October

THEFREEMAN IDEAS ON LIBERTY FEATURES 652 658 663 667 670 674 678 682 684 687 691 693 698 Center 661 680 706 650 708 Classical Libertarian Compromises on State Education by Edwin G. West Inconsistencies in the writings of Tom Paine, Adam Smith, and John Stuart Mill. The Vatican and the Free Market by John C. Goodman The Catholic Church and pro-free enterprise intellectuals find common ground. A Good Conversation and the Marketplace by Candace A. Allen and Dwight R. Lee Market prices speak louder than words. Rights, Freedom, and Rivalry by Charles W Baird Avoiding a semantic trap. The Flat Tax: Simplicity Desimplified by Roger W Garrison There ain't no such thing as a big simple tax. Cutting Marginal Tax Rates: Evidence from the 1920s by Gene Smiley A lesson from history. Government's Hostile Takeover by Raymond J. Keating How confiscatory estate taxes destroy wealth. Why Some Federal Jobs Should Be Abolished by Tibor R. Machan A rationale for reducing a payroll financed by plunder.

What Is Multiculturalism? by Eric Mack Unmasking the dangers of politicized cultural relativism. The Bright Side of Failure by Matthew Ragan and Walter Block The detrimental effects of governmental attempts to promote success. Individual Happiness and the Minimal State by Edward W Younkins People are happier when they are in control of their own actions. Managing Dissonance in the Iron Triangle by J. R. Clark Why legislators, bureaucrats, and special interest groups behave as they do. Thomas Babington Macaulay-Extraordinary Eloquence for Liberty by Jim Powell The inspiring life of the great English historian. COLUMNS NOTES from FEE-Economic Ends and Means by Hans F Sennholz IDEAS and CONSEQUENCES-The Privatization Revolution by Lawrence W Reed POTOMAC PRINCIPLES-Regulatory Overkill by Doug Bandow ECONOMICS on TRIAL-Classical Economists, Good or Bad? by Mark Skousen DEPARTMENTS Perspective-Charles W. Baird, Glenn Hoover Book Reviews •Liberty for the 21st Century, Contemporary Libertarian Thought edited by Tibor Machan and Douglas Rasmussen, reviewed by Matthew Carolan; Environmentalism at the Crossroads: Green Activism in America by Jonathan Adler, reviewed by Roy Cordato; The Just Society edited by Ellen Frankel Paul, Fred D. Miller, Jr., and Jeffrey Paul, reviewed by Ronald H. Nash; Principle & Interest: Thomas Jefferson and the Problem ofDebt by Herbert E. Sloan, reviewed by Douglas E. French; Taking Responsibility: Self-Reliance and the Accountable Life by Nathaniel Branden, reviewed by Russell Madden; The State ofHumanity edited by Julian L. Simon, reviewed by Walter Block.

THEFREEMAN IDEASON LIBERTY Published by The Foundation for Economic Education Irvington-on-Hudson, NY 10533 Phone (914) 591-7230 FAX (914) 591-8910 E-mail: freeman(cvwestnet.com President: Hans F. Sennholz Managing Editor: Beth A. Hoffman Guest Editor: Charles W. Baird Editor Emeritus Paul L. Poirot Lell'ishurR, Peflflsy!l'wlia Book Review Editor Robert Batemarco Marymount ColleRe, Tarrytoll'n, Nell' York Editorial Assistant Mary Ann Murphy Editorial Intern Jessica Schupak Columnists Doug Bandow Cato Iflstitute, WashiflRtofl, D.C. Lawrence W. Reed Mackiflac Ceflterfor Puhlic Policy Midlafld. Michif.!afl Mark Skousen Rollifls ColleRe, Wiflter Park, Florida Contributing Editors Charles W. Baird California State Uflil'ersit" , Ha\'l\'ard Peter J. Boettke .. New York Uflil'ersit" Clarence B. Carson . American Texthook Committee Wadle", Alabama Thomas i. DiLorenzo Loyola ColleRe, Baltimore, Marylafld Joseph S. Fulda New York, Nell' York Bettina Bien Greaves Resident Scholar, FEE Robert Higgs The Independent Iflstitute, Oakland, California John Hospers University of Southern California Tibor R. Machan Auhurn Universit"

Ronald Nash . Reformed TheoloRical Seminary Edmund A. Opitz Chatham, Massachusetts James L. Payne Sandpoint, Idaho Jim Powell Westport. COflnecticut William H. Peterson Adjuflct Scholar, HeritaRe Foundation, WashinRton, D.C. Jane S. Shaw PERC, Bozeman, Montana Richard H. Timberlake University of GeorRia Lawrence H. White University of Gem'Ria 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, educa tional champion of private property, the free market, and limited government. FEE is classified as a 26 USC 501(c)(3) tax-exempt organization. Copyright © 1996 by The Foundation for Economic Education. Permission is granted to reprint any article in this issue. except "Thomas Babington Macaulay." provided credit is given and two copies of the reprinted material are sent to FEE.

