Book Reviews

BOOKS Forgotten Lessons: Selected Essays of John T. Flynn edited by Gregory P. Pavlik Foundation for Economic Education. 1995 • 208 pages + index. $14.95 paperback Reviewed by Paul Gottfried G reg Pavlik has done a true service by an thologizing and commenting on the essays of John T. Flynn (1882-1964). It is remarkable that a journalist and legal scholar with Flynn's views became a regular contributor to Collier's and Harper's and a featured columnist of The New Republic. Despite his unfashionable stands as a critic of the New Deal and of American military involvement, Flynn remained a cele bratedjournalist into the post-World War II era. Major commercial presses brought out his books, and as a child, I recall hearing his feisty com mentaries on the radio. Until a few years ago, when I began writing my history of American conservatism, I had not heard of Flynn since the 1960s. And then as a card-carrying adherent of National Review, which turned down his submis sions, I had thought of Flynn as either a Commu nist or a Nazi. What else could this self-described isolationist have been?

As someone also consigned by the respectable conservative movement to the outer edges of perdition, I believe that the condemnations hurled at Flynn should be seen as a badge of honor. He did not compromise his classical liberal convictions; nor did he rise to the bait and accept William Buckley's price for American participation in the Cold War, "a totalitarian state on our shores for the duration." As a historian and political theorist, I must disagree with some isolated points in his brief. I do not believe that all acts of military mobiliza tion by the major powers in this century, and certainly not by the United States, have been deliberate maneuvers to increase the power of the welfare state or even attempts to stave off economic depression. In some cases, American and European governments have reacted to real geopolitical threats, while arousing and yielding to popular hysteria, as our own country did in the forties and fifties. In other situations, as when the 737 Wilson administration pushed us into the Great War, cultural bias seems to have played as much of a role as material interests: the Northeastern elites were deeply pro-British and therefore anti German.

The point that should be made is that the welfare state has benefited from all crusades for democracy. Such fits of frenzy allow public administrators and thought police to run riot, to erase any meaningful distinction between the public and private, and to widen the scope of the welfare-warfare state which Flynn described pri marily in its economic dimension at mid-century. Among his prescient observations, the most impressive are those dealing with the role of the military and technicians in the modern welfare state. Again it is important to recognize that Flynn was writing at a point in time when his perceptions were not yet fully confirmed, but he did intuit the political future from trends that were present fifty years ago. Flynn has been proven right in his view of the military in the modern welfare state, as a microcosm of social experimentation. Revenues raised for con scripted armies have been used throughout the century to support and render dependent on government much of the young male population; the military has also been a laboratory for cre ating a population subservient to public admin istration, which has made itself into a new voice of authority.

Flynn rightly notes that military expansion in Imperial Germany was favored not by the Prus sian aristocracy, but by the advocates of a powerful modernized German state, including socialists. While the Junkers feared the loss of their social and professional positions in a more dynamic welfare-warfare state, the risingclasses, such as workers and various dependents of the new regime, embraced a larger military budget and Weltpolitik. In the United States today, which has a much bigger public sector, the military establishment survives even in the ab sence of any danger that would require its present size. And like Scandinavia far more than Imperial Germany, it is used to carry out programs of social and cultural change put forth by feminists and other governmentally designated victims. UntH recently,journalistsand academiaper sisted in presenting the welfare state as an achievement in scientific planning. In the 1920s Ludwig von Mises had already given the lie to this pretension and showed how thoroughly flawed were the scientific predictions made by socialist planners. But the claim to scientific accuracy among administrative technicians, as 738 THE FREEMAN • NOVEMBER 1995 Flynn suggests, typically went beyond economic analysis to the reconstruction of society itself. In what might be described as an understatement about an emerging political reality, Flynn pre dicted that Americans may soon be restricted in their electoral choices to candidates who are certified public administrators. In point of fact, we do not have even that much choice. Unelected administrators and judicial social engineers ar range our social and political life without having to worry about electoral hurdles. Rotating parties organize the elections while making only minimal efforts to take charge of the government.

