" semantically valid.

In the disputed case, this very value judgment may only occur after the fact of··trial. (2) If the loss is to be diffused, who decides the mode of diffusion? The Court? The legislature? The payor or the recipient? Who has the moral right to decide that C should pay A's loss: A, B, or C? or ABC? (Notice that ABC can outvote C.) (3) Is it true that those who benefit from an industry would bear the loss under any or all of 496 THE FREEMAN August the plans suggested for risk dif fusion? It is much more likely, given the current scheme of things, that the individuals who bear the loss will be people who have little or no contact with the particular industry, who are fault less in their own conduct, who merely wish to be left alone, and who happen to possess the re sources to pay the tab (and lack effective elective voice to prevent plunder of their property). The looter philosophy fails to discern this particular evil which is ap parent and inherent in any kind of risk adjusting or social engi neering.

Underlying all statist postulates and proposals is the arrogant as sumption that A can better live B's life for B than B can, and the concon1itant disregard for the fact that the user benefits most from increased productivity and effi cient use of natural resources. (4) Is it not more consonant with freedom, with the maximiza tion of individual choice and in dividual responsibility, to permit variation according to individual tastes? There are available or possible, in infinite variety, pri vate insurance plans for personal private protection of the "vic tim."23 He can bond with others and seek protection from a group insurer (e.g., major medical cov erage, accident and health insurance, disability coverage, income replacement insurance); he can secure private indi vid ual health, accident, disability, life and other types of coverage in infinite com binations and kinds. If insurance is not presently available in the desired form, it can be created in a free society. If protection of the individual and his family are im portant, shouldn't the individual protect his own instead of seeking state-imposed protection? The sole reason for exhorting state activity in any case is simply monetary (cost shifting) : A wants the state to act so that A (or B for whom A is concerned) need not pay the cost; instead C will pay most of the cost. It is unj ust to penalize the provident; a free system al lows free choice to insure or not to insure. Under a compulsory system, payment by the provident tends to benefit the improvident, or those persons who choose not to commit part of their assets to protective devices.

(5) Enterprise liability conve nietly overlooks economic reality. As a major premise, the advocates assert that the entrepreneur gains a profit from his enterprise and must pay for the human loss fac tor involved. A profit motive per se is not evil. The individual en gaged in the industry and the consuming public also gain from the enterprise, often more than 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 497 the entrepreneur. Any other con clusion is either intellectually dis honest or dismally stupid. There is a certain risk in just living and there is no reason to diffuse that risk. The end result of a nation alization scheme would be a dis tinctly lowered standard of living which would adversely affect the "innocent victims" in their roles as consumer, employee, and in habitant of the country.24. The fault system does not guar antee compensation to all accident victims; it was never intended to effect that result. Each citizen must bear the risk of some loss, without shifting it to third par ties. Man can properly diffuse losses by contract or voluntary engagement; he ought not be able to mulct his blameless neighbor unless that neighbor specifically caused the consequences by soci ally undesirable actions.

The success of the segregation attempt in singling out automo bile accident claims for basic· ("so cialistic" or "nationally imposed") protection, must rise or fall upon the enterprise liability concept in one of its guises. Enterprise lia bility does not accord with good morals, and fails to consider rele vant empirical assumptions which can be perceived by any observant individual possessing a modicum of common sense. Hence, the doc trine is empty. The retention of a traditional negligence system of identical sub stance for all types of claims is recommended primarily by the egali tarian concept that each per son engaging in substantially similar conduct should, for rea sons of justice, be treated simi 1arly. No sound reason exists to deviate from this norm. 8. The Deterrent Factor Fault-based tort liability deters dangerous, irresponsible and so cially undesirable conduct. Adop tion of a basic protection plan for automobile claims will delete the fault factor from this segment of tort law. Obviation of the fault concept will thereby attenuate or wholly destroy the deterrent fac tor. Deterrence is an admirable and valid goal of civil jurispru dence and should not be destroyed.

These assertions, in simple terms, state the fundamental premises of the traditional tort doctrine. If each statement is true, then it follows that the basic protection automobile insurance plans should be dismissed out of hand. Each premise has been chal lenged by articulate purveyors of the liability-without-fault doctrine. Deterrence has been downgraded or ignored as a reason for impos ing responsibility upon an indi vidual for his conduct.

498 THE FREEMAN August First, what is the position of the advocate of the fault system, stated in simple terms? It is truly no more than an a prio1'li tenet that reward and punishment meted out by a system of liability based upon fault serve (1) to deter the careless actor from acting care lessly again, and (2) to exemplify the pain attendant to carelessness so as to deter others within the ambit of knowledge from doing the same or similar act. 25 If I know that it is foolhardy to drive an automobile through the streets of a metropolitan area during business hours at 80 miles an hour, and if I further know that in so conducting myself I hold in my hands the lives and properties of others, as a moral man I may channel my conduct, thwart my own desires and slow my speed to a reasonable pace. But moral suasion may not be enough. If I further know that I am responsible to other parties whose lives, liberties and proper ties are damaged or destroyed by my unreasonable conduct, and that the law will sanction their claims against me, hopefully I will be persuaded to act more prudently.

