Book Reviews

A REVIEWER'S NOTEBOOK Two WORLD VIEWS by John Chamberlain A s Eugene Rostow, former dean of the Yale Law School, shows in his book, Toward Managed Peace (Yale University Press, New Haven and London, $35.00),we have definitely had a foreign policy: It was to fight the Cold War. Stalin, like the Ro manov Czars, continued the immemorial policy of trying to bite offmore territory. His prey was anything he could pick up, but at Yalta he showed his preference for land that was contiguous to Mother Russia. With the perspective of a world historian, Rostow reminds us of the origins of current events: The Cold War came to an end with the collapse of Marxism in Russia. Instead of one huge Russia we had ten or twelve smaller Russias from the Ukraine on down. The Contras controlled much of Central America and reached into South America. Chile became a benevolent dictator story. Castro was another such story though not quite so benevolent.

There isn't much point in writing a sim plifiedreview of the Rostow book, as long as another book, Final Warning (Warner Books, New York, N.Y., $18.95) subtitled "The Legacy ofChernobyl" by Dr. Robert Peter Gale and Thomas Hauser demands attention. Gale was the doctor summoned by Armand Hammer to supervise bone mar row extraction and deposits in victims of the Chernobyl disaster. Chernobyl could have been much worse. It was pure luck that blew the wind around. The Ukraine city of Kiev might have been ruined. Odessa, on the Black Sea, might have been stricken. But Chernobyl operates still. With the prevailing world winds going from west to east, all of the new Russias (the Ukraine, etc.) are in perpetual menace. There must be no more accidents. But there have also been acci dents in the Urals, as Gorbachev has inti mated. Together, Toward a Managed Peace and Final Warning, enable the reader to visual ize two opposing worlds; a hopeful har mony, which I can't picture at this moment in history, and a possibly disastrous conclu sion to everything alive. D Making Democracy Work: Civic Traditions in Modern Italy by Robert D. Putnam Princeton, N.J.: Princeton University Press.

1993 • 258 pages. $24.95 Reviewed by Ben W. Bolch I t is a rare occurrence when a book ap pears that is destined to influence the study of the interrelationships of economics and politics for decades to come. Making Democracy Work is such a book, one that will no doubt become a classic in the social science literature and should be read by all economists. In 1970,fifteen new regional governments were created in Italy and were given essen tially the same powers and responsibilities. 1 By the 1990s these governments were spending nearly a tenth of Italy's GDP, so that they were quite powerful structures. 211 212 THE FREEMAN • APRIL 1994 This creation of nearly identical govern ments offered Putnam the exceedingly rare opportunity to study something that resem bles a controlled experiment in the natural sciences. The question Putnam asks about these governments is classically simple: Which of them worked best and why?

Clearly there were differences in the Italian regions which contained these govern ments, especially differences in the history of the people of these regions. Did these differences matter? Putnam measured the performance of the governments in various ways. Did the peo ple find them comprehensive, reliable, and internally consistent? Did the governments conform to the objectives of their constitu ents? What Putnam found was that the success ful governments were located in areas where he also found a high degree of "civic tradi tion. " In areas in the south of Italy a powerful Norman kingdom had appeared around the eleventh century A.D. There a ruling tradition was established that, while enlightened in terms of religious toleration and othermatters, had an autocratic, top down structure that promoted state monop olies and other mercantilist sorts of eco nomic arrangements. In certain northern and central parts of Italy ,on the other hand, there began to develop at about the same time a tradition of republican government featuring the involvement of large numbers of the members of the society.

