June

225 Preserving the Joy of Giving Kenneth A. Bisson "Majority rule" is an inappropriate way to make many decisions. 227 Beyond Hayek: A Critique of Central Planning Tibor R. Machan Shielding individual sovereignty from state intrusion. 231 Fractional versus 100% Reserve Banking Morris J . Markovitz The advantages of a free market money and credit system. 234 Making Every Drop Count: The Case for Water Markets Don Leal How water markets can solve water shortage problems and improve the environment. 239 Celebrating the Constitution-and Village Fires Richard R. Mayer A closer look at last year's pageantry. 242 Liberty in Great Britain: The Present and the Future Nick Elliott Changes in public policy and other hopeful signs. 247 A Reviewer's Notebook John Chamberlain A review of Privatization: The Key to Better Government by E. S. Savas. CONTENTS JUNE 1988 VOL. 38 NO.6 THEFREEMAN IDEASON 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 CarlO. Helstrom, III Jacob G. Hornberger Paul L. Poirot 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. Additional single copies $1.00; 10 or more, 50 cents each. For foreign delivery, a donation of $15.00 a year is required to cover direct mailing costs. Copyright © 1988 by the Foundation for Economic Education, Inc. Printed in U.S.A. Permission 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 The Way of Freedom The human spirit seeks full and free expres sion in every department of life: in the spoken and written word; in music, sculpture and ar chitecture; in sport and play. And also in work. Man's work, when people are free, takes form as the market economy; and the free economy generates the material support the human spirit needs for its intellectual and aes thetic fulfillment. Economic liberty makes for a broadly shared prosperity which provides the wealth a people need to build schools, churches and factories; hospitals and laboratories; theaters, concert halls, art galleries, and museums; gardens, playing fields, and stadiums.

These cultural artifacts reflect the several facets of human nature striving for full and har monious realization; they are the fruits of freedom. Only tend to the roots, and these mir acles-and more-are possible. -EDMUND A. OPITZ Age-21 Drinking Laws ,'[T]he enactment of minimum [drinking] age laws around the country has led to an in crease in illegal drinking by those under 21. "Just as those under 21 are not stopped by law from acquiring drugs, so too do those under 21 acquire alcoholic beverages. And in stead of paying higher prices in taverns, they now buy more for the same dollar in unsuper vised offpremise outlets. That increase in il legal drinking may be the cause of the increase in deaths of 15-to-19-year-old drivers and passengers. , "In fact, recent data from the National Highway Traffic and Safety Administration show that the number of alcohol-related deaths of 15-to-19-year-olds increased from 3,115 to 3,540 between 1985 and 1986. In the prior years, before the very wide enactment of the 21-year-old minimum age laws, alcohol-related deaths of 15-to-19-year-olds had decreased from 4,135 to 3,115 from 1982 to 1985. In 1986, there was, therefore, a sharp reversal of the trend, possibly because of the enactment of minimum-age-21 laws and despite the con tinuing campaign against drunken driving.

"Those who have sought to reduce the number of fatalities by enacting laws that lead teenagers to drink more illegally on campus and off campus have created the opposite result of what they intended. More youths are dying because of a foolishly enacted law. ,'As things stand now, those ardent advo cates of the minimum 21-year-old law must .now explain why alcohol-related deaths of teenagers and those from even a lower age group increased in 1986 after they had declined consistently for a number of years." -JERRY STEINMAN, publisher of Alcohol Issues Insights, in a letter to The New York Times (November 27, 1987) Push the Button Should the welfare state be eliminated all at once or phased out over time? Some of the most committed freedom devotees waffle when it comes to that question. They maintain that the immediate elimination of the welfare system would be unfair or harmful to those who benefit from the welfare apparatus.

We must never lose sight of the fact that the welfare state is founded on an immoral prin ciple. The political process is used to coer cively take the wealth and income of some and transfer it to others. The person whose property is plundered is denied the basic right to dispose of his property in the manner he chooses. We must also take care not to doubt the effi cacy of freedom and the market process. When people are unable to tum to the political system for sustenance and support, and instead must rely upon their own efforts and the voluntary efforts of others, the resulting economic vitality benefits everyone. In Germany after World War II, Ludwig Er hard one day surprised everyone by lifting the extensive economic controls which the Allies had imposed on the German people. Despite all the dire predictions of the harmful effects Er hard's action would have on the German PERSPECTIVE economy, the result was the. beginning of the German economic miracle.

In the 1930s, serious doubts began to be raised about the effectiveness of the National Industrial Recovery Act, the pervasive eco nomic controls which regulated American busi nesses. Many argued that the regulations would have to be removed gradually, rather than all at once, because so many people had become de pendent on them. One day the Supreme Court declared the Act unconstitutional and immedi ately the American economy began to revi talize. Perhaps the best example of a sudden re moval of a welfare system took place when Lee surrendered to Grant at Appomattox. Prior to the Civil War, blacks in the South were pro vided their food, housing, employment, and other necessities of life. There were those who argued that the slaves were too dependent on the system to be immediately permitted their freedom. Nevertheless, the newly freed blacks rapidly adjusted to their new lives of liberty and self-reliance.

To eliminate the welfare state, the "button" should be pushed. Why? Because to argue for the continuation of an immoral action, even for a short period of time, is itself immoral. Fur thermore, freedom works: the creative abilities of human beings enable them to respond quickly to the market process. -JGH Arthur Shenfield at FEE We are pleased to announce that Arthur Shenfield, eminent British economist and bar rister, will be Visiting Scholar at FEE for the month of June. He will devote his time to writing and lecturing. Dr. Shenfield has been economic director of the Confederation of British Industry, director of the International Institute for Economic Re search and president of the Mont Pelerin So ciety. He has held visiting professorships at a number of u.s. colleges and universities, in cluding the University of Chicago, Temple University, University of Dallas, University of San Diego, and Rockford College. This past year he was the Ludwig von Mises Distin guished Visiting Professor of Economics at Hillsdale College.