Moreover, my neighbor, who might like to join in a race through the center of town, will also be dissuaded of the wisdom of such an endeavor if he sees that I am forced to pay a strict penalty to a person who is in jured by my misbehavior. In order for deterrence to work satisfactorily, it is necessary (1) that the standard be clearly speci fied, if not at the penumbra then at least at the core, and (2) that the penalty be sufficiently severe in contradistinction to the pleasure thwarted so that the ordinary hu man actor be disimbued with so cially irresponsible action. Two further implicit criteria exist, fun damental to all legal order: (3) the conduct deterred must be truly socially irresponsible and danger ous to the activities and lives of other persons - whimsical and use less laws are rarely obeyed, and disregard for law flows naturally from an overabundance of. regula tions; a few laws, reasonably based and strictly enforced, are generally sufficient for the order ing of society; (4) the standard to be obeyed must be known. 26 At present, no studies have been uncovered which factually prove or disprove the primary premise approving the value of deterrence.

Little empirical data exists sup porting abstract propositions. Moreover, any test, survey, or sta tistic would be subject to criti cism as to, inter alia, sampling technique and coverage. The second premise appears sat isfied. Admittedly, the third prem ise (a proliferation of laws) has 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 499 been savaged. Sufficient knowledge of the standard exists to satisfy the fourth premise. As to the first premise, it may be posited generally that it is just that the penalty extracted from the tortfeasor equal the amount of money necessary to compensate the injured party for his dam ages. The penalty in this respect does not appear untoward and should be sufficient in the ordi nary instance to deter. In criminal law, deterrence is not achieved by $50 fines.27 But in civil law, where the actor knows that if his fault causes harm he is liable to the ex tent of the loss (a sliding scale based upon the foreseeable conse quences of his conduct) he is more likely to take adequate precau tions. The standard of conduct to which the actor is held may be subject to some salutary chal lenge, but it encompasses the only workable and just criterion avail able, given the existent state of man's knowledge.

Previous allusion has been made to the difficulty of marshalling sci entific support for a moral con cept. 28 Whether or not the fault doctrine provides a direct deter rent effect is a matter of much speculation but little proof. 29 While an individual may not necessarily become a more pru dent driver solely because he fears the consequences of h.is negligence, he often purchases insurance' to protect himself against the con tingency of a loss or laws uit. By this type of purchase, drivers vol untarily provide, a pool out of which an inj ured party can re cover. This type of compensation fund, more consonant with the scheme of freedom, exists with out the coercive force of the state's further meddling in man's affairs (as would neecssarily occur in the basic protection cabal). Initially, the proponents of the doctrine of basic protection or lia bility without fault ignore the fact that their type of insurance protection could be purchased by any ready buyer in an open mar ket without state compulsion. Cov erage could be tailored to indi vidual needs. 30 Harper and James devote con siderable time to the problem; in fact, their eleventh chapter is en titled "The Accident Problem and Its Solution."31 Without benefit of citation or proof, they charge that the traditional fault system causes court congestion. 32 It is unfair and invalid to assign the fault concept in automobile claims as the cause of court congestion. 33 Accident proneness also has been proved to the satisfaction of Harper and James. 34 In other words, a. few individuals tend to have a. higher percentage of acci500 THE FREEMAN August dents than random sampling would demand. In brief, the authors con clude that there are many indi vidual causes of accidents, e.g., stress, fatigue, mental or physi cal inabili ty to reach a careful standard, which are not subject to the deterrent effect of juridical penalties. Once again this conten tion lacks proof and validity. Rea son suggests contrary assumptions and arguments, and empirical proof is nonexistent. 35 Further, the proponents of lia bility without fault are fond of asserting that the fault doctrine worked well in the early nineteenth century and fit the concept of in dividualistic morality, as if this concept were unfitted for 1973, and as if the two centuries dif fered so greatly in this regard. 36 Advocates of liability without fault assault deterrence on several counts.

First, it is urged that the ob jective standard of the reasonably prudent individual has attenuated the deterrent factor. 37 Many peo ple are assertedly incapable of achieving the status of the "rea sonable man" ; yet the law calls upon them to act in a manner for eign to their physical, physiologi cal and mental abilities. Applica tion of a subjective standard might deter, but one is undeterred if he is held to a standard with which he· cannot comply. The appropriate rebuttal to this argument is to examine the valid ity of its premises. Accuracy may exist in a small number of cases. But no one can prove or disprove the ability or inability of the vast majority of the American popula tion to achieve an objective stand ard of care. The standard is a fluid and shifting one. And does not Professor J ames miss the point, that the ameliorative effects of the fact finder upon one who "cannot" reach the standard ef fectively obviate this argument?

