November

409 "Insider Trading": The Moral Issue Ridgway K. Foley, Jr. The ethics of gaining and using inside business information. 415 Voluntary and Coercive Cartels: The Case of Oil David Osterfeld An analysis of the various monopoly and cartel arrangements in the oil industry-and their effect on market efficiency. 426 Federal Job Training: Road to Nowhere James Bovard Federal programs to alleviate teen unemployment are all too often a dead-end. 428 Why Government Jobs Programs Destroy Jobs Thomas J. DiLorenzo Government efforts to create jobs are bound to fail. 431 The Trade Deficit Ken S. Ewert Overcoming the old mercantilist notion of a national "balance of trade. " 437 A Reviewer's Notebook John Chamberlain A look at two recent best sellers: "The Closing of the American Mind" by Allan Bloom and "Cultural Literacy" by E. D. Hirsch, Jf. 439 Other Books "Crisis and Leviathan: Critical Episodes in the Growth of American Govemment" by Robert Higgs. "The Rule of Experts: Occupational Licensing in America" by S. David Young.

CONTENTS NOVEMBER 1987 VOL. 37 NO.11 THEFREEMAN IDEAS ON LIBERTY Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 President of the Board: Robert D. Love Vice-President of Operations: Robert G. Anderson Senior Editors: Beth A. Hoffman Brian Summers Book Review Editor: Edmund A. Opitz Contributing Editors: Bettina Bien Greaves Jacob G. Hornberger Paul L. Poirot Gregory F. Rehmke The Freeman is the monthly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533 (914) 591-7230. FEE, founded in 1946 by Leonard E. Read, is a nonpolitical educational champion of private property, the free market, and limited govern ment. FEE is classified as a 26 USC 501 (c) (3) tax-exempt organization. Other officers of FEE's Board of Trustees are: Bruce M. Evans, chairman; Thomas C. Stevens, vice-chairman; Joseph E. Coberly, Jr., vice-president; Don L.

Foote, secretary; Lovett C. Peters, treasurer. The costs of Foundation projects and services are met through donations. Donations are invited in any amount. Subscriptions to The Freeman are available to any interested person in the United States for the asking. Single copies $1.00; 10 or more, 50 cents each. For foreign delivery, a do nation of $10.00 a year is required to cover direct mailing costs. Copyright © 1987 by The Foundation for Eco nomic Education, Inc. Printed in U.S.A. Permis sion is granted to reprint any article in this issue, provided appropriate credit is given and two copies of the reprinted material are sent to The Foundation. Bound volumes of The Freeman are available from the Foundation for calendar years 1969 to date. Earlier volumes as well as current issues are available on microfilm from University Micro films, 300 North Zeeb Road, Ann Arbor, MI 48106. The Freeman considers unsolicited editorial sub missions, but they must be accompanied by a stamped, .self-addressed envelope. Our author's guide is available on request.

PERSPECTIVE Give Thanks for Freedom The Pilgrims are usually credited with having celebrated the first Thanksgiving in this hemisphere. And rightly so. However, the custom of giving thanks became nationwide only much later. Our first President, George Washington, was grateful for the Constitution. In his view, it of fered an opportunity for the new nation to start afresh. On October 3, 1789, he proclaimed one day nationwide, Thursday, November 26, for ,'acknow ledging with grateful hearts the many and signal favors of Almighty God, especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness." In Washington's view, the new Constituti()n limited the power of govern ment, leaving the people free "to perform our several and relative duties properly and punctu ally." He gave special thanks also "for the civil and religious liberty with which we are blessed. "

Ever since Civil War time, beginning with Abraham Lincoln, our Presidents have issued a similar Proclamation each year, setting aside one special day for giving thanks. Thanks giving Day has become a national holiday, cel ebrated by some in prayer, by some in sports and parades, and by others with feasts. . We in this country today enjoy economic prosperity on a scale unequaled in any other time or clime. We pride ourselves on our "American way of life." We truly have a great deal to be thankful for. However, as we count our blessings this November, let us give some thought and thanks to the freedom on which these many blessings rest. It is commonplace to say that the colonies were settled, the West explored, the nation de veloped, and the country populated by individ ualists who wanted to be independent. The tired, the poor, the huddled masses who yearned to be free came to our shores. They sought the opportunity to speak, to write, to work, to worship, and to live where and as they chose. The Statue of Liberty now symbolizes their desire to escape oppressive government and to seek opportunity in this land of the free.

