Capitalism and Socialism; J. Chapman

John L. Chapman CAPITALISM •SOCIALISM My PURPOSE here is to extol the vir tues of a social system based on the precepts of private enterprise, lim ited government, and maximum in dividualliberty. This system, known as "capitalism," will first be defined, and its major features will then be highlighted. Additionally, the pri mary competing social system, known as "socialism" or "interven tionism," will be defined, and com pared or contrasted where appropri ate. Finally, key features of current public policy debates will be ad dressed where they relate to points under general discussion. Mr. Chapman, an economics major in college, is a marketing representative for IBM in Louisville, Kentucky. 304 One of the most intriguing of all intellectual debates concerns the most optimal method of organization of human society. More specifically, from the time of Aristotle onward a great debate has raged concerning the proper form, scope, and role of government in society, in order to ef fectuate the "good life."

Most people would agree that two polar-opposite kinds of society have evolved through the ages, and the aforementioned debate centers around which society is superior. Us ing the analogy of a continuum or spectrum, at one pole we have what is commonly referred to as "capital ism," and at the opposite pole is the system known as "socialism." All nations reside along this continuum, CAPITALISM AND SOCIALISM 305 and none is at either absolute ex·· treme. Closest to the theoretical pure capitalism is the United States; clos·· est to pure socialism is the U.S.S.R. All other nation-states lie in be·· tween. A definition of each social system and a look at some of the major fundamentals ofeach will help us determine why capitalism is clear ly the superior form of social organization. Market Allocation Capitalism is a system of social or·· ganization whereby capital is allo·· cated and distributed via market-· based channels. More simply capi.

talism is a system where private in· dividuals or organizations deter·· mine the production, distribution, and ownership of all goods and ser·· vices in an economy. "Capital" may be defined as any entity used in the production of goods and services. Ex·· amples of capital would include raw materials, equipment, buildings, money, and machines. In a capital istic society, all the above-mentioned examples are owned and utilized by private individuals or organizations for the attainment of the owner's ends. Socialism is a system whereby cap ital is owned, allocated, distributed, and utilized by the collective society as a whole, rather than by private people or groups. The concept of pri vate property and use of capital for private ends is replaced instead by public ownership and collective em ployment of capital. Government bureaus, acting in the name of "the public" as a whole, replace private organizations as the main actors in an economy. For example, in social ist Great Britain, the steel industry has been nationalized, and there is one government-run computer com pany as well. Both enterprises thus avoid the rigors of marketplace com petition facing such United States firms as U.S. Steel and IBM in these respective industries.

A final level-setting point of im portance concerning capital is the undisputed fact that the only way a country is able to increase its wealth is to experience an increase in cap ital per worker. The only method of increasing "output per worker" meaning either (a) more work in the same amount of time, or (b) the same amount of work accomplished in less time-which is commonly referred to as productivity, is to increase the amount of capital invested in that worker. For example, factories with automated machinery today produce thousands more articles of every thing, from widgets to automobiles, than in previous times. Another example of capital in vested in a worker to increase his productivity-and thus his wealth is the pocket calculator. A student utilizing a calculator to do his math homework will finish earlier than the student computing the same 306 THE FREEMAN May problems in his head or with pencil on paper; the resultant time savings may either be used as leisure time an economic good-or to increase in come, with either choice represent ing a net increase in wealth. There fore, any economy, socialistic, capitalistic, or mixed, has to invest in capital in order to increase output and thus wealth, and thereby im prove living standards.