The two types of government traditions, vertical in the south and horizontal in the north-central regions, produced very differ ent kinds of civic traditions. The vertical tradition produced the lord, vassal, and serf style of relationship, while the horizontal tradition developed into guild, fraternal, and university relationships. In the south, disputes tended to be settled by godfather-like figures who, in order to maintain their power, were not above caus ing trouble among people so that they could later be of use in settling the dispute. In the north-central regions, people tended to form mutual aid societies and other spontaneous kinds of organizations that promoted mutual trust and a team spirit for the solution of economic and social problems. Thus it is no accident that the banking community grew up around Florence in the north, comments Putnam, for the very word credit derives from credere, "to believe." It is also no accident that the Mafia emerged as domi nant in the south. However, the really striking economic difference between these regions did not come until the time of the Industrial Revolution, which took hold in the north-central regions of Italy and still languishes in the south. It is interesting to note that the civic differences between the regions remained more stable than the eco nomic differences. While the civic regions became wealthier they also remained stead fastly civic. In Putnam's words: "Like a powerful magnetic field, civic conditions seem gradually but inexorably to have brought socioeconomic conditions into alignment, so that by the 1970s socioeco nomic modernity is very closely correlated with the civic community. ... In other words, perhaps civics helps to explain eco nomics, rather than the reverse" (pp. 153-4).

Interestingly enough, Putnam finds that organized religion, at least in Catholic Italy, is mainly an alternative to the civic commu nity: the more people take part in religious activities the less they take part in govern ment. Along similar lines, of course, Max Weber in his The Protestant Ethic and the Spirit of Capitalism (1904) felt that Cathol icism was less conducive to business suc cess than were certain forms of Protestant ism. Yet, it may not be Protestantism versus Catholicism that is at issue here, but once again the vertical structure of the Church system. Historian Paul Johnson writes in his History of Christianity (pp. 313 ff.) that entrepreneurs have historically been put off by highly structured Christianity of any kind and have tended to favor more loosely structured "primitive" churches or even solitary worship. Putnam's work should demonstrate to economists something that they have long suspected: economic development is path dependent. It matters a great deal how we got where we are. And, while only the radical fringe of the economics profession believes otherwise, this work makes it crys tal clear that certain cultures and govern ments are more supportive of economic growth than others. In particular, the dan gers are evident of replacing the decentral ized government given to us by the founders of this Republic with a "more efficient"

vertical structure. Further, since the inter relationships between the economy and government are glacial in their historic movement, Putnam's work suggests that we should abandon any hope of quick cultural "fixes" in less developed areas and recog nize as well that pro-growth cultures can be slowly eroded in ways that will become perceptible perhaps only centuries later. The importance of these findings for the battles of the culture wars yet to be fought is immense. D Ben Bolch is Robert McCallum Professor of Economics and Business Administration, Rhodes College, Memphis, Tennessee. 1. Putnam actually studied twenty governments, five of which had been created somewhat earlier. However, all were close enough in structure to be included in the comparative work. What Everyone Should Know About Economics and Prosperity by James D. Gwartney and Richard L. Stroup Mackinac Center for Public Policy, 119 Ashman Street, P. O. Box 568, Midland, MI 48640 • 1993 • 120 pages • $5.00 paper Reviewed by John Attarian E ven economists can lose sight of basic principles in the complexities of modern economics. More ominously, economic il literacy is endemic among the general pub lic. Fortunately, Professors Gwartney and Stroup have produced a very clear, crisp primer which will help everyone keep basic economic ideas straight.

They begin by explaining ten fundamental ideas: (1) incentives matter; (2) free lunches BOOKS 213 don't exist; (3) voluntary exchange pro motes economic progress; (4) so does low ering transaction costs; (5) increasing real output increases real income; (6) growth rests on skills, technology, capital and or ganization; (7) income is earned by meeting others' needs; (8) profits steer businesses to productive activity; (9) markets harmo nize individual and social interests; and (10) secondary and long-term effects must be kept in mind. Hence economic progress rests on private ownership, free exchange, competition, ef ficient capital markets, stable money, low taxes, and free trade. A government that ensures them will preside over prosperity. To wreck an economy, it need only do the opposite. Gwartney and Stroup illustrate this with data giving international compari sons for real interest rates, inflation, mar ginal tax rates, tariffs, and economic growth.

