Book Reviews

316 BOOKS Capitalism: A Treatise on Economics by George Reisman Jameson Books. 1996 • 1,096 pages. $95.00 Reviewed by Jim Powell I n this monumental work (81/2by II-inch pages), Reisman offers the most comprehensive de fense of capitalism ever written. He covers funda mental principles and a wide range of policy issues. He discusses controversies-especially environ mentalism-which have emerged since Ludwigvon Mises and Ayn Rand wrote their immortal books. Reisman attempts something nobody else has done: combine some doctrines from classical eco nomics, plus the free-market economics of the Austrian School and the procapitalist moral vision of Objectivism. He is perhaps in a unique posi tion to pull this off, having long been a friend and intellectual compatriot of Ayn Rand, and having attended Ludwig von Mises's New York University graduate seminar for years. Reisman translated Mises's work on methodology, published as Epis temological Problems of Economics.

Reisman, now an economics professor at Pep perdine University, tells how this magazine helped him on his intellectual journey more than four decades ago. "It was one of the early issues of The Freeman," he recalls, "that I had my first exposure to the writings of Ludwig von Mises.... I could see that Mises knew the history of economic thought and that he was presenting a strong, self-assured position. . .. I bought Socialism and over the coming months had one of the very greatest intellectual experiences of my life, before or since. ... Here at last was a great, articulate defender of the economic institutions of capitalism." Although a thoroughgoing Austrian, Reisman believes that classical economists made some en during contributions to the case for capitalism. "A leading application of the classical doctrines, of which I am especially proud," he says,"is a radically improved critique of the Marxian exploitation theory. In my judgment, classical economics makes possible a far more fundamental and thorough going critique of the exploitation theory than that provided by B6hm-Bawerk and the Austrian School ... [and] also provides the basis for greatly strengthening the refutation of the ideas of Keynes."

From classical economics, Reisman takes "the recognition of saving and productive expenditure, rather than consumption expenditure, as the source of most spending in the economic system. Closely related to this, I have brought back the wages-fund doctrine and have made clear the meaning of John Stuart Mill's vital corollary prop osition that 'demand for commodities does not constitute demand for labor.' I have reinstated Adam Smith's recognition that in a divisionof labor society the concept of productive activity must incorporate the earning of money and that because of its failures to earn money, government is a consumer .... I have reintroduced Ricardo's insights that capital can be accumulated not only by saving but also by anything else that serves to increase wealth.... The main thing I have dis carded in classical economics is any notion that wages are determined by the 'cost of production of labor.' "

Many Austrians will surely counter that Aus trian economics already builds upon what was of enduring value in classical economics, but as noted, Reisman learned economics from Mises himself, and he labored some 18 years on this book, so his views aren't offered on a whim. Capitalism will be a stimulating read even if you disagree with him on some important theoretical issues. Rand's influence is perhaps most apparent in Reisman's discussion of individual rights, liberty, competition, monopoly, and environmentalism. Like Rand, Reisman sees progress as "a self expanded power of human reason to serve human life." He draws on her insights when he talks about philosophical influences which are essential for capitalist civilizationand philosophical influ ences which threaten to destroy it. Capitalism climaxes with a radical agenda for liberty. Again reflecting Rand's influence, he pre sents a powerful moral and practical case for abolishing government schooling, minimum-wage laws, compulsory unionism, Social Security, Medi care, welfare, business subsidies, rent controls, in come taxes, fiat money, and other types of govern ment intervention which cause so much misery.

For instance, after explaining his proposal for cutting off the flow of taxpayer money to govern ment schools-thus going far beyond the current debate over school vouchers-Reisman adds: "the public education system is inherently unsuited to teach any subject about which there is controversy. This is because teaching such a subject necessarily entails forcing at least some taxpayers to violate their convictions, by. providing funds for the dis semination of ideas which they consider to be false and possibly vicious. On the basis of this principle, the public schools should be barred from teaching not only religion, but also history, economics, civics, and biology. In the nature of things, only private schools, for whose services people have the choice of paying or not paying, can teach these subjects without violating the freedom of con science. The fact that barring the public schools from teaching these subjectswould leave them with very little to teach, and place them in a position in which they may as well not exist, simply confirms the fact that public education should be abolished."

