Book Reviews

BOOKS Hidden Order: The Economics of Everyday Life by David Friedman Harper Business • 340 pages + xi pages • 1996 • $25.00 Reviewed by Douglas E. French A nyone who has met· David Friedman knows he is a man looking to pick an argument. Only the naive or foolish will attempt to joust with him. Careful study of Friedman's new book, Hid den Order: The Economics of Everyday Life, will make the reader a better thinker and a more skilled debater, whether the topic is economics, politics, crime, or love and happiness. Economics is not just the study of "satisfying insatiable wants with limited resources," as so many Econ 101 textbooks contend. Economic science encompasses all human behavior: people acting rationally to reach objectives. Those objec tives include such everyday dilemmas as deciding which checkout lane at the supermarket will be fastest, dating and finding the right person to marry, voting, and protecting one's property.

Friedman is at his best in the book's second half, analyzing everyday situations. For instance, the public is outraged, believing that criminals are getting off lightly because of plea bargaining. But Friedman points out that punishment is more severe because of plea bargaining. How? Defendants must decide whether they wish to roll the dice by goingto trial with only a 10 percent chance of acquittal, or take the sure bet of some jail time. Rational criminals will accept the plea bargain if it makes them better off. The district attorney's limited budget can then be spent con victing those who won't take a deal. As Friedman points out, "[a]ll criminals would be better off if none of them accepted the DA's offer, but each is better off accepting." Ever notice how many religious radio stations there are? A bunch. By comparison, the number of religious magazines, books, and newspapers is a small percentage of all print media. Why the difference? Radio broadcasts are a public good.

And because people who listen to religious pro grams are religious, believing that donating money is virtuous, "the religious broadcaster is better able 111 to get the listener to pay for them. The religious publisher has no corresponding advantage over the secular publisher." Friedman also explores whether stricter en forcement of drug laws increases or decreases violence. He concludes that no matter what, "[a]ll [possibilities] imply that legalizing drugs would eliminate drug-related crime." What's behind the decline in American mar riage? A decline in family values? Hardly. It used to be that a man would marry his baker or brewer, someone who could cook and clean while he toiled in the fields. Moreover, a high infant mortality rate required that a woman produce children continu ally, so that the couple might see two or three survive to adulthood. Today's conveniences and low infant mortality rate make being a housewife a part-time job. Thus, as Friedman points out, "[w]ith fewer children and less spouse-specific capital, the costs of divorce are much lower than they were a few generations ago."

Unfortunately, before Friedman gets to the fun stuff, he spends a third of the book getting bogged down with David Ricardo's debunked labor theory of value, which Karl Marx embraced. Friedman writes: "price equals both cost of production and value to the user, both of which must therefore be equal to each other." Subjective value, the insight of the Austrian school, is never mentioned. Ifvalue exactly equals price, why would anyone ever make the trade? Besides, what I pay for an item or service, does not depend on how much it cost to be produced, but the value I place on the item at that particular moment. Despite those shortcomings, Hidden Order is a book spiced with jokes, anecdotes, and riddles that will keep the reader laughing, learning, and (es pecially) thinking. D Mr. French is a vice president in commercial real estate lending for a bank in Las Vegas, Nevada. Government: Servant or Master?

Edited by Gerard Radnitzky and Hardy Bouillon Rodopi. 1993 • 322 pages. $50.00 Reviewed by David L. Prychitko Y ears ago James Buchanan wrote The Limits of Liberty: Between Anarchy and Leviathan in which he argued that the constitutional and coer cive authority of the state is necessary to maximize 112 THE FREEMAN • FEBRUARY 1997 our liberty, but the state has broken its contractu ally sanctioned bounds. Once broken of its chains, the modern nation-state tends, willy-nilly,toward the monstrous leviathan that threatens, rather than enforces, people's basic liberties. That book's weaknesses lay in providing an overly abstract neoclassical model of constitutional choice that is difficult for those untrained in economics or po litical science to follow, and in failing to provide sustained empirical or historical examples that clearly shed light on the substantive growth of the state. Although they aren't intentionally following Buchanan's lead, Gerard Radnitzky and Hardy Bouillon offer a solid set of philosophical, eco nomic, and empirical arguments which, taken together, make for a fine complement to Buchanan's earlier study. Government: Servant or Master? draws primarily upon European classical liberal scholars, and focuses on the present expan sion (and chaos) of European nation-states. Of particular concern are the goals of the European Community. As Radnitzky states in his introduc tion, "Their aim will be the expansion of Leviathan from [the] national to European level, to an Euro Leviathan (the Maastricht Monster), among other things conceived as an institutional taxing cartel that enables the member states to maximize the spoliation of citizens" (p. XLI). Can Leviathan (let alone a burgeoning Euro-Leviathan) be tamed?