What then is the economic role of gov ernment? The authors sort it out admirably. Government can help by protecting life, liberty, and property, and providing certain public goods. It is, however, capable of great mischief. Constitutional rules are vital to prevent deficits and special-interest gov ernance. Substituting political decisions for market ones, central planning turns in infe rior results. Income redistribution costs more than the intended beneficiaries gain. Worse, when government helps some peo ple at the expense of others, "resources will move away from production and toward plunder. " Hear, hear. Straightforward without being simple minded, the book is a master clarifier. An analogy illuminates the economic disruption caused by inflation: "money is to an econ omy what language is to communication. Without words that have clearly defined meanings to both the speaker and the lis tener, communication is impossible." On the economic significance of government protection of life, liberty, and property: "Simply put, this protection provides citi zens with assurance that if they sow, they will be permitted to reap. When this is true, people will sow and reap abundantly."

214 THE FREEMAN • APRIL 1994 They offer a "positive program for pros perity": protection of private property, vol untary exchange, and free trade; requiring Congressional supermajorities to spend, run deficits, and mandate expenditures by states or businesses; and committing the Federal Reserve to a sound dollar and price stability. "It is limited government, not majority rule, that is the key to economic progress." Give your future a chance. Send a copy to your Congressman. D John Attarian is afreelance 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. Taking the Environment Seriously Edited by Roger E. Meiners and Bruce Yandle Rowman & Littlefield, 1993 • 270 pages. $42.50 Reviewed by Jonathan H. Adler I n 1994, the United States will spend approximately $150 billion on environ mental protection and there will be precious little to show for it. Certainly the staffingat environmental agencies willincrease, as will the employment of green lawyers and con sultants. Bureaucratic paperwork also will continue to grow at an exponential-and dare one say unsustainable-rate. Never theless, the countless dollars, opportunities and hours spent to comply with America's environmental laws will yield marginal en vironmental benefits. Something is very wrong with the conventional approach to environmental policy.

Many experts would counsel that the profligate waste in today's ecological efforts results from too much enthusiasm. In this view, American society has collectively taken the threats posed to the environment all too seriously. There is truth in this statement, insofar as humans have overes timated the likelihood of ecological catas trophe resulting from the growth of civilization. However, before turning our backs on the issue of ecology, we should consider a second opinion. Perhaps, as Roger Mein ers and Bruce Yandle suggest in their new volume, we have failed to take the environ ment seriously enough. The essays in Taking the Environment Seriously make the case that the dominant regulatory approach to environmental is sues should be re-examined by those who recognize the onus of existing environmen tal rules, as well as those with an abiding interest in conserving the natural world.

Conventional regulatory efforts "relate to production inputs . None focus .directly on the environment itself," note Meiners and Yandle in their preface. Indeed, modern policy experts have been deluded in thinking that environmental results can be ade quately achieved through properly designed government fiats, and have been oblivious to the failings inherent in their approach. Those essays that focus on the failures of existing government policies may be old-hat to those enthralled by the minutiae of envi ronmental policy-for those less familiar with the subject they should provide a rude awakening. The book opens with Robert Nelson's overview of America's failing en vironmental programs and their histories. David Riggs discusses acid rain, illustrating how utilities are being forced to invest millions purchasing emission-control equip ment that is unlikely to produce tangible environmental benefits. Indeed, the most comprehensive environmental study ever conducted could find scant evidence that acid precipitation was causing much of a problem at all. Efficiency-minded econo mists may marvel at the cost-effective use of tradeable emission permits to achieve the mandated emission reductions. However, Riggs reminds the reader that the more important question is whether one should promote the undertaking at all. Enacting "efficient" means to achieve unworthy ends is hardly something to crow about.