Amen! Reisman does a fine job explaining the creative genius of capitalism, and the moral dimension really makes the book compelling. He articulates a rigorous defense of individual rights, open mar kets, free trade, hard money, and freedom of movement. Capitalism is a classic. D Mr. Powell's biographical profiles of the heroes of liberty appear monthly in The Freeman. The Pyramid by Ismail Kadare Arcade Publishing. 1996 • 161 pages. $21.95 Reviewed by Richard A. Cooper A lbanian novelist Ismail Kadare unveils the mystery behind structures of statist tyranny in his perceptive fable The Pyramid. On the surface, it is a reconstruction, a retelling of the actions of the pyramid-building Pharaoh Cheops of Egypt. But, like the real pyramids, it has its own secrets to be revealed. It is a tale of tyranny of all times and places, wherever and whenever those who hold power seek to enshrine their power and their ideas on the lives and backs of the ruled. I rank The Pyramid among the great literary depictions of tyranny and its consequences.

The new pharaoh Cheops dismays his courtiers by dropping hints that he may not construct his own pyramid. They fret, but know not why they worry; they think the pyramid should be built, but only because it is traditional. Eventually, they find the answer in their ancient texts as a magicprescription for the health of state. "To launch works colossal beyond imagining, the better to debilitate its in habitants, to suck them dry. In a word, something exhausting, something that would destroy body and soul, and without any possible utility. Or to put it more precisely, a project as useless to its subjects as it would be indispensable to the State." Why is the pyramid indispensable to the State? 317 The pyramid is not just a physical construction, but a psychologicalstructure that compels submis sion. Kadare, from Stalinist Albania, zeroes in on his target. "In the first place, Majesty, a pyramid is power. It is repression, force, and wealth. But it is just as much domination of the rabble; the nar rowing of its mind; the weakening of its will; monotony; and waste. a my Pharaoh, it is your most reliable guardian. Your secret police. Your army. Your fleet. Your harem. The higher it is, the tinier your subjects will seem. And the smaller your subjects, the more you rise, a Majesty, to your full height."

Kadare gives us the myriad details which would accompany such a project, but with a peculiar resonance for the survivorof the twentieth century, our age of total war and the total state. The con scription of labor and other resources, the reports of police, and the plans of the master planners all give us a sense of eerie recognition in our more enlightened age of Hitler, Stalin, and Pol Pot. The pyramid project drags the nation from one reported conspiracy to another. Arrests, tortures, and executions construct the pyramid just as much as granite, basalt, and alabaster. "Every morning people learned with a shudder of terror the names of those arrested during the previous night." This is an Egypt as police state, with its inhabitants to be molded to the whims of their rulers. But Egypt, of course, is a standin for its predecessors and successors in the sorry spectacle of state building.

From the Egypt of the Pharaoh Cheops, Kadare takes us on a strange excursion in time and place to the empire of Central Asian conqueror Timur the Lame (also known as Tamerlaine), who erects another pyramid. This Central Asian pyramid is constructed of skulls of the conquered. From the distant past he transports us again, this time to Communist Albania's capital of Tirana for another state building exercise. Here again the pattern of State power underlies the "modern" structure. Finally, from Enver Roxha's Communist Alba nia, Kadare carries the reader to our own time. With the poet's insight and richness of image, Ismail Kadare exposes how the structures of Stat ism reveal their true nature if we but look. The Pyramid will no doubt be compared to George Orwell's 1984. I think it a superior book, with its combination of everyday realistic details and the voice of historical experience underneath the crushing burden of the structure. The details of the domination differ. The causes invoked differ. But the blueprints are telling in their similarities. 0 Richard A. Cooper makes his living as an export import manager while exploring ideas as a freelance writer.