The costs of Foundation projects and services are met through donations, which are invited in any amount. Donors of $30.00 or more receive a subscription to The Freeman. Student subscriptions are $10.00 for the nine-month academic year; $5.00 per semester. Additional copies of this issue of The Freeman are $3.00each. For foreign delivery, a donation of $45.00 a year is suggested to cover mailing costs. Bound volumes of The Freeman are available from The Foundation for calendar years 1972 to date. The Freeman is available in microform from University Microfilms, 300 N. Zeeb Rd.. Ann Arbor, MI 48106. PERSPECTIVE Freedom-for-Labor Day in New Zealand May 15, 1991, is a day that shall live in glory in the history of the worldwide strug gle to free working men and women from the shackles of compulsory unionism. On that date the New Zealand Parliament enacted the Employment Contracts Act (ECA), a piece of legislation that, notwithstanding its two faults, could be used as a model for the rest of the world. It would be an excellent substitute for the American National Labor Relations Act (NLRA).

Section 1(c) of the ECA declares that a purpose of the Act is To enable each employee to choose ei ther-(i) To negotiate an individual em ployment contract with his or her em ployer; or (ii) To be bound by a collective employment contract to which his or her employer is a party (emphasis added). New Zealand workers can choose to repre sent themselves in the sale of their labor services or to be represented by an agent. Furthermore the agent does not have to be a labor union. Unions represent only those workers who individually choose them as representatives. There is no forced repre sentation. Under the NLRA American workers are forbidden to designate representatives of their own choosing. The decision to union ize or not is decided by majority vote. Individuals are not free to choose for them selves. Moreover, American workers can be forced to join (or at least pay dues to) unions that have been certified by majority vote. The First Amendment to the U.S.

Constitution forbids government to abridge the freedom of association of any individual. Yet, with the blessing of the U.S. Supreme Court, Congress has given unions the right to force workers to pay tribute to them as a condition for those workers to keep their jobs. In 1991 the New Zealand Parliament boldly eliminated forced membership and forced dues altogether. Section 6 of the ECA 650 guarantees that membership is totally vol untary. Section 7 of the ECA proscribes any discrimination for or against a worker for membership or nonmembership in a union. Under Section 8(a)(3) of the NLRA employ ers are forbidden to discriminate for or against any worker on the basis of member ship or nonmembership in a union except an employer can agree with a union to compel union membership. Section 1(d) of the ECA makes all collec tive bargaining voluntary. In contrast, under Sections 8(a)(5) and 8(d) of the NLRA employers are forced to bargain in good faith with certified unions on a long list of man datory subjects of bargaining. Case law has defined good faith bargaining as being will ing to make concessions. If an employer does not make sufficient concessions to prove that he is bargaining in good faith, he can be found guilty of an unfair labor prac tice and forced to accept the union's terms.

This is an excellent example of what Ed Vieira calls the apartheid of American labor relations law. In every other area of the law, in order for contracts to be valid they must have been entered into freely by all of the parties involved. Parties are not forced to bargain, they must choose to bargain. Con tracts that are the result of coerced bargain ing are not enforceable. But in American labor relations law all collective bargaining contracts are coerced and enforceable. All U.S. collective bargaining contracts are based on involuntary exchange. The two faults in the ECA I alluded to above are: (1) it prescribes mandatory un justifiable dismissal restrictions in all em ployment contracts whether individual or collective, and (2) it gives jurisdiction in employment contract disputes to a specialist court made up of judges who served on the old Labour Court under the compulsory unionism regime that preceded the ECA.

First, the stated aim of the ECA is to restore the common law of property, contract, and tort to labor relations-i.e., to stop treating labor relations as a special case. Under the common law of employment, all employ ment relationships were at-will unless othPERSPECTIVE erwise agreed to by both the employer and the employee. There is no room in the common law of employment for mandatory unjustifiable dismissal restrictions in em ployment contracts. Second, labor relations cases should be tried in generalist courts rather than in courts that are dedicated to treating labor relations as a special case. Nevertheless, the ECA has abolished all forms of compulsory unionism in New Zealand. Next to that, its faults pale in significance. Compared to New Zealand, America is not the land of the free, at least not in labor relations. -CHARLES W. BAIRD Guest Editor Forty Years Ago in The Freeman . . .

Most people want commodities to be sold in free markets, but many doubt if such markets are suitable for the determination of wage rates. They insist that workers should be permitted, or even encouraged, to orga nize and bargain collectively with their em ployers. They believe that just wages can be had only if workers are permitted to collectively decide the minimum price at which they will sell their services .... By definition, a free market for labor is one in which no monopoly power is exer cised by either employers or workers. In such markets, how much will a prospective worker receive? The amount of the offer cannot be predicted, but this much is evi dent: 1. The employer will not offer more than his estimate of the value to him of the worker's services. 2. The worker will not accept any offer that is less attractive than he can get from some other firm. With these limits, if he is to work for the firm in question, a wage must be agreed upon. If there is a more just method of determining wages, I have yet to hear of it.

-GLENN HOOVER A Just Distribution of Wealth (Reprinted from The Freeman, October 1956.) 651 THEFREEMAN IDEAS ON LIBERTY Tom Paine, Adam Smith, and John Stuart Mill: Classical Libertarian Compromises on State Education by Edwin G. West T here seems to be a consensus that the typical intellectual today is more com fortable than most with the government supply of education. But what of the intel lectuals who were also advocates of laissez faire in the eighteenth and nineteenth cen turies? They would surely not approve of today's extensive intervention. I shall ar gue, nevertheless, that their tendency to compromise seriously weakened the de fenses against an all-encompassing state. From among the early intellectual liber tarians I shall concentrate on the political economists. I shall then focus on Adam Smith, John Stuart Mill, and a writer whose characterization as a political economist may be challenged by some: Tom Paine.