Book Reviews

The date was the third week of September in 1787. General George Washington was returning to his farm at Mount Vernon on the Potomac with the new Constitution in his keeping. Crossing the Elk River in northeast Maryland, his carriage fell through the rotten planks of a makeshift bridge. His horses hung suspended 15 feet above the Elk flood. As a reporter who givesus this information, St. John has an uncharacteristic lapse-he doesn't furnish the details of how local citizensbrought the animals to safe ground. Otherwise St. John plays his clever game of reporting the struggles which gave us our Con stitution and our first President. He makes you see what a crushing blow it would have been if Washington had not made it safely to Mount Vernon. The first volume of St. John's projected trilogy was called Constitutional Journal. It appeared in the bicentennial year of 1987 after running as a daily newspaper series in the Christian Science Monitor.

In a foreword to the second printing of Consti tutional Journal, retired Chief Justice Warren Burger wrote that "St. John ... takes the reader through the debate, day by day, in an entertaining style that succeeds in conveyingboth the historical facts and the emotion and drama of the debates." Justice Burger has continued his support of St. John by offering a foreword to volume two, pub lished as A Child of Fortune (Jameson Books, 392 pages, $24.95 cloth). The title comes from a letter written by Washington to the Marquis de Lafayette: "It is now a Child of Fortune, to be fos tered by some and buffeted by others.... I suppose it will work its way if good; if bad, it will recoil on the Framers." Recoil there was to some degree: the provision that extended the slave trade for 20 years wasn't liked in the Northeast, but it had to be accepted as a compromise to keep the Southern states in line. The anti-federalists (and there were many) would have liked to sustain some connection with the Articles of Confederation, but they were objective men. They were primarily students of geography. The Spanish empire to the south of the 13 colonies and the British to the north in Canada controlled access to two great river sys tems, the Mississippi and the St. Lawrence. To deal with empires controlling river systems, something stronger than 13 independent colonies was needed. This was the thought that guided the Philadelphia delegates in their Constitution making. They were happy to have the French, then headed for their own revolution, on their side, but Quebec might become an enemy if the French Revolution went askew. There had once been a French and Indian War. Spaniards were inciting Indians in Georgia even as the Constitu tion was being debated.

318 THE FREEMAN • AUGUST 1991 For A Child of Fortune, St. John pretends he is a reporter at ratification debates in 11 states. He makes the progress of ratification exciting even though the reader knows that the stipulated num ber of nine ratifying states will be reached. Delaware, with more Senators than Representa tives, was the first to ratify, followed by Pennsyl vania and New Jersey. There were riots in Penn sylvania. New Jersey, a "barrel tapped at both ends," was easy, for its traders stood to benefit from being a corridor from New York to Philadel phia. Georgia came into line in late December of 1787on a unanimous vote, with vows to keep the Creek Indians at bay. But there was more to it than that. St. John quotes Georgia's chief justice as saying his state "suffers from wounded credit." Paper money was indeed a curse in all the colonies, and the Founders were agreed with Oliver Ellsworth of Connecticut that the wisest thing done at Philadelphia was to forbid its print ing by the states.

Connecticut became the fifth ratifyingstate, and the first in New England, for economic reasons specified by Ellsworth. Massachusetts became number six. Shays's Rebellion against debt fore closures in the western part of the state was still a vivid warning in Boston. Governor Hancock cov ered himself with glory-and promoted his own case for the Vice Presidency-as the great concil iator of the Massachusetts convention. But John Adams got the Vice Presidency. The Lees of Virginia had started talking about a Bill of Rights. Thomas Jefferson, then absent in Paris as ambassador, was in agreement. Patrick Henry in Virginia, the orator of the Revolution, let it be known that he favored acceptance of a Bill of Rights as a "condition" for ratification. There followed the epic struggle between the dis trustful patriots Henry and James Madison, with Madison (and General Washington) holding for voluntary amendments to the Constitution. The voluntarists won in Maryland, seventh state to ratify, and in South Carolina (the eighth). New Hampshire became the ninth, giving "legal life"

to the Constitution. Legal life, however, would not have meant real life if Virginia and New York hadn't been satisfied with promises of a Bill of Rights. Jeffrey St. John is currently busy with his third volume, which will follow events leading to Con gressional adoption of the Bill of Rights. D THE MYTH OF SCIENTIFICPUBLIC POLICY by Robert Formaini Transaction Publishers, Rutgers University, New Bruns wick, NJ 08903 • 1990 • 129 pages • $24.95 cloth; $14.95 paper Reviewed by John Semmens T he thesis of this book-that an objective, scientifically determined public policy is impossible-stands in stark contrast to the proliferation of public planning agencies that has occurred over the last generation. The goal of a sci entific public policy would appear meritorious. Using research and experimentation to gather evi dence with which to guide public policy decisions would seem superior to reliance on unresearched and untested opinions. Nevertheless, the author contends that allthe research in support of govern ment intervention adds up to essentially nothing.

