Book Reviews

Frankly, the book has given me a bad time. I found it utterly fascinating in detail, but it is quite literally all over the place. The participants all had their say, with comments piled on comments, but, in the words of The Rubaiyat of Omar Khayyam, they come out as individuals by the same door that in they went. Not that there is any basic disa greement between Milton Friedman on the one hand and the Reverend James M. Wall of the Christian Cen tury magazine on the other about the role that fundamental religious con victions may play in economic affairs. Value assumptions cannot be avoided. The trouble comes from the inability of twenty-eight participants to reach any consensus about the will of God. The general assumption is that the Creator has endowed human beings with a moral sense, but does this mean that we must all be socialists in order to make human brotherhood a real ity? The Catholic bishops come up with one set of answers when they say the decisions of the marketplace must be corrected if there is to be justice to the poor, but they may be missing the forest for the trees. So may certain spokesmen for Protestant Christian ity, such as the contributors to the Christian Century that Edmund Opitz quotes in his paper about a magazine that he began to read in his school years.

J. Philip Wogaman, a professor of Christian Social Ethics, makes the point that a good economic system should allow for the concepts of stew ardship, vocation and charity. He condemns laissez-faire economics for its alleged failure to protect the weaker members of the community and the common environmental inheritance of everybody. He likes the New Deal be cause it "worked" to bring about "beneficent" social change. Wagaman is not quite a socialist, for he says there' 'may well be a need for private centers of economic power." But he is oblivious to the claims of the Vienna and Chicago eco nomic schools that when government intervenes in the disposition of wealth there will be less money in the end available to care for the needs of growing populations. The paradox here is that welfare depends on capital earnings, but the earnings must fall short if the state takes more than a minimal percentage of the capital usufruct for its own purposes, whether beneficent or not. Wogaman is a clear thinker in his own realm, but it is fairly obvious that he has never seriously studied economics.

In his "overview" paper, John C. Bennett of the Union Theological Seminary explains his own evolution. He was originally influenced by the so-called Social Gospel, and by the Christian realism of Reinhold Nie buhr, which made him a Christian So cialist. But since 1950 he has, as he says, lost his dogmatism. Now he gives "weight" to "the pluralism and the incentives for efficiency and produc tivity" which are "characteristic" of capitalism. But in conceding that the market has its virtues Bennett has not really changed his mind. "One gen eral conclusion that can be drawn," he says, "is that Christian teaching about finiteness and sin provide warn ings against both a consistent social ism and a consistent faith in the mar ket economy." This sort of talk leaves me floun dering. The Twentieth Century offers ample proof that socialism can't feed its own people. The private plots are what keep Russian peasants going.

Collectivist agriculture in Africa has starved its millions. In Red China they are now turning to enterprise zones in an effort to restore the productivity that Maoism killed. Sweden's vaunted Middle Way struggles along by tol erating capitalist enterprise, but the boredom that comes with leveling in comes has resulted in a high suicide rate. Ludwig von Mises proved long ago that the problem of calculation is insoluble under complete socialism. Without a price system nobody would know how much wheat to plant, how much fertilizer to produce, or how many widgets to make. In short, faith in a market system is a sine qua non if the human race is to endure and proliferate. Where peo ple have lost their faith in the market, production has faltered, and the worst, as Hayek has said, have risen to the top to make slaves of the rest. It is an insult to God's intelligence to argue that Christian teaching about sin demands an equal amount of skep ticism of both socialism and the free market. The latter lets more people live, which is in full accord with the Biblical injunction to increase and multiply.

Michael Novak's overview paper takes direct issue with Bennett's. No vak has no hesitation in saying that the market is far more concordant with the Christian vision of the hu man being than any system of pro duction and distribution by political command. Voluntary exchange and autonomous choice, he says, are crit ical both for religious liberty and for freedom to preach the Word. There is most certainly a lot to life besides economics. Edmund Opitz quotes Matthew Arnold on the in stinct for intellect and knowledge, the instinct for beauty and poetry, the in stinct for social life and manners, and the instinct for religion and morals. These demand expession just as much as the instinct for accumulation and expansion. But if there is no acumu lation and expansion,· there will be fewer people around to seek knowl edge and beauty. Ed Opitz, commenting on Ezra Mishan's paper, says there is a great deal of truth in Mishan' s contention that economics and politics have usurped a position in our lives that their intrinsic merit does not deserve.

