November

Socialist Games Kenneth McDonald 660 Cutting it into "fair shares" diminishes the pie. Unbinding Prometheus: Productivity through Morality William H. Peterson 662 How can we release productivity from the snarls of the welfare state? Supply Side Economics: Miracle Cure or More of the Same? Robert G. Anderson 673 A new approach that could free us from excessive government in tervention. Government Empowers Unions Clarence B. Carson 677 How governmental powers of coercion were vested in unions-with harmful consequences. Against All Enemies, Part III Robert Bearce 690 A call for the better practice of freedom in the United States within the framework of the Constitution. Book Reviews: 698 "Planning for Freedom" by Ludwig von Mises "The Gold Clause: What It Is and How to Use It Profitably" edited by Henry Mark Holzer "Farm and Food Policy, Issues of the 1980s" by Don Paarlberg "Those Gasoline Lines and How They Got There" by H. A. Merklein and William P. Murchison, Jr.

Anyone wishing to communicate with authors may send first-class mail in care of THE FREEMAN for forwarding.

FOUNDATION FOR ECONOMIC EDUCATION Irvington-on-Hudson, N.Y. 10533 Tel: (914) 591-7230 Leonard E. Read, President Manag'ing Editor: Paul L. Poirot Production Editor: Beth A. Hoffman Contributing Editors: Robert G. Anderson Bettina Bien Greaves Edmund A. Opitz (Book Reviews) Roger Ream Brian Summers THE FREEMAN is published monthly by the Foundation for Economic Education, Inc., a non political, nonprofit, educational champion of pri vate property, the free market, the profit and ioss system, and limited government. The costs of Foundation projects and services are met through donations. Total expenses aver age $18.00 a year per person on the mailing list. Donations are invited in any amount. THE FREEMAN is available to any interested person in the United States for the asking. For foreign delivery, a donation is required sufficient to cover direct mailing cost of $5.00 a year. Copyright, 1980. The Foundation for Economic Education, Inc. Printed in U.S.A.

Additional copies, postpaid: 3 for $1.00; 10 or more, 25 cents each. THE FREEMAN is available on microfilm from University Microfilms International, 300 North Zeeb Road, Ann Arbor, Mich. 48106. Some articles available as reprints at cost; state quantity desired. Permission granted to reprint any article from this issue, with appropriate credit except "Socialist Games" and "Government Empowers Unions."

the Government the Market and thePoor David Osterfeld WHEN one argues that the govern ment has become too large and ought to be reduced inevitably the first question that comes to the minds of most people is: what would happen to the poor? This is certainly a legit imate question. What would be the condition of the poor if all govern ment ttpoverty" programs were abol ished? An accurate assessment of the im pact of such a change in policy can best be obtained by dividing this broad question into two parts: (1) what is the· actual impact on the poor of existing government policies and (2) what would be the probable impact of a program of laissez-faire? This paper will attempt to deal with both of these questions. Dr. Oaterfead is Assistant Professor of Political Sci ence, St. Joseph's College, Rensselaer, Indiana. Part I: The Government and the Poor 1. The "Ideal" Model: The Way Government Is Supposed to Work In the area of the market econ omy, or the ttprivate arena," we are constantly told, the proper concern of the individual is with satisfying his own personal needs. Thus, in the economic arena the individual is as sumed to behave egotistically in order to maximize his individual utility. In contrast, since the proper concern of government and politics, or the ttpublic arena," is the well being of the entire society, individ uals in this arena are assumed (or perhaps ttsupposed" is a better word) to act altruistically. Politicians and government bureaucrats are no~ 643 644 THE FREEMAN November concerned so much with maximiz ing their own personal utilities but with maximizing ffsocial utility," Le., with pursuing something called the ((public good."! Thus, the individual is divided, as it were, into two parts: the egotistical, which is given free rein in the private, or market, arena, and the altruistic, which dominates the public or governmental arena.

The ramifications of this ((ideal" model for analyzing the politico-eco nomic world are significant. In the competitive struggle that prevails in the open market between egotis-· tically-motivated individuals, the economically strong, Le., the wealthy, the well-educated, the cun ning, and the unscrupulous, emerge as the victors, while the weak, Le., the physically and mentally handi capped, ethnic minorities, the un and under-educated, and the poor in general, are piteously ground un derfoot. But since individual behav ior in the governmental sphere is assumed to be altruistic, an impor tant function of the government be comes that of helping the casualties of the economic conflict by adopting policies, sometimes referred to as the ((bucket" method of eliminating poverty, which transfer wealth from the economic winners to the eco nomic victims. Thus, according to the ((ideal" model, while the egotis tical behavior of the individual in the private, economic sphere creates poverty among the weak, the altruistic behavior of individuals in the public sphere serves to eliminate, or at least ameliorate, it.

2. The Problem: Assumptions about Individual Behavior The fatal flaw in the foregoing model lies in the assumption that while individual behavior in the pri vate arena is egotistical, that in the public sphere is altruistic. Regard less of how one believes that individ uals ought to act, there is no reason to suppose that individuals actually compartmentalize their lives after the fashion of the ((ideal" model. True, individual behavior is always a combination of egoism and altru ism, with the particular ((mix" of each not only varying from individ ual to individual but within the same individual over time. But it is unwarranted to assume that indi viduals act altruistically in one realm and egotistically in the other. Surely, individuals can, and do, behave ((altruistically" in the pri vate arena, as is demonstrated by any voluntary contribution to a charitable cause. And just as surely, and far more importantly, individu als can, and do, behave ((egotisti cally" in the public sector. Aside from the daily revelations of the scandal ous behavior of many of those in the public arena-Watergate, Korea gate, Abscam, etc.-one has simply to note, after all, that to get elected a politician must try to convince a 1980 THE GOVERNMENT, THE MARKET AND THE POOR 645 majority of the voters that more benefits will accrue to them from his election than from the election of his opponent. One may, as a Plato, or a Rousseau, adopt the moral pos ture of condemning such ttegotisti cal" behavior as unsuitable for the ttpuplic arena," but it is scarcely deniable that such behavior is no less prevalent in the public than the private arena. "

The recognition that ((egotistical" behavior exists in both arenas en tails an entirely different way of viewing government which, as we shall see, has significant ramifica tions for the ((ideal"perspective. According to this alternative per spective, which Professor James Buchanan has termed the ((logical" or ttindividualist" model,2 there ex ists no such thing as Uthe public in terest." In fact, government, as such, has no ttgoals." Individuals and only individuals possess goals, which may run the gamut from purely selfish to purely altruistic. And just as the market is an instrument which the participants use to attain their goals, so government is viewed as an in strument which the participants in the political process try to use to their own benefit. The critical question then be comes not, as in the ttidealist" model, which type of behavior, egotistical or altruistic, or which type of goals, individual or social utility, ought to take precedence, but which instrument, the market or government, can best, or most efficiently, satisfy the needs and wants of the members of society. Economic tools, in other words, are brought to bear on the political process. 3 3. The "Logical" Model: The Way Government Actually Works The first thing to be noted in de veloping an alternative view of gov ernment is the fundamental differ ence between government and the market. The market is nothing more than the nexus of exchanges. Force is absent. Not only can anyone offer to make an exchange, anyone can refuse any offer. This means that for any exchange to occur, each party must value what he obtains in the exchange more highly than what he gives up. Thus market or voluntary exchange must, ipso facto, entail benefit to both parties.

In contrast, government is pre cisely that agency in society which claims a monopoly on the use of force. This unique position of gov ernment means that while it does not, in fact cannot, create wealth its monopoly on the use of force can be used to transfer wealth from .one group to another. It is this aspect of government which makes it a poten tially valuable instrument for any group or groups that can obtain con trol of it. An important question is: who is likely to obtain control? (a) The Process of Politics. Even 646 THE FREEMAN November though based on different assump tions regarding individual behavior it might seem that the results of the ((logical"model would be identical to those expected by the ((idear' model. Democracy means rule by the ma jority. And if those who are rela tively poor are in a majority they should be in a position to benefit themselves by seeing to it that the government adopts and follows a policy of transferring wealth from the relatively rich to the relatively poor.

Reality, however, is far more com plex. To understand the flaw in the foregoing we must look a little more closely at the concept of ((majority rule." There is, in fact, no such thing as ((the majority." Rather, each indi vidual has various interests which he desires to see protected and fur thered. Since single individuals sel dom have much influence in the po litical process, those individuals who possess the same or similar inter ests tend to join together to form in terest groups, such as the Nation al Association of Manufacturers (NAM), the AFL-CIO, the National Organization for Women (NOW), etc. The purpose or goal of the interest group is, of course, to advance the interests of its members. This can be done in any number of ways but one of the chief means is by influencing government policy. Thus, labor groups like the AFL-CIO desire such things as increases in the minimum wage, closed or union shops, or a na tional health care program; busi ness groups, like the NAM, the Fatty Acid Producers Council, or the Un derwear Negligee Association, gen erally push for such things as sub sidies or licensing restrictions to shield themselves from domestic competition and tariffs to protect themselves from foreign competi tion, although it must be borne in mind that ((business" is not monolithic. Department stores like Sears benefit from the lower prices that foreign competition brings and therefore oppose tariffs while such industries as clothing and TV man ufacturers are hurt by such compe tition and therefore favor tariffs. 4 If a primary goal of an interest group is to influence government policy one would quite naturally ex pect that they would endorse only those politicians who promise to support their demands. It can be seen that there is no such thing as ((the majority" to which a politician must appeal to be elected. Rather, the goal of the politician is to pledge his support for the demands of enough interest groups to create a coalition of groups totaling a major ity of the voters in an election.:> (b) Who Influences Govern ment? We are now in a position to answer the question: who is most likely to influence or even control government? Superficially, it still might seem that since the relatively 1980 THE GOVERNMENT, THE MARKET AND THE POOR 647 poor would be a fairly large group which politicians could not· afford to ignore, the result of interest group politics would be the governmental transfer of wealth from the wealth ier segments of society to the poorer.

The data, however, belie this as sumption. While it is no doubt true that some government programs do benefit some groups of poor, nearly all studies indicate that the poor as a whole do not benefit. Although the federal income tax appears on the surface to be pro gressive, much of this progressivity is eliminated by loopholes. And when this is combined with the regressive nature of most state and local taxes, the. overall effect is that the tax bur den is ((essentially proportional for the vast majority of families."6 But government revenues are only half of the story; there are also govern ment expenditures. The venerable John Calhoun rec ognized long ago that what is cru cial is not solely what one pays in taxes but what one pays in taxes rel ative to the government benefits one receives. And he also realized that if some groups are net tax benefici aries, other groups must be net tax losers.7 This means that while all in come groups pay approximately the same percent of their income in taxes, the poor could still be consid ered gainers from the political pro cess if the benefits they received from government exceeded the taxes they paid to it. While the evidence is somewhat mixed, .this seems un likely.

When one considers the direct ef fect of such programs as subsidies to businesses, and the indirect effect in terms of higher prices, of such poli cies as tariffs and licensing restric tions, it is likely that the overall im pact of government policies is a slight transfer of wealth from the less well off to the better off. As a dramatic illustration, economist Walter Williams has determined that $250 billion is spent annually at all levels of government simply to Ufight poverty." Now, if all of this were divided equally among those families with incomes below the poverty line, each poor family would receive a yearly stipend of $34,000.8 Of course very little of this ever reaches the poor. Most of it gets eaten up in bureaucratic overhead or siphoned off by private contrac tors. 9 The ((bucket" is clearly very leaky. In brief, far from showing that government helps the poor, the evi dence indicates the opposite: the poor tend to be the net losers in the polit ical process. The significant ques tion is: why are the less well off, who would appear to be a potentially powerful interest group, unable to exercise any effective control over government policy? Two related principles of the ((logical"model ex plain this seeming paradox rather 648 THE FREEMAN November well: the ((IronTriangle" and ((Olson's Law."

(c) The "Iron Triangle." Political scientist, Theodore Lowi, has pointed out 10 that if a particular interest group desires a particular policy it goes, not to Congress as a whole, but to the Congressional committee or subcommittee with jurisdiction over this policy area. Since it is normal for Congressmen to be placed on committees that deal with the con cerns of their districts, those repre senting farming districts get on the Agricultural Committee, those rep resenting districts or states that are primarily urban desire to be placed on, say, the Banking, Housing and Urban Affairs Committee, etc. This, of course, makes the committee quite sympathetic to the concerns of the interest groups that appear before them, and it is common for the Com mittee to deal with a particular con cern simply by adopting the policy recommended by the interest group and then instructing the bureau cratic agency to carry it out.

Typically, the agency will then go to the interest group that initially proposed the policy for information and guidance in implementing the new policy.The Tobacco Institute and the Retail Tobacco Distributors of America, for example, desire contin ued or expanded government subsi dies for tobacco. Since seven of the eight members of the House Sub committee on Tobacco come from tobacco growing states, it is hardly surprising that the Subcommittee is sympathetic to this. And since, in administering the program, agen cies in the Department of Agricul ture have nearly daily contacts with tobacco growers it is also quite nat ural for them to see themselves as protectors of the interests of the to bacco growers. 11 But the best known ((triangle" is probably the ((military-industrial complex." Between 1969 and 1973, 1,406 Pentagon officials left govern ment to take positions in defense in dustries. Given this close connec tion between government and the defense industry it is not surprising that, a recent study disclosed, prof its in the aerospace industry were 12.5 percent higher than for Ameri can industry as a whole. One de fense corporation, in fact, averaged 245 percent profit on 22 government contracts. 12 These are only two ex amples where an ((iron triangle"

composed of an interest group, com mittee and bureaucratic agency, has emerged. The public is locked out and the interest group is left to, in effect, regulate itself. The problem, in so far as the poor are concerned, is that to influence government in this fashion requires three things: time, money and ex pertise. Both time and money are required to put together an effective interest group; money is also re quired to hire the services of a lob1980 THE GOVERNMENT, THE MARKET AND THE POOR 649 byist; and some expertise. is needed to know how to manipulate the po litical system. Usually, the poor lack all three: by definition they do not have money; their working sched ules tend to be inflexible; and since the poor tend also to be the less well educated, they lack expertise. Con sequently, as one commentator has put it, the interest group system is ((skewed, loaded, and unbalanced in favor of a fraction of a (wealthy) mi nority." And, he adds, probably ((about 90 percent of the people can not get into the pressure system."13 (d) Olson's Law. Reinforcing the effect of the ((iron triangle" is ((Olson's Law of small groups." Isn't it possible for the poor to compen sate in numbers for what they lack in wealth? After all, it's ultimately votes that count and each vote counts equally. The flaw here stems from the fail ure to distinguish between the potential and the actual group.

For instance, since everyone is a consumer, the potential member ship of a consumer group is the en tire population. But the actual membership is only a tiny fraction of this. Why? This can best be seen by way of an example. Assume that a tariff on the importation of foreign cars would cost consumers $10 mil lion per year. If we assume that about 50 million Americans will buy a car in a year the cost·of the tariff to each car-buyer would be about 20¢. But since there are only three American auto manufacturers, the benefits to each would be approximately $3.5 million. It is easy to see which side would devote the greater time and resources to influence Congress on the passage of the tariff. Thus, as economist Mancur Olson has pointed out,14 when the benefits of a law or policy are concentrated on a particular group, while its costs are dispersed to the larger popula tion, the interest group will have an incentive to work for its passage while the larger population will have little or no incentive to oppose the policy. This is so because it would cost each member of the larger group more in time and money to oppose the tariff or policy than he would gain by the defeat. In brief, accord ing to ((Olson's Law" there is an in verse relationship between size and political effectiveness: the larger the group the less effective it tends to be.