We still pay lip service to freedom. But many have forgotten our ancestors' fear of op pressive government. Many have come to rely on some government privilege or protection. We no longer understand how such piecemeal interventions, regulations, and controls can gradually erode our independence. We no longer realize what a big debt we owe to freedom and to the freedom of others. Practically everything we have today has stemmed from the ideas, initiative, and efforts of free men and women, working and pro ducing together. The food, clothing, shelter, and luxuries we now enjoy represent the output of men and women working, planning, and producing in voluntary cooperation with one another. Countless individuals have labored without being coaxed or coerced by govern ment to till the soil, cultivate the fruits and vegetables, harvest the grains, herd the sheep and cattle, build the skyscrapers, erect the churches and synagogues, build the factories, manufacture the automobiles, trains, planes and buses, weave the textiles, invent the radio, moving pictures, television, computers, appli ances, and other conveniences, produce the medicines, build the hospitals, write the books and stories, print the newspapers, compose the music, produce the plays and films, and so on, that all of us now use and enjoy. We are apt to forget that this entire process of voluntary so cial cooperation could disintegrate if govern ment obstructions are permitted to expand and to proliferate.

Countless individuals, each with his or her own particular aptitudes, talents, and interests, have contributed to the good life we now enjoy. In giving thanks this year, therefore, let's count our blessings. But let's do more than that. Let's not forget the debt we owe to free men and women everywhere, whose ideas, initiative, inPERSPECTIVE novativeness, energy, and efforts contribute to our well-being. In all humility, therefore, let's give thanks also to the freedom that makes our blessings possible. -BBG Peru's Informal Economy Peru's Institute for Liberty and Democracy (ILD) estimates that 40 per cent of the nation's GNP is produced by the subterranean economy. "Informal" (unlicensed) entrepreneurs build houses, repair motor vehicles, and run their own small factories. In the capital of Lima, half the population lives in housing built by the in formal sector, and informal entrepreneurs pro vide 95 per cent of public transportation.

Why are so many workers and entrepreneurs operating without licenses and other govern ment permits? Red tape. Peru has more than 500,000 laws and executive orders. When ILD tested the bureaucratic waters by trying to open a small workshop with two sewing machines, it took 289 days to get the needed permits. It took a group of low-income families almost seven years to acquire a vacant lot to build a house. And it takes an average of two decades to ob tain formal title to a home. When people are poor, they can't afford the time and expense of dealing with an endless parade of bureaucrats. But ILD cautions that the informal sector is far from an ideal business environment. There are no legally enforceable contracts, businesses can't incorporate, capital is difficult to acquire, and entrepreneurs must self-insure. Still, for millions of people in Peru and other nations, the subterranean economy is the only hope for survival.

Bruce Alan Johnson, an American busi nessman who recently visited Peru, helped launch a young Peruvian on an entrepreneurial career. Mr. Johnson recounts his experiences in his article beginning on page 404. -BJS 404 THE FREEMAN. NOVEMBER 1987 David: From Beggar to Entrepreneur In a Day by Bruce Alan Johnson The difference between education and intelli gence is this: intelligence will make you a good living. -Charles F. Kettering T he backstreets of Lima, Peru, are cob blestoned alleys of poverty and squalor. Yet, as G. K. Chesterton remarked, it is the task of the artist always to see beauty be hind the masks of even the most depressing human suffering. To be sure, amid these narrow, winding lanes there are countless colo nial balconies overhanging the cobblestones, many of them dating back to the early nine teenth century and all of them reflecting the grace of a departed era. While walking in these backstreets one Sat urday afternoon this winter, I heard a young boy's voice call out to me, in half-educated Spanish, "Senor, you got a hundred soles [about 22 cents] for a starving boy?"