There are two strong impressions which the anthology made on me, that did not come from Flynn's own words. One is the account given by his son in the preface about his father celebrating the end of the First World War. Then an editor of the New Haven Register (which I grew up reading), the senior Flynn flew a'plane over New Haven in November 1918 and marveled at the happy relief of his countrymen below. At that time he hoped that a victorious America would turn its energies inward and presumably restore the freedoms that President Wilson had tom from his fellow-citizens in "making the world safe for democracy. " The second impression to be noted comes from the understandably gloomy views expressed by Greg Pavlik in his introduction to Flynn's essays. Mr. Pavlik, who wrote the most comprehensive and most illuminating review of my work on American conservatism, evokes an American regime that thrives on war and taxes. He depicts Flynn as a voice in the wilderness crying out against what may be irreversible evils. The young John Flynn and the young Greg Pavlik both speak for the foundational beliefs of the American constitutional order: dual federalism, account able administration, and the sanctity of property.

Those are principles which would not have divided even the two polar figures in the Amer ican founding, Hamilton and Jefferson. It tells volumes about our own age that the editor of Flynn's essays has such deep and justified doubts about the prospects for liberty in contemporary America. Perhaps, as Flynn feared, we have moved too far into that totalitarian future pro duced by public administrators to entertain any reasonable hope that the present mockery of the old order can or will reverse itself. D Paul Gottfried, is Professor of Humanities at Elizabethtown College, Elizabethtown, Pennsyl vania. He is author of The Conservative Move ment. Disasterin Red: The Failureand Collapseof Socialism edited by Richard M. Ebeling The Foundation for Economic Education. 1995 • 379 pages. $24.95 paperback Reviewed by Walter Block W hat? Yet another book on the evils of socialism! Give me a break. There are already far too many of them; and they are unnecessary especially since the breakup of the Berlin Wall, and the move toward private enter prise in Eastern Europe, China, and, seemingly, everywhere else as well.

If this is your attitude, you are sadly mistaken. True, the forces of collectivism have been reeling of late, but there is still a need for this book, and for any other that tells the socialist story of broken promises, abject failure, economic disar ray, and massive killings. Purely on a practical level, this is a very welcome compilation. While economic collectiv ism has been renounced in many countries, there are several remaining which still suffer under its painful yoke: North Korea and Cuba come all too readily to mind. If the only function of Disaster in Red is to help relieve the misery of the peoples in these lands, it will have been well worth it. Further, while the nations of Eastern Europe have undergone drastic changes, these have not all been in the direction of the free market, limited government system. They are stillwallowingalmost directionless, and could do with a crash course based on the readings of this book.

Centralized economic planning is no monop oly of present and formerly communist nations. There is also our homegrown variety right here in the United States of America, where leftist messages emanate from the pulpits of many mainstream religions, from the classrooms of many highly respected universities, from the editorial and even news pages of many main stream publications, and from politicians. We, too, need to be told again and again, in carefully crafted prose, just why it is that free markets are morally and pragmatically preferable to central commands from economic dictators. But there are more than pragmatic political reasons for bringing out a book. There is also the little matter of the search for the truth, and the pleasure of intense study. All this and more are afforded us by Disaster in Red. It is a compilation of35 essays which have previously appeared in the, flagship publication of the Foundation for Economic Education, The Freeman. It is a pleasure to have them accessible within the covers of a single volume.

The author list includes several leaders who have long been in the forefront of the intellectual and moral fight against economic oppression (Ludwig von Mises, Henry Hazlitt, Hans Senn holz, Clarence Carson, Sven Rydenfelt), several who are just making national reputations for themselves (Tom DiLorenzo, Gary Anderson, Morgan Reynolds, Yuri Maltsev, E.C. Pasour, James Bovard) and several very promising new comers (Peter Boettke, David Prychitko, Steven Mosher): a very nice balance. Section I is devoted to the basic economic fallacies of socialism. Mises starts offby remind ing us of the benefits of capitalism (mass produc tion, consumer sovereignty, how in a few short decades our living standards improved from agrarian mercantilistic pre-industrialism to the benefits of a modern economy). Along the way we learn of how the market disrupts caste sys tems, of the importance of prices, economic calculation, and incentives. Sennholz bats in the cleanup position, offering a blueprint for trans forming an economy from command to peaceful cooperation.