(e) Conclusions. Lowi's ((Iron Triangle" and ((Olson's Law of Groups" help to explain why the poor, as a group, have not and do not ben efit from government policies. We live in an interest group system. Yet the poor lack the three elements time, money, and expertise-needed to participate effectively. But we can go even further. Since small, well-fi nanced interest groups are able to influence government, and since, ac cording to the niron triangle," they are also able, literally, to regulate 650 THE FREEMAN November themselves, one would expect to see many interest groups actually wanting to be regulated by govern ment. And this is exactly what we see. Milton Friedman has noted that ttthe pressure on the legislature to license an occupation rarely comes from the members of the public ... On the contrary, the pressure in variably comes from the occupation itself."15 Since regulatory boards typically set maximum rather than minimum prices, and since licen sing boards serve to limit rather than encourage. competition, their effect is to raise prices. It's been es timated that the cost of such regu lation is about $130 billion per year.16 And since the poor can least afford high prices they are the ones most severely hurt by these agencies.

Thus, not only do the poor not bene fit from government policies, as a rule, they are actually hurt by them. Part II: The Market and the Poor Before one can appreciate the manner in which the plight of the poor is eased through the workings of the market process, a few prelim inary observations are necessary. 1. The Culture of Poverty Although it is a truism to say that the poor are those without much wealth the most important thing to realize is that poverty is not so much an economic as a sociological prob lem. Professor Edward Banfield, among others, has distinguished be tween lower, middle, and upper class individuals on the basis of their time orientation. While middle and upper class individuals are future-ori ented, the lower class individual lives in and for the present. A fu ture-oriented culture is one which emphasizes hard work and delayed gratification, i.e., discipline in the present for the attainment of a larger ttpayoff' in the future. Such a cul ture, Banfield notes, Uteaches the in dividual that he would be cheating himself if he allowed gratification of his impulses ... to interfere with his provision for the future."17 In contrast, he continues, the Hlower-class individual lives from moment to moment. If he has any awareness of a future, it is of some thing fixed, fated, beyond his con trol: things happen to him, he does not make them happen. Impulse governs his behavior, either because he cannot discipline himself to sac rifice a present for a future satisfac tion or because he has no sense of the future. He is therefore radically improvident: whatever he cannot use immediately he considers valueless.

His bodily needs . . . and his taste for taction' take precedence over ev erything else-and certainly over any work routine. He works only as he must to stay alive, and drifts 1980 THE GOVERNMENT, THE MARKET AND THE POOR 651 from one unskilled job to another, taking no interest in his work."18 In brief, the goal for those in the middle class is ~~to get ahead;" to suc ceed; the means are hard work and delayed gratification. The goal for those in the lower class is ~~to enjoy now," i.e., immediate gratification; the means are to work as little as possible and to spend whatever you make as soon as you make it. These are, of course, pure types. But while all individuals are mixtures of the two life styles, a lower class individ ual lives far more in the present than a middle or upper class person. Although there are many reasons for poverty, what is important is that it is found disproportionately among those exhibiting the values of the ((lower class mentality." Perception of this fact has significant ramifica tions both for determining the num ber of those who are actually poor and the ability of the government, even assuming the best of intentions, to deal with the problem. It is to these two issues that we now turn.

2. Government Poverty Statistics Approximately 12 percent of the population of the United States have, according to official statistics, in comes below the poverty line. 19 ~tThe poor," however, must not be thought of as a permanent economic class. Given the affinity of a lower class individual for risk, action, and im pulse behavior, it is not surprising to discover that, as Professor (now Senator) Daniel Moynihan has noted, many who are classified as poor have high risk and/or seasonal jobs and therefore that their cCin_ comes rise and fall with changing employment conditions ... "20 The result is that the turnover rate among those whose income is below the official poverty line is about one third per year. This means that if poverty statistics were measured on, say, a two or three, instead of a one year, Period, the actual number of poor would be significantly less. Also, since people must pay tax on their incomes there is a built-in in centive for people to underreport their incomes. While this is true for all income groups and not just the poor, what is significant is that bas ing poverty statistics on reported in come inflates those statistics. In tes timony, a few years ago, before the House Hearings on the Economic Opportunity Act of 1964, Margaret Reid disclosed that those reporting incomes of under $1,000 per year were actually spending an average of approximately $2,500 each per year. And reinforcing this is the fact that such high-risk, action-oriented occupations as gambling, loan sharking, prostitution and the like, naturally attract a disproportionate share of cClower class" individuals.

But since these activities are ille gal, this income cannot be reported. Although the amount of income from 652 THE FREEMAN November such activities is difficult to gauge there is no doubt that it is in the billions. Regardless of what one may think of these activities one thing is clear: If such income could be taken into consideration ((a considerable percentage of the (poor' in some of the large cities would turn out to be well-off."21 There is no doubt that there are people in this country who are poor. Yet, it is also clear that the official figure of approximately 12 percent is highly inflated. This is due to the basing of poverty statistics on (1) one-year periods and (2) reported in come rather than actual spending. 3. The Poor and the "Ideal" Model of Government The concept of the ((culture of pov erty" also indicates just how limited is the ability of the government to help the poor, even assuming the best of circumstances, i.e., that the government follows the altruistic policy prescribed by the ideal model.

Consider the government policy regarding education. One of the rea sons for compulsory, ((free"grade and high school education, and zero or minimal tuition, taxpayer sup ported, state universities, was to make education accessible to chil dren of poor families. This, so it was reasoned, would break the ((cycle of poverty" by providing such children with the skills needed to enter high paying occupations. What happened was instructive. The payoffs from education lay several years in the future. Consequently, while middle and upper class individuals began attending state-run universities in droves, the poor were not particu larly attracted, even when it was free. Instead, they entered the work force and began paying taxes, some of which went to provide low-cost ed ucation for middle and upper class children at state universities. 22 Another government program was (Jobs training," which began with much fanfare in the ((War on Pov erty" programs of the 1960s. This too proved a failure and for the same reason: like education, the payoffs from training programs lay months, maybe years, in the future. In fact, the entire program was based on a contradiction. A program designed to train the poor for good jobs could not succeed for the same reason that the poor do not have good jobs in the first place: both good jobs and suc cessful training are future-oriented; the poor live in the present. 23 One final anti-poverty policy might be mentioned: the minimum wage. This is probably the most per nicious of all ((anti-poverty" legisla tion. Wages are determined by the marginal productivity of labor. And since the poor as a rule do not have the skills that would enable them to become highly productive members of the labor force the only jobs for which they are suited are low-pay1980 THE GOVERNMENT, THE MARKET AND THE POOR 653 ing ones. This is most unfortunate but good intentions are not enough.

Since minimum wage legislation does not, and can not, increase the marginal productivity of the poor, its only effect is to eliminate their jobs. If an individual worker's mar ginal value to the firm is $3.00 per hour, an increase in the minimum wage from $2".90 to $3.10 per hour means that that worker will lose his job. Thus, the ones most hurt by minimum wage laws are the least productive members of society, i.e., the poor. If the foregoing is correct, then the ability of government to elimi nate poverty is most limited, in deed. It should therefore not be too surprising to discover that while the percentage of the population classi fied as cCpoor" had declined steadily for decades, its rate of decline ac tually slowed down during the vaunted government cCWar on Pov erty" program of the mid-1960s. And, despite the continued increases in the Hanti-poverty" budget through out the 1970s, the percent of those classified as poor has remained at 12 percent for the past decade. 24 Once the cultural basis of poverty is recognized, the government ap pears to have but two options: (1) to insure everyone a minimum income and/or (2) to somehow change the time-frame of the poor from a present to a future orientation. The problem with the former is that if the minimum is set high enough to eliminate poverty it would also be high enough to have a disincentive effect on those whose incomes are only slightly above the minimum. If some of this group quit not only would this increase the number of those receiving handouts from the government, it would also impose increased taxes on those who con tinued to work, thereby encourag ing still others to quit. The result would be an ever-increasing number of Hbeneficiaries" living off an ever dwindling number of producers until the whole pyramid collapsed. As Milton Friedman is fond of pointing out, if you pay people to be poor, you will have no shortage of poor people.

But, if the minimum were set low enough to preserve the incentive to work, it would no doubt be too low to eliminate poverty. But what of the second option? Since values are picked up very early in childhood, usually from the par ents, the cCweedingout" of the cClower class mentality" would require nothing short of the seizing, proba bly at birth, of all children born to (~lower class" parents. These chil dren would then be placed in homes or schools and inculcated with mid dle class values. While this could work, the medicine is probably far worse than the disease. At the very least such a draconian measure raises significant moral and ethical questions.

654 THE FREEMAN November In brief, there is next to nothing that the government, even assum ing the best of circumstances, can do to help the poor: if one is poor but doesn't have a lower class mentality, he will not need government help to succeed; but if he does have such a mentality, no amount of aid will work. 4. The Market Process and the "Culture of Poverty" Even though government statis tics exaggerate the amount of pov erty in America there is no doubt that there are people who are needy. Given the ~~culture of poverty," gov ernment efforts at dealing with this problem have been ineffective. The question therefore becomes: given this same condition, would pure market measures prove any more ef fective than government policies? There is reason to believe that this is so. There prevails on the unham pered market a tendency to employ every factor of production, including labor, at its most value productive point. Since people only buy what is useful to them there can be no dis tinction between production for use and production for profit. Profits re sult from successfully supplying consumers with what they most in tensely desire at the time of their evaluations; losses from the failure to do so. In the quest for profit, labor and capital perpetually flow to areas where they can reap the most lucra tive returns on investment and away from areas manifesting loss. In the same way the market also deter mines prices for the factors of pro duction.

Since what the entrepreneur can bid for factors is limited by his ex pected yield from the sale of his product, those making the most profits can make the highest bids. Thus· the factors of production are channeled into the production of the most intensely desired goods. Since it is precisely the poor who can least afford the lower standard of living caused by the squandering of scarce resources, they are the economic class most benefited by the market process.25 But, it might be objected, this is all very well for the ~~able-bodied" poor, but most who are poor today have limited education and/or phys ical· or mental handicaps. Such un skilled workers do not benefit from the market process since their pro ductivity tends to be so low that they cannot even find jobs. This line of reasoning is based on a fallacy. The reason that such individuals cannot find jobs is not because of their low productivity but because minimum wage laws establish wage rates in excess of their productivity.

For example, in the 1950s and early 1960s, most elevators were op erated manually and many restau rants had their dishes washed by 1980 THE GOVERNMENT, THE MARKET AND THE POOR 655 hand. These jobs were filled by the unskilled: the young, uneducated and the handicapped. They did not pay much, of course, but that is just the point. As the minimum wage was raised to 75¢, then to $1.00 and then to $1.25 per hour, the building owners discovered that it now was economical to automate their eleva tors, thereby eliminating the jobs in that field. And the same was true with dishwashers: as the minimum wage was pushed upward, dish washers were replaced with auto mated dish washing machinery. 26 The root of the problem, therefore, is not the low productivity of the un skilled worker, but the fact that the minimum wage prevents the worker from offering a ((compensating dif ference" for his low productivity. As Walter Williams points out, uLess preferred chuck steak can compete with more-preferred filet mignon only by offering a compensating dif ference-a lower price. If we had a minimum price law for steak of, say, $4 a pound, sales of chuck steak would fall relative to sales of filet."

Chuck steak, in other words, would be ((unemployed" under those condi tions. The same thing applies to minimum wages. Since an unskilled worker cannot offer a ((compensating difference," his labor, under those conditions, is overpriced and he is therefore unemployed. 27 Thus, while a worker's productiv;. ityhas a bearing on his wage rate, it would not affect his ability to get a job provided the market were free. Unemployment rates are especially high among the handicapped and the unskilled because of such gov ernment restrictions on the market as the minimum wage. But, it might be objected, in the absence of the minimum wage the unskilled might find jobs. Such jobs would pay so little, however, that the workers would still have to rely on the government for assistance. This, too, is a fallacy. First, most of the lowest-paying jobs are not had by the breadwinner but by other members of the family desiring to supplement the family income. And second, wage rates, Ludwig von Mises noted, do ((not depend on the individual worker's (productivity,' but on the marginal productivity of labor."

A barber, Mises comments, ((shaves a customer today in the same man ner his predecessors used to shave people two hundred years ago. A butler waits at the table of the Brit ish prime minister in the same way which once butlers served Pitt and Palmerston ... Yet the wage rates earned by all such workers are today much higher than they were in the past. They are higher because they are determined by the marginal productivity of labor. The employer of a butler withholds this man from employment in a factory and must therefore pay the equivalent of the 656 THE FREEMAN November increase in output which the addi tional employment of one man in a factory would bring about."28 This means that, while the un skilled worker would seldom become wealthy his wage rate would tend to be higher than commonly thought, provided there were alternative means of employment open to him. What is needed are more jobs avail able for the unskilled. But the effect of such regulations as the minimum wage and licensing restrictions is to eliminate just those jobs. Repeal of such legislation would be expected to provide adequate, but not lucra tive, wages for the unskilled.

The market process would also help the poor in their capacity as consumers. Consider, for example, the ~~ghetto merchant." Since prices in the ghetto average about 10 per cent more than prices for goods in other neighborhoods, the ghetto merchant is often excoriated for ex ploiting the poor. But the key ques tion is why is the ghetto merchant able to charge, and receive, such prices; why don't such prices attract additional competitors? The answer is that higher prices do not mean higher profits. Ghettos are high crime areas and this means higher insurance premiums, expensive padlocks, safes, etc. The higher prices, economist Walter Block points out, merely reflect the addi tional expenses of doing business in the ghetto. If, in the name of ~~fairness," the government imposed ~~equal" prices between neighborhoods, profit mar gins in the ghetto would be reduced, forcing the bankruptcy of many ghetto merchants. The resulting shortages would, of course, entail severe hardships on the poor. Con versely, if the market operated un impeded, higher profit margins in the ghetto would lure additional merchants into that neighborhood, thereby lowering prices. This means that the ghetto merchant is actually a benefactor of the poor, for his pres ence serves to keep prices lower than they otherwise would be. And the more such merchants, the lower the prices. 29 The same is true, Block has dem onstrated, of many other commonly condemned occupations. The ~~slum lord" is another example. This per son is usually depicted as charging exorbitant rents for dirty unsani tary apartments, located in old, di lapidated buildings. But the prob lem of slum housing ~~is not really a problem of slums or of housing at all. It is a problem of poverty." This is unfortunate but not only is he not responsible for this condition, the slumlord, regardless of his motives, helps the poor make the best of their bad situation.

Consider what would happen, Block asks, if slums and slumlords suddenly disappeared. If the slum lord truly harmed his tenants, then 1980 THE GOVERNMENT, THE MARKET AND THE POOR 657 his disappearance should increase their well-being. But exactly the re verse would occur. For the poor would then ttbe forced to rent more expen sive dwelling space, with conse quent decreases in the amount of money available for food, medicines and other necessities."30 But this is just what occurs when the govern ment imposes rent controls, housing codes, and the like. Forced to charge lower rates, some landlords will go bankrupt; others will employ their property in alternative uses. The re sulting housing shortage can only leave the poor worse off. These two examples could be mul tiplied many times over. But they demonstrate how the unhampered market works to the benefit of the poor. 5. Care for the Truly Poor There is one final question to be dealt with. What would happen to those few who were (almost) com pletely incapacitated and could not take care of themselves? Regardless of the socio-economic system, such people can be provided for only out of usurplus production." The com plete elimination of government in tervention would have two effects: (1) it would eliminate the poverty unnecessarily created by such gov ernment policies as minimum wages and licensing restrictions; and (2) it would increase output and thus tcsurplus production." There is, of course, no guarantee that this ttsur_ plus" would go to the truly need}: Yet, in 1977 Americans donated $32 billion to charity.31 If one assumes that under a pure laissez-faire econ omy. there would still be about 6 million poor, this would prorate out to over $5,000 for every poor indi vidual in the country. And, given an even more productive economy cou pled with the significantly lower taxes resulting from the disman tling of the welfare state, it is likely that this figure would be even greater under pure laissez-faire.

