Book Reviews

452 BOOKS Social Security: What Every Taxpayer Should Know by A. Haeworth Robertson Retirement Policy Institute, Washington, D.C. Order from: Retirement Policy Institute, Publications Division, P.O. Box 240242, Charlotte, NC 28224 • 1992 • 321 pages $40.00 cloth; $14.95 paperback Reviewed by John Attarian M isunderstandings surrounding Social Security are on a scale comparable to its size and impact on our national life. Millions of Americans believe that they only recover in benefits what they paid in taxes; that their taxes are "invested" in a "trust fund" accumulating assets to pay "insur ance"; that benefits are "bought and paid for, " an "earned right" which is "guaran teed." This misunderstanding, "the most serious threat to Social Security in the immediate future," prompted A. Haeworth Robertson, Chief Actuary of Social Security from 1975 to 1978, to produce an excellent handbook for taxpayers.

In clear, readable text, assisted with nu merous helpful charts and tables, Robertson first describes the basics of Social Security -the benefit system, costs, the payroll tax system, and the two basic methods for financing Social Security: current-cost fi nancing ("pay-as-you-go"), whereby cur rent taxes pay current benefits; and advance payment, whereby current taxes accumu late a large trust fund to pay future benefits. The next 17 chapters address selected top ics, e.g., actuarial assumptions, inflation and cost of living adjustments, how Social Security determines behavior, and Medi care. Robertson masterfully describes two key measures of Social Security's financial con dition, "actuarial deficits" and "accrued liabilities," often confused in the public mind. "Actuarial deficits" are the excess of projected future costs over projected future income. Social Security's total actuarial deficit, including Medicare, is an eye popping $13.2trillion over the next 75 years.

"Only the foolhardy would continue to ignore the longer range financial problems projected for the Social Security program. . . . It is a question of whether we are making promises we will not be able to keep." ,,Accrued liabilities" are the present value of future benefits which have accrued as of a certain date. As of January 1, 1990, Social Security's unfunded accrued liabili ties were $12 trillion. That is, "we have made promises worth $12 trillion more than we have collected in taxes [to honor them]. " The situation is even bleaker than Rob ertson reports. The 1990 annual report of Social Security's Board of Trustees, which he consulted, predicted exhaustion of Social Security's trust funds in 2043 (2023 under pessimistic assumptions); 1993's report projects exhaustion sooner: in 2036 (pessi mistically, in 2017). Medicare's 1993 report projects trust fund exhaustion in 1999 (pes simistically, in 1998).

Social Security's looming financial crisis is rooted in demographics. As the huge baby-boom generation retires, Social Secu rity's costs will soar, but our falling fertility rate means fewer and fewer taxpaying work ers will support each beneficiary. Thus the enormous actuarial deficits. "Unfortunately these long-term projections and their signif icance do not appear to be widely known and understood by the public or the Con gress or the Administration." Social Security is widely misunderstood partly because its low initial cost fostered complacency. Also, being poorly informed about the program, the media misleads the public. And government use of insurance terminology ("trust fund," "contribution," etc.) creates a false impression of Social Security's nature. Hence, government and public alike take an unacceptable "head in the sand" approach. For example, the Supplementary Medical Insurance .program myopically estimates costs only' three years ahead. And in a valuable discussion of the actuarial assump tions about our future fertility rate, productivity, and death rate which the Social Se curity Administration uses to project Social Security's future status, Robertson cogently argues that the SSA' s assumptions are too optimistic, and that pessimistic projections should be used, to avoid unforeseen nega tive developments.

Discussing Medicare, Robertson ac knowledges that the "third party payer" principle contributed heavily to our soaring health care costs by destroying incentives for cost control, and cautions against na tional health insurance: "it is questionable whether there is anything inherent in a nationally designed and managed system that would not also work in a decentralized, free-enterprise system . . . . If individual freedom of choice is relinquished to attain a uniform social insurance structure, it may soon be relinquished in other areas of life as well." Social Security's march to the abyss prompts the thought that dismantling it would be the wisest policy. Unfortunately (if understandably), Robertson asserts that abolishing Social Security is "out of the question," that social insurance is "abso lutely necessary" in modern society. He does call for change, which might entail a separate scheme for young people.

