Business and Morality in a Free Society; E. Younkins

Workers acted on their incentive to retrain for jobs in the newlyaltered economy, just as they had done during previous economic revolu tions. Similarly, today's computer revolution is restructuring, not destroying, the work force. Of course, these pessimists believe that, even with massive retraining and re education, there will not be enough high-tech jobs to go around. But Perry Pascarella argues that pessimism is "an easy game to play" because technological disaster always seems to be just around the corner. Social critics have forever warned of a coming technolog ical catastrophe, be it a nuclear mishap, an environmental disaster, or some other cata clysmic event. But we're still here. Admittedly, not all is rosy for America's short-and long-term economic future. Exist ing government policies currently pose a barrier to the market process of "creative destruction" that will create new work oppor tunities in the new economy. There are many wide-ranging proposals, from regulatory re form to competitive educational changes, that we should seriously consider as we exit the industrial age in order to raise Ameri ca's growth rate above its currently sluggish levels.

We live in a rapidly changing, globally competitive technological marketplace. Soci ety is in the midst of a major transformation away from the industrial age into the infor mation age. There is real value in peeking into the future. But the technological pessimists are using glasses that are too intellectually biased to yield results that even approach practical reality. Although nothing is certain, one prediction is likely to come true: work has not ended. D Businessand Moralityin a Free Society by Edward W. Younkins F ewwould deny that capitalism is the most productive and efficient economic sys tem, especially after the collapse of Soviet Communism. But some critics still contend that capitalism is not a moral system. Yet morality is impossible unless one is free to choose between alternatives without out side coercion. Since capitalism is based on freedom of choice, it provides the best envi ronment for morality and character developDr. Younkins is professor of accountancy and busi ness administration at Wheeling Jesuit University, Wheeling, West Virginia.

ment. In addition, business success not only requires but also rewards virtuous behavior by participants in the market. Morality Requires Freedom All human beings have natural rights either endowed by their Creator or inherent in their nature, and have a moral obligation to respect the rights of others. Natural rights impose the negative obligation not to interfere with someone else's liberty. Thus, it is morally illegitimate to use coercion against someone 680 THE FREEMAN • NOVEMBER 1997 who does not first undertake the use of force. The role of government, as recognized by America's founders, is to protect man's nat ural rights. This kind of freedom involves far more than simple democracy. It demands a protected private sphere within which an individual can pursue his freely chosen norms, actions, and ends without the arbitrary intervention of others. And this freedom is necessary for individual morality.

There can be no morality without respon sibility and no responsibility without self determination. Responsible self-determina tion implies rationality, honesty, self-control, productiveness, and perseverance. In order to provide the maximum self-determination for each individual, the state should be limited to maintaining justice and defending against internal or external coercion, thus protecting life, liberty, and property. A social system such as capitalism is a system of relationships and cannot be moral or immoral in the sense that a person can be-only individuals can be moral agents. However, a social system can be moral in its effects if it promotes the possibility and like lihood of moral behavior by individuals who act within it. It follows, then, that there is a moral imperative to create a political and economic system that permits the greatest possibility for self-determination and moral agency. Capitalism is that system.

Capitalism is itself only a means and re quires its individual participants to decide on the ends to be pursued. No economic system can make people good. The best that an economic system can do is to allow people to be good. But morality and virtue require that individuals be free to be immoral and of bad character. Only when an individual has choice and bears responsibility for his actions can he be moral. Capitalism, more than other eco nomic systems,allowsthe exercise of individual free will. Thus, though capitalism cannot guar antee a moral society, it is necessary for one. Human development usually requires more than material wealth. However, prosperity enables individuals to cultivate their talents, abilities, and virtues. Thus, capitalism, the best system for wealth creation, permits indi viduals to spend less time on physical con cerns, leaving them more time to engage in higher pursuits.

The Moral Responsibility of Businessmen At the same time, the achievement of prosperity tends to reward moral behavior. Businesses-more particularly, their owners, managers, and other employees-have moral obligations. They must respect the natural rights of other individuals, which includes honoring contracts, not engaging in fraud, not using coercion against others, and honoring representations made to the local community. Moreover, businessmen should not support government economic interventions, such as price supports, tariffs, and subsidies, even though doing so might result in higher profits. To do so would involve the use of coercion, one step removed. Living up to these virtues will aid business men in the pursuit of profit. The free market rewards polite, cooperative, tolerant, open, honest, realistic, trustworthy, discerning, cre ative, fair businessmen. Lying to and cheating other businesses, misleading consumers, and mistreating workers all have serious adverse consequences. In the long run, profitable businesses tend to be operated in accordance with the basic ethical principles most people hold dear.