Second, Professor James con tends that legal fault has already been diluted, and the deterrent factor lessened by the very nature of the jury system. 38 This, too, is an unprovable proposition. It pre supposes that juries always as sume that defendants in automo bile liability cases are insured, that the insurance exists for the purpose of compensating the vic tim, and therefore the standard of fault is meaningless. 39 The as sumption lacks both support and validity. Acceptance of the prop osition requires a determination that jurors willfully violate their oath; no practicing lawyer be lieves that this occurs often. Third, it is claimed that the de terrent effect of fault has been severely diluted by the advent of the vicarious liability.40 Those who 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 501 pay are not the tortfeasors; in stead they are the owner of the business, the employer of the neg ligent servant, or the insurance company which bargains to pro tect the harm-causing driver. To deter A, A must be punished if he does not act in accord with the standards, and A is hardly pun ished if B pays for A's conduct.

The argument appeals super ficially.41 However, the assertion oversimplifies the fact. The reali ties of excess insurance problems which face the practicing attorney belie the validity of the contention. For example, in Oregon, minimum insurance limits have long been $5,000 each person, $10,000 each accident; in 1968 they were raised to $10,000 each person, $20,000 each accident. Yet many serious accident cases are filed each year where the prayer far exceeds min imum limits although many driv ers purchase only that required coverage. Certainly there is an ex posure to harm and a penalty to the "true tortfeasor" where the prayer or the recovery, or both, exceed available insurance pro tection. If nothing more, there are additional costs and fees incurred by the driver who secures inde pendent legal counsel to protect his uninsured interest. Moreover, automobile insurance rates are partially based upon driving records and prior adherence to standards of care. The careless driver will pay a premium proportionately higher than the careful driver in most cases under the fault system. Merit driving rating plans applied by many in dustries deter, as does the specter of the assigned-risk pool. Even so strong an advocate of enterprise liability as John G. Flemming rec ognizes the existence of this type of deterrent. 42 He admits that premiums based upon accident rates may well deter, the same as potential loss of assets, loss of driving or automobile privileges, and the suggestions of the acci dent-prevention teams sent forth by insurance companies.

Moreover, inconvenience deters. The allegedly negligent driver is greatly inconvenienced when he is sued, even if the prayer is less than his policy limits, because the tortfeasor must be a named party to the action, he may be deposed, and he may spend days in court in the uncomfortable position of party and witness. As a conse quence, he will lose free time or wages, and all in all will find his daily routine disrupted. Allied with this last argument is the contention that, like vicari ous liability, the advent of wide spread liability insurance has weakened the deterrent factor be cause the true tortfeasor does not bear the risk of loss. The forego502 THE FREEMAN August ing rebuttal applies with equal fervor here. Furthermore, it is un acceptable to assume that normal individuals alter driving patterns from good to wicked because they contract with a third party to pass on the financial burden.

Fourth, proponents of the "non deterrence" position assert "enter prise liability" arguments to ad vance their position. 43 For ex ample, both James and Calabresi contend that appropriate econom ic resource allocation demands that the industry bear the cost of harm as a portion of overhead. This sophist argument fails upon analysis of the maj or premises: the enterprise does not cause the harm - human actors cause the harm because of their conduct, their failure to act reasonably. The resource allocation assertion begs the question and assumes validity of social engineering. Moreover, it is unmeritorious to say that victims of strict liability are "ill-equipped" to protect them selves. 44 Who can better determine the desirability of a specific course of conduct than the· actor? Fifth, the liability-without-fault claque claims, curiously, that the fault system is ineffectual because there is no necessary relation be tween the extent of fault and the extent of· loss.45 This contention really is not a nondeterrent argu ment (unless it is intended to mean that one will think the law unj ust and therefore not be de terred if he is forced to pay a large amount for a sman fault) ; actually it is an axiological argu ment, and a faulty one' at that.

The fault doctrine can be defend ed on the basic tenet that it is just that a person bear the conse quences of his own acts; no more, no less. Oddly enough, the authors of the Keeton-O'Connell plan are not so likely to dismiss deterrence' with a mere passing glance. In stead they tend to follow Profes sor Calabresi's distinction be tween general and specific deter rence. 46 Keeton, however, feels that deterrence is diluted because most people will not admit fault, even to themselves. 47 The practic ing lawyer perceives a contrary tendency; many people, because of the sympathetic nature of human character, admit fault where none really exists. The theoretical bases of the en tire subject of deterrence are ana lyzed by Glanville Williams. 48 Al though he contends that the de terrent theory does not provide a perfect rationale for a fault-based tort concept,49 Williams recognizes the existence of deterrence as at least a partial pre,mise. For ex ample, he contends that employers 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 503 now take numerous precautions for employee safety unknown pri or to the Factory Acts. 50 Is this not a type of deterrence?

9. Liability Without Fault Means Liability Without Responsibility Fault is fundamental to free dom. Retention of traditional jur isprudential concepts exhorts man to be more ordered, more careful of his voluntary actions, and to regard his neighbor when plan ning conduct. Imposition of indi vidual responsibility upon the actor to pay the price of careless conduct tends to demand compli ance with reasonable rules of care and thus promote harmony in a crowded world. No reason exists to fragment tort law and discrim inate against the automobile ac cident case. Acceptance of liabil ity without fault in the arena of automobile accident litigation can cure no evil - only produce more ills. ~ • FOOTNOTES • 1 The administration of common jus tice - the settlement of civil disputes between members of society - forms one of the restricted areas where the state may act justly, where governmental coercive force may be properly applied.

