The Freeman 1975

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FreemanVOL. 25, NO.2. FEBRUARY 1975

Holy ExperimentThe story of William Penn and of Pennsylvania.

Paul Luther Brindle 67

The Police: Friend or Foe? Leonard E. Read 75What is it, then, that in good conscience we should ask of the police power?

Magic, Envy, and Economic Underdevelopment Gary North 80Reasons why Western prosperity can't be transplanted successfully in many lands.

Gold is Honest Money Hans F. Sennholz 88Some helpful signs for traders seeking a return to sound money.

Blunders of the Founding Fathers Cha,rles R. LaDow 95Attending to a few chinks in the national armor.

The Organization or the Individual? William H. Peterson 105The failure of modern economic theory lies in its preference for the organizationrather than the individual.

The Concept of Value in Ethics and EconomicsThe most important reason why a man chooses freedom.

Book Reviews:"The Roots of American Order" by Russell Kirk"Mises Made Easier: A Glossary for

Ludwig von Mises' HUMAN ACTION" by Percy L. Greaves, Jr.

Ridgway K. Foley 115

124

Anyone wishing to communicate with authors may sendfirst-class mail in care of THE FREEMAN for forwarding.

t11e

FreemanA MONTHLY JOURNAL OF IDEAS ON LIBERTY

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LEONARD E. READ

PAUL L. POIROT

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Managing Editor

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is Honest Money."

WILLIAM PENN

THE HOLY EXPERIMENT was thename given by William Penn fohis colonization on the west bankof the Delaware River. WilliamPenn was sure that he was directed by God through his InnerLight. When he was 12 years old,and alone in his room, he had aspiritual experience which he described as God appearing untohim and making it clear to himthat there was important work forhim to perform.

William Penn was born October14, 1644, almost within. the shadow of the Tower of London. Hisfather was an English Navy Captain whose name was also William.H-is mother was Dutch, the former

Mr. Brindle is a Washington, D.C., attorneywhose paternal ancestors arrived in Philadelphia in 1715, from Liverpool.

HolyExperiment

PAUL LUTHER BRINDLE

Margaret Jasper, and is creditedwith giving him his unshakablepoise. The father had been taughtthe way of the sea by his father,Giles Penn, on his own ship in thesailing-vessel days and in therough-and-tumble merchant service. Sir William Penn becameVice Admiral and was knighted.As recipient of many honors, hewas invited to State' functions,where he felt humbled by his limited formal education. He determined that his son should be educated as a courtier.

A tutor was engaged andyoung William was sent to Chigwell School in Essex, then to Oxford University tor two years,and then to Soumur in Francewhere he came urtder the influenceof, and lived with, the noted

67

68 THE FREEMAN February

theologian, Moses Amyrault, ofCalvinist persuasion and a manof learning and eloquence.

Penn wore fine clothes, armorand side arms becoming the cavalier gentry, and young men of distinction. While at Oxford, Pennhad developed skills in fencing, andwhen an attacker in Paris drewhis sword over some imaginary offense' Penn ~ested him. This gavePenn the right to pierce through,but he turned his attacker free unharmed. Penn, by now the theologian, said concerning the incident,"I know no religion which destroyscourtesy, civility and kindness."This led to his giving up of the armor and side arms.

Penn went to the London Inn tostudy English law until his fathertook him to his estate in Irelandto avoid the plague of 1665 and1666.

In Ireland, Penn heard the Quaker preacher, Thomas Loe, preaching on the subject, "There is afaith that overcomes the worldand a faith that the world overcomes," and from that time Pennwas a Quaker. The Quakers weredelighted to secure a convert fromthe cavalier class, a man of family, education, wealth and prominence. He became a recognizedQuaker leader, preacher and author of numerous theologicalworks.

Seventeenth Century life in

England was at a low ebb, with250 crimes punishable by death usually on the block. The Conventicle Act of 1664 made it unlawfulto hold any religious meeting otherthan that of the authorized Churchof England. Magistrates were allowed to impose fines upon violation, often amounting to confiscation of assets and imprisonmentwithout trial by jury. The informer's fee was one-third of the fine.The Quakers refused to obey theConventicle Act, and worshipedopenly as Quakers with the resultthat men, women and childrenwere arrested and carted off toprison, and the following weekthere would be replacements tosuffer the same fate.

A Quaker in Prison

Newgate Prison was overlycrowded. While in prison there,Penn spent most of his time writing, The Great Case of Liberty ofConscience, and on another occasion he wrote, No Cross, NoCrown, which has been reprintedfrom time to time.

On another occasion, Penn spenteight months and 16 days in theTower of London without trial.Word reached him that the Bishopof London had vowed to keep himthere until he died. To this Pennreplied, "They are mistaken in me,I value not their threats;' I willweary out their malice."

1975 HOLY EXPERIMENT' 69

During Penn's incarceration inthe Tower, he was without research material, but his writingsincluded accurate quotations andanalyses of the opinions of over150 personages of the past andpresent. When the book, Innocencywith Her Open Face, was published and reached the streets, itwas so helpful in authenticatinghis claim of his Inner Light, as aman of God, and stirred such aclamor, that in a few days he wasreleased from prison by the act ofpardon.

Property Seized,Later Restored

Large numbers of Quakers wererefusing to pay tithes, or taxes tomaintain the government, whichincluded support of the establishedchurch. The sheriff was obliged toseize their property and sell it toobtain treble the amount of thetax, or to imprison them.

The Quakers refused to take anoath, or to remove their hats incourt, church, or in the presenceof important persons. They deniedthe validity of all sacraments, including baptism and the Lord'sSupper. They declared that a manshould not be bound to believemore than his reason could comprehend. The Quakers were attempting to hark back to FirstCentury Christianity, and therebyto circumvent 16 centuries of

growth and struggle of Christendom. Their position on primitiveChristianity was to become an important point of understandingwith the Indians in America.

The Test Act of 1673 barredfrom public office, both civil andmilitary, all who refused the sacrament according to the rites ofthe Church of England. Thisforced the resignation of JamesStuart, the Duke of York, fromhis position of Lord High Admiralof the Navy. James was openly aRomanist, while Charles II wassecretly of the same faith.

Ten years after the death of Admiral Sir William Penn, CharlesII was still unable to pay the estatethe Admiral's uncollected salaryand loans which amounted toabout £16,000. William Penn wasat the peak of his influence. Heproposed that the Crown convey tohim the uncolonized land west ofthe Delware River in North America in exchange for the indebtedness and, at the same time, to provide a haven for the religiouslyoppressed in England. It had been60 years since the Pilgrims hadsettled in Massachusetts for thefree worship of the Puritan religion, and Penn saw a need for individual religious liberty.

When the Charter for the grantwas being considered in Council,on March 4, 1681, Penn stood withhis hat on, as was the Quaker cus-


tom, although he was in the presence of the King. When the Kingremoved his hat, Penn asked,"Friend Charles, why dost thounot keep on thy hat?" His Majestyreplied laughingly, "It is the custom in this place for only one person to remain covered at one time."

Penn, in deference to the Quaker restriction against vanity, objected to the colony being namedPennsylvania, the Latin for Penn'swoods, whereupon the King said,"I will name it after your father."On March 4, 1681, the Holy Experiment was launched, and March4 was later selected as the date forthe Inauguration of the Presidents of the United States - a custom which prevailed through 1933.

Pennsylvania became the onlyproprietorship colony in America.It consisted of 45,000 square miles,only 5,000 square miles less thanthe area of England. Of it Pennwrote "'Tis a clear and just thing;and my God, which has given it tome, through many difficulties,will I believe, bless and make itthe seed of a nation. I shall tender care to the government that itmay be well laid at first."

Address to Settlers

Penn lost no time in puttingthe Holy Experiment into.· effect,as inspired by his Inner Light. OnApril 8, 1681, he wroteto the settlers in. Pennsylvania-the Swedes,

Dutch and English - in a stylewhich has sometimes, been referred to as Governor Penn's Inaugural Address. He wrote, in part:

My Friends:

I wish you all happiness, here andhereafter, I have to let you knowthat it has pleased God in his Providence to cast you within my lot andcare. It isa business that, though Inever undertook before, yet God hasgiven me an understanding of myduty, and an honest mind to do it uprightly, I hope' you will not betroubled with your change and theking-'s choice, for you are now fixt, atthe mercy of no Governour that comesto make his fortune great ; you shallbe governed by laws of your own making, and live a free, and, if you will,a sober and industrious people. I shallnot usurp the right of any, or oppresshis person; God has furnished mewith a better resolution, and hasgiven me the grace to keep it. Inshort, whatever sober and free mencan reasonably desire for the securityand improvement of their own happiness, I shall heartily comply with.... I beseech God to direct you in theway of righteousness, and thereinprosper you and your children afteryou. I am,

Your true friend,Wm. Penn.

When Penn first arrived in hiscolony on October 27, 1682, at Uplands, (renamed Chester), he immediately began to apply hisframe of government. He issued

1975 HOLY EXPERIMENT 71

writs for the election of Representatives to the assembly to meet atChester on December 4, 1682.Penn was delighted to find thegreat storehouse of riches whichexceeded his fondest expectations.Prior to going to Pennsylvania, hehad written several letters to theLenni Lenape (Delaware) Indians,which had been read and translated to them. The letters werefriendly and deeply religious, andhe assured them that his peoplewould never harm them nor taketheir land without payment.

He learned their language andwould walk among them. The Indians had strong likes and dislikes, but were deeply fond ofPenn, whose brotherly love wascontagious. The Indians sharedPenn's convictions on immortality.Penn contended, "That the truestend in life is to know the life thatnever ends- that death is no morethan turning us over from time toeternity."

After making land purchases in1683, Penn wrote:

The poor people are under a darknight in things relating to religion;to be sure, the tradition of it, yetthey believe in God and Immortality,without the help of metaphysicks; forthey say, there is a great king thatmade them, who dwells in a gloriouscountry to the southward of them,and that the souls of the good shallgo thither where they shall live again.

Penn's Fundamental Constitutions of Government read: "Thatall persons living in the provincewho confess and acknowledge theAlmighty and Eternal God· to beCreator, Upholder and Ruler ofthe world - subject to the generalrules of piety, all were welcome.Only those who denied the existence of God should be excluded."

The frame of Government

Penn looked upon the state asevil and wanted no more government than the ill-behaved ofworldly citizens made necessary.His· philosophy of an ideal societywas one in which men governedthemselves and their affairs sowell and justly that formal government would have little or nothing to do. Penn said, "Libertywithout obedience is confusionand obedience without liberty isslavery." Imprisonments were continuing in England, requiringcourtier attention. Penn sailed onAugust 16, 1684, to England.

King Charles II died in 1685,and his younger brother JamesStuart ascended to the throne asJ ames II, and declared that hewould establish the· Roman religion in England or die in the attempt. Charles had a natural sonMonmouth, for whom a Dukedomhad been created. He mustered hisforces to take the throne from hisuncle, James II, which' resulted in


a bloody failure, and Monmouthlost his head on the block. It tookWilliam of Orange with 14,000well-disciplined Dutch troops torout his father-in-law from thethrone. J ames tossed the greatseal into the Thames and fled toFrance where he lived on thebounty of Louis XIV. This wasthe end of Penn's influence as acourtier.

At the behest of William in1689, eight years after Penn'sHoly Experiment began, Parliament passed the Toleration Act,which William had promised whenhe announced his intention todrive James from the throne. TheAct established religious libertyby law. The refor~s establishedwere the very ones for whichPenn, in his earlier days, had soardently contended, and modernEngland was to grow up underthese reforms.

William and Mary

Under the reign of William andMary, violence, cruelty and brutalexecutions largely passed away.Mary was the daughter of JamesII and his first wife, Anne Hyde,and was reared as a Protestant.She and William were virtuousand honorable monarchs, and setan example for all rulers to follow. The statesman who failedlost his office, not his head. Underthe liberties established by Wil-

Ham III, the modern world wasbeginning to appear. The Toleration Act brought tranquility tothe English people, and clearedthe way for dealing with those ofdifferent religions and cultures.

Penn visited Holland and Germany, preaching to the oppressedMennonites and Schwenkfelders,and urged them to colonize inPennsylvania. He visited PrincessElizabeth, granddaughter ofJ ames I, who was then the Abbessof Herford, and who entertainedan interest in the mysteries ofthe Deity. Penn, accompanied byQuaker missionaries, was hopefulof her acceptance of Quakerism.Penn wrote in his notes, "Thegospel was preached, the dead wasraised and the living were comforted."

In 1699 Penn made his secondtrip to Pennsylvania, when thepopulation was about 20,000, consisting of about one-third members of the Church of England,one-third Quakers, and one-thirdPresbyterians, Mennonities aridothers. When Penn, a man ofgreat poise, visited throughoutthe province and the neighboringcolonies of New York, New Jerseyand Maryland, he was graciouslyreceived.

Penn returned to England in1701, but before his- departure, anew and simpler constitution wasadopted by the people. Penn

1975 HOLY EXPERIMENT' 73

stoutly maintained that thereshould be:• 1. No establishment of the

Church of England as thestate church.

• 2. No use of public funds forsectarian benefit.

• 3. No abridgment of suffrage.• 4. No Test Act eligibility for

office.• 5. No direct parliamentary tax

ation upon property or income.

In compliance with Leviticus25: 10, a huge bell was cast byPass and Stow of Philadelphia,and was rung on the 50th Anniversary, proclaiming libertythroughout the land. It was againrung in jubilation on July 4, 1776,and each year thereafter until acrack developed. After that, it became an attraction for visitors.

Those whom Penn left in chargeof his province were soon to beoperating it at a loss, and Pennwas imprisoned for debt. To terminate the loss in his advancingyears, he offered a sacrifice saleof Pennsylvania to the Crown,for £12,000, and accepted £1,200as advance payment.

When the new constitution wasadopted in 1701, the first of theprohibitions (against a statechurch) was inadvertently omitted, and Penn by recoupment,tried to incorporate it as a restrictive covenant in the sales

agreement, but destiny had another plan for the survival of theHoly Experiment.

Penn suffered a stroke whichrendered him unable to contractduring his remaining years. Itfell to the lot of his widow, theformer Hannah Callowhill, to savethe Holy Experiment. She terminated the foolish sales talks, repaid the advance from an inheritance, schooled herself in theaffairs of the province, and taughtthe same to her sons.

The Order of Successionin Pennsylvania

Thomas Penn was the businessman of the family. Later he· became Governor and he instructedhis nephew, John Penn, to succeed him. John Penn served untilthe Revolution.

Written .high in the Capitol atHarrisburg are William Penn'sfamous words, "The nations wantan example and my God will givethem one." By liberating thespirits of men, more power wasreleased through the Holy Experiment than was theretoforethought possible by those of lesserstature.

The Quakers opposed war perse, and even as a means of defense. They surrendered politicalpower as early as 1757. Duringand after the Revolution, manyQuakers emigrated to Canada.


