Myths of the Rich Man; J. Fulda

These fears are little more than myths. After all, there are plenty of other things we need food, clothing, shelter-and yet none of the fears people have of the rich have materialized in any free market system. Economics teaches us why these fears are fallacious, and since they are nevertheless so prominent in discussions of privatization among the general public, it is well to review those teachings here. Society is not at the mercy of the malevolent rich man controlling its necessities. A man who holds vast reservoirs of water or large parcels of land and makes no economic use of it out of spite (and it is fear of spitefulness that is behind this myth) will soon find the management costs of his properties causing him to lose all. The Joseph S. Fulda is an assistant professor of biomathemat ical sciences at the Mt. Sinai School of Medicine and re sides in Manhattan. water will lose its potability, the pipes will be come rusty, and the whole system will become worthless; the streets will fall into disrepair and require endless reconstruction. Certainly that is not how the rich man acquired his wealth!

But, still, what if? All that will happen is that large holdings of real estate will be converted to streets and reservoirs by others, rich or poor. As long as free entry-competition-is allowed, the rich man who has but will not market spites only himself and will lose his fortune. Someone else will see the need, convert his property to the now-more-marketable use and take the rich man's erstwhile profits away. Nor can the rich man buy up all the streets or reservoirs and charge arbitrarily large sums for these necessaries. As he raises the price, con version of other resources to these purposes be comes more attractive. Furthermore, substi tutes, once far too expensive even to be contemplated let alone developed, begin to be come attractive as well. All it takes is one per son with a vision-be he rich or poor-and the consumer demand for a water-substitute or a street-substitute will be satisfied. As Julian Si mon demonstrated in The Ultimate Resource, the human mind, throughout history, has been uniformly able to find alternatives which satisfy the very same need as some resource previously thought to be indispensable.

Finally, we must remark that the situation itself-a malevolent rich man monopolizing all but providing none, or providing only at impos sibly steep prices-is most artificial. People are not like that. Besides, empirical studies have 83 shown that as capitalist society progresses, the distribution of resources and funds for capital tends to become more diffuse and mobile. It is therefore doubtful on both psychological and economic grounds whether (without state grants of monopoly power or the equivalent) the sce narios that underlie the myths of the malevolent rich man could ever come to pass. But the free dom-lover may rest assured that even if such concentrations of wealth and malice somehow did befall society, all that would occur is ad justment-the redistribution and reallocation of natural resources, capital, labor, and entrepre neurial talent-nothing worse than a temporary inconvenience for the masses, coupled with special opportunities for those who would tum the situation to their advantage.

Nor does society, to consider the opposite fear, depend on the beneficence of the rich man to provide its necessities. Were none of the rich interested in providing water or streets, the poor aspiring to become rich would provide, al though perhaps not in large quantities mediated through big corporations. Perhaps water would be sold by local ven dors. Perhaps streets would be owned by the homeowners and shopkeepers on the block, in small lots. Or perhaps workers would acquire streets in their neighborhood with their union pension funds, an investment linked to the gen eral economic performance of the area, much like stocks or bonds. I repeatedly say "perhaps, " for no one can know just how the market arrangements for, say, water and streets would work out. But work out they would-the price system guarantees it. As water and streets become scarcer their prices will rise. As prices rise, the opportunities available for entrepreneurs will become increasingly irresistible. In a society with an economy in which everyone is free to take advantage of the available opportunities, one need not worry about the do-nothing rich any more than the spiteful rich.

Again, of course, the situation is artificial. Those with the most capital acquired their riches by taking advantage of opportunities, not by ignoring them. But even if somehow the rich will not provide, things will work out as new entrepreneurs replace the old rich and exercise their resolve to provide and thus be provided for. [] IDEAS ON LIBERTY Promoting COlDpetition B y competition, I refer to a situation that exists when the basic rules of the free society are observed - when everyone possesses the basic rights of private property and freedom of contract. Competition is not a mode of conduct that anyone has to promote institutionally. It develops naturally and necessarily among persons who are free to pursue their own interests. Whatever one's personal interest or objective may be - businessman, sculptor, or preacher - the consequence of pursuing it puts him in competition with all who share that objective. That being the case, preoccupation with promoting competition is at best a diversion of effort which could have been used to protect private property and freedom of contract.

-SYLVESTER PETRO 84 A REVIEWER'S NOTEBOOK The Life of Herbert Hoover by John Chamberlain "FOOd will win the war." So we were told in 1917 by Herbert Hoover, who was just home after a three-year period of feeding Belgian and French civilians who were trapped in back of the contending Allied and German armies. Accordingly I signed up to work on a school farm in Windsor, Connecti cut, where I did my bit by shingling a hen house roof and chopping stumps out of a field destined for com. At the age of fourteen I was sure that Hoover was a man for the ages. I was not so certain at a later age, when Hoover, as President, couldn't contend with what he called "the Mississippi Bubble of 1927-29." We forget that Hoover, in the White House, pioneered many of Franklin Roosevelt's New Deal devices. His Reconstruction Finance Corporation tried to save weak banks, his Fed eral Reserve Board bought millions of govern ment notes in the open market, his Farm Board tried to prop up wheat prices. His excuse was that he had to compete with Europe in a world that had lost touch with Adam Smith. Roosevelt beat him at the polls in 1932, partly by a prom ise to balance the budget. Then Roosevelt pro ceeded to double Hoover's New Dealism in spades.