Book Reviews

George H. Nash, the able historian of Amer ican conservatism, is doing a multi-volumed life of Hoover. He will be wrestling with the contradictory White House career of Hoover, the "chief," at some later date. We have al ready had a remarkable account from his pen of Hoover's pre-1914 days as a mining engineer all over the world, from the Australian "out back" to Burma, Siberia, and northern China at the time of the Boxer Rebellion. Hoover was a great competitor then. He made his million, dominating his ventures in silver and other met als from a London office, and was ready for public service when the outbreak of war came in August of 1914. Nash's current installment of the Hoover saga is called The Life of Herbert Hoover: The Humanitarian, 1914-1917 (New York: Norton, 497 pp., $25.00). It is a wonderfully researched story of a venture in practical benevolence that belies Hoover's outward demeanor of cold hearted efficiency.

In the beginning, when he was setting up his CRB, or Commission for Relief in Belgium, Hoover was threatened with competition from the Rockefeller Foundation. The Swiss also had ideas of getting into the act. But Hoover insisted on a monopoly. He couldn't quite have it all his own way. The Spanish diplomat Villalobar and the Belgian banker Emile Francqui dogged him for three years. There had to be an agency in side Belgium to help distribute food in German occupied territory. But by February of 1915 the British Admiralty and the Germans, with French concurrence, agreed that only a Hoover could properly coordinate tens of thousands of people on several continents in saving 9,000,000 Belgians and a much smaller number of Frenchmen from starvation. The tens of thousands in the Hoover organi zation included volunteer fund-raisers in Amer ica, Australia, Canada, Great Britain, Italy, and Spain; farmers, bankers, accountants, shippers, and grain merchants in the U.S.; the crews and owners of dozens of cargo ships crossing the oceans to British ports and Rotterdam in Hol land; diplomats in Madrid and Berlin and Le Havre; stevedores operating 600 tugs and barges along canals from Rotterdam into Bel gium, where 40,000 volunteers stored the food in regional warehouses for distribution to hun gry people in more than 2,500 communes.

Hoover, says Nash, appeared to sense the epic actualities of his endeavor as early as March of 1915. To a Belgian priest he wrote: "To beg, borrow and buy nearly $1,800,000 worth of food every week; to ship it overseas from America, Australia, the Argentine and In dia; to traverse three belligerent lines; to trans port it through a country with a wholly demor alized transportation service; to distribute it equitably to over 7,000,000 people; to see that it reaches the civilians only and that it is adapted to every condition from babyhood to old age ... is a labour only rendered possible by the most steadfast teamwork on the part of all. . . . We are under daily zealous surveillance of all the governments involved; . . . we maintain an investigation department of our own . . . and we have the right to demand the absolute con fidence and support of our fellow country men." Hoover, if he had written to the Belgian priest again in 1917, would hardly have changed a word in his estimation of what he had done. But the difficulties of traversing belliger ent lines were multiplied by the shifting attitude of the Germans in regard to submarine warfare.

The sinking of the Lusitania, and the tum to unrestricted attacks on all shipping into British, Dutch, and French ports, forced Hoover to fight the Germans to obtain respect for the symbol CRB on the sides of his ships. The matter was never really settled. Hoover's blunt ways of operating did not sit well with Brand Whitlock, the American am bassador to Belgium. Whitlock understood Hoover's virtues, but couldn't regard the eter nal squabbling with Francqui over jurisdiction inside of Belgium with equanimity. He came almost literally to dislike Hoover. For his part, Hoover thought Whitlock was something of a weakling. He would have called him a wimp if he had known the word. Hoover had to get along with the French and British governments to get regular subsidies for his "practical institution. " But, although he as pired to play a big part in the Wilson adminis tration once we were in the war, he regarded most governments as obstacles to be shunted aside. His way of dealing with governments in volved him in undercover operations to plant stories in the press of two continents. He was a master of what we would now call media sub version. He ghostwrote articles for Ambassador OTHER BOOKS 85 to Britain Walter Hines Page and for others in embassy headquarters; he "edited" materials for the Associated Press. With him, freedom of the press was freedom to manipulate the press.