Penn had placed happiness foremost in his letter to the settlers in1681, and 95 years later (1776)when Philadelphia. was the mostpopulous city in America, it wasparaphrased as the "Pursuit ofHappiness" in the Declaration ofIndependence. Seven of the 39signers to the Declaration of Independence were Pennsylvanians,and Pennsylvania was the first ofthe larger states to ratify theFederal Constitution, on December 12, 1787, following only 5 daysafter ratification by Delaware, aland formerly owned by Penn and

settled as a part of the HolyExperiment.

The Holy Experiment in repre...sentative government, by strangecircumstances, remained not thework of anyone person, or groupof persons. Succeeding generations and freedom-loving immigrants could find inspiration fromPenn's dedicatory prayer inscribed on Philadelphia's CityHall, the closing words of whichare, "To preserve thee from suchas would abuse and defile theethat thou mayest be preserved tothe end." ~

IDEAS ON

LIBERTY

Discourses -Concerning Government

IT WERE A FOLLY hereupon to say that the liberty for which we

contend is of no use to us, since we cannot endure the solitude,

barbarity, weakness, want, misery and dangers that accompany it

whilst we live alone, nor can enter into a society without resigning

it, for the choice of that society, and the liberty of framing it

according to our own wills, for our own good, is all we seek. This

remains to us whilst we form governments, that we ourselves are

judges how far 'tis good for us to recede from our natural liberty ;

'tis of so great importance that from thence only can we know

whether we are freemen or slaves; and the difference between the

best government and the worst doth wholly depend upon a right or

wrong exercise of that power. If men are naturally free, such as

have wisdom and understanding will always frame good govern

ments: but if they are born under the necessity of perpetual

slavery, no wisdom can be of use to them; but all must forever

depend on the will of their lords, how cruel, mad, proud or wicked

soever they be.SIR ALGERNON SIDNEY (1622-1683)

LEONARD E. READ

WOODROW WILSON, in his book,The State, also identifies government with force: "Government, inits last analysis, is organizedforce." Stated very simply,.a government issues edicts -lawswhich are backed by a constabulary or policemen. Obey, or sufferthe consequences! Other agenciesor persons must rely on attraction,service rendered, peaceful persuasion.

It is beginning to dawn on methat we who believe in and arespokesmen for what we have called"limited. government" have beenusing that term in vain. Why thesuspicion? Again, hear WoodrowWilson:

No man ever saw the people of whom

Government is not reason 1 it is noteloquence;.... it is force. Like fire itis a dangerous servant and a fearful master; never for a momentshould it be left to irresponsibleaction.

- George Washington

The Police:Friend or Foe?

he forms a part. No man ever saw agovernment. I live in the midst of theGovern1nent of the United States. Inever saw the Government of theUnited States.

In a word, we have been sponsoring, arguing for, trying to explainsomething no one ever saw - trying to make the case for an unpereeived abstraction!

In the interest of better communication, why not use a termthat is consonant with what organized force really is: the police.All of us, from youngsters to oldsters, have seen policemen. Woodrow Wilson, for instance, neversaw government but he saw policemen·, one of them in the mirror a Chief of Police. So let us try

75


that image of limited government- the police - to better presentour freedom point of view.

The question is this: Are ourpolicemen - local, state, and national - friends or foes? This, Ibelieve, can be resolved by assessing their countless actions as related to justice and injustice. Theyare friends when supporting justice and foes when inflicting injustices.

Is Justice Served?

Here is my conclusion at theoutset: When the police serve asan agency of justice, we shouldin all good conscience regard theagency as a friend. But-when thepolice power becomes an instrument of injustice we should lookupon it as a foe; for then it is apolitical device that contributestoward rather than deters socialchaos. Above all, let us bear inmind that the police force is butan agency or an instrument ofours, and that ours is the responsibility to keep it a friendly agencyof justice rather than a foe ofmankind.

Wrote Edmund Burke: "Whenever a separation is made betweenliberty and justice, neither, in myopinion, is safe." I side withBurke: Liberty and justice areinseparably linked! So, what isliberty? It is the "pursuing ofour own good in our own way, so

long as we do not attempt to deprive others of theirs, or impedetheir efforts to obtain it." Myphrasing: No man-concocted restraints against the release of creative human energy.

Let me catalogue a few instances where the police behave asa foe and try to explain how theagency could serve as a friendinstead.

Inflation: When the agency dilutes the medium of exchange itis a foe, precisely as if everypoliceman in the U.S.A. were engaged in counterfeiting. Foe? Ifthe money supply continues toescalate at the rate since 1938from about $35 billion to $280 billion - the supply by the year 2000will be one and one-half trilliondollars. Savings, insurance, bonds,and other such assets wouldn'tthen be worth a plugged nickel.Here is a separation of libertyand justice.

How can the police agency become a friend '? Remove the causeof inflation: excessive police expenditures. For it is an observedfact that whenever the costs ofthe police power rise beyond thatpoint where it is no longer politically expedient to defray its costsby direct tax levies, such agenciesresort to inflation as a means ofmaking up the deficit. Inflationsyphons private property into the

1975 THE POLICE: FRIEND OR FOE? 77

coffers of the police. Let the policepower do only what police are supposed to do: Invoke a commonjustice and keep the peace! Thatwould be a big step toward libertyand friendship.

Food stamps: a perfect example of the police agency as foe! In1965 the cost of the food stampprogram was $85.5 million. Thisyear it will approximate $7.2 billion - up 8,400 per cent in tenyears-with 16,000,000 people riding this gravy train, feeding atthe public trough. Where is thisand similar.plundering schemes ofthe police force taking us? To asituation of all parasites and nohosts - the rich becoming poorand the poor poorer. Liherty andjustice separated!

The light shed by this policeinjustice? Allow everyone maximum opportunity to become selfresponsible. It is as unjust for thepolice to forcibly take from someand give to others as it would befor me to rob you to aid a personwho is the object of my pity. Whatabout instances of distress? Relyon the practice of Judeo-Christiancharity. Were the police not preempting this role, true personalcharity would be more than sufficient. For another step towardliberty and justice, let us relievethe policeman of this highly questionable activity.

Social security: Why shouldevery person engaged in "coveredemployment" be compelled to contribute 11.7 per cent of the first$13,200 of his annual earnings tothis huge "policemen's benevolence fund"? For the benefit ofthose already retired? For achance to draw from the fund ifand when he reaches 65 and retires from "covered employment"?Is it justice to force everyone tocontribute to this "fund for thefuture" regardless of the indhridual's present needs and circumstances or of his own ideas abouthow best to save and invest hisproperty?

What should a friendly policeman do in this regard? Why notask that he protect and defend theright of each of us to buy as muchor as little insurance as he wantsfrom whomever is willing to supply it? And if either party attempts to defraud the other, letthe policeman then intervene asan agent of justice.

Price controls: The police arefoes when they control the priceof commodities, rent, interest,wages or permit control by laboror business or whoever. Prices areexpressions of value judgments.No policeman or anyone else candetermine the value of this or thatfor you or me. Value is always asubjective determination. When


the policeman tells you what priceyou must payor at what price youmust sell, he is, in effect, forcingyou to buy or sell contrary to yourwishes; in other words, he· is controlling you. All attempts at pricecontrol have failed; the resultshave been surpluses and shortagesand economic chaos. People control is rank injustice.

The friendly policemen let pricesbe determined in the free and unfettered market, that is, by supply and demand. Liberty andjustice!

Paying farmers not to farm: afoe to consumers - who pay more;a foe to taxpayers - who keepless; a foe to the farmers- themselves - who degenerate intoplunderers.

The friendly way? Be done,"lock, stock, and barrel," withthis silly blockage of the market.Restore liberty and justice!

Police-type education: This isfeatured by three forms of policecoercion: (1) compulsory attendance, (2) police dictated curricula, and (3) the forcible collection of the wherewithal to paythe enormous bill. The police haveno more place in education thanin religion. In my view, police"education" has been one of thegreatest errors in American history and this fact is becoming

more and more evident with eachpassing year. The collectivisticjargon issuing from classroomsaccounts, in no small measure, forcollectivistic practices in all walksof life. Foes!

What then would be friendly?Get the police out of educationexcept to identify any and all misrepresentation, and impose appropriate penalties! Leave education - as we leave religionto citizens acting freely, cooperatively, competitively, privately,voluntarily. Education is a voluntary taking of ideas freely offeredby others, not a police process ofstuffing information into a captiveaudience. The police who sidewith this view are friends and theupholders of liberty and justice asrelated to education.

Why give more examples of alist virtually endless? These fewspecimens - a mere sampling may· suffice to demonstrate thedifference between justice and injustice at the hands off the police.

Now to the role of the citizenwho believes in friendly policeand who is devoted to the proposition that liberty and justice areinseparable. Is there a part foreach of us to play if we seek thegood ·society? Indeed, there is!Note the phrasing of a previoussentence : "When the police serveas an agency of justice, we shouldin all good conscience regard the

1975 THE POLICE: FRIEND OR FOE? 79

agency as a friend." We should,but we don't. And this lack ofself-discipline may account, asmuch as any other reason, for theloss of liberty and justice, forrunaway police.

It occurs to me that the required discipline may be more unknown than carelessly glossedover. John Philpot Curran said:

The condition upon which God hathgiven liberty to man is eternal vigilance; which condition if he break,servitude is at once the consequenceof his crime, and the punishment ofhis guilt.

This oft-repeated axiom is, in myview, the missing discipline. True,the words are well known; it's themeaning that's not known or evensuspected. The axiom sounds good,but actually, what does one do tobe forever vigilant? How exercise this discipline?

Yes, we rail against inj usticebut we do not know how to hailjustice - or so I believe. Merelytake note of the fact that whenand if a policeman does somethingthat's just - consistent with liberty - we do no more than regardit as the what-out-to-be and letit go at that. Not vigilance atall; merely static acquiescence. In

favor of justice, yes; vigilantstandard-bearers, rarely, if ever.

This raises the final question:How does one become a vigilantstandard-bearer ? Would that itwere as simple as a pat on theback to those police who do what'sright and just! And even thiswould not be simple, for there areever so many who so conductthemselves but whose actions wenever hear about. Mere praisedoes not suffice. All well and dandy, but there's nothing vigilantabout that.

What then? The police agenciesmight soon rise to their principledrole were their millions of members to stand ramrod straight. Butthis for certain, they will never sobehave short of some exemplarsamong the citizenry.

Eternal vigilance is nothingless than exemplarity of the highest order on your part and mine day in and day out, now and forever. A society gets the policemen it deserves; for the policeagencies are no more than a reflection of you and me. We aidand abet what's good and juston the part of the police by beinggood ourselves - by nothing lessthan personal standard-settingperformances. *

,:est an-d by three

(P. T.,ist (Ed

sociologistc oec auer, a pro-

fessor at the London School ofEconomics, has published severalimportant books on the topic ofeconomic development, but by farhis most comprehensive work isDissent on Development, publishedby Harvard University Press in1972. The key to economic development in a society, argues Bauer,is the character of the people. Thepresence of a socialist planningapparatus inhibits development,since it pours money into stateapproved projects, bases its decisions on politics rather than economic returns, and acts as a scapegoat for personal failure ("thegovernment did this to me"). Butfar more important is the attitudeof the population:

Dr. North is the commentator on the "Gold &Inflation Telephone Report" (213) 422-1266.

This article has been adapted from a longerpiece appearing in the ]aurnal of Ch'r;st;an Reconstruction, Box 368, Woodland Hills, California 91365.

GARY NORTH

Magic,EnV¥and Economic Under

~INCE the great depression of the1930's, and especially since 1945,the concern of concerns amongorthodox Keynesian planners hasbeen economic growth. Believingthey had created Western prosperity, they thought to export it tounderdeveloped lands throughmassive giveaways. At someundefined point, these so-called"transfer payments" would enablethe recipient nations to becomeproductive. "Primitive" culturescould then become "modern."

But a major question still confronts the historians and economists: what factors contribute toeconomic growth? Why do somesocieties grow steadily, seeminglyas a result of their own people'sefforts, while others stagnate, de-

80

1975 MAGIC, ENVY, AND ECONOMIC UNDERDEVELOPMENT 81

Examples of significant attitudes, beliefs and modes of conduct unfavourable to material progress include lackof interest in material advance, combined with resignation in the face ofpoverty; lack of initiative, self-reliance and a sense of personal responsibility for the economic fortune of oneself and one's family; high leisurepreference, together with a lassitudeoften found in tropical climates; relatively high prestige of passive or contemplative life compared to activelife; the prestige of mysticism and ofrenunciation of the world comparedto acquisition and achievement; acceptance of the idea of a preordained,unchanging and unchangeable universe; emphasis on performance ofduties and acceptance of obligations,rather than on achievement or results,or assertion or even recognition ofpersonal rights; lack of sustainedcuriosity, experimentation and interest in change; belief in the efficacy ofsupernatural and occult forces and oftheir influence over one's destiny; insistence on the unity of the organicuniverse, and on the need to live withnature rather than conquer it or harness it to man's needs, an attitude ofwhich reluctance to take animal lifeis a corollary; belief in perpetual reincarnation, which reduces the significance of effort in the course of thepresent life; recognized status of beggary, together with a lack of stigmain the acceptance of charity; opposition to women's work outside thehousehold. (pp. 78-79).

These attitudes are primarily

religious in nature. They are noteasily changed, and dollars alone,even billions of dollars annually,are not likely to alter them significantly. A nation dependent on another nation's largesse is stillcaught in the trap of the ,occult.The increased wealth is 'not aproduct of the recipient nation'splanning, conscientious men. Ittherefore will not teach men thatwealth stems from moral actionand obedience to basic principlesof conduct. The presence of attitudes such as those described inBauer's summary are the sign of"primitivism." Primitive externalconditions that persist in a culturethrough countless generations area sign of cultural degenerationthe wrath of God (Deuteronomy8; 28).

Bauer's favorite example of apopulation that has pulled itselfup by its own· bootstraps, withoutforeign aid, natural resources, ora system of massive central planning, is that little piece of rocksouth of China, Hong Kong. Freetrade, open entry to occupations,low taxes (until quite recently),the right of profit, and an attitude favorable to growth havecombined to produce an economicmiracle. Even the Japanese cannot compete with them; Americancapitalists long ago began screaming about the ':unfair competition"- read: effective competition - of


the inhabitants of this bit of rock.But Africa stagnates, with its untold mineral wealth, or even declines economically.