Government or Market? The key question all concerned hu man beings must answer is this: which institution, the "govern ment" or the "market" (an intan gible consisting of freely acting in dividuals or groups), is better equipped to solve the problems con fronting society today? All rational men and women, whatever their po litical and philosophical leanings, would like to see a world at peace, fully employed, with equality of op portunity for all, and the eradication of poverty. Which kind of society, the command economy or the market economy, will generate the capital wealth necessary to eliminate social ills? The answer, it would seem, is self evident. Yet the debate rages on, be cause the illiteracy and lack of knowledge of the general populace with regard to economics is rampant in our world. Lacking the intellec tual tools to correctly analyze prob lems or interpret relevant data, most people, whether they be commoners of the street or members of the United States Senate, misinterpret the causes of a problem, and subse quently then advocate solutions which usually will tend to make the problem worse! Let us then analyze briefly the workings of capitalism, and expose the shortcomings of gov ernment interventionism, whether total (as in socialism) or partial (as in a mixed economy,such as the United States today).

Capitalistic institutions had their latent beginnings in the periods of Greece and Rome, disappeared dur ing the Dark Ages, and reappeared during the Reformation. During most of this time, from primitive tribal cavemen through to the rise of civilizations in the Middle East, the Far East, and then Greater Europe, societies were authoritarian in na ture. A ruler-king or ruling class de vised several rationales for their subjection of others ("divine right," position ofbirth, wealth, or ancestry, for example), but the end result was the same. It is obvious but important to note that throughout the thousands of years of human history, up to the present day, the fundamental eco nomic problem of "scarcity" has per sisted; that is to say, man's wants (for scarce goods and resources) have not been, and never will be, satiated. It is of further fundamental impor tance to note that through the ages, 1985 CAPITALISM AND SOCIALISM 307 up until just a few hundred years ago, man's material condition, or standard of living, was relatively constant. It rose briefly with the ad·· vent of Greek and Roman civiliza·· tion, but receded as those societies died. Authoritarian structures may have resulted in pyramids or great cathedrals, but life continued mostly to be "nasty, brutish, and short."!

Only with the advent of free en·· terprise capitalism was the standard of living for all to suddenly realize a dramatic improvement. This is im·· portant only because of the wide u spread but fallacious notion that ma·· terial progress is merely a function of the progression of time (Le., the quality of life in the 1980s is an im·· provement from the 1880s, but not as good as it will be in the 2080s). In fact, the standard of living is a func·· tion of the prevailing social and eco·· nomic institutions of any given so·· ciety. 2 Indeed, only when such capitalistic institutions as private property, limited government, and liberal trade were developed, did the quality of human life show marked improvement from the relative stag nation of the preceding centuries. Social Contract As Locke, Hobbes, and others have observed, individuals form a "social contract" (or government) to protect individual life, liberty, and property.

Capitalism developed as individuals began to withdraw from the yoke of authoritarijlnism, and instead de sired individual liberty to order their lives. The "social contract," or gov ernment, entailed a delegation of fundamental rights of individuals to protect themselves. Thus, early gov ernment was an "umpire" rather than an active participant in day-to day affairs, and as such treated each individual neutrally (or equally). This was an important development because the private property order and individual liberty allowed for the first time a "long-run view" of life, rather than a preoccupation with immediate concerns. In eco nomic terms, the individual could now save and accumulate goods for future use (Le., "investment"), be cause of societal guarantees of life and property. The resultant saving and capital accumulation led directly toward in creased specialization and a produc tive division of labor, and the "In dustrial Revolution" quickly ensued.

Most Marxian analysis of this period focuses on the horrors and exploi tation, but the facts were otherwise. People flocked to the urban centers of Europe and then America as cap ital investment steadily increased worker productivity and thus raised the living standards of the masses. 3 More recently, South Africa has ex perienced a tremendous influx of im migrants seeking improved opportunities. The functioning of this emerging 308 THE FREEMAN May market society was brilliant to be hold. As Adam Smith first so elo quently described, a market-based economy was driven by an "Invisible Hand" which promoted order out of seeming chaos. Each individual la borer in a capitalist society seeks to acquire a marketable skill in order to trade with others. Thus, increased specialization (with all its attendant productive efficiencies) is promoted. As literally thousands of specialties are developed, relative prices (which are nothing more than the collective monetary votes of the masses of con sumers) point the use of scarce eco nomic resources toward their most highly-valued ends.