He did not butter up the young men who worked selflessly for him. The most he would say was a cool "well done." But his youthful supporters loved him for his assumption that good men should make correct decisions as a matter of course. The British had always to be reassured that the Germans weren't stealing neutral-intended food from the regional warehouses. There were "angry egos" involved in the disputes about possible thefts. The relief of Belgium depended on German forbearance. This forbearance was never total, but what there was of it sufficed. Hoover's one great disappointment was the behavior of his good friend Lindon Bates, head of the New York office. Bates feared Hoover was guilty of infringing the Logan Act and mak ing foreign policy. No doubt he was. But 9,000,000 people remained alive. D EQUITY AND GENDER by Ellen Frankel Paul Transaction Books, Rutgers University, New Brunswick, NJ 08903 • 1988 • 192 pages • $24.95 cloth, $12.95 paper Reviewed by Clint Bolick E llen Frankel Paul's new book may be greeted with skepticism: Why do we need another book on "comparable worth, " when that theory is deader than a door nail?

The answer is simple: rumors of comparable worth's well-deserved demise are greatly exag gerated. Though presently discredited as a via ble discrimination theory in Federal litigation, comparable worth is very much alive in state legislatures and in the hearts and minds of rad ical feminist groups and their allies. As .Paul notes, ten states have implemented the results of comparable worth studies, and 20 have commissioned studies. Some states are considering proposals to extend comparable worth to the private sector. And Congress is considering imposing comparable worth at the 86 THE FREEMAN. FEBRUARY 1989 Federal level, at a potential cost of billions of dollars. In a new administration, comparable worth advocates may gain even greater momen tum. Of course, it's not called "comparable worth" anymore, but rather the more benign sounding "pay equity. " But scratch the veneer of pay equity and the same old beast emerges: a concept that, as Paul describes it, would destroy "the very foundation of our market-based eco nomic system."

Paul, who is affiliated with the Social Philos ophy and Policy·Center at Bowling Green State University, has a superb ability both to take complex issues and translate them into English, and to take simplistic rhetoric and explain its serious ramifications. Since comparable worth is at once both deceptively simple and enor mously complex, Equity and Gender provides a vital tool with which to effectively defend the market. Paul begins with a dispassionate and compre hensive review of the arguments in favor of comparable worth. She observes at the outset that" '[e]qual pay for equal work' is not the objective of the comparable worth advocates, for that standard has been the law of the land since 1963." Rather, they believe the market "is corrupted by discrimination, for nothing else can sufficiently explain discrepancies be tween women's wages and men's." This discriminating "wage gap" can be re dressed, the theory holds, by a scientific assess ment of the objective worth of jobs to employ ers, ,''to which salaries would be calibrated.

Thus, Paul explains,. "comparable worth pro vides the hope of a quick and easy fix for the injustices foisted upon women by the marketplace. " Paul then presents the arguments of compa rable worth opponents, which she observes are primarily economic. The wage gap, they argue, is created by the combined impact of women's job choices, expanding work-force options for women, and entry by women into the labor market in growing numbers. And, they add, the wage gap is diminishing as women gain more experience and enter traditionally male jobs. Moreover, they argue that comparable worth would be enormously expensive to implement, thereby reducing America's ability to compete. Paul then turns to the progress of comparable worth in the courts and legislatures, and finds that while comparable worth has been dealt se rious setbacks in the courts, it is winning the day in the legislative arena. The bulk of the book thus comprises a useful summary of the arguments pro and con and the futurt? prospects for comparable worth.

Paul concludes with her own views on the issue, and comes down solidly in favor of the market as the arbiter of salaries. Jobs do not have inherent value apart from the market, she argues. She concludes that comparable worth "depend[s] upon some rather dubious assumptions" and "embrace[ s] a view that is at odds with our American tradition, [is] unper suasive as an ideal, and incapable of being put into practice without chaotic results." But the bottom line for Paul is that compara ble worth destroys the freedom of choice that the market provides. She observes that the "women's movement in the late 1960s and 70s emphasized women's capacity, women's ability to perform jobs traditionally monopolized by men. Comparable worth sets a different agenda, portraying women in an unflattering light that enshrines their incapacity. Instead of encourag ing women to engage in new ventures, it con cedes that they will be secretaries, nurses, and teachers for a long time to come and only asks that they be paid more."

