Book Reviews

A REVIEWER'S NOTEBOOK WALTER E. WILLIAMS, a good econo mist who happens to be black, is not one to call names or to impugn mo tives. So, when he entitles an excel lent book The State Against Blacks (New York: New Press, McGraw-Hill Book Company, 183 pp., $14.95), he does not mean to imply that con scious racial discrimination is being practiced. The big point that he makes, with specific chapter and verse, is that most of our govern ment economic policies hurt the poor in general by depriving them of the opportunity of hooking in to what Isabel Paterson called the "long cir cuit of energy." Insofar as blacks are more heavily represented than whites on the lower income brack ets, they suffer more proportion ately. 122 JOHN CHAMBERLAIN THE STATE AGAINST BLACKS Williams does not deny there is such a thing as racial discrimina tion. He merely thinks it plays very little part in most economic deci sions. Banks don't "red line" certain inner city residential areas because they are heavily populated by blacks and Hispanics. They do so because mortgage foreclosures are a big sta tistical threat. Merchants in ghetto areas charge their customers higher prices not as a way of acting out their prejudices. They have to charge more because losses from business-related crime are greater in ghetto environ ments. Insurance premiums for fire and theft are a heavy cost of doing business.

The very fact that there is "block busting" by blacks in neighborhoods once exclusively inhabited by whites THE STATE AGAINST BLACKS 123 has less relation to color than to eco nomics. What happens is that prop erty owners, regardless of their race, find that they can get more in total rental volume if they split their space into smaller units for disposal to poorer people who will put up with being crowded. The displaced whites move to suburbs where zoning, a po litical phenomenon, keeps poor peo ple from buying property no matter what percentage of melanin they may have in their skins. The Impact of Minimum Wages In a beautifully persuasive chap ter called "Minimum Wage, Maxi mum Folly," Williams demonstrates that minimum wage laws hit inevi tably at marginal workers who can not in the circumstances do enough work in a given hour to make a profit for their employers. The conse quence of the minimum wage is that nobody will hire people who haven't yet learned certain skills or ab sorbed certain disciplinary lessons.

It is purely accidental that the worst negative effects of the compulsory minimum wage are borne by non white teenagers, followed by non white males in their twenties. White youths do better than blacks because they happen to be more highly qualified for jobs for reasons that go deep in history. In coming north to unfamiliar surroundings in ghetto districts, black kids may lose two or three years of schooling. The taxes in inner cities are not suffi cient to build the best schools or hire good teachers capable of keeping kids off the streets. Busing doesn't help, for it creates strains that affect classroom discipline and attention. Good teachers won't put up with "blackboard jungle" conditions. Forced to the streets, black youths discover it is easier to steal or sell drugs than it is to crack the mini mum wage barrier. It is as simple as that, but our politicians can't see it. The state, in passing minimum wage legislation, has tried to be "compas sionate," but it has only succeeded in forcing the poor of whatever color to seek relief by way of "entitle ments" that drain the economic sys tem of savings that might otherwise have been productively employed.

Occupational and business licen sing, which raises the cost of entry into a business or profession, is color blind even where its hidden inten tion may be to exclude blacks from certain fields such as plumbing and work on the railroads. The justifica tion for government regulation is usually stated as a desire to protect the public safety or morals and to keep out unscrupulous practitio ners. But the effect of regulation, as something that is often distinct from its intention, is to limit job opportu nities. The poor, who can't raise the money to pass licensing exams or to fight their way into exclusive unions, 124 THE FREEMAN February are hurt no matter what their ethnic backgrounds may be. If more blacks are affected than whites, it is once again due to the fact that they are more numerous in a low income class category whose ethnic components have been changing ever since the Irish, the Jews and the Italians were complaining about discrimination.

Taxicab Medallions The taxicab industry gets special attention from Williams as some thing that, with bank finance, ought to be open to anybody, white or black, who can raise $5,000 to cover the operation of a single vehicle. Per sonal business skills needed to be come. a taxicab owner-operator are minimaL But in many communities the number of cabs that are allowed to operate is severely limited. In New York City a cab driver must have a medallion before he can legally take to the streets. There were 13,566 medallions issued in 1937, sold at $10 a throw to all drivers operating in the city at the time. During the war 1,794 medallions were returned to the city by owners going into the army or navy. These have never been reissued. So the licensed city cab fleet stands at 11,772. The number of officially permitted New York taxis may have been right for 1937, but for 1983 it is another story. A cab medallion in New York now commands a market price of $60,000. New York banks will lend John Chamberlain's book re views have been a regular fea ture of The Freeman since 1950.

