July

THEFREE IDEAS ON LIBERTY 252 Corporationsat Stake DouglasJ. Den Uyl Contemporary"stakeholder"theoryunderminesprivatecontractualresponsibility. 255 The WomanWho DiscoveredPrivate Property WilliamHoltz How a primitiveAlbanianwidowhelped Rose WilderLane to understandthe implicationsof personalfreedom. 258 Mud'Farmingand PoliticalExtortion RichardB. Coffman Wastingresourcesby distortingeconomicdecisions. 260 Capitalism:An OlympicWmner DavidR. Henderson Whileeconomiclibertydoesn'tguaranteegold medals,it does alloweachperson maximumpersonaland entrepreneurialfreedom. 262 CivilDisobedience:A Threat to Our SocietyUnder Law Morris1. Leibman Order is the sinequa non of the constitutionalsystemif there is to be any possibilityfor long-termjustice. 266 Czecho-SlovakiaRejoinsthe West Sean Gabb "Radicalproblemsneed radicalsolutions." 270 The Billof Rightsand MoralPhilosophy TiborR. Machan Recallingthe basicethicaland politicalidealscapturedin the firstten amendments.

273 The Rifleby the Door DonaldG. Smith For capitalismto succeed,there must be a remnant of free-thinking,free-acting individualswho prizefreedomaboveall else. 274 Memoriesof a RecessionPast MalcolmA. Kline Reflectionson the addictivenature of unemploymentbenefits. 276 Unemploymentand Liberty BenjaminZycher Sourcesof unemploymentin a free market. 277 The "Fair Trade" Myth ShyamJ. Kamath We mustresistcallsfor "fair" trade, if we wish to maintainand enhanceour standard of living. 279 Student ActivityFees ThomasC. Klein Centralplanningon collegecampuses. 280 Do Seat Belt LawsWork? John Semmens Challengingthe presumedbenefitsof increasedauto safetyregulations. 282 Book Reviews The Fair Trade Fraudby JamesBovard;The ImpossibleH. L. Mencken,edited by MarionElizabethRodgers;ForbiddenGrounds:The CaseAgainst EmploymentDiscriminationLawsby RichardEpstein; The Litigation Explosionby WalterOlson. CONTENTS JULY 1992 VOL. 42 NO.7 THEFREEMAN IDEAS ON L1BER1Y Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 President: Hans E Sennholz Editor: John W. Robbins Senior Editor: Beth A. Hoffman Contributing Editors: Bettina Bien Greaves Mark W. Hendrickson Edmund A. Opitz Editor Emeritus: Paul L. Poirot Copy Editor: Deane M. Brasfield The Freeman is the monthly publication of The Foundation for Economic Education, Inc., Irvington-on-Hudson, NY 10533. FEE, established in 1946 by Leonard E. Read, is a nonpolitical educational champion of private property, the free market, and limited govern ment. FEE is classified as a 26 USC 501 (c) (3) tax-exempt organization. Other officers of FEE's Board of Trustees are: Gregg C.

MacDonald, chairman; W.A. Speakman III, vice-chairman; Paul L. Poirot, secretary; Don L. Foote, treasurer. The costs of Foundation projects and services are met through donations. Donations are in vited in any amount. A subscription to The Freeman is available to any interested person in the United States for the asking. Addition al single copies $1.00; 10 or more, 50 cents each. For foreign delivery, a donation of $20.00 a year is required to cover direct mail ing costs. Copyright © 1992 by The Foundation for Economic Education, Inc. Printed in the U.S.A. Permission is granted to reprint any article in this issue except "The Woman Who Discovered Private Property" and "The Bill of Rights and Moral Philosophy," 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 1971 to date. Earlier volumes as well as current is sues are available on microfilm from Univer sity Microfilms, 300 North Zeeb Road, Ann Arbor, MI 48106.

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. Phone: (914) 591-7230 FAX: (914) 591-8910 Cover art: A Minuteman preparing for battle. © Dover Books. PERSPECTIVE StrengthSprings from StrongIdeas The Foundation for Economic Education is a "home" for the friends of freedom everywhere. FEE's spirit is uplifting, reassuring, and con tagious, inspiring the creation of numerous similar organizations at home and abroad. F. A. Harper founded The Institutefor Humane Studies; Ken neth Ryker created the FreedomEducationCenter in Cedar Hill, Texas; and Ralph Smeed, the Cen terfor MarketAlternativesin Boise, Idaho. In Lon don, Antony Fisher founded the Institutefor Eco nomic Affairs;in Buenos Aires, Alberto Benegas Lynch established the Centro de Estudios sobre la Libertad; and in Guatemala City, Manuel F. Ayau built the magnificent Universidad Francisco Mar roquin. FEE's dedication to the ideals of liberty has been and continues to be an inspiration that of fers great hope for the future and new courage and confidence.