Part I of the book consists of five theoretical chapters: Arthur Seldon's "Politicians for and Against the People" is a study of the dire, politically alienating effects of the professionalization of politics. Gerard Radnitzky's "Private Rights Against Public Power" explores the classical liberal claims that political freedom can only be a conse quence of fundamental economic freedom. An thony de Jasay's "Is Limited Government Possi ble?" argues yes, limited government is possible, but only if constitutional commitments override the narrow interests of utility-maximizing individ uals and special interest groups. Hardy Bouillon's "Mastering the Growth of Government" is quite pessimistic, building upon de Jasay's arguments that James Buchanan's earlier analysis really doesn't show how people, in forming a binding constitutional contract, will be able to overcome their own selfish interests and foster "impartial"

agreements over rules. Finally, this section ends with another de Jasay chapter, "Ownership, Agency, and Socialism," which employs principal agent problems to state or social ownership. Part II focuses upon several illuminating case studies: Peter Bernholz discusses the problems of hyperinflation and the need for credible institutional reforms-specifically rules that restrict the discretionary power of the state-to fundamentally curtail inflationary potential, while Gerhard Schwarz and Hans Otto Lenel discuss Switzer land's current economic floundering and the in terventionist "social" market economy of post World War II Germany, respectively. Antony Flew criticizes the state-monopoly system of education in the United Kingdom, while Jacob Sundberg turns the book's attention to the crippling Swedish tax system and its present crisis. Steve Pejovich focuses on the economic, political, and ethnic crisis of the former Yugoslavia, supplying his classic property rights analysis to explain its explosive rates of inflation and problems of merely reforming socialist categories of ownership, rather than fun damentally attempting to generate private, mar ketable ownership claims.

The book is rounded off, in Part III, by Peter Bernholz's keen discussion of totalitarianism as the "limiting case" of the state, the "institutional antipode to a free society." This book is mixed reading. The authors' styles range from the philosophically analytical (if not overlyitalicized) of Radnitzky to the clearly written (but overly romantic) of Arthur Seldon; in one sense the collection as a whole seems a bit unwieldy to be read seriatim: readers will probably tend to read two or three chapters that fit their interests or academic backgrounds rather than devour the entire book. In light of this, and the publisher's series, most will find Government: Servant or Mas ter? suitable to add to college or research libraries rather than their own personal collections. The topics in this book suggest that Buchanan's pessimism of the 1970s is shared by many classical liberals of the 1990s, even though this age has produced, in the name of greater freedom, tre mendous constitutional upheaval in the former Yugoslavia, Soviet Union, and other socialist coun tries in Eastern Europe. And when we witness the rise of individual nation-states agglomerating into a larger internation constitutional matrix, such as the European Community, one wonders whether Buchanan's public-choice model of rational indi viduals agreeing to general rules, as if under a veil of ignorance, can help thwart the coming of a possible Euro-Leviathan. After reading this book, I myself have become a bit more skeptical. 0 Dr. Prychitko teaches economics at the State Uni versity of New York, Oswego.

Austrian Economics: An Anthology edited by Bettina Bien Greaves The Foundation for Economic Education. 1996 • 176 pages. $14.95 paperback Reviewed by Robert Batemarco I n my years in academia, I've attended many seminars in Austrian economics and even taught a few. Indeed, Austrian Economics: An Anthology reminds me of nothing so much as one of those scholarly assemblies-a seminar between covers, if you will. Led by Dr. von Mises, assisted by Dr. B6hm-Bawerk, and graced with the pres ence of "visiting professors" Bonar and Seager, this seminar delves into the origins and first principles of Austrian economics. All of these proceedings take place under the watchful eye of "Dean" Bettina Greaves, who went to great lengths to assemble the essays that make up this volume and wrote an enlightening introduction to it. In any discussion of the origins of Austrian .economics, the rivalry between Vienna and Berlin looms large. H. R. Seager's discussion of the contrasts between the Austrian School and the German Historical School is enlivened by details of the actual participants available only to an eyewitness. While showing utmost respect for the scholars of both schools, Seager does not shrink from the conclusion that, contrary to the assertions of the German Historical School, all the historical data in the world can teach us nothing without being sifted through a filter of theory. The inade quacy of that approach comes through clearly in his description of chief German Historical School proponent Gustav Schmoller's attempt to explain value and price. "In this part of his lectures, the student meets only confusion, loose definitions, description instead of careful analysis, and conclu sions arrived at, no one knows exactly how. His elucidation of the action of demand and supply in fixing price seemed to me especially unhappy."