Consumers in Charge The Invisible Hand of the market directs capital to wherever consum ers desire. For example, in recent years the demand for improved de cision support and analysis tools (leading to improved professional productivity in business) has led to an explosive growth in low-cost per sonal computers and software that is easy to use. Market signals prompted data processing compa nies in this direction, and market competition has resulted in steadily lower prices and improved quality. Conversely, the market signaled to Ford Motor Company several years ago that its production of the Edsel was a waste of scarce resources (be cause Ford was not realizing a profit on this auto), and consequently Ford ceased Edsel production. A few significant points should be noted here. First, the Invisible Hand, when allowed to operate unham pered by government, serves indi vidual consumers by catering to the satisfaction of their wants. This is a monumental development; through out most of human history, the masses toiled for the king, the phar aoh, or the oligarchical elite. Under capitalism the reverse is true; the captains of industry seek to serve the consuming masses.

Secondly, resources are most effi ciently allocated, and production most effectively coordinated under capitalism. The free movement of prices signals capital and labor (the two main ingredients of production) to migrate to their highest-valued marginal uses. The production of the most desired goods and services en sues, and this obviously promotes so cial welfare in the best possible way, by satisfying the most urgent wants. Thirdly, the private property order engenders a spirit of peaceful, har monious coexistence and coopera tion among individuals and groups. Permitting and protecting the nat ural right to property encourages saving and capital accumulation (and of course as capital invested per worker increases, standard of living and quality of life increase), fosters a climate of production by encour aging labor, and encourages individ1985 CAPITALISM AND SOCIALISM 309 ual self-reliance and responsibility (through the growth of personal assets).

Of course, what is true for individ uals can scarce be folly for nations as a whole.4 International speciali zation and division of labor lead to increased production of goods and. services worldwide. Increased pro·, duction, enhanced by full and effi cient employment of labor, capital, and land, leads to generally lower goods prices, and market competi tion improves quality. Where active trade across borders occurs, the liv ing standard is improved and war will never occur; Canada and the United States have no need for arm ies and border guards. In fact, there has never been an armed conflict be·, tween two capitalistic societies, be cause the bonds of free trade and. peaceful noncoercive coexistence are too strong. EconomicProgress Under capitalism, then, the en gines of production turn at full speed. Individuals are free to pursue their own interests, and the consumer is king. Any individual who seeks em ployment finds it, because wages are not distorted by any intervention and compensation is based on mar ginal contribution to needed produc tion (labor is always in demand, as wants are insatiable). It is talent and merit, and not birth or wealth, that propel the individual up the economic ladder. And of course, it is ab surd to deride those individuals who amass great wealth; no one is any poorer because of them, and they at tained such rewards by serving the rest of us!

Peace and prosperity prevail among individuals and nations, and poverty is eradicated through full employment. Additionally, and most importantly, the individual leads a free, uncoerced life and has complete sovereignty over his own existence, as long as his actions are peaceful and create no negative externalities for others. As long as the spirit and responsible attitudes engendered by capitalistic institutions are promul gated, the happy state of affairs such liberty fosters will never break down. In the short span of a few hundred years, capitalism has delivered an improvement in the general quality of life unparalleled in the previous thousands of years of human history under the ancien regime of authori tarianism. It would thus seem self evident that capitalism is the most superior form of social organization (even more so if one travels to and observes the two Berlins, or the two Koreas, or the two Chinas). A brief look at the underpinnings of social ism shows, however, why it is still so prevalent, just as its functional workings expose its false glamour.