Also, Robertson inadvertently illustrates the philosophical muddle of America's wel fare state. He argues that Social Security will give us our money's worth if designed on the principles of maximum individual freedom of choice consistent with the na tional interest, maximum individual oppor tunity and incentive, and government pro vision of only those benefits an individual cannot provide for himself. Yet he also contends that "Social Security is a program of social insurance. It emphasizes social adequacy. It pays benefits according to presumed need, " and that in such a program "no attempt is made" to relate a given group's benefits to the taxes it paid to qualify for them. That this is an admission that America's largest welfare program applies the evil Marxist principle "From each ac cording to his ability, to each according to his need," escapes his notice. 453 Nevertheless, Social Security's merits outweigh these flaws. Its thoroughness, ac cessibility, and comprehensiveness make it indispensable for everyone concerned about Social Security, including opponents.

Best of all, Robertson is unflinchingly honest. He repeatedly warns taxpayers that they face substantially higher taxes unless Social Security is radically altered; that the notion of entitlement is dangerous; that misunderstandings about Social Security are abetting an ' 'alarming' , decline in a sense of responsibility for oneself; that fu ture costs will probably exceed the SSA' s "most likely" projections; that general rev enue financing would encourage disregard for the future; and that "It is clearly inap propriate . . . to rely upon some undefined good fortune to enable us to continue our present Social Security program without paying substantially higher costs." He emerges as a believer in Social Security haunted by a vivid awareness of its costs and perils, and blessed with an honest man's determination not to disserve his reader by minimizing them. After so much calculated deceit in federal budget policy in recent years, Robertson's courage and candor are just what the doctor ordered. D John Attarian is a freelance writer in Ann Arbor, Michigan with a Ph.D in economics, and an adjunct scholar with the Midland, Michigan based Mackinac Center for Public Policy.

Mises: An Annotated Bibliography: A Comprehensive Listing of Books and Articles by and About Ludwig von Mises Compiled by Bettina Bien Greaves and Robert W. McGee The Foundation for Economic Education, Inc., 1993 • 408 pages. $29.95 Reviewed by Israel M. Kirzner T his is, quite simply, an extraordinary work. The reference, in its title, to an "annotated bibliography," is grossly, al454 THE FREEMAN • NOVEMBER 1993 most laughably, inadequate as a description of it. Even its subtitle fails to convey its phenomenal and fascinating scope. This book not only provides a "comprehensive listing" of relevant material; it provides in most cases, excerpts from, or succinct char acterizations of, the material referred to. This has resulted in an encyclopedic trea surehouse of materials and information re garding Mises, his works, and the reactions of hundreds upon hundreds of reviewers and authors to his ideas and his writings. Dozens of future doctoral dissertations could be planned based on the wealth of information and bibliographical citations included here, covering sources spanning some 80 years and translated from many languages. As a bibliographical compilation this is utterly unique. Its compilers richly deserve doctor ates of their own for the scholarship and indefatigable research which this work so obviously reflects.