The Unheavenly CUy

Edward Banfield's gem of abook, The Unheavenly City(1970), earned him the wrath ofmost of the academic profession,as well as the students of HarvardUniversity. So continuous andbitter was the student oppositionthat Banfield finally left "scholarly" Harvard for the University ofPennsylvania. What was thecause of such an outcry? Simple:Banfield had concluded that theeconomic backwardness of theghetto is primarily the product ofthe chosen style of life of the majority of those who live in theghetto. Most crucial, argues Banfield, is their conception of the future: they are present-oriented.They want immediate gratification.They want excitement - "action"- to brighten their otherwise dulllives. They want no part of thewhite middle class and its worldof plodding stability. Present-orientation is the key to understanding the concept of "lower class,"not present income. Present income can rise later; it can be supplemented by income from otherfamily members. But present-orientedness is internal. There is noimposed solution possible: no

school program, with its systemof endless written exams; no jobtraining programs, that in 1967were costing $8,000 per enrollee;no system of rehabilitation forhardened criminals. The problemis spiritual, moral, and cultural.White money changes only the level of activity in the -ghetto, not itsgeneral direction.1

Both Bauer and Banfield havestruck at the very heart of moderneconomic Liberalism. The simpleworld of environmentalism is amyth, they have concluded. Somany dollars per capita of wealthredistribution on the part of civilgovernments mean nothing. Thekey is internal. White middle classbureaucrats, armed with their dollars and their survey forms, do notand cannot change anything. Theold routine of "find a problem,cure a problem" is too simplistic;money and more public educationare insufficient. White middle classbureaucrats have tried to transform men's lives and cultures byspending other people's money. Ithas been dollar diplomacy of thegrossest kind: the attempt to buypeople's minds. And it has failed,and failed miserably. The policiesof Liberal reformism have constituted a massive, endless failure.The operating presupposition oftheir programs has been externalenvironmentalism, and that principle is totally false. The problems


are moral not external. The slumsare in people's hearts. Thus, concludes Nisbet in his lively revie\vof Banfield's book, the old formulaof Liberal bureaucracy has to bechanged, from "Don't just sitthere; do something!" to "Don'tjust do something; sit there !"2

Educational Opportunity

Corroborating evidence has beenproduced in the field of public education. James S. Coleman supervised a major study of educationalopportunity in the United Statesback in the mid-1960's. One estimate has placed it as the secondmost expensive social science research project in our history. Naturally, the Federal governmentfunded it. The result was a lengthyreport: Equality of Educ'ationalOpportunity (Government Printing Office, 1966). The data werestartling. School facilities forblack and white children, in anygiven region of the country, areabout equal within that region, andequal in almost every statisticallymeasurable respect. Per capitastudent expenditures are about thesame. So is teacher training. Theresults have been studied by anumber of scholars, and their collective conclusions have been published.3 The primary conclusion ofthe Coleman Report and thosestudying its figures is simple:there is no measurable impact that

public schools have had on eliminating or even modifying comparative achievement among students. Furthermore, the data indicate that no known changes inschool inputs - teacher salaries,more expensive facilities, biggerschool libraries - are likely to haveany significant effect on studentoutput. As the editors have written, "the central fact is that itsfindings were seen as threateningto the political coalition that sponsored it."4 Understandably, it wasignored as long as possible.

What factors are important, according to the Coleman Report?Primarily, family inputs. Innateability, peer group pressures, andcommunity standards are also important. In short, there is no signthat anything short of radical reconstruction of the whole societywould change the learning patternsof students, and there is no guarantee that even this would do anything but lower all performance tothe least common denominator.Once again, the simplistic environmentalism of Liberal reformismhas been thwarted, this time by itsown methods of investigation.This, of course, has had no measurable effect in the calls for everhigher public school budgets. Nowthe reformers are convinced thatpublic education has to start earlier, "before the lowered level ofcompetence sets in.";) If a century


and a half of coercive public education has failed to meet its promisedgoals, then there has to be more ofit. All facts are interpreted interms of the religious presuppositions of the investigators.

Envy

P. T. Bauer mentioned the belief in occultism as one of the cultural· forces of economic retardation. Helmut Schoeck, the sociologist, has explored this in greaterdepth. His monumental study,Envy, has been conveniently ignored by most scholars. The factshe presents, however, are extremely important. His basic thesisis straightforward: envy againstthe wealth or achievements ofothers reduces the ability of individuals to advance themselves economically. Envy is not mere jealousy. It is not wanting the otherman's goods for oneself. It is theoutright resentment against anyone even possessing greater wealth- the desire to reduce anotherperson's position even if thisreduction in his wealth in no wayimproves the position of the envious person. Nowhere is envy moredevastating in its effects than inso-called primitive cultures.

If a person or his family getahead of the accepted tribal minimum, two very dangerous thingscan easily take place. First, he willbe suspected of being a wizard or

a witch (which can be the samething) . Second, he can becomefearful of being the object of theevil magic of others. As Schoeckwrites, "the whole of the literature on the subject of Africansorcery shows the envious man(sorcerer) would like to harm thevictim he envies, but only seldomwith any expectation of therebyobtaining for himself the assetthat he envies - whether this be apossession or a physical qualitybelonging to the other."6 Understandably, this envy is presentonly where there is close soC'ialproximity between the envious andthe envied. It is always consideredvery difficult to bewitch a strangerwith any success.7

The efficacy of demonic magic isstrong in these non-Christian cultures. The fear of magic is pervasive. Thus, the threat of its useagainst the truly successful mancauses men with talents to conceal them from their fellows. Menbecome secretive about what theyown. They prefer to attribute anypersonal successes to luck or fate,both impersonal.

Institutionalized envy . .. or the ubiquitous fear of it, means that there islittle possibility of individual economic achievement and no contactwith the outside world through whichthe community might hope to progress. Noone dares to show anything that might lead people to think


he was better off. Innovations are unlikely. Agricultural methods remaintraditional and primitive, to the detriment of the whole village, becauseevery deviation from previous practice comes up against the limitationsof envy.8

Furthermore, Schoeck writes,"It is impossible for several families to pool resources or tools ofany kind in a ... common undertaking. It is almost equally impossiblefor anyone man to adopt a leading role in the interests of the village."9 While Schoeck does not discuss it, the problem of institutionalized envy and magic for the establishment of democratic institutions in primitive cultures is almost overwhelming. Once a chief'slink to authority is destroyed, whois to lead? If a man cannot pointto his family's long tradition orauthority or semi-divine status asruler, who is to say who shouldlead? Whoever does proclaim himself as leader had better be prepared to defend his title fromenvy and magic. In a culture inwhich the authority of traditional rulers has been eroded by Western secularism and Western theories of individualism and democracy, the obvious alternative ispower.

Perhaps most important as aretarding factor is the effect thatenvy has on men's concept of time."In a culture incapable of any

form of competition, time meansnothing."lo Men do not discusstheir plans with each other. Sharedgoals, except of a traditional nature, are almost absent in magicalsocieties. "Ubiquitous envy, fearof it and those who harbour it,cuts off such people from any kindof communal action directed towards the future. Every man isfor himself, every man is thrownback upon his own resources. Allstriving, preparation and planning for the future can be undertaken only by socially fragmented,secretive beings."ll Is it any wonder, then, that primitive culturesstay primitive, despite massivedoses of foreign aid - state-tostate aid? Schoeck does not exaggerate when he concludes: As asystem of social control, "BlackMagic is of tremendous importance, because it governs all interpersonal relationships."12

The Conditions for Growth

The concept of general economicgrowth was not present in the pagan cultures of antiquity. It wasonly in Judaism and Christianitythat such a view of life couldflourish, precisely because economic growth was understood personally and culturally: it is the product of outward response to basicethical requirements. Magicalmanipulation of the environmentwas rejected officially as an ille-


gitimate form of economic practice. Prayer to a personal Creatorby the humble believer is legitimate; ritual offerings to polytheistic deities or impersonal forceswas outlawed. It is not ritual accuracy that God requires, but ahumble heart and obedience toethical laws (Micah 6 :6-8). Christianity and Judaism prohibitedenvy and jealousy. Men are not tocovet their neighbor's goods (Exodus 20: 17), nor are they to envythe prosperity of the wicked(Proverbs 24 :19-20).

The most comprehensive of allcolonial American Puritan treatises was Rev. Samuel Willard'sCompleat Body of Divinity, thelargest book. ever published inPuritan days (1726). It was acompilation of Willard's sermonson the larger catechism, whichtook him twenty years of Sundayevening services to finish. Thesection on the Eighth Commandment, the prohibition of theft,contained a comprehensive critiqueon envy. Willard denied that weare hurt by our neighbor's advantages. (This fallacy has beencalled by Mises the Montaignedogma, i.e., the belief that in anexchange of goods, one man's gainis the other's loss. It was a basicerror of economic mercantilism,which was a prominent philosophyin Willard's day. Mises correctlyargues that this doctrine is at the

bottom of all modern theories ofclass confiict.13 ) Envy, Willardcontinued, feeds on grief. It leadsto mischief. It is utterly unreasonable, hate without a cause. Itis an affront to God, for God hasset men up for His purposes; envyis an affront to God's purposesand glory in this world. Furthermore, it despises God's gifts. Itleads .to covetousness (j ealousy,in Schoeck's use of the term).Men should not be tempted to takerevenge on those who are moreprosperous than they are.14 Withpreaching like this, men found itdifficult openly to envy or covettheir neighbor's prosperity. Thefruits of men's personal laborcould be safely displayed. It wouldpay men individually to plan forthe future, both individually andin groups. The free market couldflourish because the ethical supports so fundamental for its existence were provided by Christian preaching and laws againstmagic.

Sack to Magic?

Magic again is coming back intothe thinking of Western men. Byabandoning the belief in a CreatorGod and a world of personal law,modern man has been thrown backinto the grim polarity of theclassical world: blind impersonalfate vs. blind impersonal chance.15

R. C. Zaehner is quite correct in


beginning his study, Zen, Drugsand Mysticism (1972) ,with ananalysis of the philosophy of thebiologist, Jacques Monod (Chanceand Necessity). Man is alone in aninfinite world, simultaneously determined by and subject to totalrandomness. This is all the promise of science holds for man: anendless, meaningless process ofdeterminism and indeterminism.Men seek to escape this world bymeans of mystical illumination(meditation, drugs, alpha-wavemachines) or by means of powerfrom below (magic and revolution). A world without God is aworld without meaning. It is aworld ripe for the Satanic religionof magic.

From an economic point of .view,we already have a widespread philosophy of envy present in industrial societies. If magic is reintroduced to the West, then culturaldegeneration is assured. Modernsociety is not some autonomousmechanism. It needs ethical andphilosophical support. We shouldheed Schoeck's warning: "Theprimitive people's belief in blackmagic differs little from modernideas. Whereas the socialist believes himself robbed by the employer, just as the politician in adeveloping country believes himself robbed by the industrial countries, so primitive man believeshimself robbed by his neighbor,

the latter having succeeded byblack magic in spiriting away tohis own fields part of the former'sharvest."16 Modern secularism andsocialism threaten us with economic reversal- the kind of disastrous reversal promised. by Godin the 28th chapter of Deuteronomy. Magic and envy, whethersecular or animistic, are equallyprimitive. I)

- FOOTNOTES -

1 Edward C. Banfield, The UnheavenlyCity: The Nature and Future of OurUrban Crisis (Boston: Little, Brown &Co., 1970). A second edition, The Unheavenly City Revisited (1974), answers hiscritics politely.

2 Robert A. Nisbet, "Urban Crisis Revisited," Intercollegiate Review (Winter,1970-71), p. 7. Cf. Christopher De Muth,"Banfield Returns," The Alternative(Nov. 1974).

3 Frederick Mosteller and PatrickMoynihan (eds.), On Equality of Educational Opportunity (New York: RandomHouse, 1972).

4 Ibid., p. 28.5 Ibid., p. 49.6 Helmut Schoeck, Envy: A Theory of

Social Behavior (New York: Harcourt,Brace & World, 1969), p. 37.

7 Ibid., p. 40.8 Ibid., p. 47.f} Ibid., p. 48.10 Ibid., p. 41.11 Ibid., p. 50.12 Ibid., p. 52.13 Ludwig von Mises, Human Action

(3rd ed.: Chicago: Regnery, 1966), p. 664.14 Samuel Willard, A Compleat Body

of Divinity (New York: Johnson Reprin ts, [1726] 1969), pp. 750-52.

15 Charles Norris Cochrane, Christianity and Classical Culture (New York:Oxford University Press, [1940]), pp.156-60.

IG Schoeck, Envy, p. 41.

HANS F. SENNHOLZ

st Money

WITH THE APPLAUSE of mostAmericans, President Ford declared inflation to be Public Enemy Number One. At the presentrate of inflation our real incomeswill be significantly reduced in thisdecade, retirement incomes willerode substantially, savings willvanish, fortunes melt away, andthe economy stammer and falterin a violent fever of hyper-inflation. In fact, the present rates ofinflation carry with them the mostominous implications for democratic institutions and peacefulsocial cooperation.

But this public condemnation ofinflation sounds like a public confession of sins in church on Sun-

Dr. Sennholz heads the Department of Economics at Grove City College and is a notedwri ter and lecturer on monetary and economicaffairs.

This article is published by permission froman address before a November 1974 meeting ofthe Committee for Monetary Research and Education.

88

day morning. The preacher intones the confession, the congregation accompanies him in loudvoices, and then returns home tosin again. The President denounces inflation on Monday andsigns another multi-billion-dollarappropriation bill on Tuesday. Politicians who are the noisiest inflation fighters on Wednesday submitmore costly bills for economic welfare and distribution on Thursday. The news commentators publicly enlist in the war on inflationon Friday and bravely endorse another costly program for politicalimprovement on Saturday. Thefollowing week the ritual is chanted all over again.

The federal government is nowdeclaring war on the inflation itinitiated and promoted and whichit continues to press forward withever greater force. The same politicians who now sound like mili-

1975 GOLD IS HONEST MONEY 89

tant inflation fighters pushed hardin the past for every dollar ofdeficit spending. In just ten years,from fiscal year 1965 to 1975, thefederal government boosted itsspending from $118.4 billion to anestimated $304 billion. Expenditures on "human resources," i.e.,income redistribution, alone rosefrom $35.4 billion to an estimated$151.5 billion. (Education andmanpower from $2.3 billion to$11.5 billion; health care from$1.7 billion to $26.5 billion; income security, i.e., retirement anddisability, unemployment insurance, public assistance, social services, from $25.7 billion to $100.1billion; veterans benefits and services from $5.7 billion to $13.6 billion.) 1

Such a rapid growth of government, however achieved, wouldhave strained the American economy as economic resources werewithdrawn from business and individual taxpayers. But this process of redistribution was carriedout through the most insidious ofall possible methods: deficit spending and money creation. In thoseten years the total federal government deficit amounted to an estimated $113.5 billion - since 1970alone to $77.5 billion.2 Simultaneously, the quantity of Federal

1 Cf. The Budget of the United StatesGovernment, Fiscal Year 1975, p. 52.

2 Ibid., p. 331.

Reserve credit was inflated from$39.9 billion on January 1, 1965to $90.8 billion at the present. Thetotal money stock, consisting ofdemand deposits in commercialbanks and 'currency in circulation,rose from $160 billion to $282billion.