Public policy decisions are inherently entangled with value judgments. The aim of policy is to do "good," however that may be defined. Since defi nitions of the "good" will differ, demonstrating that one policy is superior to another must quickly run into subjective inputs. For example, no public policy has uniformly beneficial effects on every one. Some willbe helped, others may be hurt. Bal ancing the help and the hurt is the ostensible goal of a scientific approach to policy-making. The tools of scientific policy-making include "risk assessment," "cost/benefit analysis," and "environmental impact analysis." However, researchers don't agree on just how these tools should be used. Yet,the way in which a tool is used can affect the result. Consider, for example, the 1987 speed-limit increase on rural interstate highways. Since the limit was raised to 65 miles per hour, studies have been done to show that accidents and fatalities have increased. Focus on the affected routes reveals, unsurprisingly, higher incidences of acci dents. However, other researchers question the scope of the analysis and point to lower overall accident and fatality rates. Scientists come down on both sides of the policy issue of whether the increase in speed limit was a "good" or "bad" pol icy change from the perspective of safety.The pol icy question becomes even more complicated when we consider other travel dimensions such as time and convenience.

The end result of policy decisions is frequently a law or a regulation compelling people to modify behavior or to finance government programs. Even if we were convinced that the majority of people would benefit, there is still the uncomfort able aspect that the law compels some to take actions from which they will not benefit, or per haps even be harmed. In the absence of the com pulsion of law or regulation, people are making the choices that they perceive as optimal. Initiating the compulsion will shift people into behaviors that they did not freely choose. The inevitable conse quence is that there willbe less satisfactory results despite the noblest of intentions. As an alternative to relying on the choices peo ple make in the free market, many advocates of government intervention imagine that we can rely on information obtained from polls or surveys. Unfortunately, such data are less reliable than many might hope. The wording of survey ques tions can easily force the desired result. In the eagerness to discover a wellspring of popular sup port for a government project, researchers can lapse into faulty survey design and achieve mis leading answers. Even if the questions are designed with utmost care, respondents may mis perceive or misrepresent their own preferences.

A case in point is the survey carried out on the "Sardine Express" train during the 1980 Phoenix flood. For a period, all but two highway bridges over a river that splits the metropolitan region were closed or washed away. Commuters packed the trains set up to offer an alternative service dur ing the emergency. A survey of riders showed that the average rider evinced a willingness to pay more than twice the existing fare and to ride the train regularly once the emergency had passed. Yet, the day a third bridge over the river was restored to service (by no means eliminating the crushing traffic jams) train ridership dropped by 75 percent. The severed link between the costs and benefits of public projects aggravates the problem of deter mining the relative worth of each project. This is probably what lies behind the phenomenon of a voter population that wants more services from government, but doesn't want to pay more taxes. If we ask people whether they want more roads, parks, police, or whatever and no price tag is attached, large majorities will respond in the affir mative. If we ask them if they want to pay higher OTHER BOOKS 319 taxes, they will naturally say no. Hence, we have persistent crises in government budgets.

The private sector resolves this dilemma by putting the price tags right on the merchandise. Then those who truly value the product at more than the cost will buy. Those with an opposite opinion won't buy. This linkage between costs and benefits simplifies the problem for private sector firms. Tax-funded projects are denied this crucial measure of true value. Robert Formaini is not an opponent of science per se. He does assert, though, that more skepti cism should be applied to the claims made on behalf of government intervention. The scientific studies purporting to show gains from displacing the market with government edicts are fatally flawed. The benefits are typically inflated. The costs are repeatedly underestimated. The risks are always far greater than admitted. The alternative to a pseudo-scientific backing of more interference with freedom of choice is a greater appreciation of the irreplaceable role played by voluntary transactions in the market place. When people are free to choose, they are in the best position to maximize both individual and social well-being. Recognition of this fact would be the most scientific approach to public policy making. D Mr. Semmens is an economist for the Laissez Faire Institute in Tempe, Arizona.