But without science, technology and large-scale production four-and-a-half billion people would have little energy left to cultivate the non-economic val ues. The big question posed by this book is whether a market system or a command system is more compatible with finding scope for expressing the Arnoldian instincts. The answer should be the market system, but the babel of voices in this book is more confusing than clarifying. 0 155 MORALITY OF THE MARKET 156 OTHERBOOKS Essays in the History of Liberty: Se lected Writings of Lord Acton edited by J. Rufus Fears Liberty Classics, 7440 N. Shadeland, Indianapolis, IN 46250. 558 pages, $15.00 cloth; $7.50 paperback Reviewed by Tommy W Rogers L ord Acton (John Emerich Ed ward Dalberg-Acton), 1834 1902, was a major figure in the Liberal Catholic Movement, and was instrumental in transforming the writ ing of English history into a rigor ously scientific discipline based on the model of German scholarship. The themes Acton expounded in his phil osophic and journalistic activities as essayist, lecturer, and reviewer were those of individual liberty, political self-government, and unfettered sci entific research.

The book opens with Acton's cel ebrated 1877 lectures on the history of freedom in antiquity and in Christi anity. Acton argued that Christian civilization emphasized the dignity of the individual and offered him a gift of freedom beyond anything offered by Greece or Rome. He viewed the church as a force in society capable of limiting the power of the state; and' 'it is only by abridging the authority of states that the liberty of churches can be assured." By the same token, Ac ton condemned any effort by the ch urch to wield secular power, as being the "absolute power which cor rupts absolutely." Here also are the essays on the Pu ritan Revolution and the rise of the Whigs. But of more interest to us are the essays on the colonies and on the American Revolution. A society emerged on these shores, Acton wrote, "more powerful, more prosperous, more intelligent, and more free than any other that the world has seen."

Acton analyzes the philosophic is sues underlying the Civil War in America, declaring that "the one ruling element in the American war, which reduces all others to compara tive insignificance, is the defense of the rights of self-government against the theory that there is a supreme, ir resistible, and irresponsible power." Slavery, in his view, was not so much the cause of secession as the reason for the failure of secession and of the Confederacy. Acton felt that the Con federacy, apart from slavery, and viewing the Confederate Constitution as a political document, justified say ing that "history can show no in stance of so great an effort made by republicans to remedy the faults of that form of government (republi can). Had they ... called on Negroes to be partners with them . . . I believe that generous resolution would have conferred in all future ages incalcu lable blessing on the human race." In a letter to General Lee, Acton wrote: "I mourn for the stake which was lost at Richmond more deeply than I re joice over that which was saved at Waterloo."

Acton's consistent rebel sympa thies, which he extended to the Boers in South Africa, shaped his under standing of the issues at stake in the great struggle between Union and Confederation. Northern victory in the American Civil War, he argues, represented the triumph of political centralization over principles of fed eralism, self-government, and liberty under the law. When Acton wrote that "Power tends to corrupt and absolute power corrupts absolutely," he spoke to gen erations past and future. How often has this phrase, this principle, been aptly descriptive of contemporary af fairs! In an era when the state intrudes increasingly into the domain of the personal, the private and the sponta neous, Acton's insight into the mean ing of human liberty and the dynam ics which threaten its promise and exercise, remains salient and timely.

Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered by Don Lavoie Cambridge University Press, 32 E. 57th St., NY 10022 • 208 pages, $34.50 National Economic Planning: What is Left? by Don Lavoie Ballinger Publishing Co., Cambridge, MA 02138· 291 pages, $25.00 cloth; Cato Institute, 224 Second Street, SE, Washington, D.C. 20003, $9.95 paper Reviewed by Bettina Bien Greaves E ver since the days of Karl Marx, opponents of the "es tablishment" have argued that socialism is the answer to all social ills. But Marx gave few clues as to the pre cise form that socialist society would take, and he attacked as "utopians" any who sought to describe it. Never theless, the inevitable inference to be drawn from his writings is that so cialism would substitute central plan ning for the capitalist "anarchy of production" and for the isolated mer cantilist interventions against which Adam Smith (1776) had directed his barbs.