While Seager describes the products of this approach, Mises, in his previously published con tributions here (including "The Historical Setting of the Austrian School" and "The Epistemological Problems" from Human Action) analyzes its es sence. While Seager accords Schmoller and his colleagues the status of "economist," Mises cor rectly sees their approach as the nullification of economics. To Mises, economists exposed the dispensation of privileges by governments to their sustainers for the injustice that it is. The German Historical School, however, glorified government and its prerogatives and sought, with undeserved BOOKS 113 success, to brand laissez faire a parochial and outmoded doctrine. Mises' penetrating mind cut through their muddled methodological arguments to unearth the method in their madness: "The only way to refute economists' critique of intervention ism is to deny the very existence of economics as a science."

Where the Austrians' method of making logical inferences from the irrefutable axiom of human action (i.e., that people seek to achieve goals) was attacked by the Germans as yielding nothing but tautologies, Mises correctly insists that tautologies do indeed add to our substantive knowledge. This is especially true when the adherents of the His torical School were busy denying these tautolo gies-with the predictable tragic consequences. In "The Austrian Economists," Bohm-Bawerk steers the "seminar" awayfrom the methodological battles, which he sees as distractions, however necessary they may be, to the crux of the matter, namely, the reform of positive economic theory. He does not dwell here on his own monumental contribution to our understanding of capital and interest, but rather on how Austrian economics stands the labor theory of value on its head by showing that value determines cost.

Make no mistake about it. It was their value theory which made it possible for Austrian econ omists to elucidate such issues as the role of money in economic activity and the inability of socialism to engage in rational economic calculation. Thus, it is appropriate that the first essay in this collec tion is lames Bonar's lengthy appreciation of Austrian value theory. While he errs in one par ticular, claiming that Austrian economic ideas are, "substantially identical with those of levons," a fellow discoverer of the marginalist principle who stressed the use of mathematics to advance eco nomic theory, elsewhere he captures a truth which only Austrians have taken to its ultimate conclu sion: "Objective value in exchange is the resultant of subjective valuations of the competing individ uals in a commercial society." As any good seminar does, this book provides a "reading list" (References for Further Study), not to mention an index. To the serious student seek ing real intellectual stimulation and a thorough grounding in Austrian first principles, I would say to sign up for this course before it fills up. D Dr. Batemarco is director ofanalytics at a marketing researchfirm in New York City and teaches econom ics at Marymount College in Tarrytown, New York.

114 THE FREEMAN • FEBRUARY 1997 The Heroic Enterprise: Business and the Common Good by John M. Hood Free Press. 1996 • 266 pages. $25.00 Reviewed by William H. Peterson I n his introduction John Hood, president of the John Locke Foundation in Raleigh, North Carolina, and a former Bradley fellow at the Heritage Foundation, notes that among free market thinkers from Adam Smith to Milton Friedman, he has been especially inspired by Henry Grady Weaver. A devotee of Rose Wilder Lane and her The Discovery of Freedom, Weaver published his own interpretation and amplification of her work as The Mainspring of Human Progress. Weaver, a General Motors corporate manager and number-cruncher, observed man's long, ardu ous, and often bitter struggle to overcome scarcity. Famine struck Ireland in the 1840s, for example, and has ravaged Africa and Asia in this century. Weaver's sharp eye saw scarcity as exacerbated by government intervention and overcome by private property rights.

Yet private property and American business continue to be savaged by the intelligentsia and the mainline media. Why this downgrading of Amer ican business? Hood suggests as one reason the dominance of negative business characters in Hol lywood movies like Norma Rae and Wall Street. He cites analogous TV-series research by the team of Linda Lichter, Robert Lichter, and Stanley Roth man in which they find 58 percent of big-business characters since 1965 portrayed as villains. In like manner, liberal politicians and media mavens fume as AT&T and other big businesses resort to downsizing, re-engineering, outsourcing, cost-cutting, consolidating, merging, and other vicious commercial practices. Critics too quickly forget their own innate cost-cutting and outsourc ing in their own housekeeping and personal busi ness. They still manage to wax indignant and rant: Is there no sense of business decency left? Is not American business guilty of putting property rights over human rights? Where, 0 where, has fled the social responsibility of American business?

Hood answers by discussing Milton Friedman's provocative view that "only people have responsi bilities"; businesses have no responsibilities as such. As Friedman explains, "There is one and only one social responsibility of business-to use its resources and engage in activities designed to increase its profits, so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud." So three cheers for The Heroic Enterprise. It makes waves and should be read by all those in high places who view market solutions as inferior to government solutions. Modern liberals should see that capitalism and private property, not "social responsibility," re lease the energies of inventors and entrepreneurs. Enterprise induces savers and investors to serve and be served; it brings income and jobs into being, simultaneously conserves and expands natural re sources, advances occupational health and safety, and improves wages and hours. Most importantly, under the sovereign direction of the consumers equipped with their life-and-death power of the purse, enterprise democratically causes producers to run scared and ever try to put out more for less.