318 THE FREEMAN • MAY 1997 Sovereign Nations or Reservations? An Economic History of American Indians by Terry L. Anderson Pacific Research Institute for Public Policy • 1995 • 202 pages. $19.95 Reviewed by Bruce L. Benson I took a couple of Prometheus-award-winning libertarian science fiction novels and Terry Anderson's Sovereign Nations or Reservations? along on a recent vacation. I chose to read the science fiction first, but that was a mistake Anderson's book is better. Not only is it very well written, but it tells a compelling true story that provides a much more devastating critique of the state and a much more convincing case for bas ing a society on individual freedom and private property than any fictional story can. Economic history may not sound as exciting as science fic tion, but Anderson's version is, as he debunks a large number of popular myths about Indians that have impeded a clear understanding of the lack of economic advancement on Indian reservations.

Among the myths that fall is the claim that prior to the arrival of Europeans, Indians lived in almost idyllicsocieties where everything was communally owned and shared, and where nature was so revered that Indians only took what they could consume. Anderson explains that in reality, North American Indians developed private property rights in resources whenever the benefits of pri vatization exceeded the costs. Furthermore, while Indians certainly had a great deal of respect for nature, as anyone trying to subsist in a harsh environment must, their techniques for harvesting common pool resources such as buffalo (where the cost of establishing private property rights were prohibitive) often led to tremendous waste (e.g., a large percentage of the meat from buffalo driven over buffalo jumps was simply left to rot, and large areas of prairie were burned to force buffalo into traps). It was only after the European introduction of the horse (a privately owned resource among Indians) that less wasteful hunting techniques developed.

Another politically correct myth is that Indians were continually coerced and exploited following the arrival of Europeans. The history of Indian White relations in North America breaks roughly into two periods. Before the United States gov ernment began maintaining a standing army, ne gotiation dominated with relatively few violent confrontations. After the Mexican-American War this began to change, and especially after the Civil War violence became the primary means of re solving disputes. Anderson convincinglyattributes much of this change to the incentives facing the military bureaucracy-incentives to secure their jobs, to expand, and to create an environment conducive to promotions. Similar bureaucratic incentives facing the Bu reau of Indian Affairs (BIA) explain the almost total lack of effective economic development on Indian reservations since the Indian Wars, in opposition to the myth that there is something about Indians themselves which prevents them from adapting to market-based economic activi ties. The politically correct suggest that Indian culture and heritage, their love for nature and communal nomadic lifestyle, stand in the way of their assimilation into the modern market econ omy. Others see some inherent flaw in the Indian people. Both are wrong. American Indians have always adapted to changing conditions. When Indians were placed on reservations, they quickly began to adapt. Agricultural activity was develop ing quite rapidly until the BIA and Congress started meddling with the evolving property rights systems on reservations. Then, through a series of statutes reflecting the political demands of white and bureaucratic interest groups, the institutions and property rights on reservations were changed, undermining individual Indians' incentives to in vest in productive economic activitywhile creating incentives to focus on group rent seeking.

The variation in productivity across reservations today reinforces Anderson's main point. Produc tivity is significantly higher on reservations where a relatively large portion of the land is privately owned as compared to land held in trust by the BIA or land that is tribally owned and administered. Furthermore, tribal governments that are consti tutionally constrained support more economic growth than tribal governments that can arbitrarily change the rules of the game and redistribute wealth. The story Anderson tells is not unlike the story that can be told about less developed economies all over the world. He tells it very well. Individuals everywhere adapt to the incentives and constraints that they face: secure private property creates incentives to produce and expand wealth, and centralized power creates incentives to pursue other peoples' wealth. 0 Dr. Benson is Distinguished Research Professor in Economics at Florida State University.