In Section II the relationship between social ism and the arts, religion, labor unions, and pollution is explored. Consider the last of the four chapters in this section, the one by Thomas , DiLorenzo. We hear so much in the news media about how "capitalist greed" is the cause of environmental degradation, it will come with some surprise (not, of course, to readers of The Freeman) to learn that things are worse, far worse, in the countries behind the former Iron Curtain. The longest section in the book (III) offers a careful consideration of the tragic Russian expe rience with socialism. This is quite proper, as the Communists held the longest sway in this coun try, and, with the possible exception of China, did the most damage to the human race. Hans Sennholz provides great insight into the meaning of "economic growth" in the Soviet Union. This serves as an intellectualantidoteto economists such as Paul Samuelson, who for years, before the facts became so clear that even they could no longer ignore them, contended that the U.S.S.R.

was growing faster than the United States, and would soon catch up. Yuri Maltsev provides an insider's perspective on socialism as it was practiced in Russia, Peter Boettke gives evidence BOOKS 739 showing that even the communists knew their system didn't work, and Gary Anderson inter prets the Soviet system along mercantilistic lines. Finally, Section IV is given over to the Eastern European, Chinese, and Third World experi ences with the philosophy of the "Evil Empire." From China to Cambodia, from Tanzania to Hungary, from Poland to Vietnam to Yugoslavia, the point is the same. A system which ignores private property rights, human rights and eco nomic incentives, which denigrates prices, mar kets and profits, which prohibits individual ini tiative, cannot work anywhere on the globe. Last but not least, Richard Ebeling must be singled out for the initiative in bringing us this collection, and for his stirring introduction showinghow truly inhumane was this experiment in utopianism. This alone is worth the price of admission.

Throughout the twentieth century, Mises and Hayek held a long-runningintellectual battle with Oskar Lange and F. M. Taylor and others over the viability of central planning. At one point in the hostilities it was widely believed that the socialist side had "won." Whereupon the men of the left promised to build a bust of Mises, and exhibit it prominently in the main hall of the socialist planning bureau, as a testimony to the help that Mises had conferred on socialism, by trying (albeit failing) to show them the error of their ways. It would be difficultat the time of this writing (summer 1995)to find virtually anyone in the free world who would now maintain such a position. To a great degree, this was due, one, to the internal contradictions of Communism itself, and, two, to the publications of courageous economists, many of whose writings can be found in between the covers of this book.

Perhaps it would be a good idea to translate Disaster in Red into the languages of those who still suffer under the yoke of Communism, and then to drop thousands of copies all throughout their countrysides. A good reason for not doing this is that the human race is so given to enthus iasms of this sort that perhaps we need a real live example of Communism in action for all to see-so that we are never tempted down this path again. But this would be cruel and unusual punishment for those who still suffer. Say I, translate and distribute! 0 Professor Block teaches economics at the Col lege of the Holy Cross, Worcester, Massachu setts.

740 THE FREEMAN • NOVEMBER 1995 Henry Hazlitt: A Giant of Liberty by Llewellyn H. Rockwell, Jr., Jeffrey A. Tucker, and Murray N. Rothbard Ludwig von Mises Institute. 1994 • 158 pages • $14.95 paperback Reviewed by William H. Peterson L ast November 28th the occasion of Henry Hazlitt's 100th birthday was celebrated at a testimonial conference and dinner in New York City. Among those presenting tributes to Hazlitt were Lawrence Kudlow, Joseph Sobran, LleweHyn Rockwell, Bettina Bien Greaves, and yours truly. Why all the ongoing applause? For good reason: Hazlitt possessed rare cour age and insight. And, as Llewellyn Rockwell points out in this volume, through Hazlitt many an American conservative learned free-market economics at a time when statism was rampant in the land. In 1946, for example, Hazlitt's Economics in One Lesson was published. Still available, it's gone through many editions here and overseas, selling around a million copies. In 1959 Hazlitt came out with The Failure ofthe "New Econom ics." In this book, hailed by the Wall Street Journal as a landmark work, Hazlitt delivered a devastating line-by-line refutation of the twenti eth-century bible of liberal economics, John Maynard Keynes' The General Theory of Em ployment, Interest and Money (1936).