Conclusion The ttideal" model depicts a gov ernment implementing policies de signed to help the poor. But this model is based on the faulty behav ioral assumption that people act al truistically in the ttpublic sphere." In fact, the poor are more commonly the victims rather than the benefi ciaries of government programs. Further, what is important are re sults, not intentions. Even assum ing that the government operates as envisioned by the ideal model, the cultural basis of most poverty not only renders the government inca pable of benefiting the poor, it ac tually increases the incidence of poverty.. The market, on the other hand, has the capability of both re ducing poverty to those few who are completely incapacitated, or nearly so, and creating the economic sur658 THE FREEMAN November Cited in Murray Rothbard, For a New Liberty (New York: Macmillan, 1978), p. 161. 7John C. Calhoun, Disquisition on Govern ment (Indianapolis: Bobbs-Merrill, 1953), pp.

16-19. 8Walter E. Williams, ~~Commentary," News week (September 24, 1979), pp. 57-59. See also Thomas Sowell,Race and Economics (New able, however, are James Buchanan and Gor don Tullock, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1974); and Gordon Tullock, Private Wants, Public Means (New York: Basic Books, 1970). 4Robert Lineberry, Government in America (Boston: Little, Brown and Company, 1980), pp.27S-83. SThe interest group model is developed in far more depth in such works as Robert Dahl, A Preface to Democratic Theory (Chicago: University of Chicago Press, 1956); David Truman, The Governmental Process (New York: Alfred Knopf, 1971). For a provocative article using economic tools to analyze inter est-group politics see William Landes and Richard Posner, "The Independent Judiciary in an Interest-Group Perspective," The Jour nal of Law and Economics (December 1975), pp. 875-901.

6Joseph Pechman and Benjamin Okner, Who Bears the Tax Burden? (Washington D.C.: Brookings Institution, 1974), p. 10. Also see Robert Sherrill, Why They Call It Politics (New York: Harcourt Brace and Jovanovich, 1979), p. 300; and Michael Parenti, Democ racy for the Few (New York: St. Martin's Press, 1977), p. 97. A recent study by R. A. Herriott and H. :P. Miller shows the following relation ship between income classes and total tax takes: plus necessary for the care of those few. In short, there is every reason to believe that the poor would fare con siderably better under the market than under the government ap proach. , -FOOTNOTESlWhile this model is something of a hybrid, it runs throughout much popular as well as academic literature. Jacques Maritain, The Person and the Common Good (New York: Schriber, 1947), and Mortimer J. Adler, The Common Sense of Politics (New York: Holt, Rinehart and Winston, 1971), are two, of many, philosophers for whom the notions of the ~~common good" and "altruistic" behavior in the political sphere are central. Also see Roland J. Pennock, Democratic Political The ory (Princeton: Princeton University Press, 1970), pp. 183-91, for overview of this ap proach.

2James Buchanan, ~~n Individualistic The ory of Political Process," Varieties of Political Theory (Englewood Cliffs: Prentice-Hall, 1968) ed. David Easton, pp. 25-37; and James Buchanan, ~~ Economist's Approach to ~Sci entific Politics' ," Perspectives in the Study of Politics (Chicago: Rand McNally, 1968) ed. Malcolm Parsons, pp. 77-88. aWhile the economic approach to govern ment can be traced back to the writings of Thomas Hobbes and John Locke in the sev enteenth and eighteenth centuries, it was not until the mid-twentieth century that eco nomic tools began to be applied to the study of politics in a systematic way. The landmark book was Anthony Downs' An Economic The ory ofDemocracy (New York: Harper and Row, 1957). The number of works employing this economic or "public choice" approach to the study of government has mushroomed since 1957. Two of the more important, and readSelected Income Classes Under $2,000 $ 4,000-$ 6,000 $ 8,000-$10,000 $15,000- $25,000 $50,000 and over Percent of Income Paid in all Taxes 50 31 29 30 45 1980 THE GOVERNMENT, THE MARKET AND THE POOR 659 York: David McKay, 1975), pp. 19~200.

98ee Tom Bethell, '<TheWealth of Washing ton," Harper's (June 1, 1978), pp. 41-60; also see Tom Alexander, "Why Bureaucracy Keeps Growing" Fortune (May 7, 1979). For a study that cond udes that the poor are net tax pay ers see Gabriel Kolko, Wealth and Power in America (New York: Praeger, 1962). But for a contrasting conclusion see Morgan Reynolds and Eugene Smolensky, "The Post Fisc Dis tribution, 1961 and 1970 Compared," Na tional Tax Journal (1974), pp. 515-30. lOTheodore Lowi, The End of Liberalism (New York: Norton, 1979). llLineberry, pp. 26S-69. 12Philippa Strum, Presidential Power and American Democracy (Santa Monica, Cal.: Goodyear, 1979), pp. 51-54. 13E. E. Schattschneider, The Semisovereign People (Hinsdale, Ill.: Dryden Press, 1975), pp.34-35. 14Mancur Olson, The Logic of Collective Ac tion (Cambridge: Harvard University Press, 1965). 15Milton Friedman, Capitalism and Free dom (Chicago: University of Chicago Press, 1962), pp. 13S-44.

16See mThe Regulators,'They Cost You $130 Billion a Year," U.S. News and World Report (June 30, 1975), pp. 24-28. 17Edward Banfield, The Unheavenly City Revisited (Boston: Little, Brown and Com pany, 1974), p. 57. 18Ibid.,p. 61. 19See Robert Lineberry, pp. 490-92; also see Herman P. Miller, Ulnequality, Poverty and Taxes," Dissent (Winter, 1975), p. 45. The "poverty line" is calculated by determining how much it co~ts to feed a typical family of four and then multiplying that figure by three. 2°Daniel Patrick Moynihan, "Poverty in Cities," The Metropolitan Enigma (New York: Anchor, 1970) ed., James Q. Wilson, p. 369. 21Banfield,pp. 128-29. 22The same holds true for programs like so cial security. First, since the tax is regres sive, the poor pay a higher percentage of their earnings in social security taxes. Sec ond, since the poor usually do not go to col lege, they tend to enter the workforce earlier than middle or upper class individuals, and therefore begin paying social security taxes much sooner. And finally, statistics show that the poor have a shorter life expectancy than other economic classes. The result is that the poor tend to pay the most into social security and receive the fewest benefits.

23See, for example, Reo Christenson, Chal lenge and Decision (New York: Harper and Row, 1976), pp. 79-86. Especially see p. 80: ttabout one-fourth of the (Job Corps) recruits stayed less than a month. Less than half stayed for six months, though strongly en couraged to stay for nine months." 24Miller,p. 45. 25See, for example, Ludwig von Mises, Human Action (Chicago: Regnery, 1966); and Murray Rothbard, Man, Economy and State (Los Angeles, 1971). 26See Yale Brozen, ttWage Rates, Minimum Wage Laws, and Unemployment," The Liber tarian Alternative (Chicago: Nelson-Hall, 1974) ed., Tibor Machan, pp. 380-99; and Walter Block, Defending the Undefendable (New York: Fleet Press, 1976), pp. 232-33. 27Williams,pp. 58-59; and Banfield, p. 107 08. 28Ludwig von Mises, The Anti-Capitalistic Mentality (New York: Van Nostrand, 1956), pp.88-89. 29Block,pp. 162-70. 30Ibid., pp. 154-61. See also Sowell, pp.

184-189. 31In Help: the Useful Almanac (Washing ton, D.C.: Consumer News, Inc., 1978) ed. Ar thur Browse, p. 356.

Kenneth McDonald SOCIALIST GAMES DEAR to the hearts of socialists is the phrase ((social justice." It strengthens belief in their cause and gives them a stick to beat their op ponents with. Like many high sounding phrases, however, it. is never defined. Social embraces society, its orga nization, and all the people who live in it. Justice is a rendering of what is due or merited, as in ((Render unto Caesar the things which are Cae sar's." Who is to decide what is due to all the people or what they merit? Will Tom decide what sort of house Dick ought to live in? Will Dick deter mine the reward that Harry should get from his labor? Will Dick and Kenneth McDonald is a Toronto freelance writer. This article first appeared in ,The Toronto Sun, July 10,1980. 660 Harry combine to order Tom's af fairs? Experience tells us that any such attempts would be resisted. Good fences make good neighborn.

How is it, then, that otherwise sensible people, who are on exeel lent terms with their neighbors, will raise no objection to a comparable interference in their lives by politi cians and civil servants they have never met, in short, by the state? They have been led to believe not only t.hat the state is wise and just but also that it has wealth of its own. They are encouraged' to forg'et that it consists of politicians and civil servants who are people much like themselves and every bit as prone to error. Social justice means what the so cialists want it to mean and that, usually, is ((fair shares," not equality SOCIALIST GAMES 661 of opportunity but equality of re sult. Tom, Dick and Harry live by a free exchange of the goods they make or the services they provide. In the process they create the wealth of the society they live in. The money they save (financial capital) is converted into the productive capital (land, tools, machines, factories) that keeps the wealth growing.

The state's job is to set the rules of exchange and to see that they are obeyed. But when the state, which produces nothing, uses its arbitrary power to change the results, ex change is neither as free nor as pro ductive as otherwise. The society's wealth ceases to grow because more and more of its people are assured of rewards whether they produce or not. Suppose that the same principle were applied to games. The support ers of an unsuccessful team would demand social justice for their side and that the results be adjusted to Ralph Waldo Emerson equalize wins and losses. Without competition there would be no point in playing. Yet we have come to admit the same principle to the much more important game of life. Baseball and other games are played to rules that everyone under stands. Umpires and referees are employed to enforce them. In the game of life, too, there are rules that everyone used to understand.

Heading the list is: ~~In the sweat of thy face shalt thou eat bread." Now the politicians and civil ser vants who are supposed to enforce the rules have changed them. In the name of social justice they take what some have earned and give it to oth ers. When it is no longer politic to increase the take they print money instead. The recipients are per suaded they need sweat no more. But the game of life is like any other game. The challenge and the joy are in the playing. By trying to fix the outcome the state spoils the game for everyone. @) IDEAS ON LIBERTY THERE is a time in every man's education when he arrives at the conviction that envy is ignorance; that imitation is suicide; that he must take himself for better for worse as his portion; that though the wide universe is full of good, no kernel of nourishing corn can come to him but through his toil bestowed on that plot of ground which is given to him to till. The power which resides in him is new in nature, and none but he knows what that is which he can do, nor does he know until he has tried.

William H. Peterson Unbinding Prometheus: ProductivitythroughMorality How can we unfetter productivity? How can we unleash the inborn in centives dwelling in each and every one of us? How can we release the job-creating, prosperity-induc ing genie of savings, of business in vestment, of capital formation? How can we, in other words, un hamper our much hampered system of capitalism? I think the answer is, in a sense, as simple as saying, lais sez faire-laissez passer, as Adam Smith and the French Physiocrats said more than 200 years ago. (Or saying, in five cCD's"-deregulate, de control, despend, detax and disin flate.) We know, in other words, what Dr. Peterson is the director of the Center for Eco nomic Education at the University of Tennessee at Chattanooga. He adapted this article from a paper for the Committee on Monetary Research and Edu cation at Arden House, Columbia University, given on March 23, 1980.

662 has to be done. After all, our prob lem is not really economic; it is po litical, and beyond that it is moral. Even so, I think we who believe in a free society are perhaps at a loss (I know I am) as to just how to tell all concerned-and, really, every body is concerned-how to unravel the endless, counterproductive snarls of our mixed or, rather, mixed up economy or, better yet, mixed-up man. Somehow, then, we must unbind this bound Prometheus that is America. .. this so-called Superpower humbled by Iran, bullied by the So viet-Union, hoodwinked by the Third World, and stretched over a barrel of oil by OPEC, . .. this nation with about the lowest personal saving, business inUNBINDING PROMETHEUS 663 vestment and employee productivity rates in the last decade of any na tion in the Western industrial world, · .. this pitiful seemingly helpless giant economy just wracked by un precedented double-digit inflation and extremely high interest rates* and now plunged into its seventh recession since the end of World War II, this increasingly ((under ground" economy, many of whose citizens commit criminal tax eva sion in unreported transactions equivalent to more than 10 percent of the GNP or currently more than a quarter-trillion dollars, according to an estimate by economist Peter M. Gutmann of City University of New York, · . . this increasingly confiscatory economy whose central government soak-the-rich progressive income tax rates stretch from 14 to 70 percent and whose taxpayers year by year pay soak-everybody higher and higher de facto if unlegislated rates as inflation surges ahead, · .. this socially disturbed society whose once sacred institutions of home and family are being battered by rising divorce and desertion rates and whose literature mirrors a trou bled society, *The Consumer Price Index was up 18% at an annual rate in the early months of 1980, a time when the prime interest rate at major banks hit 20%.

... this increasingly criminalistic society whose serious crime rate against both persons and property has about tripled since 1960, ... this huge amorphous Welfare State doling out an ever larger share of its precious national income in the form of politically-entangled in centive-destroying transfer pay ments, payments for which the Fed eral Government receives no goods or services in return, payments in an amount, by the way, of some $350 billion at an annual rate currently, or about 60 cents out of the Federal expenditure dollar, up from 35 cents in 1960, today at 16 percent of the national income, up from 7 percent in 1960. So the question is-can this once mighty industrial colossus possibly rediscover the lost genius of its own creation? Indeed, I think the question boils down to----canAmerica save itself? Or maybe the larger question is if America represents the quintes sence of Western Civilization, if it represents the only military might that could conceivably dissuade the Soviets from their dream of world conquest, now advanced by the sub jugation of Afghanistan, if it repre sents the only island of freedom and free enterprise, however emaciated, to which an increasingly Marxian world can hopefully repair-then the larger question is: can man save himself?

664 THE FREEMAN November Productivity, you see, represents survival. It cuts to the very soul and eons-long heritage of man who, not that long ago, emerged from a cave, and began to cultivate crops and do mesticate animals. Man the thinker, the human actionist, you see, is the answer to productivity-or its lack. And that answer, again, is ulti mately not economic but moral. In my judgment, our age is marked by a profound moral crisis, a crisis in volving a free-lunch philosophy of something-for-nothing and a rising misuse of the state to that end, hence a crisis involving the sanctity of property and the dignity and free dom of the individual. And on ques tions of morals, I believe we must look to the nature of man, to his goals, values and traditions, to his fears, confusions and misapprehen sions. As Alfred Marshall said at the outset of his classic Principles of Economics some 90 years ago: uEco nomics is concerned, on the one side, with the study of wealth, and on the other and more important side, with the study of man." (My italics.) Inordinate Action In this discussion let me reintro duce man in his ancient and modern moral dilemma of using the state not for preservation of life, liberty and property a la John Locke but, advertently or inadvertently, for usurpation of life, liberty and prop erty via the basically immoral process of redistribution of wealth. Let me first provide some background for my point of reference.

Again, our problem is how to un bind Prometheus or, if you wish, un fetter productivity. Recall the story from Greek mythology of Prome theus, the Titan who stole fire from Olympus and presented it to man. The act was inordinate and it infu riated the great god Zeus who pun ished Prometheus by chaining him to a rock. There each day an eagle tore at Prometheus' liver until he was finally rescued by Hercules. To me the message of Prome theus-read the Western democra cies-is the temptation of inordi nacy. Inordinacy-the word and the idea are to be found in The Reigning Error, the classic 1974 work on in flation by William Rees-Mogg, edi tor of the London Times-means man's temptation to reach beyond his grasp, to seek to go beyond the rules and limits of nature and eth ics, i.e., to knowingly commit wrong at the expense of right. Such inordi nacy is not only fraught with frus tration, it is fraught with the great est danger to the Western world, a danger mirrored today in the high price of gold.