Jefferson's "Bible": The Life and Morals of Jesus of Nazareth by Thomas Jefferson American Book Distributors. 1996. 140 pages. $15.00 (plus $3.50 shipping) paperback Reviewed by William H. Peterson "... the Laws of Nature and of Nature's God." T hose eight words and their underlying pre cepts in the Declaration of Independence, says Judd W. Patton, associate professor of eco nomics at Bellevue University in Nebraska, in his introduction to this book, account for much of the success of the American Experiment in-savor the phrase-self-government. But what the Founding Fathers really meant by this phrase was govern ment of self by American citizens and their leaders in accordance with a strong moral code. In Jeffer son's ((Bible": The Life and Morals of Jesus of Nazareth, we learn much about what Jefferson thought that moral code to be. The background of Jefferson's Bible is interest ing. In 1819-1820 he decided to set forth the "pure moral principles" of Christianity. Repro duced here are the title page and table of con tents in Jefferson's own handwriting. He literally cut out and pasted verses from Matthew, Mark, Luke, and John into an 82-page book. In 1813 he had described their wisdom as "the most sublime and benevolent code of morals which has ever been offered to man."

This unpublished work was held in the Jefferson family until it was found by Cyrus Adler in 1886. Adler purchased it for the Smithsonian Institution in Washington in 1895, and it was published in 1904. For the next half-century, ending in the 1950s, a copy of Jefferson's "Bible" was presented to each new senator and representative at his swearing-in ceremony. This is a handsome, well-thought-out edition. Fifty moral principles, including the Ten Com mandments, are presented. Here are some of them: Be a peacemaker. Avoid anger. Be a light to the world. Don't be hypocritical. Be a forgiving spirit. Love your neighbor as yourself. Do not steal. (Eighth Commandment) Do not covet. (Tenth Commandment) Be diligent in all you do. BOOKS 319 Do unto others as you would have others do unto you. (The Golden Rule) In addition, 38 parables are offered. These include the parables of the lost sheep, the wedding feast, the talents and the three servants, Lazarus and the rich man, the hidden treasure, the lamp under the basket, and the instruction to build on rock and not on sand. All point up a key moral or truth.

The foreword by nationally syndicated colum nist William Murchison of the Dallas Morning News is on target. Mr. Murchison finds our times "despiritualized" (or, to use the perception of Gertrude Himmelfarb, demoralized and demoralized). He agrees wholeheartedly with the Jefferson premise that the practice of morality is essential for the wellbeing of society. He finds it ironic that use of this book in the classroom, even on the authority of Thomas Jefferson, will likely be prohibited-while, let me note, sex education and "free" condom distribution go merrily on. This edition highlights moral precepts in red and indexes the precepts and parables by page and New Testament chapter and verse. Judd W. Patton deserves credit for republishing an important piece of American history. He hopes the practice of giving a copy to each representative and senator, beginning with the 105th Congress in 1997, can be revived.

I hope he is right and recall a relevant quotation inscribed in marble in the Jefferson Memorial in Washington, D.C.: "I have sworn upon the altar of God, eternal hostility against every form of tyranny over the mind of man." Jefferson's ((Bible"is worth reading and contemplating. 0 Dr. Peterson, a Heritage Foundation adjunct scholar, is Distinguished Lundy Professor Emeritus of Busi ness Philosophy at Campbell University,Buies Creek, North Carolina. Migrations and Cultures by Thomas Sowell Basic Books. 1996 • 516 pages. $30.00 Reviewed by George C. Leef I t is an article of faith among egalitarian oppo nents of laissez-faire capitalism that the statis tical discrepancies one finds in a free society are proof of its immorality. They note "abnormally" high concentrations of people with a certain char acteristic among the poor or among the rich and 320 THE FREEMAN • MAY 1997 conclude that the state must step in to cure the apparent inequity. Hence, their strident demands for affirmativeaction and other policies to promote "equality."