There are many other enduring Hazlitt contri butions, as the bulk of this book, a lifetime bibliography of more than 6,000 entries, makes clear. The bibliography, compiled by Jeffrey Tucker, includes citations of a novel, works on literary criticism, treatises on economics and moral philosophy, several edited volumes, some 16 other books and many chapters in books, plus articles, commentaries, and reviews. The books were annotated by Murray Rothbard. Hazlitt himself estimated he had put out ten million words and his collected works would run to 150 volumes. What sparked this outpouring? Hazlitt said he was initially inspired by the writing of British economist Philip Wicksteed and later by the work of philosopher Herbert Spencer. But his greatest inspiration sprang from his close friendship with Ludwig von Mises, a friendship starting with his review of the English translation of Mises' Socialism in the New York Times in 1938. Philosophically Hazlitt and Mises were as one on liberty and its implications for laissez-faire public policy.

Hazlitt's 1944review in the New York Times of The Road to Serfdom by F. A. Hayek, a student of Mises, apparently led the Reader's Digest to publish a condensed version that helped catapult the book to the bestseller list and later Hayek himself to Nobel Laureate fame. Hazlitt wrote for The Nation, the Wall Street Journal, the New York Times, American Mer cury, National Review, The Freeman, News week, among others. Throughout he maintained his editorial integrity and principled defense of a free society. He also managed to write pungently and clearly, winning an accolade from H. L. Mencken that Hazlitt was 44 one of the few economists in human history who could really write. " Hazlitt's classic "One Lesson" pinpoints the free-lunch fallacy of governments which spend and spend to create jobs and public support while forgetting that this spending unavoidably denies commensurate spending by taxpayers which would also create jobs and private support-but on a far sounder basis. That basis is seen in his book attacking the Marshall Plan in 1947, Will Dollars Save the World? Hazlitt saw the plan as a big rathole, an international government-to government welfare scheme. The subsequent history of foreign aid by the U.S. World Bank, International Monetary Fund and others shows how right he was. "Aid" to Mrica, for example, has helped stultify a whole continent and its forlorn people for 40 years.

Similarly his books The Foundations of Mo rality and Man vs. the Welfare State arrived decades before Charles Murray's Losing Ground. In them Hazlitt demonstrated that wel fare defies human nature, that it is based on squishy ethics, that it promotes disincentives, that for its recipients it is a future-foreclosing trap, that it deters biological fathers from sup porting their own familiesthat, in sum, it winds up promoting the very thing it seeks to discour age. So once again Henry Hazlitt proved right thinking provides right answers. "A Giant of Liberty" is an apt eulogy of Henry Hazlitt. As Hamlet said of his father, we shall not look upon his like again. D Dr. Peterson is an adjunct scholar at the Heri tage Foundation and the Distinguished Lundy Professor of Business Philosophy Emeritus at Campbell University in North Carolina.

The Bell Curve: Intelligence and Class Structure in American Life by Richard J. Hermstein and Charles Murray The Free Press. 1994.845 pages. $30.00 Reviewed by Raymond J. Keating I t is difficult to think of a recent book that has stirred as much controversy as The Bell Curve by Richard Herrnstein and Charles Murray. Indeed, the mere idea that one can measure intelligence sends many academics into fits. The notion that intellectual capacity may vary from individual to individual leaves them feeling faint, and the authors' examination of IQ measure ments among ethnic and race groups has led to near hysteria. In fact, The Bell Curve is not the vicious, racist book many have described it to be. Instead it is for the most part a methodical look at the statistical relationships between measures of in telligence and various aspects of life. The authors issue an important qualifier to their analysis, which is repeated often throughout the book, but nonetheless ignored by many critics: "measures of intelligence have reliable statistical relation ships with important social phenomena, but they are a limited tool for deciding what to make of any given individual. Repeat it we must, for one of the problems of writing about intelligence is how to remind readers often enough how little an IQ score tells about whether the human being next to you is someone whom you will admire or cherish. This thing we know as IQ is important but not a synonym for human excellence."

With this caveat in mind, Herrnstein and Murray go on to explore a host of human en deavors and outcomes, and their link to intelli gence. They look at educational attainment, occupations, economic success, poverty, unem ployment, injuries, welfare dependency, families and parenting, crime, citizenship, and more. Their conclusion regarding most all of these areas is not exactly controversial: on average, smarter individuals perform better and go farther in life. As noted, The Bell Curve ventures into much more controversial territory when discussing group differences in terms of intelligence mea sures. They conclude after lengthy analysis that "As far as anyone has been able to determine, IQ scores on a properly administered test mean about the same thing for all ethnic groups. A substantial difference in cognitive ability distriBOOKS 741 butions separates whites from blacks, and a smaller one separates East Asians from whites."