To get back to right and wrong: The key wrong, in my judgment, is the apparently inborn human pen chant for lapsing into defiance of principle, into avoidance of re straint, into derision of tradition, 1980 UNBINDING PROMETHEUS 665 into a philosophy of statism, into the undermining of property, into a dis dain of work, into, in a word, inor dinacy. Today that penchant is seen in surging crime. It is seen in swell ing government budgets. It is seen in mounting waste, bureaucracy, corruption. It is seen in galloping inflation. As Rees-Mogg has noted: ((Inflation is an inordinacy of money. It is money without order." So inordinacy is a form of human folly, an abandonment of reserve, a loss of self-control, even a crime of sorts, a crime against the inherent limits of man, of nature, of law, a folly of robbing Peter to pay Paul. It is manifest in the Old Testament, which, broadly, is a message against inordinacy, a rebuke from the Lord Jehovah to the children of Israel.

BiblicalCall for Discipline The Israelites are told the story of Adam and Eve who had partaken of the Forbidden Fruit, were banished from Paradise and condemned to eternal scarcity «((By the sweat of thy face shalt thou eat bread"). They are told the story of how Cain slew his brother Abel and became a fugi tive from justice, the story of the Great Flood that covered the earth and wiped out every living thing save the family of Noah and the creatures in his ark, and the story of Noah's descendents who sought to build a tower reaching up to Heaven, and how their inordinacy of this Tower of Babel suddenly made their words incomprehensible to many. These and other Biblical stories add up to a call for discipline over self. For order. Control. Restraint. The Law of Moses proclaims dietary restrictions, including prohibition of the partaking of swine and camels. The Ten Commandments spell out limits, boundaries, restraints, moral scruples, ((Thoushalt not do this ...

thou shalt not do that." So it is in Greek mytholo~ Greek tragedy is concerned with the inex orable retribution of hubris, the in ordinacy of extreme human pride, of daring to reach beyond the limits of man and nature. So it was, then, that Icarus flew so close to the sun that his wings melted and he plunged to his death, that Phaethon borrowed the chariot of the sun only to be struck down by a thunderbolt from Zeus to prevent the world from catching fire, that Zeus punished the aforementioned Prometheus for stealing fire from Olympus and giving it to man. All these myths are in the nature of admonitions, of warnings, of cau tions that life is perishable, that man is fallible, that judgment is dif ficult, that power is corrupting, that human nature has a dark side, that the immoralist wreaks retribution sooner or later, that rob-the-rich give-to-the-poor Robin Hood can re lieve the rich merchants traversing Sherwood Forest once or twice but 666 THE FREEMAN November soon the merchants wise up, travel a different route, and the poor are worse off than ever, that life, you see, is inevitably bound by checks and balances, by built-in feedbacks and controls. As Emerson noted in his essay on Compensation: ((Dual ism underlies the condition of man.

Every sweet has its sour; every evil its good. For everything you have missed, you have gained something else; and for everything you gain, you lose something. All things are moral." Social Limits and Controls In the social world, all things are indeed moral. Thus morals, ethics, values, traditions are social con trols, evolved through the hard knocks of man's experience; and all systems of control have in common one simple principle: they set limits; they establish boundaries; they re quire norms; they condition behav ior. And morals, I submit, bear heav ily on the problem of unfettering our much fettered productivity. Some limits are conventional, as in the provisions of the U. S. Consti tution, or in measurements of foot ball fields and tennis courts, the provision of so many points for a touchdown, of so many games in a set. Some limits are physical, as in the application of physics to theengi neering of a given internal combus tion engine, for example, so that gasoline explosions can be converted into· sustained energy that propels your car. Limits are strict. Thin the walls of the engine enough and the engine-will blow up.

Says Rees-Mogg on this point: ((Sanity consists in limitation; the inordinate is always insane and al ways ends in destruction." Or as Samuel Johnson observed in 1751 (thereby supplying the title to the Rees-Mogg book): ((The reigning error of mankind is, that we are not content with the conditions on which the goods of life are granted." On the other hand, while just laws, political and moral, set bounds to human conduct, they nonetheless allow that conduct to be free within those bounds. Man is free where he is not legally or morally prohibited; but it is up to him how he pursues that freedom, how he, to paraphrase the Declaration of Independence, pursues that happiness. For in truth, freedom and order are two sides of the· same coin. Free dom is a function of law, civil and moral. Without this rule of law, where anything goes, where noth ing is sacred, where nothing is pro hibited, where property and con tract are unprotected, where personal responsibility counts for little, then human cooperation breaks down, and with it civiliza tion, quite apart from productivity.

Beginnings or extensions of such breakdown trends are evident in our 1980 UNBINDING PROMETHEUS 667 times, especially in the progressive removal of limits in our once-limited system of government. The irony of this condition is that the greatest threat to freedom today is law-in ordinate law, extortionate law, reg ulatory law, tax law, monetary law, situational ethics, warped civil and moral law transformed into a Fran kensteinian monster of a Welfare State. For, it is still argued, as it has been for millennia, that if we could only release ourselves from Moloch capitalism, from the vices of greed, avarice and selfishness, and if we would just put our trust in princes, into a benevolent state, we would be gloriously able to distribute income on the basis ofjustice , righteousness and fairness. Then altruism would replace naked self-interest, then all would be good and lovely in the world. Such is the message derived from a host of writers including Plato, Sir Thomas More and Karl Marx.

Theory of Public Choice Strange, all such Brave New Worlds of which we have a historical record, all such attempts to strike down profit-seeking and elevate selflessness and the ((commongood," have met frustration if not disaster. Yet the siren-song of statism goes on: Private choices are obviously selfish; public choices are clearly al truistic. Or so we are told. Indeed, a fairly new development to undo such mythology in the his tory of economic thought came in 1962 when JamesM. Buchanan and Gordon Tullock wrote their Calcu lus of Consent and expounded their ((theory of public choice." All too often political scientists and profes sional economists have held, say Buchanan and Tullock, that ~(the representative individual seeks not to maximize his own utility, but to find the ~public interest' or ~common good.' Moreover, a significant factor in the popular support for socialism throughout the centuries has been the underlying faith that the shift of an activity from the realm ofpri vate to that of social choice involves the replacement of the motive ofpri vate gain by that of social good.... "

In other words, Buchanan and Tullock believe that People do not change their self-centered thinking when they shift from the market place to the polling booth. In both places people aim at their own ad vantage and interest. The rational pursuit of self-interest not only holds for individual voters but for politi cians, bureaucrats and other gov ernment officials as well, whatever platitudes about the ~~common good" they may voice. Thus the art of government, espe cially in this sanctimonious age of democracy unlimited, springs from a moral void and increasingly fol lows the dictum of Voltaire: to take 668 THE FREEMAN November from some to give to others, to en gage in the trade of conferring of privileges and immunities, to fash ion government into a game or racket, of quid pro quo, of protec tionism, of a benefit for a vote. So vote yourself better housing, cheaper food, free medical care; and, whether citizen or legislator, vote all this in the holy name of the public interest.

Or as the Romans observed in the context of ttbread and circuses," Be neficium invito non datur (a benefit cannot be conferred on an unwilling person). Thus does statism progres sively overwhelm capital creation and smother productivity. Elusive "Social Justice" Let us suppose, however, altruism somehow does replace sel~interest as at least the nominal economic modus operandi. Let us further sup pose a public-spirited government planning board is thus charged with altruism as its guiding light to fix wages and prices and allocate pro duction. Social justice. That would be the' only criterion. Ah, but economists from Adam Smith to Ludwig Mises have pointed out the inherent inability of just wages andjust prices to clear mar kets. Human nature and market place dynamics simply do not allow such clearance. Utopia is not of this earth. Planning-that sweet-sound ing euphemism for socialism-is therefore vain, even though many continue to equate planning with Christian charity and brotherly love.

As Hayek wrote in his Road to Serfdom, the alternative is not plan or no plan. The question is, whose plan? Should each individual plan for himself, or should a benevolent Big Brother plan for him? Mises said the issue is not automatism versus conscious action; it is freedom ver sus government omnipotence. Said Mises: ttLaissez faire does not mean: Let soulless mechanical forces oper ate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the en trepreneurs should produce. Plan ning means: let the government alone choose and enforce its ruling by the apparatus of coercion and compulsion. " Unlimited Democracy The devil of this truth lies in the Zeitgeist of the 20th century-a spirit of unlimited democracy, of democratic interventionism or, if you wish, interventionistic democracy. Democratic planning does not lessen the force of what Mises calls Uthe ap paratus of coercion and compulsion,"

but the problem is people think, in ordinately, it does. Vox pop, vox Dei. And so a few years ago, in a tribute to that perennial gladiator, Senator Hubert Horatio Humphrey, we passed, however emasculated, the Humphrey-Hawkins Full Employ1980 UNBINDING PROMETHEUS 669 ment and Balanced Growth Act, which calls upon the President to set 5-year goals for the U.S. econ omy. Planning of a foot-in-the-door sort, apart from extensive interven tionism, is now an official doctrine of the land. Witness, then, inordinate democ racy at work. Observe how orga nized minorities work their de mands on cowed (or, should I say, cowardly) politicians. Observe pow erful organized minorities repre senting farmers, veterans, blacks, educators, women, elderly (euphe mistically called ttsenior citizens"), unions, businessmen (usually sub divided into industries), bankers, doctors, lawyers, Indians, Mexican Americans, Italian-Americans, Irish-Americans and scores, if not hundreds, of other hyphenated and unhyphenated interest groups, ex ercising their public choice, ever anxious to wangle some contract, grant, tariff, subsidy, minimum wage, privilege, immunity, excep tion, welfare benefit or what have you from Congress and various leg islatures and bureaucracies. Such wangling, such dark-sided human nature, serves to deter capital for mation and individual incentive i.e., to fetter productivity.

To be sure, all these organized mi norities add up to majority rule. Naturally enough, the politician curries favor with these voting groups, frequently and ironically by giving them grants out of their very own tax money. The extent of this mutual milking process in America is seen in figures prepared by econ omist William A. Niskanen, Jr. of Ford Motor Company in 1976 based upon 1975 figures. He found that there are more Americans being supported by tax dollars than there are workers in the private sector who support them. He toted up civil servants at all lev els of government, members of the armed forces, the unemployed and disabled, public pensioners and those on welfare. He sought to eliminate double-counting-i.e., those on more than one welfare program. (How ever, he did not allow for nominally private sector employees of govern ment contractors such as defense suppliers.) He then found that these tax dependents, including family members, outnumbered working nongovernment taxpayers by a healthy-or, rather, unhealthy margin, of about 81.3 million tax de pendents against 70.2 million pri vate sector taxpayers. The numbers and the margin are of course greater today, five years later.

Spend, Tax, and Elect Can there be any doubt that these tax dependents, through their elected representatives, will con tinue, most inordinately, to vote themselv~s goodies from the U.S. Treasury? Is this not the theory of 670 THE FREEMAN November public choice in action? Is this not but a logical consequence of public choice, of ((voterrationality," of might makes right, of incipient moral bankruptcy? The situation brings to mind the remark attributed to Harry Hopkins, the intimate of Franklin D. Roosevelt: ((We shall spend and spend, tax and tax, elect and elect." As a wealth redistribution scheme, I think we can agree that the process is none too efficient. It breeds bureaucrac~ It breeds red tape. It breeds social friction. It breeds the crassest politics. It breeds immorality. Moreover, as noted, it significantly destroys human incen tive and capital formation-the very foundation of our productivity and well-being. And yet for all of us who think we're getting too much gov ernment, let us be thankful we are not getting all the government we are paying for.

We are paying, however, for a good deal-almost a three-fold increase in the share of personal income going for total government spending in the last half century in the U.S., from 10 percent in 1928 to 39 percent in the first quarter of 1980. Currently, as we noted, federal government transfer payments mainly to individuals but including grants-in-aid to state and local gov ernments, and net subsidies to farmers and others-are running around an annual rate of $350 billion out of total current federal gov ernment expenditures of around $580 billion, or about 60 cents out of each expenditure dollar. They are greater than current defense spend ing of about $130 billion at an an nual rate or, for that matter, total current business spending on new plant and equipment at an annual rate of about $190 billion. Indeed, current transfer payments come to more than defense and business in vestment spending combined.

Moreover, the easy assumption that transfer payments are zero-sum games, in contrast to voluntary ex changes which are positive-sum games, is not so. In truth, transfer payments are negative-sum games for four reasons. First, government overhead to effectuate the trans fers-overhead with the usual Par kinsonian tendencies. Second, the resources expended by lobbying groups seeking or defending the transfers. Third, the negative incen tive effects on working and saving. And, fourth and most important, the destruction of vast potential capital formation. Transfer Payments This outlay of $350 billion in transfer payments, I need hardly re mind you, is especially inordinate and politicized. Most politicians re gard the outlay as sacrosanct. To se riously reduce or eliminate the out lay would be tantamount to political 1980 UNBINDING PROMETHEUS 671 suicide. So these transfer payments are fraught with dubious morals, with a something-for- nothing syn drome, if not with quite a degree of outright corruption. For instance, Joseph Califano, when he was Sec retary of Health, Education and Welfare, conceded in 1978 that some $6 billion in welfare funds could not be accounted for. How much of that sum slipped into the wrong pockets on both the giving and receiving ends of government largess?

Immorality? Corruption? Sagging productivity? Logically, then, these seem to be the implications of what has been called our Redistributive State. It was Machiavelli, let me re mind you, who said politics and mor als don't mix. It was Tocqueville, I believe, who first coined the phrase ttdemocratic despotism" to describe the tyranny of the majority. It was Emerson who said democracy be comes a government of bullies. It was Henry Adams who said politics boils down to the organization ofha treds. (Witness the official assault on the oil companies in America.) It was Disraeli who said there is no honor in politics. (And not long af terwards he had the occasion to up braid a fellow Tory on the floor of Parliament: ttDamn your principles! Stick to your party!") I cite these authorities in an ef fort to buttress the moral answer to our plight of sagging productivity. For in our economic education efforts, should we not only utilize fact and theory but moral principles as well? Even Franklin D. Roosevelt felt compelled to bemoan welfare when he declared in his State of the Union Message of 1935: ttThe les sons of history ... show coneIusi vely ... that continued dependence upon relief induces a spiritual disintegra tion fundamentally destructive to the national fibre. To dole out relief is to administer a narcotic, a subtle destroyer of the human spirit ....

The federal government must and shall quit this business of relief." But quit it never did. Relief has now blossomed into that spectacular fail ure, the ubiquitous Welfare State. Listen to George Gilder writing on ttThe Coming Welfare Crisis" in Pol icy Review 45 years after F.D.R.: ttWelfare now erodes work and fam ily and this keeps poor people poor." Or to Marvin Stone, editor of U.S. News and World Report: ttWelfar ism, once planted, sinks deep roots that are difficult, if not impossible, to dig out." Is Government Necessary? Well, is government necessary? Most affirmatively, yes. Without it, who would serve to preclude fraud and force? Who would protect pri vate property and the sanctity of contract? Thomas Paine described government as a necessary evil but it was Ludwig Mises who reminded us: ttGovernment as such is not only 672 THE FREEMAN not an evil but a necessary and most beneficial institution, without which no lasting cooperation and no civili zation could be developed and pre served."

