An Ancient Fable Retold; W. A. Paton

He is author (or co-author) of a score of books and many articles, largely in the field of ac counting. Since his retirement at Michigan, he has continued his writing and lecturing activ ities and has done part-time teaching at a doz en colleges and universities, in ten states. 150 version of the fable as I heard it, sixty-odd years ago, it may be permissible to retell it, particularly for the purpose of expressing the moral to be drawn and applying it to current conditions in our col lege and university classrooms. The Fable Way back in the heyday of the Persian Empire one of the ancient rulers developed a keen desire to learn more about economic activity in his far-flung realm. He knew that many kinds of farm products and other goods were transported for long distances to the capital and other central markets, but he realized that in his palace isola tion, surrounded and waited upon 1976 AN ANCIENT FABLE RETOLD 151 by a host of servants and retain ers, he was cut off from the proc esses of production and exchange and knew nothing about the under lying factors that stimulated and guided those engaged in these basic activities. He made inquiries among his generals and other offi cials with whom he had contacts, and even consulted leading astrol ogers and soothsayers, but found no one in these groups who could enlighten him. Carefully disguised, he attended some classes taught by professors of philosophy and re lated subjects, but to him their lectures were boring and confus ing. What he wanted was a down to-earth, common-sense outline of fundamentals, not a lot of mystic jargon.

Finally, discouraged and irri tated, he drafted a proclamation, and had it distributed in printed form throughout the empire, in which he promised a royal office, and one of his beautiful daughters in marriage, to the man who would provide him with a simple, under standable statement, in writing. (In those days it was unthinkable that any female would undertake such an assignment.) But the proclamation also specified that anyone making the attempt, and failing, in the emperor's judgment, would be promptly executed by beheading. Nine months passed, and then a teacher from the top school at the capital showed up with a two volume study which he had pre pared with great care, after much pondering and stargazing. The em peror scanned a page or two and then - in a fury - threw the books at the author and ordered him to the block forthwith. Perhaps the fact that he had listened, in dis guise, to two of this man's lec tures, had a bearing on his very speedy and unfavorable decision.

The summary execution of a leading scholar and teacher was not announced by the palace, but the news leaked out and naturally cast a chill ·over possible candi dates for royal honor and a prin cess to boot. Several years went by and the proclamation had been generally forgotten, and was no longer a rnatter of special concern to the ruler himself - although he may have been a bit disappointed that only one of the empire's pro fessors had lost his head. Then a wandering magician and juggler, from a far country, ran across a copy of the old proclamation in one of the provinces and some weeks later showed up at the palace, ask ing for an audience with the em peror. He said he had come to try his skill at providing the essence of economics in a brief and plain statement. He also admitted that he was well aware of the risk he was running. The audience was shortly 152 THE FREEMAN March gran ted, and after making a very graceful obeisance before the throne the mountebank handed the emperor a slip of paper on which he had written - translated into modern English - "There is no such thing as a free lunch". The ruler happened to be in a good mood. He read the statement a couple of times, started chuckling, and finally laughed heartily. He jumped down from his dais, lifted the kneeling visitor to his feet, ordered a purple robe for him, and in due course, and with appropri ate ceremony, made him governor of a province and saw to it that he was married to his youngest daughter.

The Moral More than nine words are needed .to lay even a preliminary foundation for the serious study of modern economic activity, but still the adage provided by the old fable points the way. In launching the introductory course in economics we should get down to earth, stress the underlying problems and diffi culties encountered by human beings, at any stage of develop ment, and regardless of social ar rangements and organization, in their efforts to "make a living" on this rugged planet. For this pur pose there is merit in giving some attention - at the onset - to the primitive situation, where the consumer is largely his own producer, and is brought face to face with requirements and limitations. And there are still groups in this world eking out an existence under very primitive conditions. Even the old Robinson Crusoe approach need not be disdained. What is needed is a primer of fifteen or twenty pages to sup plement the main textbook which starts out with the fundamental truism of economics : We can not consume what we do not produce, an adaptation of the message the mountebank brought to the em peror long ago, according to the fable - also nine words. This un deniable fact of economic life is particularly appropriate for Amer ican students, as it's quite obvious that no foreign nation is going to play Santa Claus to the United States. Overall, we must look after ourselves. The teacher at this stage might also mention the old saying among our farmers: The horse can't drink without water in the trough. The family-size farm is no longer a major economic institu tion, and the tractor has largely replaced the horse, but even the city boys and girls of these days will get the point, and have their interest aroused.