The Costs of Inflation

This has been the worst monetization of Federal debt since WorldWar II. In fact, the 1960's and1970's have been the longest period of deficit spending and currency inflation since the Continental Dollar debacle during theAmerican Revolution. And the endis nowhere in sight. If the Federal deficit spending merely wereto exact economic resources in theamount of the deficit, let us say$20 billion, the economic loss tomoney holders would be very smallindeed, only $20 billion. But thegiven deficit and its monetizationcauses goods prices to rise and thepurchasing power of the monetaryunit to fall, which alters the creditor-debtor relationship of nearly$3 trillion of long-term debt. Ifthe dollar should fall at the modest rate of 10 per cent, the creditors will lose $300 billion and debtors will gain this very amount. Ata more realistic depreciation rateof 15 per cent, American creditors are losing $450 billion annually, which is reaped by the debt-


ors. As the U.S. government is thelargest single debtor with an estimated 1975 debt of $508 billion, itis gaining $76.2 billion annuallythrough debt depreciation. Butmany millions of American creditors are losing a total of $450 billion. This is why inflation is notonly a Federal tax on money holders but also a terrible instrumentfor the redistribution of wealthand income. In fact, the magnitude of this redistribution throughFederal inflation, in addition tothat through social policy, probably exceeds one-half of Americandisposable income, and as such isthe most massive juggling of economic well-being in the historyof man.

A free society that willfully embarks upon such a road is suffering a terminal case of redistribution cancer. It is bound to sufferever more symptoms of social conflict, ,poverty and tyranny. A democratic society that has thus beenled astray by its political leadersmay not expect to get off the inflation road until it elects to return to integrity and honesty. Future national elections will revealwhether the American people choseself-destruction willfully or werejust misguided temporarily.

To stabilize the U.S. dollar, theU.S. government must be made torelinquish its monopolistic powerover money and banking. As infla-

tion is a Federal policy, the following restrictions on governmentare needed if inflation is to behalted:

1. The Federal budget must bebalanced each year.

2. The engine of inflation, theFederal Reserve System, mustbe inactivated, or better yet,abolished.

3. The Federal Reserve moneynow in circulation must bemade fully redeemable in gold.

Balance the Budget

Balancing the Federal budgetdoes not necessarily spell the endof economic and social policy bythe federal government. But itwould mean open redistributionfrom taxpayers to beneficiaries.Every new expenditure would haveto be met with new tax revenue.Both the U.S. Congress and theAdministration would have to regain the lost virtues of fiscal discipline and honesty. They wouldhave to cut programs and allocations now in order to avoid largedeficits next year.

A balanced budget would greatly reduce the pressures for debtmonetization and currency inflation. But it would not guaranteedollar stabilization. The FederalReserve System as it is now constituted has independent powersof currency inflation and creditexpansion. These powers must be


revoked either through inactivating the System or abolishing italtogether. Only when the engineof inflation is thus stilled canmonetary stability be assured.

Inactivate federal Reserve

Under the' influence of the "neweconomics," which the Full Employment Act of 1946 elevated to agovernment mandate, the FederalReserve System is conductingmonetary policies of full employment and economic growth. In periods of recession it is expected tostimulate the economy with injections of easy money and credituntil satisfactory levels of employment are restored. In periodsof inflation the System is expectedto stabilize the situation throughcredit stringency or even contraction. In short, its very raisond'etre is the manipulation of theAmerican economy according tothe recipes of the new economics.

Experience alone would dictatean. immediate inactivization ofthis central command post overthe economic lives of the American people. In the sixty years ofits existence the Federal ReserveSystem has presided over unprecedented economic instability over two depressions of which onewas the longest and most severein American history, over sevenbooms and recessions, and an inflation that reduced· the American

dollar to less than one-fifth of itspre-Federal-Reserve value. This isindeed a long record of money mismanagement.

Even if the System had beenmanaged by the greatest financialminds of the century its verypremise of central management ofmoney and credit is alien to economic freedom and contrary tostability. The very existence of amoney monopoly that endows itsfiat issues with legal tender forceis antithetic to individual choiceand freedom. And by its very nature as a central bank, it must

. seek to place its currency in theloan markets, or withdraw it, inorder to manage and manipulatethose markets. Since neither theexpansion nor the contraction offiat money imparts any social utility, we mllst conclude that FederalReserve policies necessarily aredisruptive to monetary stability.In particular, its frequent burstsof currency expansion, so popularwith government officials, politicians and their beneficiaries, havegiven our age the characteristicsof unprecedented monetary instability.

Notes Remain in Circulation

To inactivate the engine of inflation does not mean withdrawalof all its money and credit. Forlack of other money, Federal Reserve notes now in the people's


cashholdings and member bank reserves -now held by the System,should remain in circulation. Afterall, deflation, Le., reduction of themoney stock, would necessitatecorresponding price and wage reductions, for which neither business nor labor are prepared.

When man is free he choosesnatural money that is free fromall strictures of government andpolitics. Gold is world money thatunites all countries in one monetary system and facilitates peaceful exchange and division of labor.For more than two thousand yearsits natural qualities made it man'suniversal medium of exchange. Incontrast to political money, it ishonest money that survived theages and will Iive on long after thepolitical fiats of today have gonethe way of all paper.

Redem.ption of the U.S. dollarin gold would be a simple undertaking that needs no central bank,no Federal plan or policy, merelypayments in gold. At a given market exchange ratio between thepaper and gold, the federal government merely resumes paymentof the gold it forcibly seized fromthe American people in 1933 forthe paper it issued since then.People thus would be free againto choose between the paper notes,the quantity of which is rigidlylimited, and the gold now hoardedin Fort Knox. Every ounce of gold

that is withdrawn would reducethe quantity of paper, which wouldbecome a mere substitute for gold,the money proper. Thus, onceagain, the people of the UnitedStates would have hard and honest money, the golden cornerstoneof a truly great society.

Political Y5. Natural Money

The gold standard functionswith the force and inevitability ofnatural law, for it is the money offreedom and honesty. Society maytemporarily depart from it in thevain hope of replacing it withpolitical money that is managedand manipulated for political ends- used and abused as an instrument of public plunder. So thepeople must choose between political money, of which they may tryanother issue or series, and natural money. In the end, a societythat prefers social peace over conflict, individual freedom over government coercion, wealth over poverty, has no alternative but to usehonest money, which is gold.

Returning to the gold standard,it is true, would precipitate a serious economic readj ustment, commonly called a recession. But thisis not the fault of gold. The political paper leaves behind a vastarray of maladjustments and mal·investments that need to be cor·rected. In fact, they would becorrected in any case, sooner or


later, when the creation of papercomes to an end.

The economic recession need notbe long and severe, provided thefederal government does notstand in the way of the necessaryreadjustment. After so many yearsof false stimulation through easymoney and credit, many mistakesneed to be corrected; some projects should be abandoned andothers initiated. The whole economy needs to readj ust to thewishes and commands of the millions of sovereign consumers of afree economy.

Reduce the Obstruction

It is important that the federalgovernment does not intentionallyor inadvertently obstruct the re~

turn to hard money. When the readjustment recession sets in, thefederal government must not beallowed to resume deficit spending. Like anyone else, it must reduce its spending when its revenue declines. In particular, itmust not be allowed to impose newtax burdens at this critical moment of recession and readj ustmente It must not repeat the supreme folly of the Hoover Administration which, in 1932, doubledincome taxation. Also, the federalgovernment must not be permittedto operate with deficits that arefinanced with the people's savings.The U.S. Treasury· entering the

loan market at that critical moment of painful readj ustmentwould deprive business of urgently needed funds and greatly raisebusiness costs through soaring interest rates, which again wouldaggravate the recession and generate more unemployment. Andwhat would be blamed for thedilemma? The fiat inflation thatcaused the maladjustments, thedeficit spending that is aggravating it, or the gold standard? Thedeficit spenders would doubtlesstry to lay the blame on the doorsteps of gold.

An administration that welcomes monetary stability wouldbalance its budget even though itsrevenue declines. It would avoidplacing new burdens on businessduring the readjustment period.It might even strive to lighten thetax load in order to hasten therecovery. But such a reduction oftax costs must not be negated bynew deficits that burden the capital markets and raise interestcosts. To reduce the costs of government and facilitate speedy recovery means to reduce government consumption of economic resources, not merely a change offinance techniques from taxationto borrowing.

Relaxation of Controls

A significant reduction of Federal spending not only would save


funds and resources but would alsoenhance productive employment.For currency stability, it does notmatter which particular expenditures are reduced as long as thebudget is balanced. Of course, itwould be beneficial to productivityand quick adjustment if Federalcontrols were substantially reduced and bureaucratic regulationrelaxed or abolished. Many industries can be revived through allkinds of de-regulation. With distressing monotony, Federal regulation has produced sick and anemic industries. The ICC's strangulation of the American transportation industry, for instance, hasdone incalculable harm that exceeds by far the budget expenditures of the controllers. The boostto productivity from a liberationof business energy could not comeat a better time.

An administration that welcomes monetary stability wouldwant to facilitate a speedy read-

Double Punishment

justment through significant cutsof business taxes. A roll-back ofcorporate income taxes, for instance, would make corporationsmore profitable, which would boostcapital investments, create newjobs, raise output and wage rates,and otherwise smooth the readjustment process.

The time clearly has come for apublic commitment to the preservation of the U.S. dollar. The ultimate destination of the presentroad of political fiat is hyperinflation with all its ominous economic, social and political consequences. On this road no Federalplan or program, incomes policy,control or .nationalization, nothreat, fine, or prison can preventthe continuous erosion and ultimate destruction of the U.S. dollar. The only alternative is toabandon this road of political fiatand return on the proven path ofour forebears to honest money,which is gold. I)

IDEAS ON

LIBERTY

THE WELFARE STATE is one that robs Peter to pay Paul, and its

success lies in the fact that Paul is fully aware and grateful for

the benefit received while Peter is bewildered over the identity ofthe robber. He is apt to blame the tradesman over whose counter

he pays his shrunken dollars, and thus private enterprise is doubly

punished.E. C. RIEGEL

Founding FathersCHARLES R. LADow

As GLADSTONE SAID, "The American Constitution is the most wonderful work ever struck off at agiven time by the brain and purpose of man." It certainly is a distillation of the best of politicalthought, from Aristotle down tothat remarkable collection of hardwon traditions which make up theBritish Constitution. Both Constitutions possessed the inevitablefault that they were unable toguarantee the persistence of thebreed of thinking which producedthem. I cannot recall who said:"Marriage is a well-nigh perfectinstitution; but very few arefitted to practice it." This observation applies equally to our Constitution. Madison and his peersmust certainly groan in theirgraves, if they could but knowwhat their successors have doneto the institutions they fDunded.

Mr. LaDow, of San Diego, recently retired asa teacher of social studies in high school.

It would be well to ask whatbasic errors the founding fathersmade in that instrument. Even ifthe errors were erased, the dangerwould still arise that scamps andthe ignorant would manage to dilute its purposes; however, erasure of the most obvious mistakesin its construction and early execution could remove some of theopportunities for the tragic distortion of our basic law whichhas ensued.

The basis of any law is its intent, which existed in the meetingof minds of its promulgators. Tomaintain otherwise is to allowthat any judge may interpret itsintention to suit his own notions.Neither our Constitution, nor thelegislatures for which it provided,were designed for such futile purpose. Its ratification signifiedbinding agreement with the Convention's intent by all parties toour government. Provision foramendment was intended to allow

95


for correction of inevitable oversights, such matters as we hereaddress ourselves to; not to alterthe fundamental purposes andspirit of the document. To holdotherwise. is, as Chief JusticeJohn Marshall said, in Marburyvs. Ma,dison, to render the Consituation "an absurd attempt tolimit a power in itself illimitable."A contract means what its signatories intended it to mean. Sacredness in the intent of contractswas reiterated in the DartmouthCollege case.

The Declaration of Independence

So many persons, both learnedand unlearned, prefer to cite TheDeclaration of Independence asthe spiritual source of the Constitution that it may be well to inspect its key intent. The words,"We hold these truths to be selfevident; that all men are createdequal . . ." are the most oftenquoted, and speakers vie with oneanother in attributing meaningsto, or heaping scorn on, this fineexample of rhetoric. Some lightcan be thrown on the intent ofthe author of the Declaration byexamining Jefferson's originaldraft. The same passage read:"We hold these truths to be sacredand undeniable; that all men arecreated equal and independent..." Jefferson thus avoided turning a noble religious concept into

a logical canon. The addition ofthe qualification of "and independent" clearly implied a firm individualism foreign to many whouse this passage to fortify collectivistic purposes. Not knowinghow Jefferson's words came to bealtered, one can suspect that itwas one of those common disastersof committee work. Anyone whoknows the thinking of his peerswould suspect that they were inagreement with his original intent,but were probably just wordtrimming.

How John Locke's "Life, Liberty, and Property" became "Life,Liberty, and the Pursuit of Happiness" is another matter. J efferson was not a dogged plagiarist,and probably liked the ring of it.I t does sound less pedestrian thanLocke's bit; but that certainlydoes not mean that its intent wasforeign to its origin. The love thatJefferson bestowed upon Monticello and all other fine things tellsus of his awareness that privateproperty is a considerable essenceof happiness. That "and independent" nailed it down. How can onebe independent if the right to private property is not sacred?

Turning to the ConstitutionalConvention, the main conflict ofopinion was between the Federalists and Anti-federalists. That thedifferences of these factions werenot ineluctable was shown by their

1975 BLUNDERS OF THE FOUNDING FATHERS 97

ability to come up with the document. Later addition of the Billof Rights, most especially the 9thand 10th Amendments, represented satisfactory resolution of theirdifferences. Individual misgivingsremained, but the ratification ofnine states made the Constitutionthe law of the land.

Differences of interpretationlater led to war, but the Confederate Constitution was a virtualcopy of the original. Its preamblecalled for the establishment of a"permanent Federal Government"and the main objection it soughtto remove was Federal invasionof rights reserved to the statesby the 10th Amendment. Presuming correctness of this objection,original misgivings of the Antifederalists had some justification,as subsequent developments haveborne out. Without equivalentamendment to legalize the changes,states rights are being legislatedout of existence or eroded bycourt decisions.

The Intent Is Clear

Whatever flaws we may detectin the Constitution, the essentialdrive of the original document iscrystal clear. Precisely its wholethrust is the protection of individual liberty and the careful restriction of government inroads,most especially those of the Federal government. Perhaps the ori-

ginal requirement that all directpersonal taxes must be equal(abrogated by the 16th Amendment) was the most essential safeguard. Not only did it ensure thesacred principle of equality enunciated in the Declaration of Independence and make certain thatall individuals would be equallyinterested in governmental economy; but it was an effective stayagainst the corruption and totalitarian moves which mark our government today.

"The power to tax is the powerto destroy" and nothing can bemore important than limiting governmental power. It cannot be toooften pointed out that the Bill ofRights, revered even by our socialists to a point which outweighsthe main body of the document,is totally a list of "thou shaltnots," like the Ten Commandments, directed at the Federalgovernment. Congress breaks thespirit of some of those commandments every term it sits! In viewof today's regimentation in a nation of once free men, let us tryto see what the founding fathershave done that has allowed matters to get so out of hand.