Under capitalism a business transaction takes place by mutual agreement for per ceived mutual advantage. Through voluntary exchange buyers and sellers can promote their own interests only by serving the interests of others. By protecting individual choice, cap italism not only generates enormous wealth, but also creates an environment in which virtue can flourish. In the end, capitalism is not only the most productive and efficient economic system. It is also the most moral economic system. D The Foundation for Economic Education Irvington-on-Hudson, New York 10533 Tel. (914) 591-7230 Fax (914) 591-8910 E-mail: freeman@westnet.com November 1997 Juvenile Delinquency G overnment brings out the kid in all of us. This truth is key to political understanding. Nanny-state activities are government's best-known way of babying its citizens. States insist that drivers buckle up; the Clinton administration never tires of scold ing cigarette smokers and tobacco compa nies; Congress now dictates the amount of time that women must remain in the hos pital after giving birth, as well as the amount of water that we free citizens are allowed to have in our toilet tanks; and the Americans With Disabilities Act hovers over us like a diabolic schoolmarm made paranoid by the mistaken belief that her charges act with no purpose in life other than to commit malicious injustices to the handicapped. These are only a few of the tens of thousands of instances of how our nanny state abuses and insults us.

But the nanny state's frightfulness doesn't end with these particular abuses and insults. Its pernicious effects run much deeper. In particular, the more we relin quish decision-making responsibility to government, the more childlike we become. Consider the response of aNew Jersey woman to my suggestion that New Jer sey's prohibition on self-service gasoline stations be lifted. "Oh, no!" cried the woman, "that would be disastrous! People here don't know how to pump their own gasoline. They'd spill it all over the place!" As it happens, my wife hails from New Jersey. Until she moved to Virginia at the age of 26, she had never before filled her own gasoline tank. Sure enough, the first time she tried to gas up at a self-service pump in Virginia, she squeezed the pump handle before inserting it into her gasoline tank. The result was quite a mess-and, with fresh gasoline sprayed all about until the shop attendant washed it away, also quite dangerous.

My wife (who now regularly, and expertly, refuels her car herself) learned how to pump gasoline the hard way. Had she grown up in a state that trusted its citi zens to pump their own gasoline, she would never have squeezed the pump handle before popping it into her tank. New Jersey's prohibition on self-service gasoline stations prevents people from gaining useful experience. In its own (thankfully small) way, this prohibition keeps people from fully growing up. While the nanny state stunts personal growth, the political process encourages childlike behavior in a less obvious and more pernicious way. A mark of immaturity is the inability or unwillingness to make sound decisions-failure to weigh careful ly the present and future benefits and costs of available alternatives. Because children cannot be trusted to make sound decisions, adults don't give them much decision making responsibility.

Why don't parents let eight-year-olds decide how to spend the family income? Because with eight-year-olds in charge, the family would vacation for months on end at Disney World-and be broke in short order. When spending their parents' money, eight-year-olds ignore the costs and long-run consequences of extended stays with Mickey Mouse, focusing only on the immediate thrills of such vacations. People who consistently act in ignorance of long-run consequences are rightly called /I childish." By this criterion most voters behave childishly. Citizens in the voting booth help decide a multitude of important issues. Should Congress increase subsi dies to farmers? Should the federal gov ernment fund high-tech research? Should the state government pay for a fancy domed stadium to attract an NFL fran chise? The idea of democracy is that citi zens, by voting, collectively make such decisions.

But citizens have no incentives to make mature decisions in the voting booth. First, voters are typically asked to decide how to spend other people's money. Just as children have no trouble spending mom and dad's money, voters have no trouble voting for pet projects to be financed largely by others. Second, no single vote counts; no sin gle vote decides the outcome of an elec tion. So, no matter how a voter votes-no matter how absurd, unrealistic, or destructive a voter's wish may prove to be-the fact that no single vote counts means that no single voter incurs any material cost of voting in whatever way strikes his fancy. Imagine a child on the knee of a shop ping-mall Santa. Because it costs the child nothing to request truckloads of play things, the child asks for everything that pops into his mind, giving no thought to costs or harmful side effects. But because Santa forgets each child's request as soon as the child leaves, the child on Santa's knee is in a harmless fantasyland.