Most socialists (and I use the term here to apply to any individual fa310 THE FREEMAN May voring an active, interventionist government) claim to be altruistic, compassionate people professing concern for and a desire to help oth ers. They view the market economy as an impersonal, cold institution promoting crass material gain, and chastise its instability and always changing chaos, brought about by the "animal spirits of investors."5 They seek to bring order and secu rity to society by instituting a cer tain amount of control over eco nomic activity, through fiscal, monetary, and even social policy. Through legalized intervention ("le galized" in the sense of a law heing passed) government seeks to amelio rate social conditions. Alleged Examples of the Failure of Competitive Enterprise Adherents of interventionism see various failings of the market econ omy. Among those heard most often are the charges that capitalism causes a rather widespread distri bution of income, and that unequal income distribution consigns some to a permanent "underclass." Fur ther, most members of this under class are from minority groups, and since such groups historically have been the victims of racial discrimi nation, collective government action is required to right earlier wrongs and raise these groups' living stan dards, argue the socialists. This ar gument, incidentally, is merely a variant of the old Marxian critique of the bourgeois exploitation of pro letarian labor.

Another failure ofthe marketplace pointed to by collectivists is the "misallocation" of resources. How can funds be properly sourced, say these social well-wishers, when professional athletes, for example, command astronomical salaries when compared with public school teachers? After all, education is a far more noble and socially useful profession than basketball or foot ball. Additionally, defense contracts, say, are a terrible waste, when such money should really be spent to feed the poor. More examples could be cited, but the key point to understand is that policies of social welfare seek to re dress inequities and social ills alleg edly caused by an unhampered mar ket economy. Conscious collective efforts are made to redistribute re sources toward women, minorities, and other institutions and special in terests. Again, to paraphrase Marx ian analysis, the "problem of pro duction" has been solved distribution is now the focal point for interventionists.

The policies of socialism are so al luring (especially to the idealists often found in graduate schools, uni versities, the arts, and the media) precisely because of the appeal to al truism, and the exhortation to ex hibit concern and compassion for 1985 CAPITALISM AND SOCIALISM 311 others. Government intervention ism (all of society supposedly work ing together for the common good) may be used to achieve a better so ciety for all, and to root out the in cessant competition, change, and chaotic insecurity of the market so ciety, replacing these with the tran quil, orderly security of the collec tive command society.6 Sadly, the appealing rhetoric that always lies behind the well-meaning policies of active government inter ventionism does not shield· the false premises on which such actions are based, or the unfortunate conse quences that ensue. A brief look at the background and general struc ture of a few of these programs and their consequences will suffice to point to socialism's broader failings.

The Transfer Society Policy-makers in government pos sessing a socialistic orientation seek to redress market failings, as pre viously stated. In the United States, this process began in earnest with the advent of Roosevelt's New Deal. Social Security was set up to aid the aged. Agriculture and various small businesses then received subsidies. Later, benefits were drawn up for veterans (and then other groups) for housing, education, and vocational training. By the administration of Lyndon Johnson, vast health care, public works, and anti-poverty schemes had come into being. The result of all this is the existence to day of a plethora of public laws showing favor to select groups, in dustries, or institutions, and of course organized lobbies represent ing hundreds of special-interest pressure groups. This sytem of interwoven welfare programs constitutes what Hans Sennholz and others have aptly named "the transfer society." In the transfer society that the United States is fast becoming, there are classes of beneficiaries receiving government largess in the form of entitlements, subsidies, grants, or generous pensions flowing from the just-mentioned social programs and hundreds of others as well. Less vis ible to the public, however, are the classes of victims that are paying the bills for such largess. The very pro gressive and high marginal taxes (not to mention chronic inflation) levied on the victims to pay for the subsidies and benefits flowing to the targeted beneficiaries has had a highly negative effect on the level of production and output (and a con comitant rise in taxpayer cynicism and disgust, as their work efforts grow increasingly futile).