We honor Leonard Read who created this home for the friends of freedom. He knew that freedom means the pursuit of our own goals, provided we do not deprive others of their freedom to pursue theirs. His goal was peace in all social relations. FEE now is 46 years old. Although it is the old est institution of learning dedicated to the study of freedom in all its ramifications, it is as vibrant with life and energy today as it was at its inception. Now, as in the past, it heeds the words of George Wash ington: "Let us raise a standard to which the wise and honest can repair. The rest is in the hands of God." -HANS F. SENNHOLZ President WillMore GovernmentImprove Health Care? We are about to do something,anythingabout health care supply. The impetus comes from the charge that we spend more on health care but compare unfavor ably with other countries in terms of life expectan cy,infant mortality, and efforts to lower various dis ease rates. This supposedly shows that our health care supply is both more costly and defective.

250 But the cause may lie on the demand, not the supply side. Maybe we spend more on health care because we have higher demands due to factors such as high crime rates, drug use, and lifestyles. Further, it is possible we spend more on health simply because we are richer. If we demand pro portionately more health care as incomes rise, our higher costs might be due to our preferences, not supply-side inadequacy. Would you conclude that because we spend more on recreation than some other country that our recreation industry is bad and needs reform? Simple connections between spending and health are tenuous and worthy of better analysis before we charge off and change the system or throw more money at it. The evidence suggests that this will make matters worse. ***** Instead of wringing our hands over the 35 mil lion who do not have health insurance, we should look at getting rid of the ways the government has raised the cost of insurance and priced some out of the market.

A major cause of high insurance premiums is the mandated benefits required by most states. For ex ample, in Washington State, most health insurance policies must cover alcohol and drug abuse and the services of chiropractors, occupational therapists, physical therapists, speech therapists, podiatrists, and optometrists .... This is how special interest groups get their ser vicesincluded in health benefits, thus helping their business and spreading the cost to everyone. Why not include economists, too? For $100I would be gladto give you advice that might improve your economic health. And you would be more inclined to buy my services, even if useless, if insurance (other people) paid 80 to 100 percent. PERSPECTIVE All this points out a real problem with health insurance. Insurance is supposed to protect peo ple from events not their fault. When it pays for a discretionary service, it is no longer insurance but welfare, and when some choose it - need it or not - this raises both health and insurance costs.

***** If the price of bread is $2 in one country and $1 in another, you might conclude that bread is "cheaper" in the second country. But then suppose you discovered you had to wait for three hours to get the $1 bread, as Rus sians do. Is the $1 bread still "cheaper"? Similarly, the statistic that Canadian per capita health care costs are only 75 percent of the V.S.'s is used to conclude the Canadian system is "cheap er" and we should adopt it. But think of the waiting lines for many medical services in Canada: 24 weeks for coronary bypass, 16 weeks for tubal ligation, 14 weeks for tonsillec tomy,16 weeks for hysterectomy, 33 weeks for sep tal surgery, and so on. As a result, many sick Canadians come to the V.S. for treatment and others die waiting. Do you still think health care is "cheaper" in Canada? ***** When you have an industry that is full of supply side rigidities, monopoly, and bureaucracy, most of which are due to government regulation, throwing more money at it will simply raise prices and re duce output. Health costs shot up after Medicare and Medicaid, and the rise in real output slowed or declined.

As Nobel laureate Milton Friedman recently observed: "The V.S. medical system has become in large part a socialist enterprise. Why should we be any better at socialism than the Soviets?" -JOHN T. WENDERS,from a column in the Moscow (Idaho )/ Pullman (Washington) DailyNews 251 252 THEFREEMAN IDEAS ON LIBERTY Corporations at Stake by Douglas J. Den Uyl I n recent years the term "stakeholder" has been introduced into the language of business ethics.It is meant to sound like, and to replace, the traditional term "stockholder" in dealing with questions of corporate responsibility.Corporations now are said to be primarily obligated to their stakeholders, rather than to their stockholders. Originally corporate managers were seen as pri marily accountable to stockholders. Indeed, they were thought of as the stockholders' fiduciaries. Replacing "stockholder" with "stakeholder" undermines this fiduciary relationship. Thus, the last vestige of privatecontractual responsibility is also undermined, making obligation a public affair open to "public" control.