Is there a way out? Can we save ourselves from ourselves? Maybe. Maybe not. I believe in democratic if limited-repeat, limited-govern ment. I believe in education. I be lieve education is, indeed, our only salvation. I believe we as economic educators should reassert the moral basis of freedom and free enterprise. The moral basis of government was well stated by Locke who, citing the corruptibility of power long before Lord Acton, gave the case for limited government. He declared that the only reason for government was for the protection of life, liberty and property. Let us, then, reaffirm that nothing is for nothing, that some thing is only for something, that the essential purpose of government is to provide law and order, to preclude fraud and force. Let us say furt~er that the mar ket is far more democratic than any thing that can be found in the politLewis Stearns ical realm. Let us say that the consumer is a lot more sovereign in the marketplace than he is in the polling booth, that economically he votes every day, usually several times a day, that virtually every producer-candidate he votes for is running scared and delivering on his campaign promises on an ~~or else" basis.

Let us also say, in the vein ofAdam Smith, that the market system is a system of social cooperation and, moreover, the Golden Rule in ac tion. As you know, the Golden Rule says, uDo unto others as you would have others do unto you.»What does the market say? It says, in the words of Adam Smith in his Wealth of N a tions: ~~Give me that which I want and you shall have this which you want." The market, in other words, says, let me help you so you can help me. In sum, unfettering productivity is a matter of unfettering freedom and free enterprise-i.e., reining in our inordinacy, regaining our moral roots and limiting once again our now unlimited government. , IDEAS ON UBERTY To BE USEFUL, government must be carefully contained and limited. How it is permitted to get out of control-whether by military coup, revolution, or by the incontinent political action of a democratic ma jority-is unimportant; for once unconfined, government always takes the same form: the rampant destroyer of the only fuel upon which it thrives-liberty!

AFTER two generations of govern ment manipulation of business structured on the dogma of demand economics, it appears that the death knell is finally sounding for the Keynesian Revolution. The claim that cCwe are all Keynesians now," made just a decade ago, has become an embarrassment to the govern ment economists. In its place today is heard the rhetoric of reindustrial ization and supply side economics. Whether such changes bode good or ill is far from certain. Like all la beling of economic ideas, supply side economics and reindustrialization mean different things to different people. To government economists the terms have become just another game in semantics, as old statist programs continue to be advanced Mr. And....on 18 executive Sec:ret8ry of The Found. tlon for Economic Education, Inc. under this new rhetoric. To propo nents of the free market, however, the labels of supply side economics and reindustrialization mean poli cies that would reduce the burden of government. Now more than ever, therefore, the proposals behind these new banners must be closely scrutinized.

Few economists any longer chal lenge the charge that past Keynes ian policies have taken an awesome toll on the prosperity and freedom of the American people. Govern ment intervention, in pursuit of the Keynesian Remedy, has generated immense deficit expenditures and a massive increase in the money sup ply in an attempt to absorb those deficits. The Keynesian doctrines have created the omnipotent state. A mere repudiation of Keynesian economic policies is no longer enough 673 674 THE FREEMAN November today. What is also required is the dismantling of the omnipresent state that these policies helped to create. But the frightening question is whether this historical problem of our age, a growth in the magnitude of government, has yet been recognized. Will the new rhetoric of supply side economics and reindustrializa tion, .as viewed by free market econ omists, lead to less government and away from disaster? Or, failing to recognize the basic problem of over extended government, will supply side economics merely mean a change in the direction and struc ture of government intervention by the statist planners now in charge?

This is the great issue that looms ahead. What proponents of the free mar ket know is that there is only good economics and bad economics. The danger .ofsegmenting economics into categories such as supply side, de mand side, labor, urban, welfare and the like is that it can, and often has, led to special interest politics that do harm to the general welfare of society. Production for Use That profound observation by Adam Smith that, CCthe sole end of productive activity is consumption," needs to be constantly recalled. The market process has demonstrated its superiority in bringing forth more of the world's goods whenever it has been free to do so. Freely acting traders are motivated to produce more because they can then con sume more, recognizing that a greater supply provides them with greater demand. For both the indi vidual and nation, supply creates its own demand since in the aggregate they are one and the same.

When government meddles with production or consumption it frus trates the ultimate purpose of all economic activity-the efficient sat isfaction of human wants. Too often the end sought by government pro grams becomes production itself or the creation of jobs. The result is nothing more than modern cCpyra _ mid building" or formulation of meaningless employment. The wasteful consumption of productive resources in such endeavors there fore denies these resources to the satisfaction of human wants. Especially alarming in this re spect are many of the proposals being offered by political econo mists. Calls for all manner of new government subsidies and govern ment directed enterprises are being heard. Vast new government spend ing projects are urged as the pana cea for the decline in productive activity. Stubbornly retaining their bias for government manipulation of the economy, many of these economists are promoting policies of interven1980 SUPPLY SIDE ECONOMICS 675 tionism under the new banner of supply side economics. Under their direction, the potential of supply side economics becoming nothing more than an additional rationalization for expanding government is a very real threat. Such action would miss entirely the real issue of over-ex tended government.

This dangerous idea of turning to government to do something still has a powerful appeal among many economists. Proponents of this brand of supply side economics and rein dustrialization seem convinced that all that is required is a simple change of places at the ((public trough." The tragedy, of course, is that fur ther manipulation of the economy pyramided on top of the present structure of government means cer tain disaster. A shift in the direction or nature of government interven tion in no way addresses the basic problem, but can only worsen it by making government an even greater force in society. What is required in stead is an abandonment of the mas sive governmental structure that is plundering and depriving the citi zen of his productive efforts. Regulated Decline It would seem that after two gen erations of government manipula tion of economic affairs, the lesson of an expanding government stifling individual freedom would be well learned. The Keynesian interven tionist policies of the past have in flicted the very worst of conse quences upon this nation. The Keynesian Remedy has trans formed this nation from a society of free and prosperous people into a regulated society suffering from economic decline.

And the primary legacy of this failure of Keynesian economics has been the growth of the omnipotent state. After many years of govern ment policies rewarding leisure and consumption, assaulting productive capital and taxing work effort, the magnitude of government has fi nally reached oppressi ve propor tions. The result is a declining stan dard of living for Americans and a mood of pessimism regarding their future. A different program of supply side economics, led by free market pro ponents, could be the path to free dom. Policies under the banner of Usupply side economics" that reduce taxation on productive capital and work effort, that eliminate interfer ences and regulations among indi vidual traders, that curtail political harassment in the marketplace, and abolish the vast transfer of wealth through the political process would drastically shrink the magnitude of government.

If ((supply side economics" is per ceived as this kind of alternative in tellectual force, then the advance676 THE FREEMAN ment of individual initiative as a replacement for government domi nance in economic affairs and the prospects for a dynamic reindus trialization and future prosperity are great. Rather than adding just another layer of statist tinkering on the economy for different reasons, the potential for reducing govern ment's role in society through sup ply side economic policies holds much promise. What must be recognized and fully understood about the present state of affairs is that America's problems have reached crisis proportions be cause of the magnitude of govern ment itself. It is not only what gov ernment has done but also how much government has done that lies at the source of this nation's ills. A program of ~~supply side eco nomics" that leads to a reduction in the. size of government and a return to economic freedom is the great hope and promise for a prosperous future. Supply side economics chan neled in such a direction can be the path back to freedom. If supply-side ideas that lead to a reduction in gov ernment are chosen, then we will have found our miracle cure. Other wise, only a change in the direction of socialism in America will be the result.

It is too early to know which kind of ~~supply side economics" will pre vail, but the hope of the future rests on choosing the right path. For it will ultimately determine whether we will be free individuals or ser vants to an omnipotent state. (I IDEAS ON UBERTY ttPlanning" vs. the Free Market THE WAY to get a maximum rate of ueconomic growth" -assuming this to be our aim-is to give maximum encouragement to production, employment, saving, and investment. And the way to do this is to maintain a free market and a sound currency. It is to encourage prof its, which must in turn encourage both investment and employment. It is to refrain from oppressive taxation that siphons away the funds that would otherwise be available for investment. It is to allow free wage rates that permit and encourage full employment. It is to allow free interest rates, which would tend to maximize saving and invest ment.

HENRYHAZLITT Clarence B. Carson Government Empowers Unions DURING the years 1932-1935 Con gress passed acts which had the ef fect of empowering labor unions. The tendency of these acts was not only to authorize labor unions to orga nize and engage in collective bar gaining but also to enable them in considerable measure to prevail. Thereafter, union powers were fur ther augmented by court decisions and by rulings of the National Labor Relations Board. Many welfare pro grams, too, contribute to the em powerment of unions by providing aid to those unable to find employ ment because of government and union policies and practices. It is generally understood that from 1932 onward the United States government set on a course of enDr. Carson has written and taught extensively, spe cializing in American intellectual history. He is a fre quent contributor to The Freeman. couraging unionization. It is not so generally understood that it was done by empowering unions. Much of the burden of this article, then, will be to submit the evidence that government empowered unions by restraining itself in applying laws of general applicability to unions, used its powers in support of unions, and permitted unions to use coercion in pursuit of their own ends. That, in large, is how they were empowered.

But there is more involved here than proving that unions have been empowered. It entails a fundamen tal departure from the principles of good government. And when that has been grasped it is much easier to see the empowerment. Before re viewing the evidence for empower ment, then, we will examine the de parture from principle that is entailed. 677 678 THE FREEMAN November The principle violated by the em powerment of labor unions lies in the bowels of the law. The principle is that government must have a mo nopoly of the use of force within its jurisdiction. The justification for the monopoly is to provide a common justice for all within its jurisdiction. Indeed, the provision of justice is the very justification of government. Remedy at Law There is another legal principle which is essential to buttressing government's claim. It is usually stated in this way: For every injury there is a remedy at law. That does not mean, of course, that every per son who believes himself to have been injured will be satisfied with the remedy. Nor does it mean that every possible injury has been cov ered by legislative enactment or legal precedent. Rather, it means that an adequate legal system pro vides means for redressing griev ances where actual injury can be shown. Otherwise, it would have to be admitted that it would be neces sary to act outside the law to obtain justice. Such an admission is tanta mount to abdication by government.

Courts of equity provide a forum of adjudication in the United States for injuries not covered by positive law. There is no place for coercive labor unions within our system of law. To empower them is to return labor relations to a state of nature, Le., to a condition which would exist if there were no government. The meaning of the return to a state of nature can be clarified by reference to natural law theory, the theory which under girds our own system of law. In a state of nature, it has been main tained, it would be both necessary and right for the individual to de fend himself. That is, he could right fully use force to right the wrongs against him and to redress his grievances. Obviously, in such cir cumstances every man becomes a law unto himself. The necessity for government is patent, at least to most of us. And, under government, the individual gives up the right to defend himself and redress his grievances by force except under ex ceptional and dire circumstances. In return for the surrender of this right, government undertakes to provide justice and to defend the individual in the exercise of his rights.

The use offorce is what makes the difference. Anyone who is injured has a primary interest, of course, in seeing to it that matters are made right. He may go in person to any one who he believes has wronged him and make request for settle ment. Or, he may appoint others to represent him in seeking amends. The person who is accused with wrongdoing may treat with him or not, as it pleases him, and may enter into discussions with those ap1980 GOVERNMENT EMPOWERS UNIONS 679 pointed to represent him, if, as, and when he will. But the aggrieved party may not force himself upon those who have supposedly injured him, nor may he resort to coercion to attain retribution .. At the point where force is to be used, govern ment must do it. Otherwise, there is a return to a state of nature-and might, not right, will rule. What is true for individuals is equally true for all associations and organiza tions which are private in character.

These are fundamental precepts of our law. There are formidable dif ficulties in the way of unions fitting within them. One such difficulty is on the question of injury. What unions have sought to achieve mainly-higher wages, shorter hours, and better working condi tions-are matters about which, if there were legal remedies, unions would be largely superfluous. In short, if the injuries were demon strable, and there were legal reme dies, as in theory there must be, the only function of a union would be as a legal aid society. In fact, the rem edies which unions seek are not ac tionable, and unions do not wish them to be. Redress of Grievances by Direct Action The other great difficulty for unions is that they seek to redress their own grievances by direct ac tion. More pointedly, they use coercion in seeking to attain their ends. Labor unions have had a violent his tory. They have used intimidation frequently in getting members. They have used force to keep people from work when they were on strike. They seek to punish employers who do not yield to their demands by cutting off their labor supply. Moreover, they have used the boycott on many oc casions to deny market access to non union produced goods. They mass numbers, concert their action, and use collective action to compel ne gotiation and acceptance of their de mands by unwilling employers.

The empowerment of unions, then, is, in effect, the granting of the power by government to unions to redress their own grievances. It sanctions the private use of coercion to attain ~Justice." It returns the union side of labor rela tions to a state of nature. The United States government did not go about empowering unions di rectly. It could have been done, the oretically at least, by granting them jurisdiction and conferring govern mental powers upon them. For ex ample, they could have been incor porated, as cities are by states, and granted the status of governments in labor disputes. Except, labor union leaders would not have wanted that, and the legality of it would have been subject to all sorts of chal lenges. Instead, the empowerment was achieved indirectly, by circum680 THE FREEMAN November vention, and had the form, if not the substance,oflavv. There had been some tentative steps tovvard giving unions special status before 1932. One of the first vvas the setting up of a bureau in government to deal vvith labor mat ters. In 1884, Congress created a Bureau of Labor and assigned it to the Department of Interior. It vvas exclusively an information gather ing agency. 1 It vvent through several status changes until 1913 vvhen its head attained cabinet rank in a sep arate Department of Labor. The stated purpose of the department vvas to ~~foster, promote, and develop the vvelfare of the vvage earners of the United States, to improve their vvorking conditions, and to advance their opportunities for profitable employment .... "2 From the outset, hovvever,it vvas more unionist in ori entation than its purpose suggests.

As a scholar of labor policy has said, UIt is essentially a department for labor, organized to promote its in terests primarily as envisaged by organized labor."3 The Secretary of Labor has usually been a union leader or a pro-union man (or vvoman). The War Labor Board Another step vvas taken vvhen a War Labor Board vvas set up during World War I. It vvas unionist in ten dency, as indicated by its position Uthat the right of vvorkers to organize and bargain collecti vely vvas not to be denied or interfered vvith."4 Union membership nearly doubled betvveen 1915-1920. Here is a de scription of the role of government in that: If we examine the figures of growth from 1917 to 1919, we shall find that the war policy of the government was by far the greatest factor, for it was the government that opened the doors to unionism in industries heretofore closed .... 5 Although the government promo tion of unionism generally vvas ended shortly after the vvar, it vvas continued in one area. A Railroad Labor Board vvas authorized by the Transportation Act of 1920. More, collective bargaining vvas encour aged by the Railvvay Labor Act of 1926. Both management and labor vvere to act by representatives cho sen ~~vvithout interference, influ ence, or coercion" by the other party. 6 Hovvever,as already noted, it vvas in 1932 that the United States gov ernment began its move to empovver labor unions generally. The Norris LaGuardia Anti-Injunction Act vvas the opening vvedge. For several de cades, the injunction had been in creasingly used by the courts to curb union coercion. The courts had also restrained unions from attempting to induce employees to break con tracts vvith employers in vvhich they agreed not to join a union (called ~~yellovv dog contracts" by unionists).

