October

THEFREE IDEAS ON LIBERTY 372 Never to Be Put Up for Vote NelsonHultberg Truth and freedom are not determined by counting noses. 377 The Marketplace Relies Upon CommercialFree Speech JonathanHAdler The First Amendment should protect businessmen,too. 379 Human "Imperfection" as a Market Strength StevenR. Cunningham How customer loyaltycontributes to market efficiency. 381 National Health Insurance: A MedicalDisaster JarretB. Wollstein National health insurance has failed whenever it has been tried. 388 Two Kinds of Slums Gary North The uglinessof slumsmay reflect the beauty of freedom. 390 Electability Donald G. Smith Only leaders are presently electable, but a free societydoes not need leaders. 392 Redlight for Greenways Jo Ann T. Frobouck The green and growingtentacles of government land ownership. 395 Can Private SchoolsSurvive"Privatization"? SaraleeRhoads America2000threatens private education in America.

400 Book Reviews The RightsRetainedby the People:The Historyand Meaningof the Ninth Amendment edited by Randy E. Barnett, reviewedby James A. Woehlke; Head to Head: The ComingEconomicBattleAmong Japan, Europeand Americaby Lester Thurow,reviewedby WilliamH. Peterson; Capitalfor Profit: The TriumphofRicardianPoliticalEconomy over Marx and the Neo-Classicalby Paul Fabra, reviewedby Raymond J. Keating;Why We Spend Too Much on Health Care by Joseph L. Bast, Richard C. Rule, and Stuart A. Wesbury,Jr., and TwentyMythsAbout NationalHealthInsuranceby John C. Goodman and Gerald L. Musgrave,reviewedby Jarret B. Wollstein. CONTENTS OCTOBER 1992 VOL. 42 NO. 10 THEFREEMAN IDEAS ON LIBERTY Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 President: Hans F. 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 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 trial subscription to The Freeman is available to any interested person in the United States for the asking. Additional copies of single issues $2.00. For foreign delivery, a donation of $35.00 a year is required to cover direct mailing 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 "Never to Be Put Up for Vote" 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 PERSPECTIVE The Educationof a Politician For 24 years George McGovern was in political office as a U.S. Congressman and Senator, and was also an unsuccessful Democratic candidate for President. Then in the hopes of realizing "a long time dream" he invested in "a combination hotel, restaurant and public conference facility-com plete with an experienced manager and staff," only to have his hopes dashed when the hotel went bankrupt. McGovern and his business associates found that they had to live with Federal, state, and local rules, "all passed with the objective of helping em ployees, protecting the environment, raising tax dollars for schools, protecting [their] customers from fire hazards, etc." All noble goals, to be sure.

But McGovern now realizes that what "most often eludes legislators is: 'Can we make consumers pay the higher prices for the increased operating costs that accompany public regulation and government reporting requirements with reams of red tape?" McGovern's hotel "went bankrupt for a variety of reasons, the general economy in the Northeast being a significant cause. But that reason masks the variety of other challenges ... that drive oper ating costs and financing charges beyond what a small business can handle." And beyond what con sumers can and will pay. Faced with higher prices, consumers can make other choices, spend less, go elsewhere, vacation in their backyards, stay fewer nights in hotels, eat out less, and forgo various services such as car washes and shoeshines. "Every such decision eventually results in job losses for someone," McGovern laments. "And often these are the people without the skills to help themselves-the people I've spent a lifetime trying to help."

Thus experience taught one former politician an important economic lesson: Government controls and regulations end up hurting the very persons they are designed to help. -BETIINA BIEN GREAVES The Munchies Communism has a lot going for it-a totalitari an political doctrine, a utilitarian ethical code and a brutalitarian leadership. There was even some370 thing called, as in the title of Edward Luttwak's book, The Grand Strategy of the Soviet Union. Surely, nothing could stand against a country and a movement which was blessed with a "grand strategy." Nothing, that is, except the munchies. Over the centuries men, women and children got hooked on eating food. Then, they started dressing in non burlap shirts and wearing shoes instead of wrapped rags. This nascent consumerism served human be ings well, while doing the dirty on feudalism and, more recently, on Communism. In the United States, the munchies struck citi zens at movies and at celebrations following office softball games. Joe Six-Pack and, for that matter, everyone else shooed them away at Miller Time with saturated fats, starches, and other good things.

Americans lived, loved, fattened, and expired from seizures. The German economist Werner Sombart hit it just right. "Socialism," he wrote when explain ing the failure of the doctrine in the United States, "has always foundered on the shores of roast beef and apple pie." -LARRY PARR, writing in the July-September 1990issue of Glasnost EarlyWarning All the books which recommend the establish ment of a planned economy in a civilian society paint an entrancing vision of what a benevolent despotism could do. They ask-never very clearly, to be sure-that somehow the people should sur render the planning of their existence to "engi neers," "experts," and "technologists," to leaders, saviors, heroes. This is the political premise of the whole collectivistphilosophy: that the dictators will be patriotic or class-conscious, whichever term seems the more eulogistic to the orator. It is the premise, too, of the whole philosophy of regulation by the state, currently regarded as progressivism.

Though it is disguised by the illusion that a bureau cracy accountable to a majority of voters, and sus ceptible to the pressure of organized minorities, is PERSPECTIVE not exercising compulsion, it is evident that the more varied and comprehensive the regulation be comes, the more the state becomes a despotic pow er as against the individual. For the fragment of control over the government that one man exercis es through his vote is in no effective sense propor tionate to the authority exercised over him by the government. Benevolent despots might indeed be found. On the other hand, they might not be. They may ap pear at one time; they may not appear at another. The people, unless they choose to face the machine guns on the barricades, can take no steps to see to it that benevolent despots are selected and the malevolent cashiered. They cannot select their despots. The despots must select themselves, and, no matter whether they are good or bad, they will continue in office so long as they can suppress re bellion and escape assassination.

Thus, by a kind of tragic irony, the search for se curity and a rational society, if it seeks salvation through political authority, ends in the most irra tional form of government imaginable-in the dictatorship of casual oligarchs, who have no hereditary title, no constitutional origin or re sponsibility, and who cannot be replaced except by violence. -WALTERLIPPMANN,writing in The Atlantic Monthly, 1937 The LongRun It is true, many people believe that economic policy should not bother at all about long-run con sequences. They quote a dictum of Lord Keynes: "In the long run we are all dead." I do not question the truth of this statement; I even consider it as the only correct declaration of the neo-British Cam bridge school. But the conclusions drawn from this truism are entirely fallacious. The exact diagnosis of the economic evilsof our age is: we have outlived the short-run and are suffering from the long-run consequences of policies which did not take them into consideration.

-LUDWIG VON MISES, Planning for Freedom 371 THEFREEMAN IDEASON LIBERTY Never To Be Put Up For Vote by Nelson Hultberg We havegivenyou a Republic,Madam, if you can keep it. -BENJAMIN FRANKLIN I t is the view of most Americans today that as long as legislation is established by a majority vote of the people, then those people are politically free, and justice reigns. This modern view would be considered grievously naive by the Founding Fathers, who in their perusal of history had acquired a thorough grasp of the follies of ancient Greek democracies. In their minds, it would be ludicrous to determine freedom and jus tice merely by democratic approval of laws. This is an enormously important point for Americans to understand, for the fact that it is not being taught in our schools and clarified in voters' minds is one of the main reasons why statism has spread throughout the world. If we consider freedom to be most prevalent where there is a minimum of coercion, it should be clear to any man with a jot of common sense that we are no longer completely free in this country, that there is, and has been for some time now, in the words of Robert Nisbet, a "new despotism"