Richard L. Stroup and Jane S. Shaw, in their chapter, further catalog the ecological harms imposed by the federal government, from the mismanagement of public rangelands and national parks to the perverse subsidies for the destruction of wetlands. After reading of the costs to be imposed by the cleanup of hazardous wastes at federal facilities-as much as $250billion-one can easily conclude that the federal government is environmental enemy number one. This stands in contrast to private environmental success stories, such as the use of property rights to protect marine resources-the sub ject of the chapter by Terry L. Anderson and Donald R. Leal. If the federal government is mediocre at protecting environmental values, and spends much of its time inflicting ecological damage, one may ask whether the federal government should be engaged in environ mental policy at all. The common law was premised on the protection of persons and their properties and, as a result, was often used to prevent what is now considered environmental harm. Polluters were not guilty of despoiling' 'public" water or lands, rather their crime was the violation of the rights of others. In their chapter "Clean Water Legislation: Reauthorize or Re peal?" Meiners and Yandle note that "The common law relies upon individuals seeking protection of their rights, not on group lobbying before Congress." This not only curtails efforts to politically impose ecolog ical asceticism, but in some cases "the common law often sets standards far tougher than those set by statutes." Under common law protections, no political entity could unilaterally impose a pollution ease ment upon private lands. From this stand point, it seems that the best a government could do is to transfer all that is common into private hands.

The most thought-provoking essay in Taking the Environment Seriously is "Eco nomics, Ethics, and Ecology" by Paul Heyne. Heyne critiques not only the mis guided ecological crusades of left-leaning environmentalists, but also the economist's obsession with efficiency. As Heyne ob serves, "There is no such thing as technical efficiency, an efficiency that is independent of subjective evaluations." Thus when the economist presents the environmentalist BOOKS 215 with a more "efficient" means of achieving environmental goals, such as through trans ferable "rights to pollute," the economist is missing the point. Environmentalism em braces what Lon L. Fuller termed a "mo rality of aspiration" -an open-ended pur suit of environmental improvement. From this standpoint, efficiency is nothing to cel ebrate, indeed an environmentalist may find it to be something to condemn' 'insofar as it pushes . . . pollution issues lower down on the political agenda."

Heyne finds principled opposition to the conventional environmental agenda not in neoclassical economics, but in a traditional standard of justice that emphasizes individ ual rights and the rule of law. This approach will not only facilitate a free political order, it will also allow for the pursuit of many goals, environmental and otherwise; "A regime of clear and stable property rights, as it turns out, will be supportive of both efficiency and justice." Indeed, by protect ingrights and the rule oflaw, "efficiency will largely take care of itself. " The alternative of statist intervention in all facets of life whether for the environment or any other end-will fail on both counts. As Heyne astutely observes, "the command-and control approach will almost inevitably sub stitute arbitrary decisions for the rule of law." Moreover: "Allowing environmental regulations to be shaped by a political pro cess that is dominated by special interests is another ethically indefensible procedure."

The reality of both failings are amply dem onstrated in the balance of the book. Free market advocates are often branded "anti-environmentalists" for their seeming 216 THE FREEMAN • APRIL 1994 indifference to environmental harms. To most self-proclaimed environmentalists, fe alty to free market ideologies will end in ecological-if not total-devastation. Yet, as this volume suggests, perhaps it is the modern environmentalist whose outlook will lead to ruin. As Heyne concludes, "When we take the whole· environment seriously, we will acknowledge that our primary moral obligations are to respect the persons, the liberties, and the rights of those among whom we live. After all, these are the people upon whose cooperation we must ultimately rely, whether it is to 'make a living,' to 'save the earth,' or to see the realization of any other of our larger aspi rations. " Jonathan H. Adler is Associate Director of Environmental Studies at the Competitive Enter prise Institute in Washington, D.C.

CLICHES of POLITICS 1 . ~-~ Edited by MarkSpangler P olitical intervention attracts support in subtle and alluring ways. Today's politicians and their constituents at least pay lip service to freedom and free enterprise. Government action is advocated only to "fix" perceived flaws in the market economy, and public spending is proposed merely to "compensate" for deficiencies in the private sector. Such political solutions, however plausible and well intended, invari ably lead to unintended consequences. They are like wolves in sheep's clothing-benign on the outside, but treacherous underneath. Clichesof Politicspresents lively, concise, pro freedom responses to 83 common interven tionist catchphrases, including: "National health care is working in Canada." "To solve the problem, we need government regulation." "Rent control protects tenants." "Government spending programs createjobs."

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