And it does all this on a strictly voluntary basis as opposed to the baldly coercive power of the state. So who is the more apt to serve the public and serve it well-the businessman or the politician? Taking a page from philosophers George Santa yana and Michael Novak, John Hood pleads with businessmen to think highly of their calling capitalism. What a remarkable system, what a godsend to man! Yet so unappreciated and ill understood, so hated and despised. Shakespeare's Puck had it right: "Lord, what fools these mortals be!" 0 Dr. Peterson is an adjunct scholar at the Heritage Foundation and distinguished Lundy professor emer itus of business philosophy at Campbell University, Buies Creek, North Carolina. Generation X Goes to College: An Eye-Opening Account of Teaching in Postmodern America by Peter Sacks Open Court. 1996 • 201 pages + index. $16.95 paperback Reviewed by Steven Yates T his is a disturbing book-all the more since the pseudonymous author is no friend of the free market. Generation X Goes to College is quite unlike the recent academic whistleblowing efforts of Dinesh D'Souza, George· Roche, and Christina Sommers. "Peter Sacks" divides his narrative into two parts. He starts with an autobiographical account of leaving journalism to teach at a school he does not identify by name. In the second part, he tries to explain what he encountered there.

Sacks found students-popularly labeled "Gen eration X"-whose indifference to learning was exceeded only by their brazen rudeness and sense of entitlement. His attempts to motivate them met with resistance; some simply walked out on him. They complained to his superiors about low grades and demands for serious work. One even threat ened litigation. He found himself at the mercy of these students via teaching evaluations, used by tenured faculty to assess their juniors. One of his colleagues quietly advised him, "teach to the evaluations." Still a journalist at heart, who taught from love of his subject, he decided to "go undercover" and find out what it takes to succeed as a professor in the 1990s. To conduct research for his "Sandbox Experi ment," Sacks designed a survey to find out what students want from professors. The results are illuminating. Forty-one percent cited entertaining as the most important quality in a professor.

Thirty-seven percent cited friendliness and warmth. Just 52 percent thought grades should be based on performance. As for studying, 35 percent studied less than one hour per day. The second half of Generation X Goes to College searches for reasons. Sacks argues that what has happened to education cannot be understood apart from the cultural shift that set the stage for Generation X, the shift from modernism to post modernism. Modernism respected science, progress, objectivity, reason; it valued hard work, self-discipline, and respect for authority. Postmod ernism is skeptical and relativistic; it replaces the intellectual quest for truth with the subjectivity of feeling, and distrusts all authority. Postmod ernism is, in other words, profoundly anti intellectual. In the cultural ambience of post modernism, the classroom is just one more "text" to be deconstructed. Now to be sure, few GenXers have heard of, much less read, postmodernist writers such as Lyotard, Foucault, and Derrida. But Sacks makes a compelling case that the postmodernist ethos is all around us-from the spectacle of mass-produced images and the dominance of entertainment val ues; the influence of television, MTV, and other manifestations of pop culture; movies, such as Forrest Gump, which implicitly reject the intellect; to the repudiation of traditional institutions and distinctions based on merit and ability.

What is to be done? Here, Generation X Goes to College falls short. One reason is Sacks's own left-of-center politics. The ethic of entitlement is not new, after all; as he notes himself,it started with BOOKS 115 the New Deal and has been spreading ever since. After World War II, we saw more and more consequences of the idea that government owes citizens an education. Public universities bur geoned and standards dropped until students were admitted regardless of their level of preparation. Populist egalitarianism did the rest. No longer content to lower standards until all students are equal, colleges have proceeded to the absurd point where students and their teachers are equals! Sacks offers three options: (1) capitulate; (2) resist with "rear-guard action"; or (3) compromise. He chooses compromise. This is not good enough. To be sure, Sacks criticizes grade inflation, open admissions, and the entitlement ethic. But he basically accepts postmodernism. To my mind he hasn't attacked the problem deeply enough. His real targets should be entitlements and egalitari anism generally, not merely as they apply to GenXers. These, after all, are not products of the postmodernist ethos, they propelled it.