Money and Banking

It has been pointed out, byLeonard Read and others, thatthe Constitutional power givenCongress to "coin money and es-


tablish the value thereof" wasonly intended to be a "Bureau ofStandards" operation, like weightsand measures, to assure fair measure in trading. That fits the limiting sense of the document, aswe have noted. However, thefounders put no stipulation uponthe substance of the coinage. Withtheir recent experience with "Continentals," they might suspectthat coins might easily becomepaper and that, eventually, "setting the value thereof" mighthave no relation to its purchasingpower. Granting power to "borrow money on the credit of theUnited States" assured such anoutcome. That same Revolutionaryexperience should have indicatedthe propensity of government, ina pinch, to monetize its debt(Hamilton's "funding of thedebt") to let coming generationspay it, and allow speculators toprofit therefrom. Anti-federalistsunderstood this; but they failed toinsist on a restrictive clause, forbidding the issuance of Federalpaper. That blunder is responsiblefor our current national debt andungoverned inflation which attendsits ongoing monetization.

Even the necessity of governmental coinage is brought intoquestion by the story of the Denver Mint. It was started by twogold buyers to avoid the risks ofprimitive transportation of their

commodity to the Philadelphiamint. (Even Brinks has known security problems!) Their privatestriking of coins exercised theFederal Treasury men, who soughtto undo their activity. When investigation showed that their coinageeven exceeded Federal standards,the T-men were stymied. However,continual harassment caused oneof our entrepreneur's wives tosuggest that they strike a deal.With the stipulation that the treasury maintain the mint, achievingtheir original purpose, they soldthe plant to the government. Themint now stands on ground onceowned by the private enterprisethat founded it.

There are a number of fine private mints today, perfectly capable of taking care of the coinageaccording to any standard ofweights and measures. Currentsuspicions, in Congress itself, regarding the real quantity of goldremaining in Fort Knox raise thequestion of the fitness of government even to be trusted with thematerials of coinage. Constantcentralized burning of worn monetary notes raises added questionsof security. Decentralization ofrisks is a first consideration ofsafety, as every miser knows instashing his hoard.

Anti-federalist argumentsagainst a national bank are toowell-known for recounting; but,


here again, opponents of such aninstitution failed to see that itsproscription was printed in theConstitution. At that, Hamilton'ssuccess in getting a bank billpassed was achieved by a Federalist bribe: agreement to move thecapital city to the Potomac. Thefounding fathers had their Watergates too! Let it suffice to pointout that this Constitutional oversight opened the Pandora's boxfrom which finally emerged theFederal Reserve which, combinedwith Treasury paper, is the sourceof our current monetary woes.

Post Office

"Establish post offices and postroads." In itself, the Post Office isa minor irritant, except perhapsto those who, like Life and Look,attribute their failures to its ministrations. However, the blindfaith in the· necessity for that Federal institution, only recently coming into more question, has undoubtedly evoked chain reactionsin various directions. Railroads,airlines, airports, automotivetransport, and all the facilitiespertinent thereto have been touchedby this clause. Success and failureof private enterprise in all theseareas has, in some measure depended on Post Office policies.Special privileges for those engagedin these fields and many attendant portions of the market show

little respect for the uses of competition. As we are beginning torealize, governments are the onlytrue monopolists; and monopoliesaffect the welfare of all their suppliers, being cruelest to the smallest. (For example, United Parcelmay survive; but what happenedto local, one-truck, parcel deliveries - an activity open to the unemployed?) Of course, the disastrous aspect of the institution isits inevitable inefficiency, whichis an economic burden on everyone. Establishment of the PostalSystem as a public corporationwas an admission of the foregoing.Its failure to ameliorate the condition was foregone from thestart. It can no more do the jobthan can public transportation systems of any sort. The difficulty ofmail delivery in 1789 made theConvention's inclusion of thisclause plausible; but the outcomehas not justified the act.

Interstate Commerce

On the face of it, delegation toCongress of the power to regulateinterstate commerce was a sagacious and necessary step. The entire history of states has beenmarked by trade wars, tariffs, andembargoes. It was presumptivethat our states, from the thirteento the fifty, would have engagedin such activities; and avoidingthat was of the utmost importance.


However, there was no stipulationlimiting the excercise of this power and it should have been foreseen that it could generate interference with commerce even moreonerous than the faults it curbedin the states.

The founders were fully awareof the dangers of governmentalpowers, as exposed in their so recent detailed charges against KingGeorge. They would have beennaive indeed to suppose that "itcould not happen here." It wouldnot have unduly cluttered the proper brevity of the instrument toadd a clause restricting the commerce power to that legitimatestoppage of state interference intrade. Perhaps the proscription ofstate tariffs should have servedthat purpose; but the interstatecommerce cIause opened one ofthe greatest loopholes into whichFederal power has increasinglysurged. So, this must count as another error, encouraging the bureaucracy which now so drains ourproductive resources, upsettingtrade and hamstringing enterprise.

Education

Nothing was said in the Constitution about education. It hasbeen suggested that this benignneglect was sufficient and that the9th and 10th Amendments shouldtake care of that danger of power

extension. After all, no power wasdelegated in that field. However,four years before the first FederalCongress was seated the Ordinanceof 1785 had been passed, arrangingfor a section (640 acres) out ofeach township of public lands, plusone-third of the revenue of all gold,silver, lead or copper mines, to begifted to public education. Thusone-thirty-sixth of the future developing nation's most basic resources, land, plus promise of alarge share of its mineral wealth,was deeded to ensure the prevalence of public schools. So dear tothe democratic tradition is thesacredness of public educationthat one might be burned forheresy for questioning that Ordinance, or the loophole which madeit possible. However, when welook to the development of education in the original 13 states, wesee that it progressed splendidlywithout such paternalism. Although the land grant collegesand universities, with their richpublic resources, have been ableto purchase a good deal of eminence, they have hardly excelledthe great Eastern schools, or evenprivate schools elsewhere, whichwere built without the boon ofsuch public largesse.

Once public money walks intoeducation, schools are on their wayto sure politicization. Managementof curriculum and all other aspects


of our public schools, from kindergarten to the doctorate, is nowpolitically determined. What thatmeans was well said by Albert JayNock: "The whole institutionallife organized under the popularidea of democracy . . . must aimat no idea~ above those of theaverage man; that is to say, itmust regulate itself by the lowestcommon denominator of intelligence, taste, and character in thesociety it represents." Becausemost private colleges depend onsome Federal gr:ants to survive,and because government threatensto withhold such grants· if they donot comply with some regulationssupporting the above nonsense,our private schools now sufferfrom this political disease in anincreasing degree, becoming adjuncts of statism.

So much said about a subjectnot mentioned in the Constitutionmay seem like "whipping a deadhorse"; but one is sure that it willbe agreed, considering the proportion of our productivity which isconsumed by public education, andthe avidity with which all partiespursue its trappings and labels, ifnot its essence, that our time isnot wasted. Let us just say thatthe founders should have positively told Congress to keep itshands specifically off education. Itis bad enough to have the statesmeddling in it; but they wouldn't

have gotten nearly so far withoutthat original 1785 handout and allthe perquisites which inevitablyfollowed it. Education is altogethertoo important a thing, being thedevelopment of the individual, forgovernment to have anything to dowith it. If government were capable of directing the developmentof individuals, its products wouldnot be free men. We have seen theeffort made, not too long ago, inGermany, Italy, and Japan; andthe Gulag Archipelago is availableto all readers. States "shape" people. Individual efforts may enlighten them.

Public Works

Provision for public worksmakes sense. Government can'tcarryon in a wheatfield. Theremust be buildings, equipment,forts, drillfields, and armaments,although, under statesman-likemanagement, a company of SwissGuards might do. Still, let us bereasonable. Statesmen are rare andfew of us qualify. Let politicianshave what they need. But do theyneed over seventy per cent of theland in the Western states? Dothey need a publicly funded damon every stream? When they haveturned our most attractive landsinto parks, do they need to assaultthe moon?

By the time the Southern Statesseceded, they saw the way the wind


was blowing. In their Constitution, they corrected this oversightof the founding fathers. They provided that the central (Confederate-Federal) government wouldnot be allowed to erect publicworks in any state. Had they wonthe war, think what that wouldhave meant to Muscle Schoals,T. V. A., and the multitude of .other Federal boondoggles whichwere to come! Would that meanthat we now would be sufferingpoverty in the midst of an ecologist's paradise? No. Henry Fordhad the plans all worked up forMuscle Shoals. It would have beenattractive even to ecologists, forold Henry, crotchety as he was,never made an ecological mess inhis life. He was too neat andthrifty. His plan would have costthe taxpayers nothing and wouldhave created thousands'of taxpayer's jobs without adding a soul tothe public payroll (unless someunnecessary inspectors were sentaround) .

If you hadn't noticed it, privateoperators have to be neater thangovernment. To succeed, they haveto court the consumer. Governmententerprises have no such compulsion, and we are still paying formost of those public works. A gooddeal of the payment is in the formof inflation, as earlier explained;but we are directed to blame thaton butchers, or cattlemen who

slaughter young calves. It is notexonerating the "middlemen" orproducers from such foolishnessto point out that they are not theguilty ones. They, like their consumers, are the angry victims ofbad political economy. Sane policyrequires that everything that canpossibly be done by private initiative and support should be left tothe people. Not only is that the requirement of Articles 9 and 10. Itis also the way that works best.

The Elastic Clause: Art. I,Sec. 8., Par. J8

Perhaps the most glaring gaffeof the Convention was the inclusion of the "elastic clause." Tospecify delegated powers, but toinvite future legislators to decidewhat is "necessary and proper" inthe extension of those powers, is toencourage altering the intention ofthe document without amendment.This is just what has happened.Erasure of such practice was theessence of the decisions in Marbury vs . Madison and the Schechter Poultry case. From the administration of John Adams to that ofFranklin D. Roosevelt, the Supreme Court held the clear intentof the Constitution superior tocommon legislation. Later, eventhe Court has assisted in rewriting that intent.

To clarify that last statementregarding the Court, let the reader


'consult The Reconstruction Amendments' Debates. While it is notwithin the scope of this paper togo beyond the original Constitution and Bill of Rights, this reprint from the CongressionalGlobe, by the Virginia Commissionon Constitutional Government, contains the sense of Congress inwriting the 13th, 14th and 15thAmendments. No more than the16th Amendment have these Reconstruction Amendments stayedwithin the boundaries of theirintent. Compare legislative arguments clarifying Article 14 withthe host of recent Court decisions,including Bro1.vn vs. School Board,to see what I mean, rememberingthe principle that laws must meanwhat they were intended to meanby their framers. Otherwise, weare in the world of HumptyDumpty: "When I use a word ...it means just what I choose it tomean."

Returning to the "elastic clause,"at any rate it violates the rhetorical economy of the document. Legislators will expand their domainwithout any encouragement. It isunnecessary. Like the "generalwelfare" clause in the Preamble,it is subject to infinite expansionin interpretation. Properly understood, the latter clause is unobjectionable, of course, unless it isconstrued to mean establishmentof a welfare state, which is abso-

lutely and clearly alien to the pur..poses of the founding fathers.They saw the general welfare asconsisting of the liberty-under-Iawof individuals, which the Constitution was established to protectfrom excessive government itself,or the invasion of foreign power.

What Can Be Done?

If the foregoing reasoning iscorrect, what can be done about it?First, are conditions suitable forany corrective action? Well, it isgenerally agreed that governmentapproaches an inability to govern.Neither the President, nor Congress, is able to control the Frankenstein bureaucracy it has created, which has become, essentially, a law unto itself. By all accounts, public faith in politicians,of whatever brand, is at an alltime low. Congress attempts tomake the Executive the scapegoat;but is prevented from anythingmore than palliative action by thepower delegated to the bureaucracy created by Congress itselfand which outruns Executive power. Querulousness and backbitingcharacterize the scene, obscuringany real issues. Such an organizational vacuum invites leadership.

At this point, Amendments and/or the erasure of some amendmentsby the process, should be a possibility; but such action would only


be cosmetic surgery, failing to getto the root of the disease. Theywould be time-consuming, whileaffairs would continue to drift.For instance, consider how longthe Liberty Amendment (abolitionof the Income Tax) has been drifting around. Presumably state governments are too busy spendingFederal money to give it muchtime. Altogether, it would seemthat a piecemeal approach wouldnot engender the interest or enthusiasm required.

At this point, a real possibilityfor leadership should be open tostate Governors. If at least twothirds of them could agree, theycould ask their legislatures to callfor a National Constitutional Convention. Conditions being as theyare, it is not impossible that Congress would honor such a requestand call the convention.

Considering the current shambles of political philosophy in thisnation, there is a great risk in sucha step; but there is even greaterrisk in allowing matters to drift.Bicentennial celebrations draw attention to the purposes of thefounding fathers. Polls indicateincreasing conservatism amongthe electorate. The supply of freemarket economists and politicaltraditionalists is sufficient to expose our basic tradition. One cannever be sure about timing, except, sometimes, in one's own af-

fairs; but it would be hard to project a better time for reconsidering our priorities. Where is theperson who does not long foraway out of this nightmare? Somecan for revolution; but they arestill few and very confused. Thehunger for liberty is still strongin individuals and calls only forcertain direction toward it.

If this enumeration of blundersin our original Constitution is acceptable, it might be offered tothat Constitutional Convention asa beginning to its considerations.Our forefathers improved the Articles of Confederation. Theywould certainly not object to ourretouching their masterpiece, solong as it verifies their intentions.Since all factions of any consequence professedly hold that document in reverence, placed face-toface with it they should not do itharm. At the very least, it wouldbe fruitful to study it. Going overit, phrase by phrase, and debatingthe thrust of each clause, would besound exercise for any politician.Even if they came to no conclusiveaction and adjourned sine die, theaction should produce nothing butgood for the future of this nation.And, if they could find a fewwords, and let them be few as inthe original, to close up such loopholes as herein mentioned, wemight be well on the way to "cleanup that mess in Washington." ~

The WILLIAM H. PETERSON

or the ?•

WHY THE FAILURE of modern economics - the vaunted "New Economics" of John Maynard Keynes?As one interventionist scheme afteranother misfires - from the War onPoverty to the War on Inflation people are bewildered and forlornunder the impact of "stagflation/'a vicious combination of risingprices and rising unemployment.

The dilemma of the economicmanagers can be seen in the statement of Dr. Walter Heller, President Kennedy's chief economic adviser and former president of theAmerican Economic Association,to the Association's annual meeting in December 1973: "Economists are distinctly in a period ofre-examination. The energy crisiscaught us with our parametersdown. The food crisis caught us,too. This vias a year of infamy ininflation forecasting. There are

Dr. Peterson holds the John David CampbellChair in American Business at the AmericanGraduate School of International Managementin Glendale, Arizona.

many things we really just don'tknow."

Or consider the conflicting counsel fed to President Ford duringhis period of Economic Summitry.An editoral writer for The WallStreet Journal (September 27,1974) called the counsel a "Towerof Babel." The nation's leadingeconomists, bankers, industrialists, labor leaders and consumerrepresentatives counseled thePresident to cut taxes, raise taxes,leave taxes unchanged, reducesome taxes while increasing others.Again, the President was advisedto allocate credit, leave credit alone,tighten credit, ease credit. Oragain, he received recommendations to re-impose wage-price controls, set wage-price guidelines,let wages and prices find theirown levels.

