September

IDEAS ON LIBERTY 332 Crackdownin China PujieZheng A Chinesestudent's accountof recent politicalunrest in his homeland. 336 The Rise and Fall of the Edsel Anthony Young A reminder that the car-buyingconsumerdetermines the successor failure of an automobile. 340 Crime and Consequences m. "... To Insure DomesticTranquility•••" RobertJames Bidinotto In the conclusionof his three-part series,Mr. Bidinotto examinesthe failuresof our correctionalsystem-and offerssome suggestionsfor improvement. 352 SocialConsciousnessand IndividualFreedom DavidBeers Exploringthe confusingnotionof "society'smoralduty." 355 What Is a Doctor's Relative Worth? Jane M. Orient A "fair" solutionto the problem of maldistributionof incomeamongvarious medicalspecialties. 359 Privatizationin Northern Ireland MakingPoliticsNormal Nick Elliott Seekingways to reduce the importance of sectarianpolitics. 361 Israel: The Road from Socialism MacabeeDean Israel seeks buyersfor many of its state-ownedcompanies.

367 Sportsin America TiborR. Machan Enjoyingthe freedom to pursue individualgoals. 369 Readers' Forum 370 Book Reviews John ChamberlainreviewsPaul Johnson'sIntellectuals.Other books: Unfair Competition: The ProfitsofNonprofitsby James T. Bennett and Thomas J. DiLorenzo, The High CostofFarm Welfareby CliftonB. Luttrell, and A Theo ry ofSocialismand Capitalism:Economics,Politics,and Ethicsby Hans Hermann Hoppe. CONTENTS SEPTEMBER 1989 VOL. 39 NO.9 THEFREEMAN IDEASON LIBERTY PERSPECTIVE Phone: (914) 591·7230 FAX: (914) 591-8910 Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 The Freemanconsiders unsolicited editorial submissions, but they must be accompanied by a stamped, self-addressed envelope. Our au thor's guide is available on request. Message from Moscow Judge George Revecomb and Lynne Cheney, chairman of the National Endowment for the Humanities, present the Benja min Franklin Award to Roger Pilon (right).

Dr. Roger Pilon, Freeman author and a se nior fellow at the Cato Institute, was one of four winners of the 1988 Benjamin Franklin awards for excellence in writing on the U.S. Constitution. The awards are sponsored by the National Press Foundation in partnership with the Commission on the Bicentennial of the United States Constitution. Dr. Pilon's winning article "On the Founda tions of Economic Liberty" appeared in the September 1988 issue of The Freeman. It dis cusses the natural connection between eco nomic and political liberties and the role of the judiciary in restoring and maintaining these rights. Dr. Pilon received his award in April at a luncheon co-hosted by former Chief Justice of the United States Warren E. Burger. The Na tional Press Foundation is a nonprofit educa tional foundation dedicated to excellence in American journalism. What's the matter with our present pricing system? For one thing, prices are set centrally, from above, and that's faulty in principle.

Wholesale prices are based on costs plus a minimum planned profit. The producer adds Pilon Article Honored by National Press Foundation Bruce M. Evans Robert G. Anderson Beth A. Hoffman Brian Summers Bettina Bien Greaves Carl O. Helstrom, III Edmund A. Opitz Paul L. Poirot Jeffrey J. Ziegler President of The Board: Vice-President: Senior Editors: Editorial Intern: Contributing Editors: Copyright © 1989 by the Foundation for Eco nomic Education, Inc. Printed in the U.S.A. Permission is granted to reprint any article in this issue, except "Crime and Consequences" and "Sports in America," 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 is sues are available on microfilm from U niversi ty Microfilms, 300 North Zeeb Road, Ann Ar bor, MI 48106.

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 limit ed government. FEE is classified as a 26 USC 501 (c) (3) tax-exempt organization. Other of ficers of FEE's Board of Trustees are: Thomas C. Stevens, chairman; Ridgway K. Foley, Jr., vice-chairman; Paul L. Poirot, secretary; H.P. Langenberg, treasurer. The costs of Foundation projects and services are met through donations. Donations are in vited 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 $15.00a year is required to cover direct mailing costs.

up all his costs of production, adds on his planned profit, and presents this figure to the State Committee on Prices for confirmation. Costs are pushed up since the producer wants to get a higher price, and the guidelines for profitability ~re strained to the limit since the producer needs to make a profit. The higher the costs and the margin of profit, the higher the prices and the better off the producer. But the consumer suffers-retail prices rise. The producer is in the driver's seat. Chaos is averted only by administrative fiat: the· planning bodies and the State Committee on Prices try to moderate the greed of the pro ducers. But how? Arbitrarily, by the seat of their pants. How else can one explain the fact that the profit margin established for the Min ister of Instrument Making, Automation Equipment, and Control Systems is one-third greater than that established for his colleagues in the machine-building conglomerate? Is this sensible? In addition to these problems, prices and profits depend less on the efficiency of production or on supply and demand than on the skill of the producer in inflating his costs and justifying his expenses and on the manag er's energy and his contacts. The system en courages the enterprise to produce less, to raise prices, and to hoard supplies. . . .

The market will successfullyreplace the "ir replaceable" apparatus of central administra tionall the committees, departments, and ministries. That's why the administrators don't like the market. When they manage less, things go better-that's what insults our officials. Let them be insulted; we will change to a market system no matter what they say. But how are prices set in a market system? By supply and demand. I won't buy meat in co operative stores for five rubles a kilo or in state stores for two rubles when I can buy it from the Arkhangelsk peasant for one ruble. And you'll probably do the same. What will hap pen? Prices will immediately drop in the coop erative and state stores. And wholesale prices PERSPECTIVE will fall as well. If producers find this unprof itable, they will have to make adjustments and improve their efficiency-learning from the Arkhangelsk peasant-or else shift to produc ing something else.

Unlike the State Committee on Prices, the market will not support excess expenses and poor work. Those who know how to work will earn real money, and those who can't will ei ther learn or they won't have any way to sup port themselves. Society has no obligation to pay for poor work, but it will willinglypay for efficient labor satisfying public demand, and thereby encourage and stimulate the conscien tious and competent workman. This gives you some idea of how the market works to control sociallynecessary expenditures, to stimulate ef ficiency,and to set costs and prices. -ALEXEI MYASNIKOV, writing in Glasnost, a dissident publication founded in Moscow in 1987. Translation pro vided by the Center for Democracy in the U.S.S.R., 358 W. 30th Street, Suite i-A, New York, NY 10001. The Triumph of Capitalism Less than 75 years after it officially began, the contest between capitalism and socialism is over: capitalism has won. The Soviet Union, China, and Eastern Europe have given us the clearest possible proof that capitalism orga nizes the material affairs of humankind more satisfactorily than socialism. . . . Indeed, it is difficult to observe the changes taking place in the world today and not conclude that the nose of the capitalist camel has been pushed so far under the socialist tent that the great question now seems how rapid will be the transforma tion of socialism into capitalism, and not the other way around, as things looked only a half century ago.

-ROBERT HEILBRONER, a leading socialist economist, writing in the January 23,1989, issue of The New Yorker.