For a discussion of the appropriate forms and uses of law consonant with a liber tarian society see, Foley, Ridgway K., Jr., "Individual Liberty and the Rule of Law" 21 Freeman No.6, 357-378 (June 1971), and 7 Will. L. J. 396-418 (Dec. 1971) . 2 Several of these reasons appear in different guises and, where appropriate, commen t will be directed to them again la ter in this article. 3 Obviously, these figures will vary from county to county. See, Hodash, Frederic, "Auto Com pensation Plans and the Claims Man," 549 Insurance L. J. 816 (1968) Experi ence with maritime and employment compensation schemes reveals no real benefit to the victim nor corresponding reduction in overhead and none is to be anticipated in the automobile accident arena. A general critique of specific basic protection shortcomings may be found in Knepper, William E., "Alimony for Accident Victims?" 15 Def. L. J. 513 (1966). See also DRI News Release Janu ary 9, 1969: "DRI urges investigation of lost savings claims by no-fault pro ponents."

4 Workmen's Compensation Law off ers a statist species of liability without fault. A workman injured on the job must be paid a limited amount for lost wages, medical expenses, and any per manent or temporary disability by his employer (or the employer's insurer) without regard to fault causing the acci dent. Even if the employee foolishly causes his own injury, his employer suff ers the ultimate loss. 5 See 18 American Bar News No.3, p. 7 (March 1973). See also Trial Magazine (April 1972). 6 No comprehensive treatment of the Massachusetts rule is intended; that state is selected merely because it pro vided the harbinger of no-fault plans. 7 For a critique of no-fault from the plaintiffs' bar, see "No-Fault Insurance - A Primer," American Trial Lawyers Association, Cambridge, Massachusetts; this brochure answers the several argu ments advanced in favor of no-fault in summary fashion.

The defense bar has also published a monograph which considers several of the problems in modern tort law and recommends reforms. See, "Responsible 504 THE FREEMAN August Reform - An Update" (The Defense Re search Institute, Inc., Milwaukee, Wis consin) Vol. 1972 (No.3). While not directly concerned with no-fault insur ance, this treatise offers some interesting comments relating to the questions posed here. 8 Reasons for the retention of fault in our juridical system are touched upon only cursorily in the text. They may be classified as axiological, praxeological, economic, political, pragmatic, and his torical. Perhaps the most cogent ration ale is essentially philosophic or moral. See, e.g., Williams, Glanville, "The Aims of the Law of Tort," 4 Current Leg. Prob. 137 (1951) passim. It is note worthy that one of the severest critics of the traditional system admits that the concept worked well in the nineteenth century, but is somehow inexplicably un suited for today. See, James, Flemming, Jr., "An Evaluation of the Fault Con cept," 32 Tenn. L. Rev., 394 et seq. (1965).

Perhaps Professor James is a victim of the "golden century syndrome" which erroneously presupposes a perfect con dition of liberty existent in the Jack sonian United States. See Note 1, op. cit. 9 Few controversies have provided such a fertile field, attracting all manner of commentators. A mere bibliography would overextend this treatise. The effi cient force, if not the harbinger of basic protectionism, is the work of Pro fessors Keeton and O'Connell, which reached its apex in Keeton, Robert E. & O'Connell, Jeffrey, Basic Protection for the Traffic Victim, (Little, Brown & Com pany, 1965). No enduring critique is in tended of the Keeton-O'Connell plan or, indeed, of any of the several other ha rangues which alternately mock or plag iarize "basic protection." Different posi tions are displayed in such articles as: Knepper, William E., "Alimony for Acci dent Victims?" 15 Def. L. J. 513 (1966); Hold, William E., "Critique of Basic Pro tection for the Traffic Victim - The Kee ton-O'Connell Proposal," 541 Insurance Law Journal 73 (Feb. 1968); Kluwin, John A., "Analysis of Criticisms of the Fault System" 534 Insurance Law Journal 389 (July 1967); and Vondra, M.

Lyn, "A Revised Plan for Protective Automobile Insurance," 553 Insurance Law Journal 7 (Jan. 1969). Numerous articles have appeared in the American Bar Association Journal, e.g., "New Hope for Concensus in the Automobile Injury Impasse," 52 A.B.A.J. 533 (1966); "Con trol of the Drinking Driver: Science Challenges Legal Creativity," 54 A.B.A.J. 555 (1968); "Basic Protection: A Rebut tal to Its Critics," 53 A.B.A.J. 633 (1967); "Basic Protection and Court Congestion," 53 A.B.A.J. 926 (1966). See also, Keeton, Robert E. & O'Con nell, Jeffrey, "Alternative Paths To ward Nonfault Automobile Insurance," 585 Insurance Law Journal 517 (Oct. 1971), Quinn, Neil K. & Allen, Fredrick W., "Analysis of the Illinois Plan: Pro vision, Practice and Problem," 588 In surance Law Journal (Jan. 1972) ; Korn blum, Guy 0., "No-Fault Automobile In surance - Comparison of the State Plans and the Uniform Act," 8 The Forum 175 (No.2, Winter 1972); Rokes, Willis Park, No-Fault Insurance (Insurance Press, Inc., Santa Monica, California 1971).