The debate over this and related statements by Herrnstein and Murray will rage for years to come. Herrnstein and Murray make a key qual ification most of their critics fail to comprehend, namely that regardless of IQ a "person should not be judged as a member of a group but as an individual." Just as disturbing is the authors' vision of where our society is headed. They see an "in creasingly isolated cognitive elite," a "merging of the cognitive elite with the affluent," and a "deteriorating quality of life for people at the bottom end of the cognitive ability distribution. " Indeed, they go so far as to declare: "People in the bottom quartile of intelligence are becoming not just increasingly expendable in economic terms; they will sometime in the not-too-distant future become a net drag." They then describe the coming of what they term the "custodial state"-essentially an expanded welfare state with enhanced police powers. This glum assess ment sees a larger but more isolated underclass, inner-city child rearing by the state, greater federal powers over social budgets and controls, and even re-emerged and virulent forms of rac ism.

The problem with this scenario is the same one that plagued past doom-and-gloom prophecies. The authors seem to be saying that advancements for one set of individuals-in this case those with higher measures of intelligence as the market place places greater value on intelligence necessarily lead to a dismal lifefor others-those less intelligent. Their argument verges on the left's apocalyptic vision of capitalism allowing the rich to get richer at the expense of the poor. In contrast, capitalism always has improved the livingconditions of individuals of all abilities. Herrnstein and Murray offer few convincing arguments to the contrary. Free markets present opportunities for all types of individuals opportunities that most of us were never able to previously envision. Herrnstein and Murray pro vide no new insights to lead the reader to believe that individuals with less intelligence will be unable to make a good life for themselves in the future.

However, the authors differ from the left's apocalyptic views in their criticism of the welfare state. They appropriately attack government's increasing role in the daily lives of individuals. They suggest that the responsibility for a "wide range of social functions" be taken away from centralizedgovernmentand restored' 'to the neigh742 THE FREEMAN • NOVEMBER 1995 borhood," that the criminaljustice system be made "simpler," andthat the government "stop subsi dizing births to anyone, rich or poor." Herrnstein and Murray tread a thin line when it comes to their custodial-state scenario. They recognize the woes of the welfare state, but seem to be saying that the marketplace will accentuate such woes in the future by allowing the cream of society to rise even further to the top than it has in the past. The possibility that capitalism will enhance opportunity for all segments of society seems to be given little chance by the authors.

A more optimistic view of the future, to which I subscribe, sees a growing recognition of the evils of the welfare state and big, centralized government, along with an enhanced apprecia tion for the widespread benefits of individuals interacting in a free marketplace. I think that Mr. Murray and the late Mr. Herrnstein hope that this more optimistic view prevails in the end, but their doubts, as described in The Bell Curve run deep. [] Mr. Keating is chief economist at the Small Business Survival Foundation, and partner with Northeast Economics and Consulting. Race, Evolution, and Behavior by J. Philippe Rushton Transaction Publishers: New Brunswick, NJ • 1995 • 334 pages. $30.00 Reviewed by Patrick Groff T he common reactions to Richard Herrnstein and Charles Murray's The Bell Curve doubt less are familiar to most readers of The Freeman. No informed person should feel fully versed on the issues that The Bell Curve raises, however, until first reading J. Philippe Rushton's Race, Evolution, and Behavior. There are several rea sons why Professor Rushton, who teaches at the University of Western Ontario, is an even better source of scientific data on the topic of race and intelligence.

First, Rushton's studies precede those of Herrnstein and Murray. He also has published more extensively on the subject than they have. As Rushton notes, he also began his studies of race-related differences in humans at the time that research of this nature still was welcomed. Rushton's Ph.D. studies were a deliberate amalgam of evolutional biology, behavioral ge netics, psychometrics, neuroscience, and social learning theory. He brings a broader field of reference to the question of race and intelligence than do Herrnstein/Murray. Rushton also explains better the equation of race and intelligence by stressing the concept of "aggregation" of data. Simply put, this means the more sources of information brought to bear on this issue, the better. Rushton thus examines comparative brain size, physiological maturation rates, personality, family stability, law abiding ness, sociopolitical attitudes and organizations, reproductive anatomy and behavior, and health and longevity of three racial groups: Orientals, whites, and blacks.