But suppose that all the shopping-mall Santas tallied up the wishes of all the kid dies and then tried to make these wishes come true. Society would be awash in toys, desperately short on many of life's necessi ties, and drowning in debt! Citizens in a voting booth are much like children on Senator Santa's knee. Enter the voting booth and vote for the candidates promising the greatest amount of wiz ardry! Because your vote is not decisive, you suffer no personal repercussions in the voting booth of using your ballot to express all sorts of fantasies. Of course, every other voter is in an identical position. Thus, democratic elections encourage voters to behave irresponsibly in the vot ing booth, just as sitting on Santa's knee encourages little children to rattle off long wish lists of toys. But unlike shopping mall Santas, voting booths tally up voters' dream-world requests and pass these requests onto government. Politicians try in vain to satisfy these unsatisfiable requests.

Compare democratic voting with pri vate decision-making. Perhaps a car buyer dreams of owning a car that gets 100 mpg, packs herds of horsepower, and is safe as a tank. Automakers will supply such cars to buyers willing to pay the price. But because such cars must be paid for by each individual buyer, no buyer indulges these costly fantasies. Each buyer settles for a less fanciful car because each buyer prefers to save the extra money it would cost to buy the fantasy automobile. Such rational weighing of costs and benefits is the mark of maturity. Pathetical ly, democratic voting encourages too many otherwise mature adults to behave like spoiled brats propped on Santa's knee. Donald J. Boudreaux President Thanksgiving Book Sale "In gratitudethat God, not thegovernment,controlsthe weather. ... And in gratitudethat thereis stillmorefreedomthan authoritarianism. ... " -Leonard E. Read (1898-1983) FreemanClassicsSeries The Morality of Capitalism The moral foundation of the private property order.

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Announcinga New Printingof Cliches of Politics edited by Mark Spangler UClichesof Politics is the best briefanthologyof economic principlesavailabletoday.It is an importantbook that couldn't come at a more criticaltime in our history." -George Roche, President, Hillsdale College Political intervention attracts support in subtle and alluring ways. Today's politicians and their constituents at least pay lip service to freedom and free enterprise. Government action is advo cated only to "fix" perceived flaws in the mar ket economy, and public spending is proposed merely to "compensate" for deficiencies in the private sector. Cliches of Politics is an indispensable tool for understanding and defending the case for limited government and the free market. Have YOU Bought Any of These Cliches of Politics? *"We have a right to this service." *"There ought to be a law!" *"The free market ignores the poor."

*"If we had no Social Security many people would go hungry." *"Government should create and protect jobs." * "Foreign imports destroy jobs." *"Private enterprise leads to pollution." *"Society is to blame, not 1." Politicians offer endless excuses for expanding their own powers, while restricting our personal liberties. But are their claims valid? Here, dozens of thinkers dissect more than eighty common" cliches of politics." They subject familiar notions about government to withering logical, economic, and Constitutional examination. The result: a bold challenge to the conventional wisdom that may forever change the way YOU think about our system of government. Clichesof Politicsis a revised edition of FEE's popular Clichesof Socialism.Mark Spangler updat ed and incorporated many of the original Clichesand enlisted the writing talents of more than thirty additional writers and scholars to complete this new edition.

Published by The Foundation for Economic Education, Inc. 30 South Broadway, Irvington-on-Hudson, NY 10533 ISBN 0-910614-96-2 • 314 pages, indexed • paperback $14.95 Visa and MasterCardorders:(800) 452-3518 THEFREEMAN IDEAS ON LIBERTY The Minimum Wage by Kevin Sohr and Walter Block T he second stage of the minimum-wage increase approved by Congress last year recently took effect. What will the impact be on the economy and particularly on unskilled workers? Economists have long argued that minimum wage increases cut employment, particularly of minorities and teenagers. But supporters of the minimum wage, now backed by some economists, claim that government legislated wage hikes do not necessarily lead to less employment, and may even create more jobs for the unskilled. So does the minimum wage benefit or injure workers? Traditionally economists have maintained that the free market establishes the wages for all workers so that they receive the value of their output. If Sam is earning $2 an hour while generating $2.50 worth of goods and services for Firm X, then Firm Y would have an incentive to offer Sam $2.01per hour. Firm Xwould then counter with $2.02and the cycle would continue until Sam was paid $2.50 an hour. No firm would bid higher because he was simply not worth it. What happens when the minimum wage is set by law at $3.00?