An interesting series of articles ap pears in the August 1968 issue of the In surance Law Journal: Blum, Walter T. & Kalven, Harry, Jr., "A Stopgap Plan for Compensating Auto Accident Vic tims," 547 Insurance L. J. 661 (August 1968); Pretze, Paul W., "The Adversary System is Challenged," 547 Insurance L. J. 671 (Aug. 1968); and Logan, Ben H., "Insure the Driver," 547 Insurance L. J. 682 (Aug. 1968). This list is neither comprehensive nor exhaustive; it is in tended to display several points of de parture which, together with the specific citations herein, will provide an over view of the issues raised and answers offered. 10 See, e.g., von Mises, Ludwig, Hu man Action (3d rev. ed., Henry Regnery Company, 1966) passim. 11 See my article, Note 1, op. cit.; see also Foley, Ridgway K., Jr., "The Ra tionale for Liberty" 23 Freeman No.4, 1973 NO-FAULT INSURANCE MEANS NO MORAL RESPONSIBILITY 505 222-229 (April 1973), wherein these premises are discussed and amplified.

12 See, e.g., "American Insurance As sociation Proposes No-Fault Auto Cov erages," 69 Best's Insurance News (Property-Liability Edition No.8) 10 et. seq. (December 1968). Compare, Kem per, James S., Jr., "Automobile Insur ance: The Politics of Surrender" (Kem per Institute Reports 1968) and Wise, Paul S., "Automobile Insurance: Which Road Toward Reform?" (American Mu tual Insurance Alliance 1968). 13 See particularly, Barmach and Payne, "The Lackland Accident Counter measures Experiment," Accident Re search 665 (1964, Haddon, et al), and the California Department of Motor Vehicles 1965 "Report on the Relationship be tween Concurrent Accidents and Cita tions." Compare Brainard, "The Psycho logical Aspects of Highway Safety," Trial 55 (Aug.jSeptember 1968). 14 See, 2 Harper & James, The Law of Torts, 752, et seq., § 12.4; see also, James, op. cit., Note 8 at p. 397. 15 These reveries might be challenged as to breadth of study, form of inquiry, and mode of analysis. The potential of statistical error and the chance of misin terpretation of empirical data always be sets this character of undertaking. The problem of the inherent research bias is considered in Hold, William T., "Critique of Basic Protection for the Traffic Vic tim - The Keeton-O'Connell Proposal,"

541 Insurance Law Journal 73, 80 (Feb. 1968) . 16 This admission is far removed from a capitulation on the fundamental issue of fault versus liability without fault, since the limitations inhere primarily in the "deterrence" aspect of the problem. Even absent a deterrent effect, the fault doctrine is justified on other bases not subject to these shortcomings. See Sec tion 3 and Note 8, supra. 17See, e.g., Prosser, Torts (3d ed 1964) p. 1, et seq., § 1. 18 See Flemming, John G., "The Role of Negligence in Modern Tort Law," 53 Va. L. Rev. 815, 849 (1967). 19 Comment, "Loss-Shifting and Quasi Negligence: A New Interpretation of the Palsgraf Case," 8 U. Chi. L. Rev. 729 (1941) . 20 Brainard, Calvin H., "A No-Fault Catechism: Ten Basic Questions Raised and Answered," 583 Insurance Law Jour nal 317, 318 (June 1972), points out that no-fault really is first-party coverage, an ancient concept. Of course, it loses much flavor when the state mandates the par ticular insurance plan.

21 Note the assumptions and the calcu lated use of the emotive term. 22 A cursory attempt (in slightly dif ferent context) to expose the specious thinking underlying this concept appears in Foley, Ridgway K., Jr., "A Survey of the Maritime Doctrine of Seaworthiness," 46 Or. L. Rev. 369, particularly 397-399, 419-420 (1967). 23 See Note 20, op. cit. 24 Perhaps the pertinent question is, what will the looters do when there is no one left to loot? 25 See general studies in Note 13, supra. Part of the underlying attack lev ied against the existent system is a tacit or explicit belief that "fault" is an "im possible" concept. If the critics are cor rect, then the precept should be discarded but if it is merely difficult of application, then by all means let us retain fault and labor to improve our system. Fault is alive and well. As found by arbitrators (judges or juries acting as fact-finders), fault is a community value judgment as to the propriety or impro priety of conduct and evaluation of the loss caused A by B for which B should recompense A.