Some of the material included here (for example, the full translations of a number of the reviews-including one by Knut Wick sell-of Mises' 1912 first German edition of The Theory of Money and Credit) will be extremely valuable for the historian of eco nomic thought. Many of the excerpted re views of the early editions of Mises' Social ism provide fascinating insights into the interwar mentality on the topic. It is cer tainly not surprising to read that as ardent a socialist as Harold Laski described Mises' book as an "extravagant and often ignorant diatribe" (p. 162).It is an eye-opener to read that as eminent an economist as Frank Knight dismissed the entire debate concern ing economic calculation as "largely sound and fury," declaring that "Socialism is a political problem . . . and economic theory has relatively little to say about it" (p. 162). Some of the material provides arresting (often wry) commentary on personal as pects of Mises and his relations with other scholars. For example, one reads (on p. 253) with a certain fascination, University of Vienna Professor Hans Mayer's tribute to Mises on his 70th birthday, bearing in mind Mises' own description of Mayer as having preoccupied himself, during Mises' years at the University of Vienna "with mischievous intrigues against me (Notes and Recollec tions, p. 94)." Among so many thousands of pieces of information-the index contains more than 2,500 entries-certain parallels and contrasts pop out, adding to the interest of the volume. (As an example: A passage cited [on p. 322] from a German-language 1974 book by Engel-Janosi concerning Mises' openness in his famed Privatsemi nar, to the articulation of opposing views, seems to be a verbatim parallel to a 1973 German-language newspaper article by M. Steffy Browne, cited on p. 311.) If the bibliography of Mises' own works is spectacularly exhaustive (going far·beyond that outstandingly valuable earlier bibliog raphy compiled by Bettina Bien Greaves and published by The Foundation for Eco nomic Education in 1970),it is the "listing"

of books and articles about Mises (going only up to 1982-while the book reviews include items from later years) which is most extraordinary. CertainlY no economist has ever before been accorded this kind of attention. Listed are not only books and articles about Mises, but books and articles in which the slightest reference to Mises is made. One can only marvel at the detective work that must have gone into the tracking down of such references in unpublished doctoral dissertations (as on pp. 325, 332, 349, 355, 371), in the autobiography of a priest (p. 347), in a letter to Business Week (p. 324), or in a 1981 Spanish-language Buenos Aires article arguing that Mises' views do not contradict those of Aquinas (p. 381). I would be less than candid if I did not register my fear that the inclusion of many references (for example those to somewhat repetitious laudatory assessments of Mises at special commemorative occasions, or those to rather trivial comments, or those which appeared in obscure, ephemeral pub lications) may lead the critical outside reader to dismiss the entire volume as a pious exercise in hagiography. This would be most unfortunate and quite unfair. Al though the inspiring and utterly splendid loyalty of Bettina Bien Greaves to Ludwig von Mises shines through this work, she and Professor McGee have bent over backwards to include the negative (often outrageous!) comments of the critics of Mises, as well as the praise ofMises' admirers. Certainly this work valuably records the reactions of hun dreds of writers to the work of Mises, the champion of liberty . But its lasting scholarly value lies in its being an important, objective, and remarkably researched source concern ing Mises, the eminent economic theorist.

I confidently expect that many of us will be consulting this wonderful volume again and again. Bettina Bien Greaves, Robert McGee, and The Foundation for Economic Education are to be warmly congratulated on this valuable contribution to the growing Mises literature. As the value ofMises' own contributions to economic understanding will come to be more and more widely recognized in the years to come, the signif icance of the patient and dedicated research which culminated in this work willbe sure to increase correspondingly-and to be corre spondingly appreciated. D Dr. Kirzner is Professor of Economics at New York University. The Ruling Class: Inside the Imperial Congress by Eric Felten The Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, DC 20002 222 pages. $24.00 cloth; $2.95 abridged paperback edition Reviewed by Peter F. Steele T 'he Ruling Class: Inside the Imperial Congress is a definitive study of the workings of the late twentieth-century fed eral government using Congress as the focal point. It is very successful in its description of a byzantine Congress and its schemes and "scams. " It is an ideal companion to Martin L. Gross' The Government Racket: Wash- .

ington Waste From A to Z since it provides a window to the wasteful programs and pork BOOKS 455 barrel projects born in a Congress bent upon creating a "Barnumoconomy" in a "Bar numocracy. " Probably the most cogent evidence Felten's work provides is that many Con gressmen have truly abdicated their respon sibilities as legislators while avoiding ac countability for the laws made and the positions taken. Chapters one through eight, respectively titled as "Sleight of Hand," ·"The Bullies' Pulpit," "Legislating Backwards," "Staff Infection," "The Grand Inquisitors," "Other People's Money," "Not-So-Inno cents Abroad," and "The Re-election Ma chine," all define the present system, con tradictory to the limited and fair government originally propounded by our Founding Fa thers after the American Revolution. Chap ter nine enumerates helpful suggestions for honest reforms in Congress. Those in our society and government who do care about matters across political, economic, and so cial lines would find the material in this chapter worth the cost of the book. D Mr. Steele is afree-lance writer from Stamford, Connecticut.