IF YOU'RE SO SMART: THE NARRATIVE OF ECONOMIC EXPERTISE by Donald N. McCloskey The Universityof ChicagoPress,11030S. LangleyAvenue, Chicago,IL 60628 -180 pages -1990 - $17.95cloth Reviewedby RussellShannon O ne can almost predict it. It usually hap pens whenever I give a talk to a civicclub or some other group. It's almost sure to occur at a social gathering when people discover that I teach economics. Sooner or later, someone is bound to ask: "What do you think is going to happen to interest rates?" Years ago, I was not only surprised by the ques tion but also somewhat annoyed, since I'm not greatly interested in what is largely a financial mat ter. But as the question persisted, I began to ask 320 THE FREEMAN • AUGUST 1991 myself, "What would I do if I really knew where interest rates are headed?" I finally realized that the best response to the question was quite simple albeit a bit rude: "If I did know what was going to happen to interest rates, would I waste my time talking to you?"

Now Donald N. McCloskey,an economist at the University of Iowa, has written a book that addresses this very issue. Broadly speaking, his book is about the rhetoric economists use. It is directed mainlyat non-economists, but it has much to recommend it to economists as well. The book's title derives from what Professor McCloskey calls "the great American question." That is, "If you're so smart, why ain't you rich?" Speaking directly to the issue I have raised, he points out that if economists really did know the future of interest rates, they would be too busy phoning instructions to their stockbrokers to be attending cocktail parties. But, of course, economists are no more knowl edgeable about how to turn a quick buck than ordinary people are; in fact, they obviously know a good bit less than such active entrepreneurs as the John D. Rockefellers and Donald Trumps in our society. In that regard, McCloskey indicates that economists play roles akin to those of art, the ater, and music critics. If these people could actu ally paint the Mona Lisa, write Hamlet, or com pose Swan Lake, then surely they would be doing that instead of writing columns for newspapers and magazines.

Then why do people turn so often to economists for financial advice-not just at luncheons and cocktail parties, but professionally,and at a steep fee, for guidance on managing trust funds and oth er investments? (In fact, some firms such as Otto Eckstein's Data Resources have used complex economic models to rake in enormous sums of money from clients.) McCloskey offers an enlightening explana tion. He tells us that "James Burk, a sociologist and former stockbroker ... found that the advice-giving industry sprang from legal deci sions early in the century.... The courts began to decide that the trustee of a pension fund or of a child's inheritance could be held liable for bad investing if he did not take advice. The effect would have been the same had the courts decid ed that prudent men should consult Ouija boards or the flights of birds." The result was a burgeoning business for economic forecasters.

By casting doubt on the ability of economists to prophesy the future, McCloskeyis similarlythrow ing a blanket ov~r the efforts of social planners to make dramatic improvements in our well-being through the power of centralized government con trol. If planners were so smart, then why haven't they made countries rich? Of course, the current collapse of Communism in Eastern Europe and the Soviet Union confirms the validity of McCloskey's disdain for such schemes. Indeed, therein lies what McCloskeysees as the true nature of the benefits to be gained from eco nomic expertise-not predicting future events but illuminating the past. As he puts it, "The point is to know history,not to change it." In McCloskey's view, economic rhetoric can perform a valuable social function by providing stories, such as those about the adverse impact of governmental regula tion and the beneficial effects of entrepreneurial endeavors, that may guide us to make valuable improvements.

At times, such as in the recent efforts at dereg ulating transportation as well as privatization, these stories have been successful. Paraphrasing John Maynard Keynes, McCloskey notes that, at least occasionally, ideas do triumph over vested interests. Not incidentally,McCloskey notes that the "sto ry" of scarcity and the need for choice appeared first not in the writings of economists but in litera ture. In Daniel Defoe's novel, Robinson Crusoe is compelled to select the items he can transport ashore on his small raft. In modern economics classes,Crusoe's dilemma has been converted into the choice between "guns and butter." But McCloskey warns that our choices are indi vidual, not collective. American well-being, he notes, does not depend on crushing Japan. Just as it isn't of great importance to predict the future, so too, in McCloskey'sview,"The idea is not to 'com pete,' whatever that might mean in thrillingly col lective policies, but to become skilled and hard working and therefore rich."

All in all, one ends McCloskey'sbook by feeling that it is a tale well told. It deserves a wide audi ence. But please don't ask me to speculate on how wide that audience may be! D Professor Shannon teaches in the Economics Depart ment, Clemson University.