1980 GOVERNMENT EMPOWERS UNIONS 681 Section 2 of the act declared that for the worker: it is necessary that he have full freedom of association, self-organization, and designation of representatives of his own choosing, to negotiate the terms and conditions of his employment, and that he shall be free from the interference, restraint, or coercion of employers of labor, or their agents, in the designa tion of such representatives or in self organization or in other concerted ac tivities for the purpose of collective bar gaining or other mutual aid or protec tion .... 7 (The phrase, ((right of self-organiza tion," crops up frequently in the labor laws passed during these years. It is a unionist euphemism for the right to join a union other than a shop or company union. It tacitly placed the government on the side of ((indepen dent" unions.) The main body of the Norris LaGuardia Act placed formidable obstacles in the way of court action to restrain union conduct. Section 6 provides that neither unions nor their officers are to be held respon sible for acts done by individual members of a union unless it can be shown that they participated in or authorized the acts. Section 7 de scribes the conditions under which courts may offer injunctive relief. In order for an injunction to be granted, the court must find that ((unlawful acts have been threatened and will be committed unless restrained,"

though how a court may know that an act will be committed is difficult to discern. In addition to the above requirement, the court must find: (b) That substantial and irreparable injury to complainant's property will follow; (c) That as. to each item of relief granted greater injury will be inflicted upon complainant by the denial of relief than will be inflicted upon defendants by the granting of relief; (d) That complainant has no adequate remedy at law; and (e) That the public officers charged with the duty to protect complainant's property are unable or unwilling to fur nish adequate protection .... 8 The act is the fulfillment of a union lawyer's dream. It affords op portunity for almost every delaying tactic imaginable. Provision for temporary injunctions was made, but even these were now limited by special restrictions in labor cases. They could only be issued after hearings had been held and could only remain in effect for an unusu ally short time. It should be noted, too, that while the act only pre scribed rules for Federal courts, the Supreme Court has since ruled that the Federal government has pre empted the field of labor relations. 9 Thus, state courts are usually pow erless in affording relief.

While the Norris-LaGuardia Act did not place labor unions and their members beyond the law, it did es682 THE FREEMAN November tablish a legal twilight zone for them. The common law rules for in junctive relief remained in effect in other cases, but in labor disputes they were drastically modified. While the law does not state that there are now to be injuries for which there is no remedy, it places the main remedy almost beyond reach. The next step in the empower ment of unions came with the pas sage of the National Industrial Re covery Act. This act was the center piece of New Deal measures which were supposed to bring about eco nomic recovery. New Deal intellec tuals who drew up most of the leg islation that was hurriedly passed in 1933 believed in a collectivist so lution to American problems. Thus, business and labor leaders in each major industry were to devise and agree upon industrial codes for their industry. The Agricultural Adjust ment Act incorporated a similar idea for farmers. Section 7(a) of the NIRA dealt with labor unions: Every code of fair competition, agree ment, and license approved, prescribed or issued under this title shall contain the following conditions: (1) that em ployees shall have the right to organize and bargain collectively through repre sentatives of their own choosing, and shall be free from the interference, re straint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organi zation or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection; (2) that no employee and no one seeking employment shall be required as a con dition of employment to join any com pany union or to refrain. from joining, organizing, or assisting a labor organi zation of his own choosing; and (3) that employers shall comply with the maxi mum hours of labor, minimum rates of pay, and other conditions of employ ment, approved or prescribed by the President. to With employers hamstrung, with other interests empowered to take collecti ve action, labor leaders had an unprecedented opportunity to get members. The scales were now weighted against shop and company unions, and labor leaders hurled themselves with alacrity into the task of organizing and taking over organizations. They even claimed to be doing the will of the government.

A circular distributed in Kentucky, for example, stated that NIRA Urecom mends that coal miners ... organize in a union of their own choosing." In many places, the organizers went further: ((The President wants you to join the union." They wanted their listeners. to believe that they meant the President of the United States; if pressed, they admitted that they· referred to the president of the United Mine Workers. 11 Strikes Continued The mining fields were not the only scene of vigorous organizing activity. The Amalgamated Cloth ing Workers went on a rampage of 1980 GOVERNMENT EMPOWERS UNIONS 683 strikes, raids, and unionizing of the unorganized. 12 A popular tactic dur ing this period was to call a strike at a nonunion factory, set up a picket line, and demand recognition of the union. (Never mind whether the local workers wanted a union or not.) For example, in Rochester, New York, ~~On July 27, 1933, the Amalga mated struck the Keller-Heumann Thompson factories for recognition.

The conflict was bitter, accompanied by mass picketing, police use of tear gas, an injunction, the company's sudden recognition of the United Garment Workers, and the inter vention of General Johnson."13 A labor board was set up to deal with problems that arose under Sec tion 7(a), but it was hardly a match for the chaotic situation it con fronted. ~~For approximately the first year it was the policy to avoid legal prosecution of violations; and even after cases were referred to the De partment of Justice, there was little effective enforcement .... "14 In fact, the NRA was a fiasco. It was based on the optimistic collecti vist as sumption that given the opportu nity men would abandon the pursuit of self-interest in favor of collective efforts for the common good. They did not, of course, and the conten tions aroused tended toward chaos. In any case, the Supreme Court brought the whole program to a halt in 1935.

Even before this occurred, legislation was being prepared for a more comprehensive empowerment of unions. Senator Robert Wagner was its chief architect, and the act bears his name. It· is also known as the National Labor Relations Act, and it was passed in 1935. It removed what remained of employer re straint on labor union organization. It accomplished this by setting forth five unfair labor practices, all di rected against employers. It de clares that employers are not: (1) To interfere with, restrain, or coerce employees in the exercise of rights guaranteed in section 7. [That is, the right to organize, bargain collectively, and engage in concerted activities.] (2) To dominate or interfere with the formation or administration of any labor organization or contribute financial support to it.... (3) By discrimination in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization. Provided, that nothing in this Act ... shall preclude an employer from making an agreement with a labor organization ... to require as a condi tion of employment membership therein ....

(4) To refuse to bargain collectively with the representatives of his employ ees .... 15 There is no doubt that the Act was phrased in legalese. There are even some attempts to give it the kind of precision we expect in a law. For ex ample, some of the terms are de684 THE FREEMAN November fined. Here is one instance: ttThe term tlabor organization' means any organization of any kind, or any agency or employee representation committee or plan, in which employ ees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work."16True, it is not much of a definitiona gang of bank robbers could probably qualify as a ttlabor organization" provided they. had some disgruntled bank employees among their number but it does have the look of being a definition and help to give the color of law to the whole.

But the National Labor Relations Act is more of an intent than a law. It is an intent to empower labor unions to attain their ends. The ac tual rule making (law making?) was vested in the National Labor Rela tions Board, e~tablished by the Act. Regular court proceedings were all but averted by having the hearings held and the facts established before the NLRH. The courts could then enforce the decisions of the NLRB or overturn them when they came before them on appeal. NLRA Summarized The justification of the National Labor Relations Act can be summa rized this way. Congress is empow ered to make laws regulating commerce. Labor disputes often lead to disruptions in commerce. The cause of these is that employers have been recalcitrant in reaching agreements with their employees through col lective bargaining. How it is all sup posed to work is stated this way in the Act: Experience has proved that protec tion by law of the right of employees to organize and bargain collectively safe guards commerce from injury, impair ment, or interruption, and promotes the flow of commerce by removing certain recognized sources of industrial strife and unrest by encouraging practices fundamental to the friendly adjustment of industrial disputes arising out of dif ferences as to wages, hours, or other working conditions, and by restoring equality of bargaining power between employers and employees. 17 Industrial harmony, then, was sup posed to be the fruit of the Act.

The most crucial point about the Act is this. It does not bring labor unions under the law. The theoreti cal justification assumes that em ployers are solely responsible for the troubles that take place in labor dis putes. Therefore, they alone need to be restrained by law. Not a single specific restraint on labor unions is contained in the Act. No unfair labor practices by unions are prohibited. (That has been slightly modified in more recent legislation.) When the bill was being considered before the Senate, an amendment was pre1980 GOVERNMENT EMPOWERS UNIONS 685 sented to prohibit coercion or inter ference with or by any person. It was defeated by a vote of21 to 50. In the House, there was an attempt to add an amendment to prohibit coer cion from any source. It was re jected. 1s Labor unions were not empowered directly to use coercion by the Na tional Labor Relations Act. What it did do-and this is the crux of the matter of empowerment-was to en able unions to receive the fruits of coercion. Specifically, the NLRB was empowered to certify unions to ne gotiate with employers. When it does so, it gives legal standing to what follows and the stamp of official ap proval to whatever union action has preceded the certification.

Compulsory Bargaining Two lines of coercion are drawn together in NLRB certification de cisions to enable unions to receive the fruits of coercion. One line stems directly from government. The Na tional Labor Relations Board re quires that employers recognize and bargain with the majority union and that nonunion workers accept it as bargaining agent. This is coercive both on employers and any workers who may not belong to the union. One writer describes the situation this way: (~Not only must an em ployer recognize a labor organiza tion as the representative of all em ployees in the appropriate unit, but he must bargain collectively with the union for all the employees in the unit regardless of whether all are members of the union."19 The government coercion reaches its pressure peak in the require ment that the employer bargain in ugood faith." When the Wagner Bill was considered by the Senate Edu cation and Labor Committee, Sena tor Walsh denied there was to be any compulsion in the bargaining process. He said: Let me emphasize again: When the employees have chosen their organiza tion, when they have selected their rep resentatives, all the bill proposes to do is to escort them to the door of their employer and say, ((Here they are, the legal representatives of your employ ees." What happens behind those doors is not inquired into and the bill does not seek to inquire into it. 20 Whether this was a correct descrip tion of the bill or not, it has cer tainly been interpreted differently by the NLRB. Here is a summary of what is required by that agency: Employers must do more than just meet with the representatives and merely go through the motions of bar gaining. To satisfy the requirement of collective bargaining, an employer must bargain in ~~good faith." In defining the term, the Board held that an employer to bargain in good faith umust work to ward a solution, satisfactory to both sides, of the various proposals and other affirmative conduct." In another case, 686 THE FREEMAN November the Board declared that CC •••the obli gation of the Act is to produce more than a series of empty discussions, bar gaining must mean more than mere ne gotiations ... " The Board has consid ered counter-proposals so important an element of collective bargaining that it has found the failure to offer counter proposals to be persuasive of the fact that the employer has not bargained in good faith. 21 In short, an employer must make concessions or run the risk of being found guilty of an unfair labor prac tice. Since there are penalties for that, the employer is coerced to make offers by a government agency.

Intimidation by Unions The other line of coercion comes from labor unions themselves. Labor unions are intimidatory by nature. Their weapon of intimidation is the use of numbers of people. Many of their tactics are aimed at frighten ing, cowing, and making timid any who would oppose them. The intim idation is palpable in such tactics as mass picketing; it is less dramatic in many other activities but none theless present. And intimidation is a mode of.coercion. By ignoring the intimidatory character of concerted action, indeed, by approving the col lective approach, and by according to unions the fruits of it, govern ment empowers unions to use coer cion. That the National Labor Rela tions Board has played a central role in the empowerment of unions is al ready clear, but a little explanation is in order. There are two main rea sons why the NLRB has advanced unionism. One is that many mem bers of the Board have been pro union .. For example, one student of the subject notes that all the early appointees u were active protago nists of organized labor."22The other is that the laws under which it op erated were heavily biased in favor of unions. 23 The courts, too, contributed sig nificantly to the empowerment of unions. Sylvester Petro, writing in the late 1950s, provided this. sum mary of the Supreme Court's role: During the past twenty years-the period coinciding with the tremendous growth of trade unions in numbers, power, and corruption-the Supreme Court of the United States has provided a succession of privileges for aggres sive, coercive union action. This succes sion began with a sharply contested se ries of decisions, releasing unions from the controls of the antitrust laws. It continued with the Court's identifica tion of a coercive economic weapon picketing-with the freedom of speech which the Constitution protects. And today the Court provides a practical privilege for monopolistic trade-union practices by holding that no injunctive relief may be granted by state courts to employers and employees injured by those practices. 24 The courts, then, completed the pat tern of excluding unions from the 1980 GOVERNMENT EMPOWERS UNIONS 687 application of laws of general force.

In sum, Congress, the NLRB, and the courts empowered unions in the 1930s. They did so by placing much of union activity beyond the reach of court relief, by placing government behind the union effort, and by en abling unions to reap the fruits of coercive activity. This was usually done with the blessing and often under the direction of the executive branch. Programs to Relieve the Consequencesof Unionization There is another facet of govern ment empowerment of unions that needs at least to be mentioned. It is government programs which facili tate unionization by relieving and diverting some of the worst conse quences of unionization. The worst economic impact of unionization is unemployment. Of course, unions are not the only cause of unemploy ment, but the thrust of their effort is to exclude from the work force all who cannot be employed at inflated wages. So far as they succeed, they raise prices to the consumer and re duce the number who can be em ployed-cause unemployment. The antipathy of unions for many work ers and the population generally would be transparent if many of their effects were not at least par tially concealed and laid to other causes.

Government has come to the aid of unions, then, by a whole complex of programs, such as, unemploy ment insurance, wages and hours legislation generally, compulsory school attendance for children, sub sidies for higher education, Social Security to foster early retirement (all programs to reduce the numbers of workers available), the subsidiz ing of consumers, and so on. Govern ment fueled inflation long made it appear that labor unions were get ting much larger gains for their members than was actually the case. These and many other programs were adjuncts to the empowerment of unions. The empowerment of labor unions was supposed to lead to industrial peace. It did not do so. It led, in stead, to turmoil, violence, the prey ing of the strong upon the weak, and something approaching class war fare for a time. The surge of union ism in the 1930s brought unprece dented disorder-sometimes chaos in industrial activity. Irving Bern stein, a most thorough chronicler of labor history, said, in his book on labor in the 1930s called Turbulent Years, ((The passage of NIRA was followed immediately by a strike wave .... 25 More, ((In 1934 labor erupted. There were 1856 work stop pages involving 1,470,000 workers. . .. Four were social up heavals .... "26 Nor did the National Labor Relations Act alter the trend.

In 1937, there were nearly 5 million 688 THE FREEMAN November workers involved in work stop pages. 27 Some of the most violent and dis ruptive strikes in American history occurred in the 1930s. Here is a de scription of one such outbreak: The decision of a local to shift from one union to the other automatically touched off a strike.... Under these conditions the coal fields of Illinois in 1933 supplied an arena for a shooting war between the factions. From August 1, 1932 to October 1, 1934, according to an incomplete list, 313 crimes were committed. A policeman was fatally shot in Springfield; at Peabody Mine No.7 in Christian County two persons were killed and twelve were wounded; dyna mite explosions wrecked the homes of two strikers in Kincaid; a Peabody dock boss was murdered in the same town: bombings damaged the plant of the Taylorville Daily Breeze which had edi torialized in favor of ending a strike; houses, cars, union halls, and relief sta tions were dynamited; an explosion de stroyed the exhaust fan at the Peabody Capitol Mine in Springfield while 350 men were underground; the coal-haul ing Chicago and Illinois Midland Rail road was bombed sixteen times. 28 Violence in the 19305 The turbulence reached new highs in the later 1930s with the surge to form industrial unions· by the CIO.

The violence and turmoil was exac erbated by the large number of rad icals who flocked into the union movement. The situation was this: Left-wing politicals of every shade and description ... were active in many of these struggles. Communists, Social ists, Trotskyites, members of the Prole tarian party and Revolutionary Work ers League, New America supporters, Lovestonites, and even old line ttwob_ blies" and Socialist Labor party mem bers and syndicalists became involved, particularly in the centers of the new mass production industries. 29 The radicals were often trained or experienced in obstructive and de structi ve tactics and eager to initi ate and prolong violence. Commu nists were especially in the forefront of the CIO organizational drive. I uVarious estimates have been made of the ultimate strength of the Com munists within the CIO. At mini mum they controlled unions con taining about 25 per cent of CIO's total membership and at maximum they wielded powerful influence in unions having another 25 per cent."30 What had happened was that labor relations reverted to a state of na ture. It was, however, a highly mod ified state of nature. Organized labor was loosed to impose their own brand of private justice. They were en abled to use coercion to redress their own grievances. But unlike a pure state of nature, there was govern ment. And government sided with the unions by restraining their op ponents and enforcing the coercively arrived at agreements.