After World War I, Marxian so cialists gained control in several Eu ropean nations. They set up commis sions to study how to implement central planning, but they had no clear idea how to go about it and, except in Russia, the power of the central plan ners waned. Into this controversy in 1920 ven tured the late Ludwig von Mises, then a rising young economist in Vienna, Austria. Mises pointed out that if the factors of production were owned and controlled by a central planning au thority there would be no markets for them. With no market for the factors of production, there would be no market prices for them. And without mar ket prices, the planners would have no guideposts to help them de cide what, when, where, how or how much to produce. Mises' position that central planning couldn't be made to work with any degree of efficiency was largely ignored by the would-be planners. Thus Lenin tried to introduce Marx ian planning in Russia in one fell swoop after the 1917 Communist Rev olution. The attempt proved a disas ter. The country was thrown into utter chaos. Lenin was forced to retreat and in 1921 introduced his New Economic Policy, which restored some function to the market. This Russian experi ence lent support to Mises' thesis that central planning couldn't be made to work.

In the 1930s, the economic calcu lation debate was revived. F. A. Hayek and the late Lord Lionel Robbins, es pecially, made important contribu tions, supporting, elaborating and helping to clarify Mises' reasoning. A number of Marxian socialists at tempted to respond. Dr. Don Lavoie reviews the controversy anew in Ri valry and Central Planning, originally his doctoral dissertation Lavoie begins with Marx's writings, extracting from them Marx's pre scription for socialism, a painstaking process for it must be inferred from Marx's negative remarks about capi talism. Then Lavoie shows that all at tempts to respond to Mises' 1920chal lenge have failed to answer his critique of economic planning. Socialists over the years who have tried to answer Mises still do not realize that the cen tral planning they advocate means state ownership and control of the factors of production, which pre cludes the development of market prices, disrupts the vital transmission of knowledge through the price sys tem and, therefore, makes realistic economic calculation impossible.

Mises' fundamental critique still stands. * * * The title of Lavoie's second book is National Economic Planning: What is Left?, a double entendre. In the first place, Lavoie asks, is anything to the ideological "left" of national eco157 OTHER BOOKS 158 THE FREEMAN APRIL 1986 nomic planning? And secondly, he speculates, now that all serious at tempts to introduce economic plan ning on a national scale have been abandoned, just what is left of them? Lavoie begins by discussing three systems through which social activi ties may be coordinated-tradition, the market and planning. Tradition is admittedly suitable only as a means for coordinating activities in simple societies. The market, on the other hand, has led to the coordination of extensive and complex social activi ties. It has facilitated rapid experi mentation and the development of countless new productive techniques. Impartial observers must admit that the extent of social cooperation and specialization under market coordi nation and the increase in production it has brought with it are remarkable.

Lavoie then discusses the third pos sibility: economic planning. He con cludes it has two fatal flaws. The first flaw inherent in national planning is the totalitarian threat, the danger that a Hitler or a Stalin will gain control. The second flaw is due to the knowledge problem, expertly devel oped by Lavoie in Chapter 3. How, Lavoie asks, will the central planners obtain the tremendous amount of widely dispersed information they need to coordinate successfully the complex activities of an entire econ omy, especially since much of this knowledge is unarticulated, existing only in the minds of scattered per sons, in the form of ideas, plans or dreams? The crux of Mises, and Lavoie's thesis, is that property should be pri vately owned and production planned by the private property owners. With free markets and competition among them, prices develop for goods, ser vices and factors of production, in dicating their relative value to con sumers. For instance, as F. A. Hayek points out in "The Use of Knowledge in Society": Assume that somewhere in the world a new opportunity for the use of some raw material, say, tin, has arisen, or that one of the sources of supply of tin has been elimi nated. It does not matter. . . which of these two causes has made tin more scarce [and thus more expen sive].... All that the users of tin need to know is that ... they must economize tin.

Free and flexible market prices fur nish private entrepreneurs with al most instantaneous knowledge about consumer wishes and also about the constantly changing supply of, and demand for, resources. When pro duction is centrally planned, there are no market prices for the factors of production. Thus, national economic planning must inevitably founder for lack of the knowledge entrepreneurs obtain on the market from instant to instant through the medium of con stantly fluctuating free competitive prices. Lavoie's critique of National Eco nomic Planning is masterful! It is also pertinent to the 1980s. Lavoie extends his analysis to many post-Marxian schemes, including such recent schemes as those of Wassily W. Leon tief, Felix Rohatyn, Robert Reich and even Tom Hayden. Let's hope these recent planners read not only the few pages devoted to them but also earlier portions of the book where Lavoie de molishes the theory of planning.

