March

113 Private Cities J. Brian Phillips A look at master-planned communities. 116 1992: Which Vision for Europe? Nick Elliott What will happen when the Single European Act comes into force in 1992? 122 My Son and the Guatemalan Indians C. F. Fischer, III A. young entrepreneur learns about the "system" in his efforts to market Central American Indian jewelry. 124 Book Reviews John Chamberlain looks at The Velvet Prison: Artists Under State Socialism by Miklos Haraszti. Reviews of When Government Goes Private: Successful Alternatives to Public Services by Randall Fitzgerald, Searching for Safety by Aaron Wildavsky, and The Art of Reasoning by David Kelley. CONTENTS MARCH 1989 VOL. 39 NO.3 THEFREEMAN IDEASON LIBERTY Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 President of the Board: Bruce M. Evans Vice-President: Robert G. Anderson Senior Editors: Beth A. Hoffman Brian Summers Contributing Editors: Bettina Bien Greaves CarlO. Helstrom, III Jacob G. Hornberger Edmund A. Opitz 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 government. FEE is classified as a 26 USC 501 (c) (3) tax-exempt organization. Other officers of FEE's Board of Trustees are: Thomas C. Stevens, chairman; Ridgway K. Foley, Jr., vice chairman; Paul L. Poirot, secretary; H.F. Langenberg, 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 © 1989 by the Foundation for Economic Education, Inc. Printed in U.S.A. Permission is granted to reprint any article in this issue, except "The British Way of With holding Care" and "Scandal at the Welfare State," 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 Microfilms, 300 North Zeeb Road, Ann Arbor, MI48106. The Freeman considers unsolicited editorial submissions, but they must be accompanied by a stamped, self-addressed envelope. Our author's guide is available on request. Cover illustration: © Geoffrey Moss, Washington Post Syndicate. PERSPECTIVE Economics and Ecology Only under certain institutional arrangements do we find complementarity between economic and ecologic goals. Specifically, only institu tions that tightly link authority to act with re sponsibility for the outcome of the action foster both. Political management often weakens or eliminates the link between authority and re sponsibility. One good way to produce these benefits is to design institutions that rely upon clear and en forceable property rights which can be freely exchanged. A free market promotes such ex change. For example, such a system holds peo ple and firms accountable for the costs of pol lution. It also permits them to capture the benefits of sound environmental management, as International Paper has done, by blending wildlife and timber management. In this way, the reforms advocated by "free market environ mentalists" encourage entrepreneurship as in dividuals face incentives to seek more efficient and valuable outcomes.

-JOHN A. BADEN, Chairman Foundation for Research on Economics and the Environment Automotive Genius Who rules the marketplace? Consider this ex cerpt from "Charles Kettering: Automotive Genius," by Mark Bernstein, in the July 1988 issue of Smithsonian: "When Kettering joined General Motors in 1920, the sales figures and efficiency of GM's array of vehicles badly trailed Henry Ford's sin gle Model T. By 1927, the organizational bril liance of GM's celebrated president, Alfred P. Sloan Jr., coupled with a plethora of improve ments from Kettering's busy lab, had helped drive the Model T into retirement. With a Ford, went the inevitable wisecrack, you could have any color you wanted, provided it was black. At GM, you could have all sorts of colors. And you could have higher horsepower for more zoom, and the new 'baBoon' tires for a smoother ride, as well as all the other improvements that made each year's model comfier than last year's.

"Americans loved it, turning the nation into the world's first automotive society. To the Boss [Kettering], this was the test that mattered; not results in the laboratory, but response in the marketplace, which Kettering unquestionably believed consumers ruled. Once the public saw something better, Kettering held, it would settle for nothing less. Henry Ford once told Ketter ing that the Model T would never adopt a self starter. Kettering replied, 'Mr. Ford, that is something you yourself are not going to have anything to say about.' " Man Alone There is a qualitative distinction between the behavior of an individual and that of the human crowd in an extreme situation. A people, na tion, class, party, or simply crowd cannot go beyond a certain limit in a crisis: the instinct of self-preservation proves too strong. They can sacrifice a part in the hope of saving the rest, they can break up into smaller groups and seek salvation that way. But this is their downfall.

To be alone is an enormous responsibility. With his back to the wall a man understands: "I am the people, I am the nation, I am the party, I am the class, and there is nothing else at all. " He cannot sacrifice a part of himself, cannot split himself up or divide into parts and still live. There is nowhere for him to retreat to, and the instinct of self-preservation drives him to extremes-he prefers physical death to a spiri tualone. And an astonishing thing happens. In fight ing to preserve his integrity, he is simulta neously fighting for his people, his class, or his party. It is such individuals who win the right for their communities to live-even, perhaps, if they are not thinking of it at the time. "Why should I do it?" asks each man in the crowd. "I can do nothing alone." And they are all lost. "If I don't do it, who will?" asks the man with his back to the wall. And everyone is saved.

-VLADIMIR BUKOVSKY "The Soul of Man Under Socialism" PERSPECTIVE Soviet Agriculture In a speech calling for farmers throughout the Soviet Union to be freed from the state-run sys tem of collective agriculture, Mikhail Gor bachev remarked: "Comrades, the most important thing today is to stop the process of depeasantization and to return the man back to the land as its real master." -The New York Times, October 14, 1988 Facing the Facts At Phoenix House, the highly regarded drug rehabilitation center in New York, a typical therapy group will start out by listening quietly to all the victim chatter of a recently arrived. addict. Then someone will say something like: "It isn't your mother or society or even the pushers who put the needle in your arm. You did." And therapy starts from there. -JOHN LEO, writing in the October 17, 1988 issue of U.S. News & World Report A Vital Difference American borrowing from abroad in the 19th century bore little relation to our rising indebt edness of the 1980s. When foreign investors in the 19th century bought stocks and bonds from our companies, the money generally was put to productive use. In many cases, the profits from those enterprises far exceeded the cost of the capital that was provided.

In contrast, in recent years the U.S. Treasury has been borrowing heavily abroad to finance deficits arising from rapid expansions in de fense outlays, entitlements, farm subsidies, and interest payments. No matter how socially wor thy or politically necessary those items of fed eral expenditure may be, they represent current consumption. These federal expenditures are not investments that generate a future return to repay or even cover the interest on the Treasury securities issued to help finance them. -MURRA Y WEIDENBAUM Center for the Study of American Business 92 THEFREEMAN IDEASON LIBERTY How SlDart Is Big Brother? by James L. Payne O ne of the attractions of government as a . problem-solver is its presumed advan tage in information and technical ex pertise. We tend to assume that government will be better informed than anyone else, and therefore better able to deal with the complex problems of our age.