Rushton proposes no public policy implica tions for the differences in intelligence between the races that he documents. His statement that "there are no necessary policies that flow from race research," thus contrasts sharply with The Bell Curve, which argues otherwise. As with The Bell Curve, however, Rushton's book raises the question as to whether or not it is necessary or vital to publicize the information that black people on the average score a standard deviation (15 points) below the average score of whites (100) on the normal.distribution curve of intelligence, and 21 points below the average score of Orientals (106). Rushton implies that his answer would be, "On what grounds is it proper to suppress this evidence? If the science of human characteristics is aimed at specifying the precise differences among humans (there would be no need for any such scientific investigation, of course, if humans all were the same in this regard), under what guise should we expurgate the evidence of racial differences in intelli gence?" As an experienced scholar, Rushton does not shy away from this battle, however, since for him it "is over nothing less than how to conceptualize human nature."

Rushton, along with the authors of The Bell Curve, found few social scientists today willing to accept the legitimacy of the scientific evidence on the relationship of race and intelligence, rejecting it out of hand as reactionary, or worse yet, as racist. In this regard, Rushton is accused, he reveals, of working "to justify existing social inequities. " He harbors a racist motive, it is said, for selecting race and intelligence as a topic of study. Finally, the evidence that Rushton cites is not viewed by his detractors as enhancing the main goal most commonly given of modern social science and education, Le., the promotion of such things as cultural and ethnic pluralism, feminism, relational ethics, affirmative action as an end to meritocracy, pacifism, and democratic socialism. Rushton would seem to sense this, but adds that "an ideology that tacitly appeals to biological equality as a condition for human emancipation corrupts the idea of freedom."

Liberty and individual differences are not mutu ally exclusive principles. Decent men therefore must not tremble at the prospect of inconvenient findings emerging from scientific research-not even from studies of racial differences. This is perhaps the best reason one can find for defending the publication of controversial books such as his. Free societies have no option but to preserve science as a truly unfettered source of information. The unre stricted flow of facts is the lifeblood of their existence. 0 Dr. Groff is Professor of Education Emeritus at San Diego State University. Gold and Liberty by Richard M. Salsman Great Barrington, Mass.: American Institute for Economic Research. 1995 • 145 pages. $8.00 paperback Reviewed by Robert Batemarco A bout five years ago, a young banker sat next to me on the commuter train I take home from work. Noticing that I was reading about central bank policies, he engaged me in conver sation on that topic. He enthused about the Fed and the "great job" it was then doing fighting inflation. "You know," I said to him, "fighting inflation is the last thing the Fed, or any central bank, for that matter, is about." Just as I was getting started, the train arrived at my station.

Whilehe seemed open to my line of reasoning , I'll never know if my words made any impact. The discussion I was barely able to initiate on that train is ably executed from start to finish by Richard Salsman in Gold and Liberty. He iden tifies gold as the only money consistent with the free market. Central banking, on the other hand, supported by the belief that free markets are incapable of adequately serving our monetary needs, is exposed by Salsman as "nothing but central planning applied to money and banking. " He uses history to illustrate that central banks were established to put more resources in the hands of spendthrift governments. This, and not preventing inflation and business cycles, is the one activity at which they have ever had any modicum of success. Salsman lays low the old BOOKS 743 canard that the classical gold standard worked only because of the tender ministrations of the Bank of England, showing rather how its steril ization policies actually broke the rules neces sary for the gold standard's survival.

Gold money is more to Salsman than the key to combatting inflation, however. He sees it as indispensable to any truly free society. He quotes Henry Hazlitt to the effect that, "the gold stan dard is not an isolated gadget, but an integral part of the system of free enterprise and limited government, of good faith and law, of promise keeping and the sanctity of contract. " This is a far cry from the' 'unpredictability, politicization, inflating, and cheating," that Salsman correctly characterizes as the hallmarks of central banking. Salsman sees free banking as another element of the integrated system of which gold is a part. In his eagerness to defend that arrangement, he sometimes overstates his case. To deny, as he does early in the book, the existence of any credit expansion or panics under a free banking regime is to ignore the nature of fractional reserves as well as the relevant history. While fractional reserves may well do less harm under free banking than central, they cannot be as stable as a system based on 100 percent reserves. A com parison of these alternatives would have been enlightening.