As Sacks admits, the people hurt most by the present situation are the good students, those who set out to earn high marks. Dismissed as "geeks" and "nerds" by their peers, and unnoticed by a cynical class of tenured professors, achievers are all but invisiblein a system aimed at the lowest common denominator. The same holds for the wouldbe professor who loves his subject and has high potential as a scholar, but is not a classroom Seinfeld or glorified motivational speaker. Entertainment, of course, is not bad in itself, but when it becomes life's (or a culture's) dominant, all-consumingpassion, it spells trouble. When aca demic culture capitulates, the situation becomes worse. For behind the glitzyfacade GenXers accept is-quite literally-nothing, meaningthat the logicof postmodemism is personal,educational,and cultural self-destruction. D Dr. Yates, a former philosophy professor, is currently adjunct research fellow with the Acton Institute for the Study ofReligion and Liberty. He is the author of CivilWrongs: What Went Wrong With Affirmative Action (San Francisco: ICS Press, 1994).

116 THE FREEMAN • FEBRUARY 1997 Faith & Credit: The World Bank's Secular Empire by Susan George and Fabrizio Sabelli Westview Press. 1994 • 282 pages. $63.50 cloth; $16.95 paperback Reviewed by Ken S. Ewert S omeone once put forth the aphorism: "the enemy of my enemy is my friend." Presumably if you're against something and I'm against that same thing, we are allies in a common cause. Believers in limited government and free markets have long criticized the World Bank. It props up corrupt Third World governments and subsidizes the statist policies that keep poor people poor, and plays a "reverse Robin-Hood" role in transferring resources from middle-class taxpayers in the West to politically connected elites in the Third World. The authors of Faith & Credit: The World Bank's Secular Empire, Greenpeace board member Susan George and University of Geneva professor Fab rizio Sabelli, are also against the World Bank. In their view, the World Bank funds projects that disrupt the environment, restrict the social pro grams and inflationary schemes of Third World governments, and promotes downsizing of public employment and bureaucracy. Clearly in this case, the opponent of our opponent is neither our ally nor a friend to freedom.

The authors believe that "the market" cannot help the poor because it cannot hear their voices. George and Sabelli more or less ignore the amaz ing cases of market-oriented countries such as Taiwan or South Korea that have moved from poverty to relative wealth in a very short time. Their comment on the free-market success of such countries is: "150 countries cannot become Asian dragons (if only because the planet would col lapse )." Their answer to Third World poverty is stronger and more interventionist Third World governments. Currency restrictions and artificial exchange rates, heavy state involvement in the economy, and protectionism (the early use of which they believe explains the later economic success of Korea and Taiwan!) are all good. Apparently what the Third World needs is more government control. Forgive my impatience, but after laboring through many, many tiresome pages of this book I have to ask: Where have these people been for the past 50 years? After failure upon failure of these policies, in country after country, what hope is there that these interventions might still be made to work? Has it not been adequately demonstrated for all to see that there are things called economic laws that operate regardless of one's desire other wise? Is reality optional?

This book is another (not particularly interest ing) example of the close link between statism's old guard and its new: Reds (socialists) and Greens (radical environmentalists). Both groups share a hatred of economic freedom. Only the Left's ratio nale has changed with time: the Reds argued that capitalismcouldn't liftthe poor out of their condition, the Greens believe that capitalism is in fact too efficacious-what we need is not that kind of devel opment, but rather "sustainable development." In the chapter on the World Bank and the environment the authors warn us that the Bank's future depends on whether or not it recognizes "the environment as the inescapable partner in all its development endeavours." This is noble sounding rhetoric, but what does it mean? Should the environment carry as much, or perhaps more, weight than the needs of the world's poor? It is clear that the authors see a fundamental clash between people acting to improve their economic condition and the environment.

Is the authors' critique of the World Bank on behalf of the World's poor, or on behalf of the environment? This query gets to the schizophrenic heart of the new Left. One has the sneaking suspicion that while much lip service is devoted to "helping poor people," it is the latter rationale, an antidevelopment and antihuman philosophy of exalting nature over man, that motivates the New Left. Free-market advocates unashamedly assert that people have priority over creatures. (I believe the only adequate basis for this premise is that God has created man in His image, and has given him dominion over all other created things.) However, unlike the Left, we see no contradiction between economic freedom and environmental protection. Recognizing and consistently upholding private property rights will both lift the poor from their poverty and protect the environment by making each individual responsible for his "piece" of the environment (his property) and by protecting him from invasion by others who may seek to pollute or abuse his property.

The World Bank must be abolished. Not be cause it promotes economic freedom and property rights, but because it is inherently opposed to iliem. 0 Mr. Ewert is the editor of U-Turn, a quarterly publication addressing theological, political, eco nomic, and social issues from a biblical perspective.