26 See Williams, Glanville, "The Aims of the Law of Tort," 4 Current Leg. Prob. 137, 150 (1951). 27 Witness the proliferation of prosti tution and gambling. 28 Blum, Walter T. and Kalven, Harry, Jr., "Public Law Perspectives on a Pri vate Law Problem." 31 U. Chi. L. Rev. 641, 646 (1964); Blum, Walter T. and 506 THE FREEMAN August Kalven, Harry, Jr., "The Empty Cabinet of Dr. Calabresi," 34 U. Chi. L. Rev. 239, 270 (1967). 29 See Notes 14 and 15, supra, and ac companying text. 30 Some of the fuzzy thinking pene trating this position and obscuring realty is discussed, supra, Section 7. See Also Note 20, op. cit. 31 See 2 Harper & James, The Law of Torts, 729 et seq., § 11, et seq. 32 I b'id., at page 734. 33 An excellent example of an uncon gested court in a metropolitan area is Multnomah County, Oregon, serving a metropolitan population approximating 1 million persons. The average lapse be tween filing of the complaint and trial date approximates 4 to 5 months in the court of general jurisdiction; the federal district court in this district is likewise current. In fact, our federal judges are frequen tly called to other parts of the country to bring their dockets current.

Perhaps there would be less court con gestion if bench and bar worked together to alleviate the true causes thereof. The "court congestion" assertion has been overstated; automobile accident liti gation has not increased apace with the urbanization of society. Defense counsel have gathered statistics derogating the argument to its rightful place in the juridical ash heap. See, e.g., statistics collected by the Oregon Association of Defense Counsel. 34 Ibid., § 11.4. 35 Ibid., Footnote 35 (pp. 741...742) summarizes an interesting exchange be tween Professor Jaffe and Professor J ames on the moral aspect of James' po sition. Prosser does not go into the detail found in Harper & James; he baldly as serts: "The idea of punishment, or of discour aging other offenses, usually does not enter into tort law, except insofar as it may lead the courts to weight the scales somewhat in favor of the plaintiff's· in terest in determining that a tort has been committed in the first place. * * *."

Prosser, Torts (3d ed) 9 § 2. In discussing the factors which affect tort liability, ibid. 16, et seq., § 4, Prosser does examine the moral aspect of the de fendant's conduct and speaks in terms of prevention and punishment. He defers to Glanville Williams on the subject of de terrence.Ibid. p. 23, n. 73 (see, infra). 36 See, e.g., Flemming James, Jr., "An Evaluation of the Fault Concept" 32 Tenn. L. Rev. at 394 (1965). See note 4, supra. 37 Ibid., 32 Tenn. L. Rev. at 395-396. 38 Ibid., at 397. 39 Ibid., at 396. 40 Ibid., at 395-396. 41 The writer believes the untoward extension of vicarious liability (liability of A for consequences of B's acts) is poorly conceived, but defense or attack on that system exceeds the scope of this article. 42 John G. Flemming, "The Role of Negligence in Modern Tort Law," 53 Va. L. Rev. 815, 825 et seq. (1967) Professor Robert C. Cranston (University of Mich igan Law School) suggests that the strongest deterrent effects of civil liabil ity are discernible in the operation of the automobile insurance system.

43 Gp. cit., Note 35, supra, at 400; see also Calabresi, op. cit., passim,. see Sec tion 7, supra. 44 See Flemming, op. cit., Note 42 at 822. 45 See, e.g., Flemming, op. cit. Note 42 at 832. 46 Calabresi, 78 Harv. L. Rev. 713 et seq. See Robert E. Keeton "Is There a Place for Negligence in Modern Tort Law?" 53 V. L. Rev. 886, 888 et seq. (1967). 47 See, e.g., Keeton, ibid., 890 et seq. 48 Williams, Glanville "The Aims of the Law of Tort," supra,4 Current Leg. Prob. 137 (1951). 49 Ibid., at 146. 50 Ibid., at 149. The assertion is ac cepted as valid, arguendo. The causal re lationship between Factory Acts and im proved safety practices may not be ac curate.

A REVIEWER'S NOTEBOOK I STARTED reading Leonard Read's Who's Listening? (Foundation for Economic Education, $4.00 cloth, $2.50 paper) in the middle of the Watergate uproar, when any men tion of listening suggested tele phones, not face-to-face conversa tion. Watergate was, of course, a seeming irrelevance, but could I help it that Mr. Read got me to thinking about it in the light of what he calls the "freedom philos ophy"? Suddenly, while meditat ing on Mr. Read's formulation of a Law of Readiness, it popped in to my quite ready mind that a tapped telephone is an adulterated good, an interference with free market choice that is all the worse when government, whose agents should be· busy protecting the con sumers of telephone service against crooks who would invade their privacy, is the prime culprit in the tapping. It is this sort of illumination that Mr. Read provokes. He would JOHN CHAMBERLAIN I be the first to admit that he stands on the shoulders of Adam Smith, Frederic Bastiat, Carl Menger and other great economic thinkers of the past, but he performs his own unique role in moving the thinking of his intellectual heroes beyond economics into general philosophy.

Take the Read Law of Readi ness, for example. He disclaims that the discovery of the Law is original with him. And, indeed, the Law is implicit in Bastiat's famous passage about the ability of the principle of free exchange to supply a million people in Paris with the necessities and amenities of life without anybody planning and directing everything from a central conning tower. Bastiat talks about "this secret power" that brings supply and demand in to a relationship without arbitrary decision by bureaucrats or elected officials. He marvels that the light of self-interest, when left free of 507 508 THE FREEMAN August hindrance, could bring what is necessary each day to a gigantic market without either choking it or leaving it undersupplied. A mysterious Law of Readiness seemed to be at work, although Bastiat didn't frame it quite that way. It is Leonard Read who has given the law its proper name.

