How to Destroy Wealth; R. Stevens

And that may not even be so bad. What could be worse is the prospect that a foreign government may nationalize the assets of U.S. companies located in that country. By the way, the term "nationalize" is how governments refer to the act of stealing what does not belong to them. Is it all that hard to imagine, for example, the government of France or Germany nationalizing the assets ofFord Europe in an effort to recoup its own losses? During the 1950s, U.S. businesses lost billions when Castro's government took over Cuba and nationalized all u.S. assets held in that nation. Even if the affected foreign governments did not openly retaliate against U.S. assets held in their country, what effect do you suppose repudiation of debt will have on our military alliances? Do you suppose the governments of the Western world will be so quick to jump to the aid of any United States interest after they have had billions stolen from them by a dishonest government?

Don't bet on it. The bottom line is, repudiation of the federal debt would be fundamentally im moral. It would constitute a dishonest act of the highest order. The ramifications would be felt in every home in the country, and every capital in the world. The United States could be ruined politically, finan cially, and perhaps militarily. After all, how many of our government's military actions are financed through borrowing? But, as the saying goes, every cloud has a silver lining. If the government of the United States repudiated its debt to inves tors, you can be sure we would have a balanced budget, whether Congress liked it or not. That is because nobody would ever lend the United States another dime! D How to DestroyWealth by Richard w. Stevens A nyone can demonstrate the fundamen tal flaw in the welfare state by engag ing in a simple experiment which illustrates that the coercive "redistribution" of wealth destroys wealth. Legislators who take funds from taxpayers coercively to create' 'wealth"

by building a dam in Colorado or a library in Pittsburgh, for instance, actually destroy wealth. This simple experiment with my two sons shows how. Mr. Stevens is a lawyer and teaches Legal Re search & Writing at George Washington Univer sity National Law Center. Andrew, age eight, enjoys books about magic and riddles. Jason, age six, loves construction toys like dump trucks and cranes. One Saturday afternoon, I took from Andrew his books of riddles and magic and gave them to Jason. I took from Jason his construction toys and gave them to Andrew. Rebellion erupted. Both boys complained that my naked exercise of power was not fair. I explained that I had not damaged their toys in any way; the total money price of the things they had received was the same as what they had given up; they should both be just as happy as before the swap.

The boys screamed and yelled. In the first place I had forcibly interrupted their play. They might soon get over this, they said, if I would only return their original toys. They even admitted that if I gave them some thing extra, "something really neat," they might be willing to forgive the interruption. However, I had forcibly taken away their favorite toys and this was unjust on its face. How would I feel, they asked, if someone came and took my chess computer away from me? I told them they hadn't really lost anything-it was as if I had taken a five dollar bill from each of them and given them each another five dollar bill. The money value of the toys each had received was the same. They had both gotten something of equal money value. But they weren't mol lified. The boys had a difficult time explaining another reason for their resentment, but it was no less real. By taking away the toys they valued most, and giving them toys they valued less, I had stolen something of value from them-their fun, their satisfaction.

Although the toys had not lost money value, the real value of their toys had decreased through the redistribution. The market price of Andrew's books and that of Jason's construction toys were about the same. But in Andrew's hands the books were more valuable than the trucks and cranes. And to Jason the trucks and cranes were more valuable than the books on magic and rid dles. By the redistribution both had lost value. The fact that they cost about the same in dollars was immaterial. Their values in the eyes of Andrew and Jason were neither objective nor measurable; they were sub jective "psychical and personal," as Lud wig von Mises wrote. 1 When I left the boys alone and told them they could trade back again, they promptly did so, grumbling as they did about why Daddy had bothered them in the first place. This simple experiment demonstrates several economic truths. First, economic values are subjective. The fact that the HOW TO DESTROY WEALTH 689 books and trucks cost the same was imma terial.

Second, no outsider, no parent or gov ernment official can forcibly redistribute goods from one person to another without decreasing the satisfaction of at least one of the parties. Andrew and Jason had already arranged their toys to satisfy their personal wants and interests. By forcibly interfering, I had reduced the satisfaction of both boys, as they told me in no uncertain terms. Third, exchanges of goods of equal mon etary value are not equal exchanges. The objective "market value," i.e., the price of a good is not the same as the subjective value in the minds of the particular persons involved. Individuals trade goods voluntar ily with one another only if each expects to receive in return something that willbe more valuable to him or her than what he or she is giving up. Fourth, there is no way to compare the unhappiness of two different people. From their yells I could tell that neither Andrew nor Jason liked the new order of things. Yet there was no way to judge whether one child was harmed more or less than the other. We cannot measure the harm that forced trans fers cause to people, but we know the harm exists. 2 This little experiment with Andrew and Jason shows that transferring wealth forc ibly from some individuals to others inter feres with the voluntary arrangements peo ple make among themselves, destroys personal subjective values, and actually re duces the amount of wealth in society. 3 Thus social programs that aim to improve the lives of some persons by taking funds forcibly from others are bound to destroy wealth in society-although there is no way to measure how much. D 1. Ludwig von Mises, Human Action, 3rd rev. ed. (Chica go: Henry Regnery Co., 1966), p. 97.

2. Human Action, pp. 204-205; cf. Henry Hazlitt, Eco nomics in One Lesson (Norwalk, Conn.: Arlington House, 1970), pp. 31-34. 3. Murray Rothbard, Power & Market: Government & the Economy, 2nd ed. 1977, Kansas City, Kan: (Sheed Andrews and McMeel, Inc.).