* * * I have two bones to pick with La voie. The first concerns his use of the labels "radical" and "reactionary." These words have no clear ideological meaning in themselves. A "radical" change in politics, according to Web ster, is a sweeping or fundamental change in law or method of govern ment. But the word itself does not specify the direction the change should take. Similarly, to advocate a policy of "reaction" gives no indication in itself as to what political or social con dition one wishes to return to. Lavoie could have avoided confusion by us ing more descriptive terms such as "classical liberal" or "free trade in ternationalist" for "radical," and "interventionist," "statist," "mili tant nationalist" or "socialist" for "reactionary.' , Secondly, I was most disappointed to find a scholar and economist of La voie's understanding and stature re vealing such historical naivete as to at tribute the idea of protectionist legislation to special groups of busi nessmen, bankers and industrialists.

According to Lavoie, "the origins of planning in practice constituted noth ing more nor less than governmentally sanctioned moves by leaders of the major industries to insulate them selves from risk and from the vicis situdes of market competition." The responsibility for our present hodgepodge of interventionist pro grams that help some and hurt others must be laid at the door of well mean ing if misguided voters and politi cians, misled by mistaken intelIec tuals-' 'economists," professors, journalists and others-who believe that the remedy for almost any eco nomic problem is a law. Businessmen, bankers and industrialists were not In FutureIssues... generally the culprits. Before the en actment of protectionist legislation, their interests are diverse; they are competitors. It is only after govern ment grants them special favors that they acquire interests in common and form combinations to sponsor more legislation. To be sure, once protec tionist legislation is in place many of them profit in the short run. Also many now seek continued govern ment protection, privileges and ben efits. This is not surprising, for once a program is established and busi nessmen have adjusted to it, they have a special interest in keeping that leg islation in force. However, special in terest groups are products of inter vention, not vice versa.

* * * Both these books make important contributions to economic under standing. It is Lavoie's hope that his Rivalry and Central Planning, which deals with the classical argument over economic calculation under socialism, will stimulate renewed discussion of this debate. National Economic Plan ning, which analyzes partial as well as total planning, should lead some modern-day advocates of government controls and regulations to question their own proposals. D 159 OTHER BOOKS May • "The Continuing Plight of Agriculture" by Dennis Bechara • "Unemployment Compensation" by Hans F. Sennholz • "Hostile Acquisitions and the Restructuring of Corporate America" by Frank W. Bubb June • "Deregulation of the Natural Gas Industry" by J. D. Steelman, Jr. • "It's Not Our Money" by James L. Payne Ways to Save "The Permanent Things" 1. New Freemanbinders, to keep your issues of The Freemantogether and close at hand o • especially designed for the new ~ format and size • leather-look covering, gold embossed with The Freeman • each binder holds twelve issues in the new, larger format Special price of $5.00 order number 0202XX for the current, larger size Freeman Binders are still available for the former, smaller size Freeman. order number 0201XX $5.00 Note: Please be sure to specify which size you need: the larger size for the current Freeman or the smaller size for previous years. If not specified, we will assume you want the new size for your current issues of The Freeman.

2. The 1985 Freemanbound volume • All twelve issues in one volume • Attractively sewn with hard cover • Fully indexed for handy reference to the latest literature on freedom Only $7.50 each order number 0185CF (Bound volumes for 1969 through 1984 are also available for $7.50 per volume.) FEE pays all postage on prepaid orders. Order from: The Foundation for Economic Education Irvington-on-Hudson, New York 10533 THEFREE IDEAS ON LIBERTY CONTENTS 164 Liberties Lost in the Balance 186 Unemployment Compensation MAY Joseph S. Fulda Hans F. Sennholz 1986 Many controversies of the day Paying people not to work VOL. 36 can be traced to underlying hinders labor mobility and NO.5 government interventions. harms the very people it is supposed to help. 166 Hostile Acquisitions and the Restructuring of Corporate 193 Teaching Economics America Ronald S. Hertz Frank W Bubb An experienced teacher outlines The freedom to buy and sell his course in free market corporate assets plays a crucial economics.