Like the Law of Gravity, it can be worked with without being quit~ understood. Readiness comes from a condition of inner and outer freedom. It might be phrased as the Law of Openness. If nobody stands in the way, someone, some where, will spring into action to satisfy a want. This is fundamen tal to understanding economic ac ion. But, as Read defines his Law of Readiness, it is also fundamen tal to the flow of ideas from mind to mind. Persons Not Vilified It is precisely because he is so certain that his ideas will reach others who are ready for them that Mr. Read preserves his al most preternatural calm. Read will attack the generality of men who want to lord it over others, but he doesn't single out any particular individual as a rascal. He attacks "flight plans" that depend on co ercion somewhere down the line, such as taxing our grandchildren to pay for our own contemporary frivolities, but he doesn't name the coercers. He doesn't. deride or vilify. Partly his method derives from his habit of humility, but there is more to it than that. He finds that anger or belittling gets peopleJs backs up. They flare out in self-defense - and in doing that they cease to listen. The Law of Readiness does not work for a man who has been hurt or embit tered by a jibe or a nasty epithet.

Since he believes that Society is comprised of "I's" and You's," Mr. Read doesn't believe theTe is such a thing as "social" justice. Justice can't be rendered to class es or groups in general, but only to each person in particular. "To each his own." It cannot be called justice to the individual if a man's substance is to be seized to pass on to other individuals who de mand rights as a "class." "Social justice" involves depriving others to gain one's own ends. It depends on legalized plunder. Organized Thievery So Mr. Read, without ever at tacking the Department of Health, Education and Welfare, gets his point across that welfare is organ ized thievery. In 1971 the Federal government spent $92 billion on "social welfare." This had nothing to do with private or voluntary charity; it was $92 billion taken out of the hides of people by the compulsion of taxation or the 1973 WHO'S LISTENING? 509 cheating involved in inflation. The believers in social welfare and so cial justice would argue· that mod ern complexities require coercive redistribution of wealth, but the world was just about as "modern"

in 1960 as it is now. How does one explain, then, our population could get along on $24 billion in "social welfare" in 1960 as compared to $92 billion in 1971? Social welfare expenditures are actually twenty nine times as high in dollar fig ures today as thirty-six years ago. Adj usted for the decline in the dollar's purchasing power, the fig ure would show only a sixfold in crease. The need to make such an adjustment is ill; itself a criticism of our policies. Mr. Read does not make a direct correlation between the rise in welfare expenditures and the debasement of the curren cy, but he hints at the connection when he says that if the trend in expenditures continues the dollar, sooner or later, will become worth less. And then what will HEW be able to use for money? One wishes, somewhat forlornly, that our politicians would ponder the Read Law of Readiness. Here we are on the brink of an energy shortage that has everybody yell ing for the government to do something! The trouble is that government has already done too much. It has controlled the price of natural gas, thus discouraging investment that might have gone into discovery and exploitation of new sources. It has frowned on oil imports, with the result that we have no deep-water unloading arrangements for the big new tankers. It has permitted a stupid law to keep oil' companies from building a trans-Alaska pipeline that would cut our dependence on Arab oil in half. It has not per mitted the construction of atomic energy plants. It has let the ecolo gists run rampant, forcing envi ronmental protection laws that have doubled the consumption of gas in the newest cars without really helping the atmosphere. (If you burn more gas, you auto matically get more pollution.) What Might Have Been If the Law of Readiness had been allowed to operate, plants and pipelines would have been built, spigots for deep-water tank ers would have been placed twenty miles offshore with connecting pipes running to new refineries on the mainland, and the Alaskan pipeline would have been in opera tion a couple, of years ago. Mean while, if the environment had suf fered, we would have learned something about cleaning it up.

The entrepreneurs were ready to dig up the necessary capital for new ventures, and the customers were waiting for cheaper prices.

510 THE FREEMAN August But, alas, our negative attitude brought the crisis upon ourselves. We can blame the politicians, and they should be blamed for not hav ing any sensei of statesmanship. But we should also blame our selves for electing them to office in the first place, and for not solv ing our problems without running to government. Leonard Read's book invites hundreds of applications of its basic thinking to contemporary problems. Mr. Read does not be lieve in singling out and scolding people who may be presumed re sponsible for creating the prob lems, but he surely can't object to analysis that might cause an oc casional villain to identify himself as such. When he likens the "pro moters" of such public works as The Gateway Arch, Urban Renew al, or moonshots" to the "mon archs of ancient Egypt," who used "slave labor" to build the pyra mids, he may not be naming names. But some people are sure to recognize themselves as the in dicated Pharoahs, which could be the beginning of wisdom for them.