Prosperity Versus Planning: How Government Stifles Economic Growth by David Osterfeld Oxford University Press. 285 pages. $39.95 cloth; $19.95 paperback Reviewed by William H. Peterson D avid Osterfeld in his Prosperity Versus Planning, a scholarly and most worth while book supported by the Cato Institute, argues on both theoretical and empirical grounds that government planning and eco nomic growth don't mix, that the interven tionist paradigm spells planned chaos, that it is deadly to development at home and abroad, that, again, it is wiser to work with than flout the law of opportunity cost. Professor Osterfeld accordingly sees for eign aid as mainly counterproductive to 456 THE FREEMAN • NOVEMBER 1993 Third World development, underwriting as it does entrenched governments which soon detect a way to maintain power and accu mulate private wealth in Switzerland and other havens for "hot money. " He cites the work of Lord Peter Bauer and African economist George Ayittey on how foreign aid has grievously set back African and other development. And he sees that attacks in the United Nations and elsewhere on foreign investment and multinational corpo rations are blind to the benefits of private foreign investment, technology transfers, and job creation in viable Third World industries competing in world markets.

He especially excoriates both the U.N.' s Brandt Commission Report, North-South: A Program for Survival, and the United Nations Code of Conduct on the Transfer of Technology adopted in the early 1980s. These documents condemn "market fail ure" and recommend government-to-gov ernment assistance along with Third World interventionism in such forms as govern ment regulation, price controls, and state owned enterprises so to control what the United Nations regards as inappropriate technology. Said the Brandt Report, for example: "The poorer and weaker countries have not been able to raise much money on commercial terms. For them, Official De velopment Assistance or aid is the principal source offunds. . . . An increase in total aid must remain a high priority . . . . The over all flow of wealth must increase . . . . The overwhelming proportion of aid money has been usefully spent [and has] done much to diminish hardships in low-income countries."

Professor Osterfeld rejects these tenets as untrue and holds the free market and not government intervention is a much more effective and far less costly method of reg ulation. Here he stresses the role of eco nomic calculation in explaining why state owned enterprises and central planning in general are doomed to failure. Economic calculation, based on free markets, perceived opportunity costs, and private prop erty rights, permits the price system includ ing interest rates to best "regulate," i.e. allocate, goods and other scarce resources to their most urgently desired applications. Economic calculation is at the center of economic development, the very secret of the North's longtime economic success and perhaps of Western Civilization itself. The plight of the interventionists and socialists, notwithstanding elaborate plan ning boards and Five-Year Plans, is that without the benefit of economic calculation they are flying blind, that they are the bland· leading the bland. And hence they are wide open to corruptible temptation and perverse political pressures. Osterfeld quotes Mises: "No single man can ever master all the possibilities of production, innumerable as they are, as to be in a position to make straightaway evident judgments of value without the aid of some system of compu tation. "

Amen. D Dr. Peterson is an adjunct scholar at the Heri tage Foundation and a contributing editor of The Freeman. As we preparedfinal proofs for this issue, we learned ofthe sudden death ofDr. David Osterfeld on September 26,1993, at age 43. Dr. Osterfeld was a professor of political science at St. Joseph's College, Rensselaer, Indiana, and an adjunct scholar at the Heritage Foundation. David Osterfeld's first Freeman article was published in 1972 while he was a grad uate student at the University ofCincinnati. Over the years he contributed more than a dozen articles-all carefully researched, meticulously doc~mented, cogently written. His September 1993 Freeman essay, "Over population: The Perennial Myth," was re printed in Man and Nature, FEE's recently published anthology on environmental issues.