Oil, Gas, & Government, 2 Volumes by Robert L. Bradley, Jr. Rowman & Littlefield. 1996 • 1,997 pages. $195.00 Reviewed by Richard W. Fulmer U ntold damage has been done by governments that restrict human action in attempts to correct perceived "market failures." Like a pebble dropped in a pond, each government action ripples through the economy in ever-widening circles, yielding unforeseen consequences that create de mands for additional government intrusion. Iron ically, when the "market failure" that provided the excuse for the initial intervention is closely examined, it usually either vanishes or turns out to have been a failure of government instead. Robert Bradley's new book, Oil, Gas, & Government, takes a critical look at the supposed "market failures" of the petroleum industry, and at the confusing swirl of regulations that our government spewed out to deal with them. Many such regulations stemmed from attempts to deal with problems created by the rule of capture, by which oil is owned by whoever pumps it out of the ground-regardless of under whose land the oilwas originallylocated. This rule created an incentive for oil producers owning or leasing adjacent pieces of land lying atop the same reser voir to pump out the oil as fast as possible despite any reservoir damage that such rapid production might entail. In addition to the loss of recoverable oil, economic losses were considerable, as produc ers drilled more wells than would have been needed simply to recover the oil. Bradley points out how a "homestead" approach to the ownership of oil would have avoided the destructive compe tition to be the first to drain the reservoir. Under Bradley's scheme, ownership of an entire reservoir would go to the individual or company that first discovered or "homesteaded" it, and not necessar ily to the owner of the surface rights.

Even with the court -imposed rule of capture, however, oil producers could still have solved the problem of overdrilling and too-rapid production on their own, had government left them free to act. Free companies would almost certainly have sought to reduce drilling costs by "unitizing" their fields, i.e., letting one of their number control production, while all shared in costs and profits according to a negotiated formula. Antitrust laws, however, prevented such cooperation for decades. During both World Wars, federal government BOOKS 117 attempts to control oil production to ensure a steady and affordable fuel supply for the military backfired. First, the government inflated the money supply to help finance the wars, then responded to the resulting rise in oil prices with price freezes. By keeping the price of fuel below its market-clearing price, regulators encouraged con sumption and discouraged production-the pre cise opposite of what was desired. After each war, these emergency controls were dropped. In both cases, decontrol was followed by a boom in pro duction and a drop in prices-clearly revealing the counterproductive nature of the government's in tervention.

To finance the war in Vietnam and the "War on Poverty," President Lyndon Johnson again inflated America's currency. Johnson's successor, Richard Nixon, attempted to treat the inevitable symptoms by "freezing" wages and prices. These controls, coming during the driving season and before winter, locked in seasonally high gasoline prices and low fuel-oil prices. Refiners were thereby encouraged to substitute gasoline production for fuel-oil yields. With the coming of cold weather, oil supplies became tight and the government had to loosen its policies. The "Energy Crisis," along with mandatory allocation and conservation, was already well under way before OPEC announced production cutbacks on October 17, 1973, to pro test U.S. policyin the Middle East. Clearly, the real cause of the oil shortage in the seventies was U.S. government policy, and not the Arab oil embargo. Oil, Gas, & Government fills an important niche.

It documents every federal oil and gas regula tion since 1861, their rationales, and their results. Extensive footnotes, three indexes (by name, sub ject, and legal case), and a good appendix provide easy access to the information contained in the book's two volumes and nearly 2,000 pages. By filling this niche with a work solidly based in free-market economics, Dr. Bradley's book is well positioned to have a far-reaching impact. His lead is one that other free-market economists would do well to follow. Industries, such as ship ping and railroading, also offer both compelling histories, and heavy legacies of destructive govern ment meddling. Similar works documenting these areas would provide powerful support in the drive toward economic freedom. 0 Mr. Fulmer is a systems analyst in Houston, Texas.

118 THE FREEMAN • FEBRUARY 1997 A Moment on the Earth: The Coming Age of Environmental Optimism by Gregg Easterbrook Viking. 1995 • 745 pages. $27.95 Reviewed by Doug Bandow E nvironmentalists have long enjoyed the polit ical high ground. After all, who could be against clean water? As a result, over the last two decades the environmental movement has· swept most everything before it. The result has been draconian legislative enactments, massive regula tory bureaucracies, and inexplicablycomplex rules. But as compliance costs have risen, so has political resistance. Common people have grown less willing to see their interests sacrificed willy nilly for measures with only marginal environmen tal benefits. Thus, many environmental activists have moved beyond shrill denunciations of oppo nents to apocalyptic threats. Their refrain has increasingly become: if you don't do as we say, the world is doomed.