Of course this is only a bare start - the lesson for the first class session. But it pushes the door of understanding ajar. It 1976 AN ANCIENT FABLE RETOLD 153 brings to light the fact that pro duction is the primary economic process, on which consuming is totally dependent, and thus stresses the need for efficiency in productive methods and utiliza tions of available resources. It also raises a warning hand with re spect to the danger of becoming unduly preoccupied with the forci ble redistribution of output, with out regard to the possible unfavor able impact on the volume of out put, and resulting per-capita stan dard of living. Then the more difficult questions can be tackled. How do we define production and "economic" goods, in the light of the varying atti tudes and desires of consumers? Sooner or later the question of nonproductive activity must be faced up to. At an early stage at tention must be given to the prob lem of identifying the basic fac tors of production, including the role of the saver, the fund pro vider. Resort to the primitive situ ation may be helpful here, with· a return to this subject later in the course. With a foundation laid the examina tion of the modern ind us trial economy can begin, with its advanced technology, high degree of specialization, network of mar kets, complex of monetary and financial facilities, corporate and other institutional arrangements, with an end result in the form of an astonishing array of consumer commodities and services (includ ing durables).

Stifled by Socialism In trying to characterize the present system briefly, above, I didn't mention government. But in the serious study of the system I see no point in giving lip service to the idea that we still have a "free enterprise", "free-market" system, although this posture is popular in some circles. The plain fact is that we are living in a quasisocialistic economy. The proc esses of production and exchange are being carried on under the weight of a bewildering, overlap ping array of bureaucratic inter ferences and controls. I'm among those who .firmly believe that both historical and current experience demonstrates that the competitive free market is the most effective and equitable instrument that mankind has discovered as a means of allocating productive re sources and awarding shares in output. Assuming this position to be sound it still doesn't follow that today's teacher should close his eyes and those of his students to the conditions actually prevailing.

Quite the contrary. A clear under standing of the current situation, built on a background of recogni tionof fundamentals (as I'm rec ommending), is necessary to form154 THE FREEMAN Ma,rch ing an intelligent judgment on the crucial question: Where should we go from here? My observation is limited but I believe I am justified in suggest ing that the approach in teaching the introductory course in eco nomics often fails to include ade quate emphasis on elementary, fundamental considerations. As I see the situation today's teachers often plunge too quickly into the complexities of 'the present system. They are often unduly enamored with statistics of "gross national product" and other aggregates, and rely heavily on mathematical models. Many instructors are so cialistically inclined these days, to begin with, and their methods of teaching tend to reinforce this inclina tion. I'm not personally optimistic that there will be an early abate ment of the tide of sheer economic nonsense from which we are suf fering, or that our advance toward complete collectivism will soon be checked. But I would see a ray of hope if there were some modifica tion of the teaching of elementary economics, especially in the col leges and universities, in the direc tion I have tried to indicate. Our educators have a great impact on the minds of their students, and these young people will soon be running the show. ~ Reprints of this article available, 5 cents each.

Robbed for Their Own Benefit IDEAS ON LIBERTY EVER SINCE THE ADVENT of representative government placed the ultimate power to direct the administration of public affairs in the hands of the people, the primary instrument by which the few have managed to plunder the many has been the sophistry that persuades the victims that they are being robbed for their own benefit. The public has been despoiled of a great part of its wealth and has been induced to give up more and more of its freedom of choice because it is unable to detect the error in the delusive soph isms by which protectionist demagogues, national socialists, and proponents of government planning exploit its gullibility and its ignorance of economics. ARTHUR GODDARD, from the preface to Economic Sophisms by Bastiat.