Despite this and some objectivist swipes at religion, Gold and Liberty makes a solid case that the road to liberty is paved with gold. It shows central banking, on the other hand, to be not only a gross infringement on our liberty in its own right, but to open the door to many other forms of mischief. I certainly hope my young banker friend gets to read it. D In addition to editing the book review section of The Freeman, Robert Batemarco is a marketing research manager in New York City and teaches economics at Marymount College in Tarrytown, New York. The Case Against the Fed by Murray N. Rothbard Ludwig von Mises Institute. 1994 • 158 pages • $9.95 Reviewed by Douglas E. French A fter 80-plusyears of inflation and devastating booms and busts, how do we get rid of the cause of these economic cancers? "The only way 744 THE FREEMAN • NOVEMBER 1995 to do that is to abolish legalizedcounterfeiting: that is, to abolish the Federal Reserve System, and return to the gold standard," answers Murray Rothbard in his book The Case Against the Fed.

For students who did not have the opportunity to take United States Economic History from the late Dr. Rothbard, this slim volume will give you an idea of what his classes were like. Dr. Rothbard never bored his students with sterile graphs or convoluted equations. Neither does this book. This story of the Federal Reserve is about good guys, bad guys, and self-serving politicians helping their rich and famous friends. Also interesting is Rothbard's discussion of nine teenth-century British case law that paved the way for fractional reserve banking. Rothbard points out that, with bailment law undeveloped in the nineteenth century, bankers were able to win three important court cases cuiminating with the Foley v. Hill and Others case in 1848.In this case, the House of Lords decided that bankers contract for an amount of money, but not necessarily to keep that particular money on hand. Rothbard lays to rest the myth that the Panic of 1907led to the creation of the Fed. Bankers began scheming for a central bank after WilliamMcKin ley defeated William Jennings Bryan in the 1896 presidential election. Long gone were the days of the hard-money Jacksonian Democratic party, and the populist Democrat Bryan pushed for monetiz ing silver to increase the supply of money. Wall Street's bankers supported McKinley, not wanting inflation that they couldn't control.

The Panic of 1907 was used to whip up support for a central bank. But, it was the meetings of the Indianapolis Monetary Convention that started the politicalwheels turning, culminatingin the passage of the Federal Reserve Act in December of 1913. With the system in place, all that was needed was the "right" man to control the money machine. In 1914,that man was Benjamin Strong, then president of J. P. Morgan-owned Bankers Trust and best friend of Morgan partners Harry P. Davison, Dwight Morrow, and Thomas W. Lamont. Strong ruled the Fed until his death in 1928. During World War I, he engineered a doubling of the supply of money, financing the U.S. war effort. The continuous Fed propaganda is that a zealous public clamors for more inflation, and only the Federal Reserve's cool heads are standing in the way of a hyperinflation armageddon. Of course, just the opposite is true. As Rothbard points out, "The culprit solely responsible for inflation, the Federal Reserve, is continually engaged in raising a hue-and-cry about 'inflation,' for which virtually everyone else in society seems to be responsible.

What we are seeing is the old ploy by the robber who starts shouting 'Stop, thief!' and runs down the street pointing ahead at others." Rothbard saves the fun part of dismantling the Fed for last. Liberty lovers are always being told that, "your ideas sound good, but how are you goingto get therefrom here?" Rothbard has given us simple directions for the Fed's liquidation. With the Fed abolished, banks would be on their own; no more lender of last resort, or taxpayer bailouts. The inflation dragon would be slain. The boom-and-bust roller coaster ride leveled. The Case Against the Fed is part history, part polemic, and part policy paper, succeeding with all three. Murray Rothbard has written another classic. 0 Mr. French is a vice president in commercial real estate lending for abank in Las Vegas, Nevada. Save the Date! The Foundation for Economic Education Reunion Celebrating its Golden Jubilee with Lady Margaret Thatcher The Waldorf-Astoria Hotel, New York City April 11, 1996 THEFREEMAN IDEAS ON LIBERTY FEATURES 748 The Arts in a Free Market Economy by Tyler Cowen Why capitalism is the most favorable system for the arts, letters, and music.