Not so fast, argues Gregg Easterbrook. In his mammothA Moment on the Earth, he contends that "the Western world today is on the verge of the greatest ecological renewal that humankind has known; perhaps the greatest that the Earth has known." The book has it all, or almost. It is comprehensive, well researched, and well written. Equally important, its author is credible to those sympathetic to the environmental movement, a liberal who has written for such publications as Newsweek and the New Republic. His liberal credentials account for the book's main flaw: a failure to fully appreciate the value of freedom and the way free markets operate. This occasionally leads to nonsensical asides, like when Easterbrook blames capitalism for homelessness and drug shootouts. Easterbrook begins by describing a predatory falcon swooping down upon a hapless pigeon. There is nothing unusual about the eternal struggle between prey and predator, which he terms "the dance of ages"-except that this particular skir mish is occurring in Manhattan. Although man may view himself as omnipotent, Easterbrook shows man's impact to be, in fact, quite limited.

Easterbrook backs up his argument with facts. Only two percent of America and eight percent of the world are "built-up." Forests are expanding in the United States and Europe. Farmland, no longer needed for agricultural production, is re turning to forest or prairie. And most of what man has done could be undone by nature which, East erbrook notes, "rearranges entire continents, a task people cannot imagine, even in the abstract." A Moment on the Earth goes on to debunk romantic rhapsodies about nature and defend mankind. "Humanity's vogue for culpability re garding its own existence must be exceptionally difficultfor nature to fathom," writes Easterbrook, since man's activities are "in strict accord with the behavior patterns of other species, most of which attempt to expand to fill the maximum area avail able to them." Nor is there anything wrong in transforming nature. Easterbrook even includes a wonderful chapter titled "The Case Against Nature." Nature, he writes, is dangerous, generates pollution, kills humans and animals alike, fosters disease, and is self-destructive. And this is never going to change, absent human intervention, since "nature lacks morals, which are artificial systems requiring fore thought."

These philosophical musings behind him, East erbrook moves to the specific issues that dominate environmental debates today. He proceeds issue by issue, largely dismissing warnings of imminent ecological disaster. For instance, he concludes that the problem of acid rain is "genuine but exagger ated, subject to correction surprisingly quickly at reasonable cost." Similarly positive are his assess ments of a variety of other problems: air pollution (overall air quality has been rising), the spotted owl (it is neither endangered nor a separate species), chemicals (they are far less dangerous than charged), global warming (warnings about the planet heating up appear to be as overstated as those about the imminence of a new Ice Age), energy (supplies are plentiful), and many, many more. In the main, Easterbrook draws sensible policy conclusions from these facts. But his liberal soul occasionally reasserts itself, to bizarre effect. For instance, he acknowledges that the costs of recent regulatory initiatives, like the 1990 Clean Air Act, exceed their benefits. No matter. Opines Easter brook: "in the main environmental initiatives ought to be considered worth the price unless proven otherwise, with the burden of disproof upon opponents."

Nevertheless, the book is truly a work that deserves wide attention. Its importance comes not only from the fact that it makes a powerful case for environmental optimism, but that it specifically addresses those people who have been most con cerned about the future. Calls for ecorealism are not new, but Easter brook has issued a particularly compelling one.

Paradise may not beckon, but, as he concludes: "The arrow of the human prospect points upward." D Mr. Bandow is a senior fellow at the Cato Institute and the author and editor ofseveral books, including The Politics of Envy: Statism as Theology. The Good Life and Its Discontents: The American Dream in the Age of Entitlement by Robert J. Samuelson Times Books. 1995 • 293 pages. $25.00 Reviewed by Thomas J. DiLorenzo T he Good Life and Its Discontents, by journalist Robert J. Samuelson (no relation to the econ omist Paul Samuelson), is a well-written exposition of some of the failures of interventionist economic policy over the past 50 years. He roundly condemns this "age of entitlement," defined not just in terms of the taxpayers' incomes that special interest groups believe they are "entitled" to, but as "the conviction that we could completely control our economic, social, and political surroundings" with interventionist econ~mic policies.

His thesis, in other words, is similar to F.A. Hayek's "fatal conceit," the idea that "planners" could somehow plan an economy better than the free market. As interesting as Samuelson's book is, it does not come close to matching the depth of Hayek or of many other writers familiar to Freeman readers who have analyzed these same topics for the past several decades. Samuelson's book is important not so much for its content, but for the fact that the author is a respected "mainstream" journalist (who writes for the Washington Post!) who has concluded that the welfare state has indeed been a monstrous debacle. Samuelson asserts that Americans are an ex tremely unhappy lot not because their lives haven't materially improved over the past several decades - he shows that they have - but because they have been misled, mostly by government propagandists and their intellectual supporters, into believing that they can achieve a more or less "perfect" world -if only government is given sufficient power. We supposedly suffer from what economists call the "Nirvana Fallacy" -comparing the real world with a utopian ideal will always make the world appear to have "failed."