Plainly, something is wrongwith modern economics; reallymany things are wrong with thedismal science in the 20th century.But it is beyond my scope here to

105


try to spell out and correct all themanifest errors of modern economics, save for one point - itsbasic approach. I submit that onereason for the breakdown of current economic policies lies in theirfundamental unit of analysisthe decided preference for the organization over the individual.

In economic analysis, the individual is It, the unit of account,the centerpiece of understanding,the raison d'etre of all activity.Without his direct incentive andwhole-hearted participation, no"social" scheme or economic planis likely to work. In fact, the dazzling failure of Keynesianism inthe 1960's and 70's can be directly traced to Keynes' virtual omission of the individual as such in hisGeneral Theory, published in 1936.Premonitions of this omission canbe found in Keynes' earlier statement in 1933:

The decadent international but individualistic capitalism, in the hands ofwhich we found ourselves after thewar, is not a success. It is not intelligent, it is not beautiful, it is not just,it is not virtuous - and it doesn't deliver the goods. In short, we dislike itand are beginning to despise it. Butwhen we wonder what to put in itsplace, we are extremely perplexed.!(Italics added.)

1 John Maynard Keynes, "NationalSelf-Sufficiency," The Yale Review, Summer 1933, pp. 760-61.

focus on IndividualMind you, my focus on the indi

vidual in no way is intended to disparage the need for social organization to achieve greater cooperation. Yet such organizations mustappeal to the self-interest of individuals to elicit their cooperation. Moreover, that cooperationhas to be voluntary if an organization is to succeed.

Unfortunately, many economistsand ccmmentators not only overlook the individual but compoundthe error by speaking of the "decisions" of various organizations.These organizations include businesses, newspapers, clubs, unions,nations, and so on. For example,economists and non-economiststalk of the actions of IBM and ITT,of France and Germany, of the Organization of Petroleum Exporting Countries and the United Nations as thinking and acting entities. In this vein, people talk ofwhat Chrysler has to say on autoemission standards, or what TheNew York Times had to say onsome issue. But the Times is anaggregation of thousands of employees and stockholders. Henceit is more accurate to talk of whatsome editorial writer for theTimes had to say on a specificissue.

The key to my argument is thatall organization decisions are, inthe final analysis, individualistic.

1975 THE ORGANIZATION OR THE INDIVIDUAL? 107

That is, any decision, whethermade in the name of the UN or inthe name of Chrysler, can be madeonly by individuals. This meansthat each individual, whether heis a delegate to the UN or an executive of Chrysler, must make uphis own mind. To be sure, his bossmay pressure or even direct him;but his boss is still another individual, and so the principle holds.

Moreover, as the individualisticapproach in economics makes clear,only individuals can think and act.Organizations, on the other hand,cannot think or, in a fundamentalsense, act. As Ludwig von Misesnoted:

A collective operates always throughthe intermediary of one or several individuals whose actions are related tothe collective as the secondary source.It is the meaning which the actingindividuals and all those who aretouched by their action attribute to anaction, that determines its character.It is the meaning that marks one action as the action of an individual andanother action as the action of thestate or the municipality. The hangman, not the state, executes a crimina1.2

The relevance of this statementto economic issues becomes clearer. The "wars" on poverty, unem-

2 Ludwig von Mises, Human Action(Chicago: Henry Regnery Company,1966), p. 42.

ployment, inflation, pollution andso on can only be understood inlight of the collective approach toeconomic analysis - the preferencefor the organization over the individual.

To be sure, this approach is frequently put forth in the name of"the public interest," and, after all,the public is of course an aggregation of individuals. Scores of interventionist acts by parliaments,assemblies and congresses are sopassed - and so fail. Yet the reason that these acts misfire lies ina fundamental misapprehensionof the individual and his motivation.

An Invisible Hand

Oftentimes, legislators and economic managers, acting under thismisapprehension, appeal for altruism and "the common good"rather than self-interest. But asAdam Smith observed in TheWealth 0 f Nations:

As every individual ... endeavors asmuch as he can both to employ hiscapital in the support of domestic industry, and so to direct that industrythat its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can.He generally, indeed, neither intendsto promote the public interest, norknows how much he is promoting it.By preferring the support of domestictothat of foreign industry, he intends


only his own security; and by directing that industry in such a manner asits produce may be of the greatestvalue, he intends only his own gain,and he is in this, as in many othercases, led by an invisible hand to promote an end which was no part of hisintention. Nor is it always the worsefor the society that it was no part ofit. By pursuing his own interest hefrequently promotes that of the society more effectually than when hereally intends to promote it. I havenever known much good done by thosewho affected to trade for the publicgood.3

Two historic examples of appealsto individuals to work for "thepublic interest" are the experiences of the Plymouth and Virginia colonists in the early Seventeenth Century. In each case, thecolonists were asked to cultivatethe fields in common, with the harvests going into a common storehouse. Communal cultivation failedin both cases despite the religiousfervor of the colonists. As Governor Bradford wrote in his history of the Plymouth experience:

For the yong-men that were most ableand fltte for labour and service didrepine that they should spend theirtime and streingth to worke for other

3 Adam Smith, The T¥ealth of Nations(New York: The Modern Library, 1937),p.423.

mens wives and children, with out anyrecompense. The strong, or man ofparts, had no more in divission of victails and cloaths, than he that wasweake and not able to doe a quarterthe other could; this was thought injuestice ...

They Tried Freedom

The elders of the Plymouth colony were in a quandary, with famine and extinction facing them.How could they get the coloniststo apply themselves for their ownsalvation? With luck they hit upon the idea of free enterprise andprivate ownership. The outcomewas spectacular:

By the time harvest was come, andinstead of famine, now God gave themplentie ... And the effect of their particuler [private.] planting was wellseene, for all had, one way and theother, pretty well to bring the yearaboute, and some of the abler sorteand more industrious had to spare,and sell to others, so an any generallwante or famine hath not beenamongst them since to this day.

Similar results marked the experience of the Virginia colony, asreported by Captain John Smith:

When our people were fed out of thecommon store, and laboured jointlytogether, glad was he could slip fromhis labour, or slumber over his taskehe cared not how, nay, the most hon-


est among them would hardly take somuch true paines in aweeke, as nowfor themselves they will doe in a day...

Does all this mean that the freeand responsible individual following his self-interest puts asideany feeling for cooperation withothers and for the plight of others? No, it doesn't. It means thatthe free and responsible individual recognizes his duties and obligations in all relationships hehas voluntarily entered. He recognizes that he benefits from cooperation with other individuals,that he shares in the knowledgeof others, that he consumes theproduction of others, and that heenjoys the company of others.

But the free and responsibleindividual naturally objects to being his brother's keeper - by law.He objects to being made to do good- by law. He objects to being required to sacrifice for others - bylaw. In all these instances, he istaken for granted - treated as acog in a state machine.

The individual can become resentful. As he loses freedom, hetends to shed responsibility. Recallthe era of Prohibition when UncleSam issued the 11th Commandment, "Thou Shalt Not Drink."But the individual drank as neverbefore, and today we justly remember the era as the "RoaringTwenties."

For the Good of the Whole

Still, the appeal to the individual to suppress his own interestsfor the "good" of all goes on andon - no matter, it seems, whatthe form of government.

Proclaimed Joseph Goebbels,Nazi minister of propaganda andan official of the National SocialistWorkers Party: "To be a socialistis to submit the I to the thou;socialism is sacrificing the individual to the whole."4

Said Stalin: "True Bolshevikcourage does not consist in placing one's individual will above thewill of the Comintern. True courage consists in being strongenough to master and overcomeone's self and subordinate one'swill to the will of the collective,the will of the higher partybody."5

Hitler: "It is thus necessarythat the individual should finallycorne to realize that his own egois of no importance in comparisonwith the existence of his nation... that the higher interests involved in the life of the wholemust here set the limits and laydown the duties of the interestsof the individual."6

4 Quoted by Susan Love Brown andothers in The Incredible Bread Machine(San Diego: World Research, Inc. 1974),p.135.

5 Ibid.

6 Ibid., p. 136.


Yet political thoughts predicated on the submergence of theindividual are not alien to democracies. In our own country,for example, President Johnsondeclared: "Weare going to takeall of the money that we think isunnecessarily being spent and takeit from the 'haves' and give it tothe 'have-nots' that need it somuch."7 And, in a similar vein,President Kennedy said: "Asknot what your country can do foryou - ask what you can do foryour country/'8

As the authors of The Incredible Bread Machine comment: "Itis by taking humanitarianism toits logical political consequencethat dictatorships are establishedand the rights of individual people ravaged. Controlled housing.Controlled prices. Controlledwages. Controlled business. Controlled unions. Controlled money.Controlled banking. Controlled television. Controlled news. Controlled people."9

Controls, in other words, fail tocomprehend the inescapable individualistic nature of human action. Inadvertently or advertentlythe controllers accept the doctrineof behaviorism - the idea thatmen react rather than act, that,bluntly, people are sheep. In one

7 Ibid., p. 135.8 Ibid., p. 136.9 Ibid., p. 138.

degree or another, the controllersmove along the pathways of theBehaviorist School of psychology.Let me, then, set forth two contrasting propositions relating tothe organization or the individual.

Proposition Number 1: There are nomysteries to human nature becausethere is no human nature.... I propose to abolish autonomous man, theman who believes in freedom and dignity. His abolition is long overdue. Hehas been constructed from our ignorance and as our understanding increases, the very stuff of which he iscomposed vanishes. To man qua manwe .readily say good riddance. "Howlike a god!" said Hamlet. Pavlov, thebehavioral scientist, emphasized "Howlike a dog!" That was a step forward. lO

Proposition Number 2: Human actionis necessarily always rational. ...Man is a being capable of subduinghis instincts, emotions and impulses;he can rationalize his behavior. Herenounces the satisfaction of a burning impulse in order to satisfy otherdesires. He is not a puppet of his appetites. A man does not ravish everyfemale that stirs his senses; he doesnot devour every piece of food thatentices him; he does not knock downevery fellow he would like to kill. He

10 B. F. Skinner, Beyond Freedom andDignity, (New York: Knopf, 1971), pp.200-201. Quoted and slightly paraphrasedby Albert H. Hobbs, "Dignity and Degradation," The Intercollegiate Review, Summer 1973, pp. 243-54.

1975 TIlE ORGANIZATION OR THE INDIVIDUAL? 111

arranges his wishes and desires intoa scale, he chooses; in short, he acts.What distinguishes man from beastsis precisely that he adjusts his behavior deliberately.ll

Skinner's Behaviorism

The first proposition, viewingman as little more than a whiterat in a laboratory maze, as areactor rather than an actor, ispenned by America's leading proponent of behaviorism, B. F. Skinner. Dr. Skinner tells us the individual behaves according to hisenvironment and the stimuli ofthe moment. This individual behavior is supposedly quite predictable and hence quite controllable - by others. Accordingly, Dr.Skinner refers approvingly to"operant conditioning" and "environmental determinism." Thegood Doctor tells us environmentalfactors "are the things whichmake the individual behave as hedoes. For them he is not responsible and for them it is useless topraise or blame him."12

So good-bye responsibility, selfdetermination and self-control.Man is beyond freedom and dignity. He responds but he is not

11 Mises, op. cit., pp. 16-19.12 B. F. Skinner, Science and Human

Behavior, (New York: Macmillan, 1953),p. 448. Quoted by Albert H. Hobbs, op.cit., idem.

responsible. He is but an animal,anything but a thinker. This approach extended to economic analysis renders man into little morethan a statistic, buried in a lettersymbol in a Keynesian formula.

In sharp contrast to the behaviorist view of the world is thework of Ludwig von Mises, epitomized in Proposition Number 2. TheMisesian man is a thinker - to besure, rarely a profound thinker,but a thinker nonetheless. Misesalso points out that man is theonly animal who has a highly individualized scale of values andsystem of goals. In fact, man isthe only animal who conceptualizes scarcity as a law of life, whoranks his preferences, who isaware of time, who is aware ofhis mortality.

Accordingly, man is the onlyanimal who engages in division oflabor and exercises what AdamSmith called "the propensity totruck, barter and exchange onething for another."13

Smith also noted that man isthe only animal who makes bargains: "Nobody ever saw a dogmake a fair and deliberate exchange of one .bone for anotherwith another dog. Nobody eversaw one animal by its gesturesand natural cries signify to an-

13 Smith, op. cit., p. 13.


other, this is mine, that yours;I am willing to give this for that."

This idea of man as thinker andtrader breaks with the dictates oflogical positivism. Mises rejectedthe strictures and approaches ofthe physical sciences as whollyinappropriate to the science ofhuman action. The individual simply can not be tested in the laboratory, molded by "human engineering," or predicted by statistical inference.

To Mises, man thinks before heacts. He choos es, rightly orwrongly, conditioned by his ownunique value scale. These choicesinteract and combine with otherindividuals' choices to constituteconsumer demands for the entirerange of goods and services, including the derived demand forcapital goods. In other words,these choices give sweep, scale,shape and substance to economicactivity.

Opportunity Cost

Moreover, every individualchoice, while conferring some utility or benefit, involves an opportunity cost - the cost of somebenefit foregone by his being ableto do but one thing at a time. Inthe words of Mises : "... actingman chooses, determines and triesto reach an end. Of two things ofwhich he cannot have together heselects one and gives up the other.,

Action therefore always involvesboth taking and renunciation."14

This searching analysis of individual motivation is preciselythe type of analysis missing inmodern economics, including government interventionism.

Wage-price controls, for example, have failed a thousand times.The repeated failures can be entirely explained in terms of theoverlooked individual. Typicallythe government, in the name ofanti-inflation, sets a full panoplyof "maximum prices." Theseprices are usually set below thosethat would have prevailed in afree market. Moreover, they areexpected to prevail while the central bank allows credit to expandand the money supply to increase.

But the wage-price control rationale doesn't jibe at all withindividual subjective values inreal-world price determination.This subjective determinationspans not only the supply of anddemand for goods but the equallycrucial supply of and demand formoney.

Naturally, as the money stockrises, subjective valuations ofeach currency unit tend to fall,both on the demand and on thesupply sides of the market. Accordingly, individual buyers bidmore for all available goods and

14 Mises, Ope cit., p. 12.


services, including capital goodsand the factors of production. Individual sellers find their costsrising and their profits increasingly squeezed. Sooner or laterthese sellers find it necessary toexport their goods to uncontrolledmarkets overseas, cut corners onquality, do business in "blackmarkets" at horne, or go out ofbusiness altogether. In any event,the controls lead to shortages,shipment delays, quality lapses,multiplying bureaucratic interferences and, ultimately, breakdown of the controls themselves.

"Contracyclical Policy"

Like price-controls, the Keynesian rationale also ignores theindividual, as noted. Today theworld is aflame with double-digitinflation directly attributable, Isubmit, to Keynesian policies.

Broadly, Keynesianism swingson macroeconomic "contracyclicalpolicy." This policy calls for budgetsurpluses in good times andbudget deficits in bad times so asto maintain "effective demand"and thus "full employment."Hence Keynesianism emphasizesspending rather than productionas the source of income and breakssharply with Say's Law (supplytends to create equivalent demand) .