We are doubly grateful to John and to Henry Regnery for now making available John's autobi ography, A Ute with the Printed Word. Copies of this remark able account of a man and his times-our times-are avail able at $12.95 from The Foun dation for Economic Education, Irvington-on-Hudson, New York 10533. up to $25,000 for a taxi medallion. With their monopoly position the le gitimate cab drivers can afford to turn down trips to ghetto areas. So a gypsy cab industry has grown up to service the poorer districts of Harlem, Bedford-Stuyvesant, Brownsville and the South Bronx. The gypsy cabs are tolerated, and they make money despite the men ace of crime in dark streets. But of ficially prescribed rates, despite the gypsy competition, remain uncons cionably high for most cab riders in the greater city. It follows from their economic cir cumstances that few blacks can af ford $60,000 for a New York medal lion. In Washington, D.C., it is different. There a poor black can set up in business with his own cab ifhe raises $25 for a license and $5,000 1983 OTHER BOOKS 125 CONCENTRATION,MERGERS, AND PUBLIC POLICY by Yale Brazen (Macmillan Publishing Co., Inc., 866 Third Avenue New York, N.V: 10022), 1982 456 pages - $29.95 cloth Reviewed by William H. Peterson "THE Darwinian jungle is not guar anteed to produce a happy ending.

Influencing and corrupting govern ments may be the only thing con glomerates are better at-as is sug gested by the IT&T scandals during the Allende Chile takeover and the Nixon Administration .... The Sherman and Clayton Acts, and most of the antitrust laws have contrib uted enormously toward improving the degree of competition in our sysfor the cab and insurance. Black tern. All who value social reliance ownership of cabs in the District of on decentralized markets and eco Columbia comes to some 70 per cent. nomic efficiency should applaud this This figure, though it is a rough es-kind of public intervention, which timate, is enough to make Wil-helps to lessen the imperfections of Iiams's point about the need for open competition." entry. Williams applies the same So writes Nobel Laureate Paul A. reasoning to his discussion of the Samuelson in his 10th edition of trucking industry and to his chap-Economics, a widely translated col ters on plumbers and electricians. lege textbook which since 1948 has Altogether this is a first-rate book molded the thinking of literally mil of sound e£onomics that transcends lions of students, many of them now the racial aspects, which are inci-in high places, around the globe.

dental. i The Samuelson evaluation of antitrust is, sadly, conventional wis dom. And with America much in need of guidance and fundamental public policy reform to lead us out of the morass of interventionism, it is refreshing to welcome Yale Brozen's Concentration, Mergers, and Public Policy, a carefully researched, even handed book which deals a body blow to antitrust theory and practice. One pet antitrust dogma, for ex ample, is concentration. Concentra tion, also known as oligopoly, re flects fewness of sellers. It also reflects bigness. Fewness and big ness, however, supposedly represent "restraint of trade" and "predatory power," against which government agencies, chiefly the Federal Trade Commission and the Antitrust Di vision of the Justice Department, have spent a lot of money and en ergy. And these antitrusters have much to show for it: They have won a host of major antitrust suits, club126 THE FREEMAN February bing down bigness again and again.

The question is: Who won what? Certainly not the American con sumer who's seen competition not thus enhanced but, rather, set back. The Brozen work raises more inter esting questions: Do large firms in a concentrated industry (frequently defined as four or fewer firms having 50% or more of the market share) really have the market power· at tributed to them? Are big corpora tions-the Fortune 500-less com petitive and productive than smaller firms? Is the long-held animus of American government toward Big Business compatible with the opti mum choices confronting the nation in the 1980's? In particular, does an titrust really aid the search for so lutions to the problems of growth, productivity, the efficient utilization of resources-of getting the country moving again? Answers, as clearly implied in this volume: No. Brozen's evidence is overwhelm ing. And notwithstanding scores if not hundreds of muckrakers like Ida Tarbell and Lincoln Steffens and in numerable economist-disciples of Joan Robinson (The Economics of Imperfect Competition) and Edward Chamberlain (The Theory of Mo nopolistic Competition), the evi dence goes all the way back to the time of the passage of the Sherman Antitrust Act in 1890.

For example, that evil trust, Stan dard Oil, had an 88% market share in 1899 but this share was whittled down by competition to 67% in 1909, two years before the Supreme Court dismembered John D. Rockefeller's giant. Again, American Sugar Re fining's 95% market share .. in 1892 was down to 49% in 1907 and to 28% in 1917. International Paper's 66% share in 1898 slipped to 30% in 1911 and 24% in 1928. And U. S. Steel's 66% share in 1901 fell to 33% in 1934 to 24% in 1968 and is down to around 19% today. The steel market-once consid ered the exclusi ve province. of steel giants-is itself a lesson in the un doing of antitrust mythology. Today the steel market, which is of course a far larger market than it was in 1901, is besieged by small stream lined "minimills" such as Nucor in Charlotte, North Carolina and Flor ida Steel in Tampa, by Japanese, Korean and European steel produc ers, and by, perhaps most interest ing of all, producers of substitute materials such as aluminum, cop per, magnesium, glass, plastics, con crete (reinforced and prestressed), plywood and even impregnated cardboard.