Samuelson smashes the "huge conceit" of the BOOKS 119 Keynesian economists of the 1960s (especially James Tobin and Paul Samuelson), who arrogantly believed that under their expert guidance "the economy could be manipulated for the larger social good." The biggest disappointment of the book, however, is that Samuelson then endorses the misguided Keynesian view that the sole cause of the Great Depression was the desire by govern ments to stay on the gold standard. He ignores the Fed's 30 percent drop in the money supply from 1929 to 1932; the fact that President Hoover increased government spending by 65 percent in just four years and raised the top marginal tax rate from 24 percent to 63 percent; Roosevelt's massive 1933 tax increase and his economic planning pro gram known as the "New Deal"; and the Smoot Hawley tariff, which precipitated a worldwide trade war that reduced the volume of world trade by a third in just three years (1929-32). Samuelson is also unaware of the Austrian School's "boom and bust" theory of the business cycle, which provides the best explanation of the Great Depression as an inevitable consequence of the Fed's monetary expansion during the 1920s.

Samuelson makes a strong case that Americans need to return to an ethic of individual responsi bility. "People ought to do more for themselves and expect government to do less." Amen. But then he soft pedals on this, his strongest point, by noting the shortcomings of individual responsibility (i.e., some people can't or won't be more responsible). This is an odd feature of Samuelson's writing: He seems to believe that economic truth can be gleaned by consensus. The free market has its virtues, but so does government intervention, so that "the truth" must lie somewhere in between. This might be a good strategy for selling books -appealing to virtually everyone's biases - but is an annoying distraction in an otherwise useful and welcomed critique of the failures of social engi neering schemes over the past half century. 0 Dr. DiLorenzo is professor of economics at Loyola College in Maryland.

120 THE FREEMAN • FEBRUARY 1997 Travels with a Hungry Bear: A Journey to the Russian Heartland by Mark Kramer Houghton Mifflin Company. 1996 • xii + 320 pages. $24.95 Reviewed by E. C. Pasour, Jr. M ark Kramer, on assignment for the New York Times Magazine, visited the Soviet Union several times, beginning in 1987,to explore its well known agricultural problems. This account of Kramer's journeys shows why neither perestroika nor privatization efforts following the breakup of the Soviet Union have worked. Agricultural productivity in the former Soviet Union was (and continues to be) stymied by the political and economic system-not by lack of fertilizer, modern machinery, or other technology. Managers of collective farms could not even make key decisions like when to plant or which crops and livestock to produce-these decisions were made in Moscow. Central planners, however, do not have and cannot obtain much of the highly specialized information relating to time and place conveyed through price and profit signals in a market econ omy. This book is a case study of the problems that arise when this lesson is ignored.

Gorbachev's perestroika reforms were funda mentally flawed-the missing ingredient was pri vate property. Meaningful reforms were precluded because he had stipulated that all reforms were to be "fullybased on the principle of more socialism"! Perhaps just as importantly, use of economic incentives that led to increased output and wages for some workers inspired fierce envy in many people. Two generations of communist doctrine emphasizing "fair ownership" of wealth had ele vated envyto a patriotic motive. Kramer found that "keeping down the Ivanovs" in that collectivist regime was what "keeping up with the Joneses" is in the West. The output of peasants' private gardens on the collective farms, however, shows the power of economic incentives. A third of the nation's milk, meat, eggs, and vegetables, and sixty percent of potatoes and fruit came from the two percent of farmland in private plots. Despite the popularity and productivity of private plots, innovative but basic market activity, such as hiring labor to work in the private gardens, inspired envy and vandal ism.

Moreover, envy continued to stymie economic reform following the breakup of the Soviet Union. Traders obtaining goods from corrupt clerks at controlled state prices increased the already per vasive antipathy toward "middlemen." In this cli mate, Yeltsin's privatization decrees in agriculture proved to be unenforceable. Aspiring independent farmers were unable to obtain land, equipment, and supplies except through the state distribution system still largely controlled by the chairmen of the collective farms. The trials of converting the Soviet collectivist system to a market economy are far from over. Kramer, in an afterword written in 1995,points out that farm output is down by one-fourth since the demise of the Soviet Union and that large state owned collectives still control more than 90 percent of Russian farmland. Travels with a Hungry Bear is a highly readable account of the pernicious economic and cultural effects of collectivism in the former Soviet Union and the destructive nature of its legacy. Wide spread adherence to collectivist dogma, instilled and nurtured by the state over several generations, makes the always difficult transition to a market economy even more problematic. 0 Dr. Pasour is prOfessor of agricultural and resource economics at North Carolina State University, Ra leigh.