Since approximately 1960, defense spending as a proportion of the Fed eral budget has dramatically de creased, from 53 per cent of total spending to less than one-fourth. At the same time, "social spending" has exploded. One would hope, at the 312 THE FREEMAN May very least, that this would have re sulted in less poverty, better job op portunities and lower unemploy ment for the poor, rebuilt cities and highways, and improved interna tional conditions. Unfortunately, the general living standard for minori ties and underclasses has in relative terms not seen improvement. 7 The inner cities are as decayed as ever, and foreign aid and agricultural and technological subsidies have not aide~ the Third World-Africa, a net exporter of food in the 1950s, is today the site of massive famine. Benevo lent socialism has failed. Rational Behavior The transfer society, as are all forms of socialism, was destined for failure for a few key reasons (which, I would argue, one could have deter mined a priori, without ever both ering to gather comparative statis tics).8 First and foremost, man is a praxeological being. That is to say, man behaves purposively, utilizing various means to arrive at chosen ends. As such, he responds in a gen erally predictable manner to chang ing incentives; as the incentive structure in the economy has changed, so has the behavior of eco nomic agents. This again is a seem ingly self-evident tautology, but it is mentioned because the proponents of Big Government constantly ig nore the inexorable laws of human action through policies which carry perverse incentives. Incentives to produce are replaced by incentives to receive statist handouts.

Government is not capable, by nature, of being productive or constructive. In its capacity as government, it acts to restrain and restrict. When it uses these powers against those who would disturb the peace in one way or another it enables peaceful men to produce and construct. When it uses them to restrain peace ful men, it inhibits the con structive. Thus it is that limited government is the requirement for releasing the energies of men. CLARENCE B. CARSON The economic distortions these handout programs cause is truly massive. What kind of sense, for ex ample, does it make to pay farmers not to produce food? Agricultural price supports are a related absurd ity. By setting maximum prices (os tensibly to help the poor) govern ment artificially pumps up demand for a product at the same time it cur tails the incentive of the producer to supply the commodity. Increased shortages result.

Minimum wage laws and union wage floors, again designed to aid certain targeted groups, have the same effect. The employer's demand for labor is reduced (labor, like 1985 CAPITALISM AND SOCIALISM 313 everything else, is a cost phenome non) at the very time the higher wages guarantee an increase of job applicants; the end result is a cer tain amount of unemployment. Those lucky enough to obtain the artifi cially high-wage jobs benefit at the expense of the unemployed; this is the collectivist's idea of "compas sion" (ofcourse, in a free market, all - who wished work and the opportu nity .to acquire skills and advance would have a job at market wage rates). It is unnatural to he unem ployed, and anywhere and every where this condition occurs, it is a sign of market interference of some sort. 9 Benefits of Deregulation All government interventions in the domestic economy, and interna tional protectionism as well, have a common denominator: restricted supply and higher end-prices to the consuming public. Where govern ment backs off, immediate positive effects are realized. Airline and trucking deregulation has led to a flourishing of new carriers offering better services at lower prices to the consuming public. Of course, the Teamsters Union and executives at Eastern Airlines may be less than happy, but the masses benefit.

Confiscatory tax rates and infla tion are perhaps the most insidious interventions of all, however, for they lead literally to the destruction of civilized society (as Lenin once ob served). Taxes are a direct disincen tive to produce, and the phenomenon of "capital flight" is a direct result of high progressive rates. Is there any doubt as to why Bjorn Borg left his native Sweden for Monaco? Trying to grab ever more income, the Swedish government lost it all. This is but one example of a widespread phenomenon-tax avoidance and outright evasion are dramatically increasing, as luxury goods boom and the "underground economy" grows perhaps beyond 15 per cent of Gross National Product. Inflation is a surreptitious tax caused directly by government mis management of the money supply. By continually inflating the money stock, the FED adds high uncer tainty into longterm contracts, sti fling business investment. Why would any creditor loan to a debtor when the payback will result in cheapened dollars? As money loses its unit of account and store of value functions, this relationship is ru ined, and further impedes vital trade. Fixed-income pensioners are devastated by real wealth transfers away from them, yet "compassion ate" government officials scoff at at tempts at monetary reform.