The situation was modified some what in the 1940s and 1950s. The 1980 GOVERNMENT EMPOWERS UNIONS 689 Taft-Hartley Act set forth as unfair labor practices some union tactics, required union officials to sign an oath that they were not Commu nists, placed restrictions on stranger picketing and secondary boycotts, and banned the closed shop. The Landrum-Griffin Act of 1959 at tempted to institute greater union responsibility toward their member ship. None of these acts, however, al tered in any fundamental way the fact of government empowerment of unions. Unions still operate in a twilight zone between a state of na ture and civilized society. (f) -FOOTNOTESIHarold W. Metz, Labor Policy of the Fed eral Government (Washington: The Brookings Institution, 1945), p. 7. 2Ibid., p. 8. 3Ibid., p. 16. 4Harry A. Millis and Emily Clark Brown, From the Wagner Act to Taft-Hartley (Chi cago: University of Chicago Press, 1950), p.

16. 5Philip Ross, The Government as a Source of Union Power (Providence: Brown Univer sity Press, 1965), p. 18. 6Millis and Brown, op. cit., p. 19. 7Quoted in ibid., p. 20. 8Henry S. Commager, ed., Documents of American History, vol. II (New York: Apple ton-Century-Crofts, 1962), p. 236. "See Sylvester Petro, Power Unlimited (New York: Ronald Press, 1959), p. 249. lOIrving Bernstein, Turbulent Years (Boston: Houghton Mifflin, 1969), p. 34. llIbid., p. 41. 12Ibid.,p. 75 13Ibid. 14Murray Edelman, uNew Deal Sensitivity to Labor Interests," Labor and the New Deal in Milton Derber Edwin Young, eds. (Madi son: University of Wisconsin Press, 1957), p. 170. 15Commager, op. cit., pp. 315-16. 16Ibid.,p. 316. 17Ibid.,p. 317. 18Millisand Brown, op. cit., p. 27. 19Fred Witney, Government and Collective Bargaining (Philadelphia: J. B. Lippincott, 1951), p. 230. 2°R. W. Fleming, ((The Significance of the Wagner Act," Derber and Young, op. cit., p.

148. 21Witney,op. cit., pp. 229-30. 22Metz,op. cit., p. 19. 23See Edelman, op. cit., p. 171. 24petro, op. cit., p. 245. 25Bernstein, op. cit., p. 172. 26Ibid., p. 217. 27See Fleming, op. cit., p. 132. 28Bernstein, op. cit., p. 63. 29Bernard Karsh and Phillips L. Garman, uThe Impact of the Political Left," in Derher and Young, op. cit., pp. 97-98. 30Ibid.,pp. 107-108. Union Power and Government Aid IDEAS ON THERE is a definite relationship between union membership and union ~ power. Growth of union membership and increase of union power come ~,~ from the same source: special privileges and immunities granted by LIBERTY governments. SYLVESTERPETRO Robert Bearce AGAINST ~TifF! ALL ENEMIES Partill OUR CONSTITUTION and the princi ples of freedom are being steadily eroded today. Too many Americans evidently disagree with Thomas Jef ferson's basic political philosophy: ((Every man wishes to pursue his occupation and to enjoy the fruits of his labors and the produce of his property in peace and safety and with the least possible expense.

When these things are accom plished, all the objects for which government ought to be established are answered." According to Jefferson and other Americans who fought for freedom, the purpose of government was to In·thls three-part series, Robert Bearce of Houston, Texas Identifies the basic principles of limited gov ernment as set forth in the Constitution of the United States. He shows how we have forsaken many of the basics, and points the way toward a restoration of freedom. 690 assure the God-given rights of indi viduals to work freely, create, build, invent, succeed, fail, and plan their own lives ... without needless gov ernment interference. Government should intervene to prevent, prose cute, and punish crime. Government was also responsible for organizing the defense of the nation from for eign aggressors. The two major roles of government were designed to allow free individuals to rise to the heights of individual potential con sistent with their own abilities, en ergy, will power, and personal ac countability.

The United States Constitution has worked very well. in the past as a bulwark for personal liberty. Now, though, we are faced by a loss of in dividual :rights and a growth of gov ernment power. Two views of the AGAINST ALL ENEMIES 691 Constitution by two past Presidents illustrate a partial cause for our present difficulties. President William Taft wrote that: U. . . the President can exercise no power which cannot be reasonably and fairly traced to some specific grant of power ... in the Consti tution or in an act of Congress." Taft's strict interpretation of the Constitution contrasts with Presi dent Theodore Roosevelt's liberal in terpretation of the powers of the Presidency: ((... My belief was that it was not only his (the President's) right but his duty to do anything that the needs of the nation de manded unless such action was for bidden by the Constitution or by the laws."

Over the years since President Theodore Roosevelt wrote about the Presidency, the ((liberal" interpreta tion of the Constitution has gained an ever increasing acceptance by all three branches of the government executive, legislative, and judicial. This ((liberal" concept of government authority tramples upon the Tenth Amendment of the Bill of Rights: ((The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respec tively, or to the people." The problem is twofold: (1) ((WE THE PEOPLE of the United States," as stated in the preamble, have deserted the Constitution, (2) The people's elected and appointed offi cials have debased the Constitution. If we truly value what freedom we have left, and if we wish to regain what rights we have lost, we must understand the destructive mental ity or philosophy that has gripped so many Americans.

The Santa Claus Complex First, a greater number of Ameri cans are accepting what has been called the USanta Claus" complex. Some people might want to term it the Big Daddy or Great Uncle Sam complex. At any rate, ·when citizens look upon the federal government as Santa Claus, they will continue to expect supposedly ((free" presents from the government. While large numbers of busi nesses' special interest groups, professions, and average citizens are looking to the federal Santa Claus for goodies, their elected officials have an affliction called the ((Robin Hood" complex. Actually, the Santa Cla~s mentality and the Robin Hood philososphy work together to as sault the Constitution. In order to play Santa Claus and give to the cit izenry federal subsidies, grants, and other aid, government officials must also assume the role of a benevolent Robin Hood. They do this with a great deal of enthusiasm and sense of morality.

Before they can distribute gifts to different segments of the populace, 692 THE FREEMAN November they must first take money from other people. Thus, government plays Robin. Hood, taking from the ((rich" and giving to the ((poor"-the ((poor" classified as whomever the federal government so chooses. The fact is that government can not create wealth. It cannot give away anything it hasn't first confis cated from the ((rich" (industries, businessmen, hardworking individ uals) or the citizenry as a whole. Robin Hood does this through taxa tion. The only other way the federal government can pay for its handouts is simply to create money it cannot or will not bring into the Treasury through taxation. When it creates the new money from the federal printing presses, we suffer infla tion. Although the average citizen de cries inflation and excessive taxa tion, he continues, to vote for more government interference in the eco nomic and social life of the United States. Legislators are quite willing to play the parts of Santa Claus and Robin Hood. To do so is the best way to get elected and reelected. They learn by experience and continue to promote the idea that government is motivated by compassion and hu manitarianism.

To some extent that is true. A large number of public servants are probably motivated by a desire to do good. Although playing Santa Claus is mostly a matter of self-interest, many government officials honestly believe they are doing what is best for the citizenry of the United States after they assume public office. They believe they can use the authority of government to devise and then carry out plans to bring ((social jus tice," good housing, health care, and the like, to the people. Frankly, they feel that government has a moral obligation to manage our lives. Their goodness in our behalf, however, profanes the Constitution. Instead of showing loyalty to the principles of the Constitution-lim ited government and personal lib erty-they attempt to create the ((good society" according to their own designs. Again, their intentions are good, but they still refuse to have faith in the individual. They really do not think individuals are capable of achieving dignity, economic sta bility, and justice on their own within the framework provided by the Constitution.

Holding Officials Responsible Those government leaders who scorn the principles of the Consti tution should be held accountable. On the other hand, the question should be asked as to who put such Robin Hoods in office. The American people, of course, are the ones who vote for the politicians who head for Washington, D.C., to continue the task of planning and regulating our lives. A nationwide survey reported 1980 AGAINST ALL ENEMIES 693 that 94 per cent of those surveyed believed that the main duty of a Congressman was ~~making sure his district gets its fair share of govern ment money and projects." The survey shows that Americans are quite willing to accept the idea that their elected officials are in the business of distributing monies from the federal Treasury. Apparently, few citizens think the responsibility of their Senators and Congressmen is to cut back on the growth of govern ment.

We-legislators and average citi zens-need to reexamine the Con stitution and realize the extent to which we have degraded it. We should think about a proposal made by Nobel Prize-winning economist Milton Friedman. Considering the fact that people in government are trying to do good with other people's money, Dr. Friedman suggests that we need an eleventh amendment to the ten already in the Bill of Rights. The new amendment would ensure that every individual would have the right to do good-with his or her own money. In reality, we already have the right to do good for others at our own expense, although it can be said that this right is being hindered due to oppressive taxation and govern ment-sponsored inflation. We can not very well help other people if we do not have the money to do so. Regardless of stifling taxation, our right to help others is being ne glected or rejected as we place char ity, human concern, and humanitar ianism in the hands of the government.

Parental Guidance For example, some Americans are concerned that advertising and some children's programming on TV is bad for the kiddies and the stability of the family. Advertisers, they say, take advantage of innocent young viewers. The youngsters are brain washed and led astray to clamor for toys, candy, or other items that they do not need. The duped children are more or less forced by the commer cials to demand the products seen on TV. Thus, we have the tragic spectacle (as some Americans see it) of boys and girls strong-arming their help less parents into buying the trivial products advertised on TV. If the parents should refuse, havoc arises in the family. Adults and children suffer emotional trauma. If the par ents agree to the children's de mands, then the families waste money on the supposedly useless products. The answer for the above prob lems, as suggested by those who dis like the quality of children's pro grams and advertising, is either government regulation or ~~social conscience" on the part of business.

~~Social conscience" means that com694 THE FREEMAN November panies that manufacture children's products should sponsor their pro grams without showing ads for toys, cereals, and other products. We could then have commercial-free chil dren's TV ... which would eventu ally mean government subsidy of children's programs at the taxpay ers' expense. Now then, if you ask the propo nents of government intervention whether or not they allow their own kids to watch what they, the par ents, say is bad children's TV, they might very well answer with an em phatic ~~No!" That being the case, we should ask such people why they feel so superior to their fellow Americans. In other words, why is it that they presumably have enough concern for their children to turn off the booby-tube, but other parents apparently cannot make the same decision in behalf of their own chil dren? Other questions we might ask are these: If changes really need to be made in children's TV, why don't those who want the changes use their own money to establish a pri vate foundation to bring about whatever improvements they feel are necessary? Why don't those con cerned about little Johnny's appe tite for candy launch a nationwide campaign-paid for out of their own pockets and through voluntary con tributions-to inform parents that they are perfectly capable of doing two things: (1) saying ~~No!'" to their children, and (2) turning off the TV set or making certain that their children do so.

The fact is that we will always have our goodhearted, well-inten tioned crusaders who want to bring about what they believe to be a bet ter society. Their moral failure lies in the fact that they basically have faith only in their own intentions and the power of government to im plement those good intentions for all our good ... regardless of whether we agree or not. Those who support more govern-, ment regulations, ~~guidelines," and laws tend to believe that the ordi nary citizen is not capable of mak ing intelligent decisions on his own. This distrust of individual responsi bility illustrates some of America's alienation from the Constitution. The principle of limited government authority is spurned. Individual freedom and the Bill of Rights are belittled. The Bill of Rights The Bill of Rights was meant to be a steadfast safeguard to individ ual liberty. These ten amendments were prohibitions against excessive government power. They upheld in dividual rights against government interference. Now, though, an in creasing number of Americans are accepting and encouraging a differ ent concept of human rights. They 1980 AGAINST ALL ENEMIES 695 would accept a new bill of rights that would not restrict government power, but· instead authorize more government intrusion into our daily affairs.

As the federal government ex pands and becomes more intensive, we proceed further down the path toward servitude. Willingly or un knowingly, most Americans accept their fate. Our future was somewhat prophesied by James Madison: ((There are more instances of the abridgment of the freedom of the people by gradual and silent en croachments of those in power than by violent and sudden usurpation." Madison realized that freedom was threatened by the gradual, often deceptive growth of government power. Whenever government steps beyond its constitutional duties, so ciety begins to deteriorate. When government tries to arrange and di rect society in defiance of the Con stitution, a type of class warfare be gins. As government attempts to pay for its various programs, it must re sort to increased redistribution of the wealth. Society and politics be come a battle ground where every one demands ((his share" of the funds in the federal Treasury.

Along with the continual struggle by lobbyists, special interest groups, and other beneficiaries for a cut of the federal pie, there is a corre sponding loss of integrity. When the government takes from some (or all) to give to others, the redistribution of wealth hurts all segments of soci ety-both the productive and the not so productive. For example, a businessman finds himself in financial trouble due to his own incompetence or misman agement. He looks to the federal government for help, and he re ceives it. A second economic crisis hits him, and he again finds himself rescued by government aid. Soon, he has lost his sense of self-responsibil ity. He has become dependent upon a paternalistic government. In this state of dependence, there is very little guilt about having his own failure subsidized by money taken from the productive elements of so ciety. Dependence and Servitude Likewise, the productive people whether they be corporations or in dividuals-slowly lose their sense of accountability, initiative, and self reliance. They ask themselves why they should continue striving so hard, only to have the fruit of their labors taxed away for the benefit of others. Thus, there is a growing ten dency for the thrifty, energetic, and hardworking people in society to work less and eventually become de pendent upon government.

Government intervention is the first step towards dependence upon government. After dependence comes servitude.

696 THE FREEMAN November If we are to escape the servitude of a socialistic type of government, we must act upon the advice of Patrick Henry: ((No free govern ment, or the blessings of liberty can be preserved to any people but by a firm adherence to justice, modera tion, temperance, frugality and vir tue, and by a frequent recurrence to fundamental principles." For the United States in the 1980s, ~(fundamental principles" should be the Constitution. Although the work of the Founding Fathers in 1787 is far from perfect, the Constitution does reflect an honest, firm adher ence to certain basic truths about freedom and the purpose of govern ment. One of the worst mistakes we can make is to believe that the Con stitution is not relevant for today. The opposite is true. More than ever, we need to uphold the Constitution with the realiza tion that it is based upon certain wise, unchanging principles-prin ciples that should be understood and obeyed today as much as they were during Madison's day. The Consti tution is not an outmoded document to be shrugged off as something that cannot or should not direct our polit ical, economic, and moral life today.

Regardless of how durable the Constitution is, it cannot protect freedom unless ~(WE THE PEOPLE of the United States" heed George Washington when he said: (~The preservation of the sacred fire of liberty and the destiny of the republi can model of government are justly considered, perhaps, as deeply, as fi nally, staked on the experiment in trusted to the hands of the Ameri can people." Identifyi ng Those Who Corrupt the Constitution If we have an understanding of how the Constitution can protect our freedom from government encroach ment, we must first identify those individuals and groups who are cor rupting the Constitution. Are they federal bureaucrats who place their faith in larger and more powerful government? Yes, but who puts them ~n office in the first place? ~~WE THE PEOPLE of the United States"! Before we can think about the bad guys holding public office, we have to ask ourselves how unfaithful we have been to the Constitution. The average American's desire for urban renewal, aid to education, price sup ports, and other handouts is the root of oppressive government. When we stop asking for needless government intervention, the constitutional renegades in Congress will not be reelected.