Fortunately the lessons of multi faceted competition are beginning to sink in here and there. In early 1982, for example, Assistant Attorney General for Antitrust William Bax ter withdrew the Justice Depart ment's case against IBM. The law suit, which had dragged through the 1983 OTHER BOOKS 127 courts for more than a decade, has cost the taxpayers millions of dol lars and untold headaches for IBM, whose only crime was, apparently, bigness. Concl udes Yale Brozen in this percepti ve work: "To attack any firm at any time for expanding capacity stands anti trust on its head. To attack proposed conglomerate mergers on the ground that the capacity of the acquisition will be expanded by the acquiring firm is to attack the essence of what makes some conglomerate mergers desirable. Such attacks restrain trade. They are, themselves, a vio lation of the spirit of the antitrust laws. It is entry that destroys unde tected collusion and polices entre preneurial or managerial sloth. En try barriers 'are the appropriate arena for antitrust action. The antitrust agencies are to be commended for beginning action in this arena in the last decade. Again, however, there is much confusion in the agencies and in the courts (and among econo mists) as to what constitutes a bar rier. The only significant barriers are those administered by regulatory agencies and licensing authorities.

Praise is due the antitrust agencies for beginning to move on these." i Dr. Peterson is the director of the Center for Economic Education and the Scott L. Probasco Jr. Professor ofFree Enterprise at the University of Tennessee at Chatta nooga. GOVERNMENT'S MONEY MONOPOLY Henry Mark Holzer,Editor (Books in Focus, P. O. Box 3481, Grand Central Station, New York, N.Y. 10163) 227 Pages - $19.95 Reviewed by John A. Sparks EDITOR HOLZER has assembled sev eral of the most interesting articles, cases and statements to be found on law and money and woven them to gether in a new book that should be in any library which has an econom ics or constitutional history collec tion. The book begins by including parts of a law journal article written by P. J. Eder on monetary debase ments in early times starting with Solon's devaluation of 594 B.C. Eder moves forward quickly to English medieval law where he emphasizes that the sovereign's prerogatives over money were limited to coinage, seig niorage (minting fee), and the fixing of denominations of English and for eign coin according to the value of the money metal contained in them.

Eder emphasizes that no general power of debasement existed in the sovereign, although one case, the Case of Mixed Moneys, seems to have allowed the sovereign to devalue the currency. However, Eder points out that the forced use of base coins 128 THE FREEMAN (mixed monies) referred to by this one case was a temporary war mea sure used against Ireland by Eliza beth. Government's Money Monopoly next turns to the thirteen colonies and provides a good introduction to commodity money, foreign (Spanish or Mexican) metallic coins, and pa per money. Then another short but insightful chapter appears on the subject of the intention of the Con stitutional Convention regarding the emission of bills of credit. The au thor concludes, from Madison's notes, that while there was grave fear of a paper money issuance with a legal tender requirement, nevertheless there was also a reluctance to com pletely prohibit the federal govern ment from issuing paper money.

Later, this ambiguity plus a broad interpretation of the coinage pow ers, and an expansive view of what was "necessary and proper" allowed Congress to take and keep nearly plenary monetary powers. It is to the matter of a central bank that editor Holzer now directs the' reader. He properly includes both Jefferson's opinion against the First Bank of the U.S. and Hamilton's de fense of it. Their views are well worth reading. Unfortunately, John Marshall and the Supreme Court later followed the reasoning of Hamilton in upholding the chartering of the Second Bank of the U.S. in Mc Culloch v. Maryland. The important cases of the Civil War era, the Legal Tender Cases are included and discussed. By repro ducing the text of these decisions, Holzer performs a valuable service. Most constitutional law students find that their law casebooks refer to these critical cases by a mere pass ing note. They are usually regarded as cases showing the laudable rush toward plenary governmental power over money. The first Legal Tender Case, Hepburn vs. Griswold, still contains some of the best constitu tional analysis and common sense about sound money ever found in a Supreme Court opinion. Ironically, the opinion repudiating the legal tender notes was written by Salmon P. Chase the very man, who as Sec retary of the Treasury, oversaw the issuance of the notes.

Other materials are included which will help the defender of sound money obtain a better understand ing of the politics behind the grad ual creation of fiat money issues by a central bank. Holzer's collection and notes tell the story clearly. f) the Freeman VOL. 33, NO.3 • MARCH 1983 Illegal Aliens Hans R Sennholz 131 Blaming illegal aliens for unemployment is to ignore the real causes. A Legal System for a Free Society Bertel M. Sparks 135 The limits and functions of government to enhance freedom. Where Figures Fail: Measuring the Growth of Big Government Robert Higgs 151 The creation and extension of governmental authority must be restrained at its source. Free Enterprise in Space Gary McGath 157 Exciting prospects, despite obstacles thrown in the way by governments. A Distant Voice Speaks to Us Today John K. Williams 162 Pericles' message to the people of Athens speaks of the problems plaguing us today.