The worst aspect of inflation, how ever, is undoubtedly that it is a key ingredient of boom"and-bust busi ness cycles. By falsifying interest rates, flows of investments into cap314 THE FREEMAN May ital goods industries are stopped as inevitably project costs rise, and re sources flow into consumer and ser vice sectors only later. Malinvest ment and misallocation of scarce resources, with attendant hardship and disruption for human beings, is always the end result. 10 This is best exemplified by the current situation in the United States, where certain sectors and geographic areas have enjoyed a sparkling recovery, while other sectors, such as agriculture and certain import-export busi nesses, are lagging. Inflation and in tervention always combine harm fully, with grave human costs. The Unseen Effects In addition to the foregoing distor tions, socialism's toll must be viewed in terms of opportunity cost. What would have been built, produced, and delivered in lieu of the inefficient profligacy of government? What would each individual and group have done with their extra income?

We of course will never know. Cer tain individuals or groups benefit from subsidies or direct transfers in the short run, and these positive ef fects are seen by all (a public hous ing project is of course highly visible, for example). The aggregate costs which burden the rest of society will in the longer term far outweigh the short run visible benefits, however. These costs are currently wide spread and diffuse, but they are growing rapidly, and will come due. In addition to economic distortion and curtailed production, interven tionism leads to expanding powerful bureaucracies. Groups no longer mo tivated to produce and serve the con suming public instead lobby for a larger portion of government hand outs (colloquially, grab a larger por tion of a redistributed pie rather than grow the whole pie). Senators and Congressmen, looking only to ward winning the next election, set up large bureaus to visibly transfer resources to privileged groups. Such an environment, geared toward re distribution rather than production of wealth, is highly conducive to the waste, fraud, and corruption so often found.

This is another predictable conse quence of interventionism, because government bureaus are not subject to the rigor and discipline of the free market; where there are no pricing signals or competition, there will be tremendous inefficiency and waste. Does anyone really know the pur pose of the Department of Energy? Has it produced any oil? Has the De partment of Transportation pro duced any autos, or run transit sys tems effectively? What do the Labor, Commerce, and Education Depart ments really do? Would the free mar ket have granted thousands of dol lars to study insect sex lives, or the effect of pornographic literature on children?

1985 CAPITALISM AND SOCIALISM 315 Obviously there is tremendous waste in a system where groups are encouraged to spend productive time trying to obtain grants from govern ment bureaus. The masses who are not beneficiaries are big losers. In novation will always be stifled un der such a system. Can anyone see a self-serving Federal Department of Railroads, under heavy pressure from railroad industry lobbyists, granting a government permit to the Wright Brothers to test their air plane? How fortunate socialism was not well developed in the United States in 1903. Legal Plunder Perhaps the worst effect of social ism, however, is that the transfer so ciety is tantamount to legal plun der. ll Leaving aside the obvious disincentives, what is "fair" about taking differing percentages of in come from different laborers? The United States once had the highest taxpayer compliance in the world, but the increasing perversity of the transfer society has caused millions to enter the underground economy.

People fight the government's un fairness by becoming corrupted thieves and tax -cheats. Additionally, the transfer society promotes true Marxian "class war fare," as several special interests compete for government handouts. Beneficiaries and victims, agricul ture and small business, black and white, and young and old are but a few ofthe many groups fighting each other for privilege. In fact, the con flict has many levels; within the ag ricultural lobby, for example, to bacco interests are surely in contention with dairy farmers for agricultural price supports. Social ism breeds violence and warfare, as competing entities vie for what is "fairly" theirs. In summary, then, the command economy has proved to be a failure because it is based on a false theory of human nature. To understand this one need only observe masses of peo ple seeking freedom and opportu nity, "voting with their feet" world wide (Southeast Asia and Cuba are recent examples of a popular flight from socialism), or talk briefly with the likes of Lech Walesa to know why: government programs take away the incentive to work and produce.