Nonetheless, Paul does not claim the moral high ground for adversaries of comparable worth. At the outset, Paul agrees with compa rable worth proponents that ultimately "justice and equity must triumph over efficiency. " But she fails to make the point strongly enough that in bargaining over wages, these values go hand in hand. While Paul seems to acknowledge that purely utilitarian arguments are inadequate to resist comparable worth, she does not present a compelling moral argument in favor of the mar ket. What defenders of the market must do is to expose comparable worth as a paternalistic the ory that assumes women are incapable of suc ceeding on the level playing field guaranteed by the present anti-discrimination laws. They must also show it to be an elitist concept, denigrating the value of blue-collar jobs. And they must raise the Orwellian specter of a commission of ,'experts" determining wages in some mystical fashion and supplanting the will of individuals.

Paul makes these points, but not graphically enough to recapture the terms of the debate. These were the points I attempted to illustrate when I represented several female prison guards in opposing the American Nurses Association's unsuccessful comparable worth lawsuit against the State of Illinois in 1984-85. My clients were women who defied societal stereotypes and took on dangerous and unpleasant jobs in order to earn higher wages--<>nly to have a board of experts conclude that entry-level secretaries were "worth" more than prison guards. Such a notion falls under the weight of its own absur dity. Tactics like these betray comparable worth as not a "women's" issue at all, but as an issue of government control versus individual auton omy. The dignity and freedom of women re quires the demise of comparable worth. Paul's book, thankfully, provides a wealth of ammu nition to hasten that demise. D (Clint Bolick is director of the Landmark Legal Foundation Center for Civil Rights in Washing ton, and author of Changing Course: Civil Rights at the Crossroads [New Brunswick, NJ: Transaction Books, 1988].) THE THEORY OF FREE BANKING: MONEY SUPPLY UNDER COMPETITIVE NOTE ISSUE by George A. Selgin Rowman & Littlefield, 81 Adams Drive, Totowa, New Jersey 07512· 1988 • 218 pages • $33.50 cloth Reviewed by Matthew B. Kibbe B anks are in trouble. But an even greater , crisis lurks beneath the political surface, on the university blackboards, and in the principles texts and academic journals. Con sider the following argument, made recently by David Warsh in the May-June 1988 issue of the Harvard Business Review: "Money is funny stuff. Like language, it has meaning only inso far as people agree to share it. Unlike language, however, it requires supervision."

OTHER BOOKS 87 Here we have the "conventional wisdom," accepted by virtually every politician and the vast majority of professional economists. Money is different. Money cannot manage it self. End of story. Enter, or should I say "re-enter," the Aus trians. Standing firmly on the intellectual shoul ders of Carl Menger, Ludwig von Mises, and F. A. Hayek, George Selgin has boldly chal lenged the status quo in monetary theory. In his recently published book, The Theory of Free Banking, Professor Selgin argues that money will, and must, manage itself. Ever since Menger, the founder of the Aus trian school, wrote his Principles in 1871, Aus trian economists have been highly critical of government involvement in the business of money and banking. In Menger's view, money cannot be arbitrarily created by legislative fiat precisely because it came into being as the un intended consequence of individuals seeking to better satisfy their wants. Money, to be ac cepted widely, must be the product of voluntary exchange.

Ludwig von Mises refined and extended Menger's monetary theory in The Theory of Money and Credit, published in 1912. Employ ing his famous "regression theorem," Mises demonstrated that the value of money also evolves through a historical process of human interaction. According to Mises, the value of money today is linked to the "price" of money yesterday, and the expected value of money to morrow will be based on the "price" of money today. When left alone by government, the value of money is both dynamic (responsive to ever-changing economic conditions) and stable (linked with the remembered past and an imag ined future). Because of its historical continuity, money provides a reliable "unit" for economic calcu lation, the means by which the millions of in dividuals within a society are able to coordinate their activities. This theoretical understanding of the nature of money provided the Austrians with a devastating critique of planning in gen eral and of central banking in particular.