~ THE RISE OF RADICALISM by Eugene Methvin (New Rochelle, New York: Arlington House, 1973) 584 pp., $11.95 Reviewed by: Allan C. Brownfeld FOR TOO LONG we have tended to group political philosophies and movements on a scale running from right to left; Communism on the outer fringe of the left with Nazism and Fascism at the ex treme right. The fact is that these move ments have far more in common than they do in disagreement. All three - Communism, Nazism, and Fascism - believe that it is possi ble for man, whom they hold to be perfectible, to create a perfect world. All three oppose the concept of God, or a force beyond man, and place man in the ultimate position of Creator. Since man is perfectible and man is also a God, there is no reason why a heaven on earth cannot be created. In what can only be described as an encyclopedic review of radi cal movements from the incep tion of the progenitor of them all, the French Revolution, until to day, Eugene Methvin, a member of the editorial staff of The Reader's Digest and a close observer of the subject about which he has writ ten, places these movements in the perspective of history and traces them to their philosophical root.

1973 OTHER BOOKS 511 Discussing the utopian fallacy which underlies modern radical ism, Methvin points out that, "Man has created centaurs, unicorns, satyrs, and mermaids - but he has never seen. one. And he has cre ated the post-revolutionary utopia. But he has never seen one of those either. Yet in its nnme he hns committed horrendous crimes." The radical - from Robespierre, to Lenin, to Hitler, to the variety at work today - sets out to de stroy the existing world order and remake it to his own plan. "If hu manity does not conform," the author points out, "then so much the worse for humanity - he will crush it ... This breed of radical turns all men into puppets for his own pleasure and gratification. And like all burners of heretics, he will destroy any sovereign .soul who dares breathe free." Compulsive utopians, when they get serious about politics, inevit ably deal with reality the way Procrustes, the legendary cruel robber-giant of Attica dealt with his victims. Procrustes would lure travelers to his home and when they would lie down on his bed, he lopped off as much of their limbs as was required to make their length equal that of his bed; or if they were too short, he stretched them. Hence, the word "procrus tean" has come to stand for the trait of reducing events of reality to fit preconceived forms of force or mutilation.

The Fascist and Nazi move ments which came to power in Italy and Germany came from per cisely the same radical root as did the Communist movement which gained power in the Soviet Union - and shared the same hostility to capitalism and to the concept of private property. Methvin notes that Mussolini, at the time of his switch from the Italian Socialist Party in 1914, "... was backing up to the point from which Karl Marx departed in the fall of 1843 when, as a young messianic phi losopher . . . he decided 'the pro letariat' would be the horse the intellectual could ride to glory. Mussolini, from the same point, decided that the 20th century re quired a revaluation and new con clusion: the revolutionary radical must ride the nationalist masses and build nationalist 'conscious ness' - instead. Again, no change in objectives, merely in propa ganda, myths and slogans. He simply substituted the myth of national solidarity for the myth of proletarian solidarity."

Mussolini made· a virtue of hav ing no program. Throughout his ascent to power, he experimented with slogans, always seeking the combination that would work. Ac cording to the author, "He fore shadowed the American SDS radi512 THE FREEMAN August cal Mark Rudd's famous 1968 an swer: 'First we will make a revo lution; then we will find out what for'." Mussolini in 1922 answered "Our program is simple: we wish to govern Italy. They ask us for programs, but there are already too many. It is not programs that are wanting for the salvation of Italy, but men and will power." The appeal used by Hitler in Germany was similar. "Hitler," notes Methvin, "used the slogan 'the broad masses' as frequently as orthodox Marxists referred to 'the working class.' This was his target audience - the same as Lenin defined in his basic works on propaganda and organization: 'All classes, every droplet of dis content.' "

Hitler and the Communists felt an affinity because, like them, he was a revolutionary. Methvin notes that, "No self-styled 'leftist' would have trouble accepting his views of revolution." The two revolu tionary movements - Communism and Nazism - drew on the same reservoirs of recruits. Reminiscing in 1941, Hitler recalled the famed Coburg street fight of Oc tober, 1922 in which he and 800 storm troopers routed the Com munists: "Later on the Reds we had beaten up became our best supporters. When' the Falange im prisons its opponents, it's commit ting the gravest of faults. Wasn't my party at the time of which I'm speaking composed of 90 per cent leftwing elements?" "There is more that binds us to Bolshevism," Hi tIer declared, "than separates us from it. There is, above all, revolutionary feeling . . . The petit bourgeois Social Democrat and the trade-union boss will never be a National Socialist, but the Communist always will."

For both Nazism and Commu nism, it was the "bourgeoisie" which constituted the enemy. Those who believe the roots of so called "left" and "right" wing rev olutionary movements are anti thetical would do well to read Eu gene Methvin's book. They would learn a far different story. ~ the Freeman VOL. 23, NO.9. SEPTEMBER 1973 No Shortage of Gold Hans F. Sennholz 515 When money is politically managed instead of market-determined, the result is inflation and economic chaos. Down with NationalPriorities Let each pursue happiness in his own way at his own risk. Arthur S. Mode 523 Portraitof an Evil Man The world-impact of Karl Marx and his message. Erik von Kuehnelt-Leddihn 525 Hobson'sChoice Edward Y. Breese 533 Not the head politician but the individual citizen determines the nature of the economy and body politic. Th'e Limits of Credulity Roger Donway 537 An analysis of the dilemma of revisionist historians in their attempt to justify postwar foreign policy.