Seeds of Conflict Capital formation, the necessary prerequisite to an increased stan dard of living and improved quality of life, is stifled as government bu reaucrats and politicians wield power which rightfully should fall to consumers. Strife and conflict re place the peaceful coordination and exchange of goods and services that capitalism provides. Once this is dis cerned, it is easy to see why the bil lions spent on "social programs" in 316 THE FREEMAN the last 20 years have done nothing to end poverty in the aggregate. It is no coincidence that social ism's most ardent supporters are rel atively wealthy, and are often found in academia or the media. Coming from a controlled and comfortable environment, these people seek only to lift the Iiving standards of the poor. Their aims and concerns are commendable, but their intellectual arrogance is unseemly. They wish to order society after their own fashion, and impose their own designs and standards on the rest of us, thinking they know best. Having no knowl edge of economics, they pursue pol icies which in the end cause misery to the unemployed, condemn mil lions to poverty, stifle innovation and production, and in the long run lower us all. In their ignorance, they dis parage the very system that has brought them several amenities of life and the time to deride capital ism, and they vote for politicians and policies which will come to hurt them, ironically. The road to hell is, after all, paved with goodintentions.

However, ideas rule the world, and the human spirit burns to be free of all man-made fetters. Those who un derstand the free market must un dertake to explain the adverse con sequences of interventionist policies to the well-meaning but misguided proponents of collectivism, and return again to freedom, prosperity, opportunity, and peace for all indi viduals. The alternative is too sad to contemplate. @f) -FOOTNOTESlSee Thomas Hobbes. 2See Ludwig von Mises, The AntiCapitalistic Mentality. 3Mises makes reference to the blatant falla cies of Marxist interpretation on this point sev eral times in his various works. 4See Adam Smith, The Wealth of Nations. SKeynes, of course, felt government could in geniously temper these animal spirits, and his General Theory prescribes the formula. 8Clarence B. Carson gives an excellent ren dition of socialism's soothing rhetoric and ap peal in The World in the Grip of an Idea (New Rochelle, NY, Arlington House Publishers, 1978).

7A growing body of literature, exemplified by George Gilder in Wealth & Poverty and more recently by Charles Murray in Losing Ground, points to the harmful social-effects of bad eco nomics. For example, the number of single-par ent black families and illegitimacies has risen steadily over the last twenty years. &This is the traditional analysis of the Aus trian school of thought, which makes use of the tenets of praxeology and methodological indi vidualism to arrive at valid conclusions. 9Hans Sennholz, "The 'Natural' Rate of Un employment" (The Freeman, November 1984, pp. 644-650). lOOnly Austrian business-cycle theory ade quately explains concurrent inflation and recession. The reader should look to authors such as Mises, Hayek, Rothbard, Sennholz, and others. llDean Russell, "The Source of Rights" (The Freeman, November 1984, pp. 661-668).

1985 Summer Seminarsat FEE June 23-29 July 14-20 August 4-10 Fortwenty-two yearsour annual summer seminars have offered a thor ough introduction to the principles of limited government and the mar ket economy. Our sessionsattract lively and diverse groups of people including students, teachers, business proprietors and employees. The week includes thirty-five hours of lecture and discussion, with ample time for participants to meet informally with both staff and dis tinguished guest lecturers. The Foundation, situated on a five-acre es tate in a quiet suburb near New York City, provides an ideal setting for a week of study and reflection. The charge for a seminar-tuition, supplies, room and boardis $400. Fellowships (including partial travel grants) are available. A de tailed seminar brochure will be sent on request. Pleaseaddress all requests for applications and further information to: Summer Seminars Foundation for Economic Education Irvington, New York 10533 (914) 591-7230 A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN Pattern for Failure In A Pattern for Failure: Socialist Economies in Crisis (New York: Har court Brace Jovanovich, 175 pp., $22.95), Sven Rydenfelt, a Swedish economist, offers a general proposi tion endorsed by Milton Friedman in a thoughtful introduction. The gen eral proposition is that wherever there is detailed central economic planning the ordinary man suffers.