The implicit assumption in this line of reasoning is that people ought to be randomly distributed throughout income groups and occupations. To the egalitarians, something is abnormal and wrong if people from Group A have a high poverty rate and people from Group B have a negligible poverty rate; if people from Group X tend to dominate in profitable businesses while people from Group Y are concentrated in menial labor. It is this assump tion that Thomas Sowell has spent many years of his life refuting. After Migrations and Cultures, it lies exposed as sheer but dangerous nonsense. The book concentrates on the migrations of six groups of people: Germans, Japanese, Italians, Chinese, Jews, and Indians. Sowellnotes that these groups were far from homogeneous (northern and southern Italians are quite culturally different, for example), but took with them stocks of skills and, more importantly, habits wherever they went around the globe. Often, the newcomers brought skills and habits-a culture-that was markedly different from that of the indigenous population.

Naturally, the natives and immigrants would not instantly and randomly mix, but rather each pop ulation would tend to concentrate in the fields where their respective cultures gave them compar ative advantages. Several traits stand out as common among the six groups: a willingness to engage in hard work, a propensity to save a great deal, even of meager earnings, and placing a high value on education. When people from cultures with these character istics mixed with people from cultures without them, the results couldn't be statistical random ness. Indeed, Sowell points out, backward nations have at times eagerly sought immigrants from particular nations precisely because their cultures were expected to help advance economic develop ment beyond what the natives could do. That is why,for example, Germans wound up in Paraguay. These days, nations beg for foreign aid, but luring skilled immigrants was much more productive.

The critical difference between the immigrant groups and the native populations into which they moved was that the immigrants were more future-oriented. Hard work, saving, education these are all attributes of people who are thinking toward the future. Although the immigrants usu ally started out in extreme poverty, their tenacious pursuit of a more prosperous future led to rising incomes. In contrast, the more present-oriented natives remained economically stagnant. Sowell shows this in case after case. The Chinese in Malaysia, for instance, were far more inclined to entrepreneurship, hard work, and investment than the more relaxed Malays, so it was not in the least "abnormal" that the Chinese became the business and plantation owners for whom the Malays worked. Unfortunately, the ugly emotion of envy also appears in case after case. The economic success of the immigrant groups usually sparks resentment and violent backlash against them. The depressing thing about Migrations and Cultures is that it repeatedly highlights this deep flaw in human nature. Rather than either learning from and emulating the successfulor at least conceding them their due, the natives usually claim that they have been "exploited" and seek to confiscate some or all of the wealth of the more future-oriented groups.

Political demagogues thrive on these intergroup resentments and have a powerful interest in fan ning the flames. Besides confiscating and redistributing the wealth of the successful, politicians can advance themselves by promoting preferential policies to "solve" the "problem" of underrepresentation among the "disadvantaged" groups. Readers may be surprised to find out that "affirmative action" is neither new nor unique to the United States. The government of Thailand, for example, established employment quotas for Thais and enacted many laws designed to handicap the Chinese back in the 1930s. Similar policies have been followed in Malaysia and, most disastrously, in Sri Lanka, where a once-harmonious country has been trans formed into a bloody battleground, thanks to governmental interference with the spontaneous order of the market. Americans should pay atten tion to the long-term damage that these policies do.

Cultures are not fungible. For all the beating of drums for "celebrating diversity" that we get in America, one thing we don't hear is that certain cultures tend to encourage productive behavior, harmony, and progress, whereas others encourage envy, sloth, and conflict. The multiculturalist in sistence that all cultures are equally "valid" and must not be treated "judgmentally" crashes on the rocks of Sowell's meticulous (there are 2,431 footnotes) scholarship. It's fine for young Ameri cans to learn about other cultures, but they also ought to learn that cultures have consequences. Like Sowell's many other books, Migrations and Cultures is a strong antidote to an array of statist cliches. I recommend it highly. 0 George C. Leef is book review editor of The Freeman.