As soon as we have our own houses in order regarding allegiance to the Constitution, we can turn our atten tion to those people in government who want to continue spending our tax money, regulating our lives, and 1980 AGAINST ALL ENEMIES 697 seducing other segments of society with their programs of government aid. Having a profound understand ing of the Constitution, we can judge how well our elected and appointed officials are living up to their oath of office. Sometimes it is possible to detect hostility toward the Constitution simply by knowing what govern ment officials say in speeches, inter views, press conferences, or by the written word. More important, how ever, are their voting records and daily actions in office. Can your own Congressman and Senators answer a truthful ttl do" to the oath .of of fice? Do you solemnly swear that you will support and defend the Consti tution of the United States against all enemies, foreign and domestic; that you will bear true faith and al legiance to the same; that you take this obligation freely, without any mental reservation or purpose ofevasion; and that you will well and faithfully discharge the duties of the officeon which you are about to enter: So help you God?

Politicians come and go. New Con gresses are sworn in as our political process carries on year by year. New administrations take over, and new Cabinets are appointed. Regardless of who our elected and appointed of ficials are-whether they be defend ers or betrayers of the Constitu tion-the tasks before us always remain the same. We are to compre hend the meaning of the Constitu tion and uphold it by accepting re sponsibility for planning our own lives. Once our own allegiance to the Constitution is firm and true, we can scrutinize our government offi cials with Thomas Jefferson's wis dom in mind: ttIn questions of power let no more be heard of confidence in man, but bind him down from mischief by the chains of the Constitution." i IDEAS ON LIBERTY Thomas Babington Macaulay OUR RULERS will best promote the improvement of the people by strictly confining themselves to their own legitimate duties-by leav ing capital to find its most lucrative course, commodities their fair price, industry and intelligence their natural reward, idleness and folly their natural punishment"-by maintaining peace, by defending property, by diminishing the price of law, and by observing strict economy in every department of the state. Let the government do this-the people will assuredly do the rest.

A REVIEWER'SNOTEBOOK JOHN CHAMBERLAIN Planning for Freedom ((Supply side economics" is the cur rent rage. In essence, it is simply J. B. Say's old ((law of markets" re stated. What the supply-siders are saying is that production must come before consumption, which is a truism. But, looking at economics as a totality, the processes of produc tion and consumption are a seam less web. The funds laid out for pro duction~wages, raw material pur chases, interest, dividends----consti tute the buying power that eventu ally clears the market. The effort to whip up an ((effective demand" by is suing paper tokens unrelated to pro duction is supererogatory, and re sults in inflation as the extra ((money"joins the chase for the given supply of goods. There can, of course, be an over production of some things in rela tion to what consumers actually want at a given price. This means that the workings of Say's Law will be ragged as enterprisers correct for 698 their mistakes in judgment. But this does not change the fact that com modities are paid for ultimately by other commodities, often at chang ing ratios. Money plays an interme diary role. The important thing is to avoid public policies that keep en terprisers from bringing an expand ing supply of goods into being in the cheapest possible way.

This is what the supply-siders are now saying in Washington as they look for tax policies that will offer the least discouragement to busi ness. But it is an ancient wisdom. Ludwig von Mises was talking ((supply" as long ago as 1950 when he published his remarkable essay, ((LordKeynes and Say's Law," in The Freeman. I remember reading the essay in a board of editors' meeting in great excitement. My wonder now is that this happened thirty years ago. The essay subsequently went into a Mises collection, Planning for PLANNING FOR FREEDOM 699 Freedom, an expanded fourth edi tion of which is now available. Four new essays have been added to the original thirteen, and the book also includes other extra dividends. There are Murray Rothbard's study, ttThe Essential von Mises," which places its subject in the Austrian School tradition, and separate sa lutes to Mises by Henry Hazlitt, Gottfried Haberler and Albert Hu nold.

New Chapters by Mises The four new essays, all of them vintage Mises, are ttThe Gold Prob lem," ttCapital Supply and American Prosperity," ttLiberty and its Anti thesis," and ttMy Contributions to Economic Theory." In ttThe Gold Problem," printed in The Freeman in 1965, Mises made the accurate prediction that the American Trea sury would continue to lose gold if deficit spending did not stop. Amer icans, of course, were forbidden to own gold in 1965, but foreigners could legally draw it out from what had once been its American haven. In the essay on ttCapital Supply and American Prosperity" Mises kept hammering at a thesis that has only recently caught the attention of a Congress that has finally been brought to admit that capital gains taxes are self-defeating. Long ago, from his vantage points in Vienna and Geneva, Mises could see that America was the most prosperous nation in the world because ttits per head quota of capital invested" was higher than elsewhere.

Coming to this country to escape Hitler, Mises was appalled at the way we were deserting our own wis dom. His ttCapital Supply" essay was written in 1952. It constituted a warning that if the federal govern ment continued to prevent capital accumulation by its tax policies and its inflationary spending, our pro ducti vity would decline and our standard of living would suffer ac cordingly. Planning for Freedom by Lud wig von Mises. Expanded fourth edition, 280 pages, paperback. Published by Libertarian Press, ~ O. Box 218, South Holland, Illinois 60473. Also available from The Foundation for Eco nomic Education, Inc., Irving ton-on-Hudson, New York 10533. Price: $6.00. Mises did not make the mistake of attributing our traditional prosper ity to the physical resources of the American continent. He said ttcapi tal is more plentiful in America than it is in other countries because up to now the institutions and laws of the United States put fewer obstacles in the way of big-scale capital accu mulation than did those foreign 700 THE FREEMAN November countries." Morality, too, had some thing to do with it. ((The climate of opinion in which capitalism could thrive," said Mises, Hwas character ized by the moral approbation of the individual citizen's eagerness to pro vide for his own and his family's fu ture. Thrift was appreciated as a virtue no less beneficial to the indi vidual saver himself than to all other people."

In his ((My Contributions. to Econ omic Theory" Mises correctly cites his Socialism, which dates back to the early Nineteen Twenties. What Mises proved in that book was that Han economic system, where there is no private· ownership of the means of production, could not find any cri terion for determining the values of factors of production and therefore could not calculate." Socialism, in short, flies blind. Mises was never impressed by economic models that depend on the manipulation of past statistics, which inevitably ignore the capacity of individuals to change ground in their future choices. ((In the liber tarian system," so Mises wrote in ((Liberty and its Antithesis," ((every individual is a moral person, that is, he is free to choose and to act and is responsible for his conduct ... Where the authoritarian system is fully es tablished, as was for instance the case in the empire of the Inca in pre Columbian America, the subjects are merely in a zoological sense human; virtually they are deprived of their specifically human faculty of choos ing and acting and are not account able for their conduct."

Beware Econometric Models Whether he wrote in German or in English, Mises always had a magnificent verbal felicity. Like others of the Austrian School, Mises knew mathematics but was not im pressed by any economic methodol ogy that (to quote Murray Roth bard) ((all but crowded out language or verbal logic from economic. the ory." Mises thought mathematical equations were only useful in de scribing a never-never land of ((gen eral equilibrium." Rothbard, in his explanation of Mises' distrust of mathematics, says that ((no one has ever discovered a single quantitative constant in human behavior, and no one is ever likely to, given the freedom of will inherent in every individual." The human development of high-speed computers has led to supposedly so phisticated econometric models. Alas for the usefulness of these models, the lack of confirmable con stants to feed into them has made for a sorry record of econometric forecasting.

Relying on verbal logic and his analytical study of business-cycle theory, Mises correctly predicted the coming of the Great Depression when Irving Fisher, for example, was 1980 PLANNING FOR FREEDOM 701 proclaiming a uNew Era" of indefi nite prosperity based on the manip ulation of governmental central banks. There is an odd contradiction involved here. Mises knew that bad mistakes would accompany a wild credit boom. This is a ~~constant" fac tor in a credit cycle. But, since the mistakes are individual and show up only in retrospect, they can't be ~~timed" for computer use. That is why the econometrist's supposed precision should give way to the Austrian School's sheer common sense. i THE GOLD CLAUSE: WHAT IT IS AND HOW TO USE IT PROFITABLY edited by Henry Mark Holzer (Books In Focus, Inc., 160 E. 38 St., Suite 31B, New York, N.V: 10016) 381 pages. $19.95 cloth Reviewed by John A. Sparks, Associate Professor of History and Director of the Institute on Public Policy and Private En terprise at Grove City College in Penn sylvania LAw PROFESSOR Henry Mark Holzer has compiled an anthology of imp or tant articles about the legal stand ing of gold clauses in private and public contracts. A gold clause is the contractual requirement that a debt be repaid in a specified quantity of gold or in an amount of currency equal to that quantity of gold. Gold clauses existed at least as far back as the latter middle ages, and though their formulation has differed from age to age, they have been used for one reason only-to protect con tracting parties against debase ment of coin or currency by the state.

The book points out the signifi cant difference between the Legal Tender Cases (1871) and the Gold Clause Cases (1935). The 1871 Cases did not rule out the use of gold clauses in private contracts, al though they did uphold the issuance of Civil War greenbacks as consti tutional; gold clauses continued to appear in all long-term contracts and obligations, as well as in many shorter term agreements. The real damage done to sound money by the legal tender decisions was not ap parent until 1935 when they were relied upon by the U.S. Supreme Court to uphold the Congressional resolution prohibiting gold clauses in contracts, private and public. Readers interested in the Consti tutional protections for hard money will gain much from reading chap ter 5 which contains the anti-gold clause analysis of Angus D. Mac Lean who had the primary respon sibility for the government's brief in the Gold Clause Cases, as well as Associate Justice James C. Mc Reynold's short, but penetrating dissent .which includes his now fa mous exclamation: ~~The Constitu702 THE FREEMAN November tion as many of us have understood it, the instrument that has meant so much to us, is gone."

Holzer's last chapters take up, in turn, the revival of gold ownership in 1974, and the relegalization of gold clauses in 1977. But, a trouble some question remains. Why, if gold clauses are now legal once again, are citizens not generally making use of them to avoid the ravages of inflation? Holzer provides one legal answer to that question. Long-term loan contracts which require the bor rower who repays in paper currency to repay more of the cheaper dollars, may violate state usury laws even where there has been a waiver of the defense of usury in advance. Holzer suggests a way that such a problem can be overcome by draft ing a clause which states that ~~a given number of ounces of gold (ei ther bullion or coins) of a certain fineness is being loaned and that ex actly the same weight and· fineness will be repaid." In just forty-seven years, igno rance of gold clauses and the gold standard has become widespread.

But, perhaps, the financial necessi ties of this Age of Inflation and the rebirth of knowledge about gold clauses, to which Professor Holzer has made such an important contri bution, may revive these old con tractual barriers to monetary tyr ann~ , FARM AND FOOD POLICY Issues of the 1980s by Don Paarlberg (University of Nebraska Press, 901 North 17th Street, Lincoln, Nebraska 68588) 1980 338 pages. $16.50 coth Reviewed by Richard w: Wilcke, Presi dent of the Council for a Competitive Economy, Washington, D. C. AMERICAN agriculture has always been an enigma for those advocat ing a freemarket economy. Farmers and ranchers are steeped in a long tradition of supply and demand, re spect for private property, and fierce independence. Yet the ever-present prejudices toward small, family owned farms has rendered agricul turists helplessly susceptible to all kinds of institutionalist theories and perfect-competition models.

As a result, since World War I the public policy of American agricul ture has remained continuously and increasingly interventionist even as farmers have tried to retain their independence. Through the USDA, the federal government underwrites most agricultural policy research, directs most agricultural economics, and pays much of the salary burden of land-grant university specialists and local extension agents. Either by accident or by grand de sign, likely the latter, what has re sulted has been a widespread and ef1980 OTHER BOOKS 703 fective major network of avidly non partisan and avowedly nonideologi cal apologists. and defenders of gov ernment's ubiquity. It should not be surprising that agricultural policy debates are narrow. Nor should it surprise anyone that outspoken champions of laissez faire are few and far between. For some three or four decades, Don Paarlberg, professor emeritus of agricultural economics at Purdue University, has been a welcome and somewhat lonely exception to the rule. From his first writings while still getting his doctorate at Cornell to his latest book, he has been a be liever in a market-oriented agricul tural sector in the U.S. economy.

His Farm and Food Policy at tempts to paint a broad picture of the policy options open to U.S. poli cymakers during the decade just getting started. In the most reason able and conciliatory tone, Professor Paarlberg leads readers to logical, usually market-:-oriented, conclu sions. From his Washington experi ence in the USDA and as an advisor to President Eisenhower, he retains an acute awareness of political pres sures and the role of special,;,interest groups. The groups taking interest in·farm and food policy are not lim ited to farmers. While some students of economic freedom, this reviewer among them, might have preferred a more straightforward and less compromising defense of the free market, Professor Paarlberg's book is a wel come addition to the shelves of books now dealing with food policy. Per haps, by a balanced and comprehen sive view, Professor Paarlberghas helped to inject· more reason and less prejudice into farm policy de bates. , THOSE GASOLINE LINES AND HOW THEY GOT THERE by H. A. Merklein and William P. Murchi son, Jr.

(The Fisher Institute, 6350 LBJ Freeway, Suite 183E, Dallas, Texas 75240) 129 pages. $5.95 paperback Reviewed by Brian Summers STANDINGin a gas line can be a frus trating experience. But because most Americans didn't understand what caused the long lines of 1973-74 and 1979, they directed their anger at the wrong people. The blamed the oil companies. But oil companies don't earn profits by holding prices below market-clear ing levels. And they don't .make money by allocating gasoline to rural areas while supplies in the cities are drying up. The federal government does these things. It took government inter vention to disrupt the flow of gaso line and create the maddening lines.

704 THE FREEMAN Now that the' Department of En ergy has relaxed its controls over the pump price of gasoline, supply and demand are again in approxi mate balance, and the lines have disappeared. However, Merklein and Murchison show, our basic energy problems persist. The Department of Energy continues to discourage natural gas exploration by control ling the wellhead price. The same holds for crude oil. On top of this, Congress has imposed a cCwindfall profits" tax (actually an excise tax) on the oil companies. These misguided policies are a po litical response to the misdirected anger of the American people. When the public understands the causes of our energy problems, these policies will be changed. Those Gasoline Lines and How They Got There, a well written, carefully documented analysis of the energy crisis, is an excellent place to begin that under standing. , HANDSOME BLUE LEATHERLEX FREEMAN BINDERS $3.00 Order from: THE FOUNDATION FOR ECONOMIC EDUCATION, INC.

IRVINGTON-ON-HUDSON, NEW YORK 10533 the . Freeman VOL. 30, NO. 12 • DECEMBER 1980 Regulation How specialinterestsvictimizeconsumers. John A. Pugsley 707 Organizing Government Employees Clarence B. Carson 712 Vesting unions with an awesomepolitical power. Iatrogenic Government Russell Shannon 724 Can governmentcurethe diseaseit has caused? Individual Rights and the Police Power of States The lawsof feudalismin moderndress. 'Tibor R. Machan 728 Sweden's Welfare State: A Paradise Lost A modelfor losingfreedomwithoutgaining security. Markets or Edicts? Freedomisthe answerto the energyproblem. Hit or Run Rightsof individualsunderthe Constitution. Ideas, Noble and Otherwise Mostvaluableof all is a good idea. Winners and Losers Marketcompetitionallowseveryoneto gain. Book Reviews: "The New Class?"by B. Bruce-Briggs "Man Is MoralChoice"by Albert H. Hobbs Index for 1980 E. W.Dykes 733 Eric Brodin 736 Jess Raley 743 Ben Barker 746 Willie E. Nelms 752 756 761 Anyonewishingto communicatewithauthorsmay send first-classmail in care of THE FREEMANfor forwarding.