But the "G" in Keynes' "fullemployment" formula of Y = C+

I + G (National Income = Consumption Spending + InvestmentSpending + Government Spending) works out to be about themost unstable, inflationary, politics-ridden and unscientific balancing mechanism that the economic managers could possiblyutilize. Specifically, as a cure ofunemployment, government spending simply assumes that joblessness reflects the failure of demand - never the overpricing oflabor which individual consumersreject. So as employment continues to lag, government spendingtends to get ever larger - andever more inflationary. As Misesnoted:

At the bottom of the interventionistargument there is always the ideathat the government or the state is anentity outside and above the socialprocess of production, that it ownssomething which is not derived fromtaxing its subjects, and that it canspend this mythical something fordefinite purposes. This is the SantaClaus fable raised by Lord Keynes tothe dignity of an economic doctrineand enthusiastically endorsed by allthose who expect personal advantagesfrom government spending)5

Too, the consumer spending andthe investment spending in theKeynesian formula subsume the

15 Mises, op. cit., p. 744.


thoughts and actions of millionsof consumers and businessmen.These individuals have their ownvalues, preferences and cost-pricerelationships which strongly tendto obviate the "contra-cyclical policy." This obviation comes partlyfrom the subjectively determinedforces of supply and demand.These forces, of course, are neverrepealed but are distorted byKeynesian policies.

"Contra-cyclical policy" alsotends to exacerbate the very business cycle it is supposedly stabilizing. Expanded governmentspending involves as a rule deficitfinance. The central bank accommodates the swollen debt instru-

ments of government and allowscommercial bank reserves to expand. The resulting credit expansion leads to false interest andprofit signals to entrepreneurs; itleads to industrial expansion andprice pressures, especially on capital goods and the factors of production. The upshot is inflation,soaring interest rates and, in theend, industrial contraction -recession or depression.

This is precisely the predicament in which the Western "'~orld

finds itself today.In sum, economic analysis which

ignores or downplays the individual and his subjective values isalmost certainly doomed to failure.

~

IDEAS ON

LIBERTY

Imprisoned Ideas

THERE are many classifications into which men and women may

be divided ... But, as I think, the only categorization which really

matters is that which divides men as between the Servants of the

Spirit and the Prisoners of the Organization. That classification,

which cuts right across all the other classifications, is indeed the

fundamental one. The idea, the inspiration, originates in the

internal world, the world of the spirit. But, just as the human

spirit must incarnate in a body, so must the idea incarnate in. an

organization. Whether the organization be political, religious, or

social is immaterial to my present argulnent. The point is that, the

idea having embodied itself in organization, the organization then

proceeds gradually to slay the idea which gave it birth.

W. J. BROW N, from the SpectatorSeptember 19, 1947

The Concept of Value

In

Ethics and EconomicsRIDGWAY K. FOLEY, JR.

THE CONCEPT OF SUBJECTIVE VALUE

provides one of the most strikingcharacteristics differentiating voluntarists from statists. One's definitionof value colors his individual view of reality and accountsfor many, if not all, of the choicesmade in a lifetime. Despite elucidation by notable persons, the concept remains elusive, renderingreiteration more than an idlegesture.

One tends to offer apologies formining tunnels seemingly exhausted in the past. Subjective valueappears, at a glance, to resembleone of those tunnels consisting ofa few specks of played-out ore anda host of useless residue. Werethis assessment accurate, mere recapitulation of the subjective the-

Mr. Foley, a partner in Souther, Spaulding, Kinsey, Williamson & Schwabe, practices law inPortland, Oregon.

ory of value might serve merelyto edify the writer, not the readers who have heard or read it allbefore from more ardent and convincing sources. Yet the mere factthat modern value theory recognizes the subjective nature ofvalue fails to mean that a lessononce uttered is forever learned.Indeed, human experience and behavior -demonstrate that thiscentral concept represents one of themost fugitive of ideas, difficult tograsp and even more taxing toapply. Thus, penetration to the coreof the concept seems warrantedfor two reasons: (1) to restateand communicate a basic truth and(2) to define and analyze the ideain a manner which will illuminatethe thought against the backdropof vexing and perplexing problems.

An analyst can gain insight

115


into the meaning of concepts byrecourse to a trusted friend: thedictionary. Like other trustedfriends, this one may be wrongon occasion but by and large itwill offer sound advice or at leastpoint the direction. Yet one mustconstantly recall that words constitute poor vehicles for the conveyance of concepts, and the imprecision of language may obscure the nature and essence oftruth.

After some false starts, my dictionary defines value as "relativeworth, utility or importance" ona scale of preference.1 The lexicographer offers some important insights derived from the bare genesis.

(A) The Individual and Value.First and foremost, value meansnothing unless it relates in somemanner to an individual, an acting human being.2 One cannotmeaningfully discourse upon worthor value unless he relates theworth of some tangible or intangible good or idea to some particular individual actor. Any creature lacking the capacity to choosebetween alternative courses ofaction cannot assess or recognizevalue.

(B) Value and Objects. Onewriter has correctly asserted thatdiscussion of value must include

consideration of the questions"value to whom" and "value forwhat purpose."3 An object evidences no value unless it can beutilized by some person to achievea certain goa1.4 Correct, as far asit goes: value does mean worth toan individual in relation to a goal,end or desire.

However, the view of objects asthe sole entity or repository ofvalue adumbrates reality. Valuesinclude intangibles. As discussedlater, the concept (and importance) of the subjective valuetheory extends beyond the confines of mere economic theory ordealings with material things. Itplays a· seminal role in the dismalscience, to be sure, but one mustnot discount the fact that humanvalues reach farther fences.

A simple explanation accountsfor the emphasis upon value inrelation to material goods: theconcept of subjective value developed almost simultaneously bythree economists working separately ...;.. Messrs. Carl Menger,W. S. Jevons, and Professor Walras5 - men whose minds were concerned with the problems accompanying the exchange of goodsand services. It is not that thesemen and their followers restrictedthe application of this novel theory to material matters but ratherthat they used it as a tool to explain economic phenomena and,

1975 VALUE IN ETHICS AND ECONOMICS 117

particularly, to refute the labortheory of value which arose inthe classical period and reachedits deadly apogee in Das Kapitalof Karl Marx.6

The objective value theory becomes manifest in the labor theory of value in the field of economics, the theory that the value of agood or service is determined bythe cost of production or theamount of energy expended.7 Thebrilliant Austrian economist andstudent of Professor Carl Menger, Eugen Bohm-Bawerk, incisively exposed the fallacies of thelabor theory of value in the latenineteenth century.8 Contrary tothe tenets of the labor theory ofvalue, value is determined by individual evaluations of personalutilitY,9 or, as Dr. North remindsus, the value of labor derives fromthe value of labor's product.1O

CC) Value and Ends. The viewthat value represents that whichpossesses utility clouds the expansive nature of value in thesame manner as the strict relation of value to tangible objects.One may value laughter or a sunrise - ephemeral but real delights- over butter, bread or bricks.One may value God, or love, orcommitment to a philosophy overhis own life. Concentration on thevery real role that value plays inmarket exchanges ought not mask

the equal truth that values equatewith both tangible and intangiblegoals as well as the means of satisfying those go'als. The value offriendship cannot be stated in market terms like the measure of apound of coffee.

Thus, value refers to worth asa means to an end as well as tothe end itself. Perhaps the imprecision of language betrays andmuddies this important distinction in common speech.

CD) Value on a Scale of Preferences. Leonard Read remarksthat possessions reflect a man'svalues and we are, in a very realsense, that which we own.ll True,to the extent that possessions accurately reflect goals. Values ofeach man refer to the goals ofeach acting individual as viewedby that person in the hierarchyof his purposes and measured byhim as relevant to those purposes.12 Each actor commands ascale of preferences in his life;only he can rate a particular goal,end, object or thing on that scale.

The Theory of Subjective Value

The objective theory of valueholds that absolute, intrinsic values exist and can be discoveredby man. Certain matters are inherently good or desirable andrank as absolutes on the scale ofpreference for every human being.


The subjective theory of value,to the contrary, recognizes thenonexistence of any means toidentify or define in absolute oruniversal terms the essential characteristics of an ultimate good.Dr. Rogge succinctly summarizesthis position:

The first of the propositions on whichI wish to base my argument is thefundamental proposition of all modern value theory: Value does not consist of objectively definable characteristics of a good or service; valueexists only as subjective judgment inthe mind of each beholder. It cannotbe measured directly but only indirectly by the behavior it elicits. Thereis no way that the subjective valuations of two people can be summed oreven directly compared.13

Consider the application of thisconcept in the economic milieu.The exchange value of any item,good, or service is what anotherperson will offer for it in voluntary exchange.14 No individualcan determine value for another;no one can comprehend the intricate hierarchy of preferencesresiding within another person.The practice of subjective evaluation represents the embodimentof freedom of personal choice orliberty.15 If nothing entails valueunless it bears a relevance to adesired end, no individual otherthan the actor can (1) recognizethe end sought and (2) measure

the relevance of the tangible orintangible value in -achieving thatend.

Achievement of any end requires payment of a cost. In theeconomic realm, we term thatcost the "price," the amount ofexchange goods satisfactory to awilling buyer and a· willing sellerin a free and· uncoerced exchange.Price acts as the indicator or objective expression of value; itmeasures value but does not constitute value.16

The common concept of cost disguises the fact that cost may bemeasured in nonmonetary or, indeed, nonmarket terms. What itcosts one to choose a course ofaction may not be measurable indollars and cents but in loss ofopportunities for happiness, safety, self-respect, love or some otherreal but intangible item of importance. Consider governmentnationalization of an industry orapplication of the doctrine of eminent domain for "social" purposes,current euphemism'S for outrighttheft. Under civilized standards,the state takes over the electricpower industry or the coal minesbut salves its collective conscienceby paying full (objective) valueto the owner. Objective value consists .of the amount of moneywhich expert appraisers tell theparties that some mythical buyerwould pay for the properties and


which some mythical seller wouldaccept. Yet payment of such anobjective cost cannot disguise robbery of the subjective worth ofthe enterprise, the right and opportunity to peacefully engage inthat endeavor. Subjective valueachieves free rein only in willingexchange; by definition, eminentdomain and nationalization proceedings involve coerced exchangewherein one individual's subjective scale of values indicates apreference to retain propertyrather than exchange it.

The Myth of An AbsoluteObjective Value

Adherents of the basic freedomphilosophy often encounter severedifficulties in understanding andapplying the theory of subjectivevalue. One primary reason concerns the apparent clash betweenthe idea of subjective value andthe belief in absolute principlesgoverning man, life and the universe. Many libertarians believe,rationally or intuitively, that lifecontains absolute tenets; for thisreason, these thinkers decry thepostulates of relativism, be it economic or moral. For example,Lord Keynes, challenged by contemporaries concerning the extended effects of his irrationalmonetary and employment policies, supposedly uttered the dictum, "In the long run, we are

all dead," a clear expression ofthe relativistic neomercantile approach to solution of economicproblems. Free marketeers disdainsuch an overture, cognizant thatman must pay a cost for everypurchase, that every cause produces effects. Again, in the fieldof axiology, libertarians oftendecry the concept of situationalethics, a trend which may justify"immorality" on a relativisticbasis.

Reflection reveals no conflictbetween the concept of subjectivevalue and the existence of fundamental absolute principles in theuniverse. The key lies in the nature of man: man is a finite, fallible, limited creature; he canglimpse truth through St..Augustine's dark glass. No man possessesunchallengable, immutable abilityto know truth; each of us maintains a world view frayed andscarred by his own ineptitude,flawing his perceptiol1 and causing his knowledge to deviate fromreality.

Truth or reality is absolute; itcannot vary; one cannot challengefact. Absolute principles derivefrom truth and exist untrammeledin the universe. These absolutesexist wholly apart from our perception. Man can contest truth orreality, but he must pay the priceof error.

The validity of the fact of· ab-


solute existence does not in anyway counteract the theory of subjective value. An actor places values on a range of choice relatedto his real or imagined goals.Truth may not rank high in hisperspective. Or, he may perceive adifferent truth from his neighbor.Or, he may value other truths ona higher plane than his traducer.Or, he may fall into error. Thepoints remain: (1) absolutes exist; (2) man may not recognizeabsolutes; (3) different men maybecome cognizant of differentviews of reality; (4) only eachman, acting individually, can ratevalues in his order of preference.These four propositions do notwage internecine war; they coexist. Thus, the concept of subjective value and the existence ofabsolute truth occupy mutually independent spheres. Truth nevervaries, never becomes relative;man's ranking of important thingsdoes vary, from person to personand from time· to time.

Dr. Gary North defrocked theerror in confusion of the two concepts a few years ago when hepointed out the fallacious reasoning of conservatives who believethat gold possesses intrinsic (objective or inherent) value.17 Manyfreedom philosophers prefer toconvert their assets to gold or silver rather than trust in fiat paper.Gold and silver contain intrinsic

properties which account for theirhistoric value, yet neither goldnor silver nor anything else manifests intrinsic worth. Whetheror not these metals are valuabledepends upon the individual subjective choices of the owner andthe one with whom he may wishto trade. One may rank gold asless valuable than food, clothingor shelter, depending upon hiscircumstances. And, one may ratefood or water or life itself lessvaluable than a cause or the lifeof another person. Literature andhistory abound with examples ofthose who have valued the livesof friends or family more intensely than their own continuedexistence and so chose to sacrificetheir very being.

Ethics and Economics

Comprehension of subjectivevalue may increase when examples portray its application to several fields of choice. In so doing,what appears apostasy may become doctrine.

As noted earlier, the initial application of the doctrine of subjective value appeared "in the fieldof economics. Easy examples appertain here. Only the buyerknows whether he values soapmore than matchbooks, watercress more than acorn squash, orpet food more than quilts. Willing exchange commands that each


participant to a trade subjectivelybelieves that he gains from thetransaction. IS If the swap onlyoccurs by virtue of coercion, nowilling exchange would have takenplace and the trade does not correspond with the subjective valueof at least one actor.19 One "profits at another's expense" only ifhe employs force or fraud in thetransaction ;20 by definition, eachactor benefits from a free transfer.

Normally, the simple model becomes more complex in modernsociety, but the basic principlesremain. One employs his creativetalents in an endeavor which produces an abundance beyond hisown needs; he then barters thoseextra goods to others in exchangefor different items which he subjectively values beyond his extracreations. As time passes and specialization and division of laborgrow, society uses trade goods asa medium of exchange: goods wecall "money." The more complicated model does not alter thefundamental fact that a producerwill choose to produce and to tradein accordance with his subjectivevalues, and a purchaser will chooseto consume on the identical basis.Each individual portrays the rolesof producer and consumer andonly the individual can determine(in accordance with his personalscale of preferences) what an'd

how much to consume. At somepoint in time, the actor will decide it accords with his preferences to withhold production orconsumption of a given good whenthe value given in return appearstoo insignificant or too costly according to his choice.