Unfortunately, this rich tradition in monetary theory was all but forgotten in the turmoil of the Keynesian revolution. Divorced from the plans and purposes of individuals, monetary theory 88 THE FREEMAN. FEBRUARY 1989 was pushed deeper and deeper into the mystical world of Keynesian "macro-economics." The intentions of individuals were replaced with functional relationships between imaginary ag gregates--equations to be manipulated by gov ernment officials to serve government ends. The appearance of The Theory of Free Bank ing signals a well-written, well-organized shift iri intellectual currents. Professor Selgin' s book will shock some. I am delighted. Soon after opening the book, the reader will notice the quick precision of Selgin's prose. Af ter a brief overview of a number of historical episodes of free banking, Selgin moves directly into a theoretical discussion of the evolution of money and banking. Here, Menger's influence is strong and obvious.

The second part of the book develops the notion of "monetary equilibrium," borrowed from economists such as J. G. Koopmans, Gottfried Haberler, Fritz Machlup, and Dennis Robertson. This is the idea that there is both a demand for and a supply of bank notes which must continually adjust toward a coordinated equilibrium. Selgin fuses the theory of monetary equilib rium with the Austrian critique of central bank ing as developed by Mises and Hayek. Central banking, they argued, is neither responsive nor stable. Besides the obvious political incentives which discourage sound money management within a central banking system, central bank ers simply cannot obtain the relevant knowledge required to match the supply of money with money demand. Only market competition and competitive note issue, Selgin concludes, provide both the incentives and information necessary to main tain monetary equilibrium. Free banking is the only monetary system that can properly adjust to changes in the market demand for bank notes without flooding the market with unneeded, un backed paper currency. Selgin reminds us that fractional banking, when disciplined by free competition, provides an altogether superior al ternative to centralized control and supervision.

While Mises might have objected to the use of such a mechanical metaphor, the insight of "monetary equilibrium" is clearly consistent with the Austrian understanding of money even more so than Selgin is willing to admit. In The Theory ofMoney and Credit, Mises defined inflation as ' 'an increase in the quantity of money . . . that is not offset by a corresponding increase in the need for money. . . ." Further more, "deflation ... signifies a diminution of the quantity of money . . . which is not offset by a corresponding diminution of the demand for money.... " The difference between Selgin and Mises ap pears to be one of emphasis. We can quibble over the proper interpretation of Mises on this point, but the fact remains that the real-world problem confronting Mises during the years he wrote was the rampant inflation generated by the central banks of both Europe and the United States. Naturally, Mises emphasized the distor tive effects of an over-supply of money. But he also saw the solution, arguing in 1949 in Hu man Action that "free banking is the only method available for the prevention of the dan gers inherent in credit expansion." According to Mises, there was "no reason whatever to abandon the principle of free enterprise in the field of banking. ' , Either way, the importance of Selgin' s con tribution should not be underrated. Mises did, in fact, tend to neglect the importance of "the demand side" of money. With the publication of The Theory of Free Banking, Selgin joins a small but growing number of economists who seek to revive and extend the forgotten Austrian tradition of free banking. I am thinking also of F. A. Hayek (Denationalization of Money), Hans Sennholz (Money and Freedom), and Lawrence White (Free Banking in Britain).

With books such as Selgin's, there is hope for the future of ideas and our banking system. D (Matthew Kibbe is a doctoral student in eco nomics at George Mason University and afel low at the Center for the Study of Market Pro cesses.) THEFREE IDEAS ON LIBERTY 92 How Smart Is Big Brother? James L. Payne When it comes to knowing things, government agencies are inherently flawed. 94 Why Deny Health Care? Robert K. Oldham Countering the dangerous notion that "if everyone can't have it, no one should." 96 Socialized Medicine: The Canadian Experience Pierre Lemieux An analysis of Canada's universal, compulsory national health care system. 101 The British Way of Withholding Care Harry Schwartz Rationing medical care to save money. 103 Moral Criticisms of the Market Ken S. Ewert Defending the free market from the attacks of Christian critics. 110 Scandal at the Welfare State Tibor R. Machan Why the welfare state is so susceptible to misconduct.