Ethics in Human Relationships

Like rules govern the ethicaljudgments made by man. Only theactor can determine whether ornot he should destroy the life ofanother human being,· either during warfare sanctioned by a group(the state) or during a fit of personal pique. Other human beingsmay wreak consequences upon theactor as a result of his chosencourse of conduct, the threat ofwhich may have a direct bearingupon his initial choice. Similarly,only the actor can decide whetherto lie or deceive even if no legalconsequences attend his conduct,whether extrinsic circumstancessuch as ill health of another j ustify an untruth, whether one oughtto marry a specific person, whetherfairness and mercy obligate thedonor to transfer $100 to poorrelief, whether to honor one'sparents, or whether to worshipGod or to maintain quiet on theSabbath.

Moreover, the concept applies topersonal relationships between human beings. Friendships develop


out of a concatenation of values.Like goals attract; unlike valuesrepel.' No state can effectively legislate friendship oi camaraderie,but at best an uneasy truce. Noone can force you to love yourneighbor; you will do so only ifthat relationship fits your worldview and· your scheme of values.

Again, the doctrine applieseasily to choices· in aesthetics andart. Preferences among personssurface abruptly in the fields ofart, architecture, sculpture, music,photography, literature, and entertainment. That which the public(individual patrons collected) sub-jectively values produces rewards(exchanged goods, plaudits, fame)for the artist or entertainer; thatwhich no one subjectively valuesrots in the producer's garret orresides, unnoticed and undusted,on a purveyor's shelf. The artistmay continue to produce despiterejection because he receives value from the creation of his art;that value may far outstrip thevalue chosen by others in the market place.

Those who ignore the conceptof subjective value lead the parade to subsidize "cultural" activities as "intrinsically" good: witness organizations to collect taxfunds for support of symphonies,art galleries and civic theatres.Yet these activities contain nomore intrinsic value than an ounce

of gold. If a sufficient number ofpersons in the community subjectively value the symphony or thetheatre, these endeavors will endure; if not, their continued existence depends solely on force.

Subjective Value and anOrdered Liberty

A number of persons who believe themselves to be traditionalist-conservative if not libertarian in outlook opt for a concept of"ordered liberty." They valueeternal things, necessary to orderand the good life in their subjective view. Unfortunately, this approach lends itself to the application of an objective value concept.Order becomes the touchstone;deviates receive punishment; menbecome fit to a Procrustean bedmeasured by those in politicalpower.

All too often, the· "ordered liberty" proponents penalize "devi,;,ant" personal conduct which fitsthe subjective value of the actorand harms no other person. Sun-;day Blue Laws, compulsory chapel,conscription, law proscribing sexual activities between consentingadults all partake of this attitude.Public display of nudity may notbe in the best of taste, but manshould be concerned with livinghis own life, not limiting theequal, reciprocal right of othersin this regard. The judicial sys-


tem tends to impose values upondisputants in this kind of societyrather than performing the limited function of deciding concretecases. The law becomes a censor ofpersonal conduct and a prescriberof the objective values to bemaintained.

Let me commit what may seeman unpardonable heresy: neitherfreedom nor mankind itself represents an objective value. To me,as a believer in the freedom philosophy and the dignity of man,individual liberty and my right tolive my own life as I see fit rankhigh on my personal scale of values. I fervently hope that othersthink likewise - but. I recognizethat all too many persons do. nothold these beliefs or, if they paylip service to such values, theymanifest a remarkable inability toequate their means and· ends. Personal freedom and the fundamental rights of man accord with absolute verity but one cannot consistently claim intrinsic value forsuch rights.

Those who seek an ordered liberty may be on the trail of veryreal values. Many of us favor theserenity of the quiet life where noneighbors intrude in our sylvanglade. Yet, as long as man sharesthis globe with other men, conflicts will arise. These conflictscan be resolved in two ways : byforce or by mutual uncoercive in-

terchange and negotiation. I prefer my order to develop out of themarket, be it a market for goodsor a bazaar of ideas. A respect forthe subjective values of othersbodes well for the survival of manas a choosing, free creature; emphasis upon objective value theorydelivers a dulling blow to the creative spirit. ~

- FOOTNOTES -

1 Webster's Third New InternationalDictionary (G. & C. Meriam Co., Springfield, Massachusetts 1966) 2530-253l.

2 See, e.g., Jennings, Frederic Beach,Jr., "Value, Exchange & Profits: TheBedrock of Economic Science," 16 Freeman (No.9) 52 (September 1966);Read, Leonard E., "Freedom's Theory ofValue," 17 Freeman (No. 10) 594, 596(October 1967).

3 Jennings, op. cit., Note 2.4 Ibid.5 Read, op. cit., Note 2.6 See, North, Gary, "The Fallacy of

'Intrinsic Value'" 19 Freeman (No.6)370, 371 (June 1969).

7 See, Read, op. cit., Note 2, p. 595;Lipton, Dean, "The Man Who AnsweredMarx," 17 Freeman (No. 10), 597, 600(October 1967).

8 Lipton, ibid.9 Read,· op cit., Note 2, p. 596.10 North, op. cit.,Note 0, p. 372.11 Read, op. cit., N ote2, p. 594.12 Jennings, op. cit., Note 2.13 Rogge, Benjamin A., "NoNewUrban Jerusalem," 3 Imprimis (No.

9) 1 (September 1974).14 Read, op. cit., Note 2, p. 594.15 Ibid.16 Pitt, W. H., "Value: The Soul of

Economics," 19 Freeman (No.9) 515,517 (September 1969).

17 North, O,p. cit., Note· 6.18 Read, op. cit., Note 2, p. 594; J en

nings, op. cit., Note 2.19 Jennings, ibid.20 Ibid.

A REVIEWER'S NOTEBOOK JOHN CHAMBERLAIN

The Roots Of American Order

I DON'T KNOW what I expectedwhen I heard that Russell Kirkwas writing a big book on thenurturing of American religious,social and political beliefs. All Ican say is that his The Roots ofAmerican Order (Open Court,$15.00) comes as a total surprise.

It is the incredible scope of thebook that is staggering. Evenmore remarkable, it is as deep asit is wide, relating order in thesoul to order in the State in masterly fashion. Kirk has alwaysbeen good at intellectual portraiture, but this book combines hisold forte with the qualities of agreat mural. Where others havesought to prove that conservatismhas been an exotic plant in America, Kirk makes it plain that wehave been much more firmly rootedin conservative western values,.stoic as as well as Christian, thanmost modern commentators havesupposed.

124

Others, before Kirk, had madethe point that the American Revolution, unlike the French upheaval that occurred a few yearslater, was a defensive operationdesigned to preserve old libertiesrather than to force a radicalchange in society. Peter Drucker,writing in 1942, had spoken of"The Conservative Counter-Revolution of 1776." This was my firstencounter with a perspective thatreally explained our origins as afree nation. True enough, Druckerhad drawn some conclusions thatwere fairly explicit in EdmundBurke if one is to put the famousAnglo-Irish Whig's speech onconciliation with America together with his Re/lections on theRevolution in France. But Burkehad been forgotten by an ignorantgeneration before Drucker camealong to remind us that Washington, Jefferson, John Adams and

1975 THE ROOTS OF AMERICAN ORDER 125

the other architects of our federal union were not revolutionists.It was King George III, with hisdesire to restore a royal absolutism, who was the real incendiary.

Kirk, as our foremost Burkean,naturally follows Drucker. But heis much more than an expositorof Burkean conservatism. He isan encyclopedist by temperament,and an inveterate educator whowants his students to go back,back, back into history before pronouncing on "relevance" for thepresent. The Roots of AmericanOrder is a searching study of theorigins of the Hebraic-GraecoRoman West before it narrows itsfocus in the later chapters to concentrate on what the FoundingFathers wrote into the Declarationof Independence and the American Constitution.

The Historical Background

What we get in the Kirk bookis a study of Israel and Revelation, a dissertation on the gloriesand shortcomings of the Greekpolis, a celebration of the high oldRoman virtue before Latinity hadbeen overwhelmed by decay fromwithin and the Germanic barbarians from without, an account ofthe spread of Christianity fromthe Mediterranean world intoEurope's Gothic North, and anoutline of the "dissidence of dissent" as the Reformation splint-

ered the Catholic synthesis. Kirkgets it all down in order to explainthe origins of the "charteredrights of Englishmen" before anysingle one of those rights had beentransplanted to North America.Everything is here from Williamof Occam, the medieval "nominalist" who was really the "realist,"to the development of the EnglishCommon Law and the rise of theScottish universities. It is an intellectual feast covering two millennia.

Most interesting, it revealssomething that I did not knowwhen I was reading Peter Druckerin 1942. Who but Russell Kirkcould tell us that John QuincyAdams, in his effort to perfect hisGerman in 1800, had translated along essay from the Berlin Historisches Journal by a youngPrussian named Friedrich Gentz?Gentz, a reader of Burke, madewhat Kirk calls "the best briefearly analysis of the distinction"between the American and theFrench Revolutions. If the worldhad only read and pondered Gentz,we could have been spared themodern revolutions of Lenin andHitler. Unfortunately, JohnQuincy Adams was not a greatpopularizer.

If Kirk's digression on JohnQuincy Adams and FriedrichGentz makes Peter Drucker seemless of a pioneer, it doesn't make


Drucker's point, which was alsoBurke's point, any less valid. And,indeed, Russell. Kirk would be thefirst to say there are no newtruths. There are only recoveriesof what Kirk is fond of calling"the Permanent. Things."

Imagination Rules

The Roots of American Orderis .something of a paradox. It isstimulating intellectual history ofthe first order. Russell Kirk cansummarize concisely what Thomas Hobbes had to say about theLeviathan state, or what JohnLocke contributed to the labortheory of value, or what SaintAugustine did to distinguish between the City· of This Earth andthe· City of God. But in spite ofhis own ability to reason, and topresent things in rational order,Kirk believes that . it is imagination, not dialectics, that rules theworld. Locke, with his triad ofLife, Liberty and Property (orEstate), appealed to the Americancolonists, not because he had anything new to s~y, but because, insofar as he may have been an importantcontributor to .the Revolution, he merely confirmed whatpeople already knew from .theirexperiences during a hundred andfifty years of "salutary neglect"ona new continent. Like Burke,Kirk continually stresses the importance of immemorial custom.

He distrusts Reason, as .Reasonhas been defined by ideologues.

In this view of things, intuitionmust be trusted - which is notexactly an intellectual position.But, as Kirk, followjng Hume,points out, .life is rooted in "enormous mysteries.". What has comeinto being through prescriptionis not lightly to be dismissed. Apeople committed to followingprecedent may be slow to improvetheir condition, but, in. the end,they will do. better than those societies that chase after Utopianreformers.

The Founding Fathers readMontesquieu on the Separation ofthe Powers. Kirk approves ofMontesquieu, who was a mostmoderate Frenchman. But didMontesquieu really account for theform of our government and thewording of our constitution? Kirkwould say no. The larger federalism of the thirteen states was· amere adaptation of the smallerfederalism that the colonists hadpracticed in Virginia for a century in which local county government had distrusted rule from thecapital in Williamsburg.

The theorist, in the Kirk viewof things, is mainly important because he discloses to people. whatthey .instinctively know to beright. The "law" already existsbefore the. formulator comes alongto. divine it and refine it.

1975 THE ROOTS OF AMERICAN ORDER 127

The Compact

Kirk is hard on compact theory.Hobbes, he thinks, was wrong in

.attributing the' origins of theState toa compact under whichpeople decided to accept a tyrantas preferable to life in a state ofbrutish nature. And Locke couldpoint to no antique tribal conclavein which people' set up governmentto·· protect individual liberties andproperty. But if the State, as Albert Nock and Franz Oppenheimer thought, originated in conquest, it nonetheless remains truethat conquerers have always hadto give ground even to serfs' andslaves in order' to get productionout of them. So "compacts" wereforced from time to time as underlying populations exerted pressures as a condition of givinggood service. The church in theMiddle Ages exacted compactsfrom kings. As more and more"chartered liberties" come intoformal' existence, the Myth of theCompact inevitably became a vitalreality.

The' myth was real to ThomasJefferson. Therereally was a compact made between the states asstates at our Constitutional convention. As James Jackson Kilpatrick pointed out some yearsago. in his The Sovereign States,it wasn't "we the people" whomade a compact. It was Virginia

and New York and other statesthat relinquished certain powers(such as the right to coin moneyor make foreign alliances) in return for keeping other powers under the Tenth Amendment.

Russell Kirk tends to be contemptuous of this element of compact theory. But he really acceptsthe Myth of the Compact when hecommends Burke's contract ofEternal Society. His own compacttheory is richer than Locke's andmore humane than Hobbes'. Heshould recognize it for what it is.But this is a minor flaw in whatindubitably is a grand book.

~ MISES MADE EASIER: A Glossary for Ludwig von Mises' HUMAN ACTION, prepared byPercy L. Greaves, Jr. (DobbsFerry, New York: Free MarketBooks, 1974) 157 pp., $6.

Reviewed by William Rickenbacker

ONE OF THE TRAGEDIES of moderntimes is that our society seems tohave lost the ability to find anduse the knowledge that might helpit to improve its condition. Onemay think of several reasons 'forthis deprivation. The matters tobe discussed -weaponry, ecology,diplomacy, monetary theory - arecomplex. The people are more interested ill amusements than insevere study of public questions.


T his book also is available fromThe Foundat-ion for Economic Education, Irvington-on-Hudson, N. Y.

Nevertheless, any venture inmaking the book more accessibleto the reading public must begreeted with applause, and here'sa hip and a hooray for PercyGreaves' contribution to thecause. He has picked out about900 of the most difficult words orphrases in Human Action and hasgiven them clear and helpful definitions. His little essays on "economics," "inflation," and "money"(in its several forms) are reasonenough for owning the book. Itmight well be kept at your elbowas you read the original monument.

Human Action deserves the widest possible audience and shouldbe made available in every form in the original bulk, in Greaves'definitions, in textbook form, incondensed versions. A close studyof the text reveals that the positive assertions of Mises amount toabout ten per cent of the entirework. The "meat," therefore,shorn of the historical and controversial dissertations, could beprinted in a book of merely a hundred pages. Perhaps this would bea worthy second step in Greaves'excellent endeavors to make vonMises better known to the world.

The truth is unpalatable to thereigning bureaucrats in government, publishing, and teaching;,vith the result that the writers oftrue works are seldom listed inthe bibliographies with adequateprominence. And, finally, alas, thewriters of truth are seldom themost amiable and charming ofstylists; they are hard to read.

For such reasons as these thegreat summing-up work of Ludwig von Mises, Human Action, remains shockingly unknown andunread. The book is almost athousand pages long. Each page isfilled with close-spaced lines whichare filled, in turn, with long sentences, iron constructions, unusual words, foreign phrases, historical references fit for the scholar'sdelight, passing allusions to ancient philosophical debates, sideexcursions into the history of intellectual quarrels....

And yet the book can be read,with immense profit, by a patientperson who is otherwise unprepared for any special study. Thebook is an exercise in logicalthought, based on the small cluster of unarguabJe assertions thatform the starting polnt of classical economics: that man has freewill, that he engages in purposiveaction, that the assets of theearth are unequally distributedamong the territories and amongthe people.

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The Freeman 1975

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