Friendship and the Free Society

by Andrew I. Cohen

Andrew Cohen teaches philosophy at the University of Oklahoma, Norman.

Private property and limited government are unrivaled in promoting personal liberty and material abundance. These institutions of a free society also beat the competition in promoting another vital personal and social good, namely, friendship.

Beneath our differences, people understand that self-respect, some wealth, a sense of personal efficacy, and maybe even a dash of luck are among the essential ingredients of a successful life. These values would still seem shallow or pointless without friendship. As Aristotle observed, “No one would choose to live without friends even if he had all the other goods.” Our achievements would be emptier and our failures more unbearable without friends by our side. If friendship is then not the supreme good, it is certainly an essential one. Some of us are admittedly less social than others. The companionship that comes in meaningful friendships nevertheless seems to be a key part of the good life.

There are of course many sorts of friendships. Some persons are friends out of convenience. Perhaps our typical “acquaintances” fall into such a category. There are also friendships based merely on what two people find mutually pleasing. Both of these types of relationships help amplify our lives in various ways, but the best sorts of friendships are those where each friend cares deeply and sincerely about the other. In such complete friendships, each friend respects the other person, not as a means to his own ends, but as an end in himself.

A free society is uniquely qualified to promote the most complete friendships because it provides the institutional framework most favorable to them.

Freedom by Degrees

By a “free society,” we can speak of a social and political framework with three key features: (1) private property is protected as inviolable, (2) government’s role, at most, is to prevent and punish the violation of individual rights, and (3) all human relationships are voluntary. Free societies can exist in degrees. While the United States now is more free than, say, the Soviet Union under Stalin, the United States is not a completely free society. To the extent that a society counts as free, it will provide the best opportunities to nurture and sustain deep friendships.

Consider what is necessary for friendships. Two persons must share some form of good will. There needs to be a certain authenticity to any such mutual affection. This sincere good will helps to nurture a sense of trust and healthy interdependence. Trust is certainly key to building and maintaining any meaningful relationship, particularly in complete friendships where friends have a special respect for each other. But suppose you find yourself in an institutional environment where you have no choice but to interact with someone else. Such a stilted setting will tend to restrict the development of any friendship. While you may still come to be friends with the other person, it is much more difficult for you to do so under such circumstances. First you must overcome some understandable mutual suspicion, but then you must fight the worry that the other merely likes you as a means to some private end.

In all political economies, individuals will sometimes find themselves having to deal with persons somewhat involuntarily. Even in a nearly free society, we may find ourselves working for, going to school with, or just sitting beside persons with whom we would rather have no contact.

Consider just one example. Most municipalities have tightly regulated local telephone monopolies. To a great extent we have no choice but to deal with our telephone repairman. His incentive to engage in gestures of good will, and our reason to show him some sincere regard, are both constrained. The repairman’s “have a nice day” rings hollow when we know that we have no choice but to get our telephone service from that one company.

What a free society does is minimize the extent to which human relationships are involuntary. When we have no choice but to deal with someone, sincere good will is often hard to muster. But when individuals are free to come and go as they please and they nevertheless continue to interact with one another, they can be more certain of one another. They might then foster the trust and mutuality necessary for genuine friendships.

Take a lower-level friendship, such as one of mere convenience. We have such friendships with many persons, such as with the family doctor, the corner florist, or (if we are lucky) with car mechanics, plumbers, and carpenters. Our good will toward such persons is mostly based on what they can offer us. Genuine good will is an ingredient in any wholesome friendship. To the extent our displays of good will are sincere, it is because we recognize both the value such persons represent to us and their freedom to do as they wish.

These low-level friendships are often steppingstones toward the more complete friendships where each friend regards the other as an end in himself. People usually do not just fall into friendships. They develop their relationships, often starting out on the fragile and fleeting bases of mutual pleasure or mutual convenience. The trust that comes from freedom of choice can only help foster the good will that gets started in such rudimentary relationships. The enhanced freedom of choice characteristic of free societies also removes several impediments to the deepening of these relationships.

To say that the institutions of a free society best facilitate friendship does not mean that people didn’t have good friends in, say, Maoist China. (Perhaps genuine friends were especially valuable there.) But it is far more difficult to discover, nurture, and sustain good friendships when human relationships are not entirely voluntary. What a free society does is enhance our range of freedom of choice. We have more options to select or reject. When you find yourself interacting with persons in this wider range of choice, you have better reason to believe that another’s interest in you is genuine. You also have better reason to know that your own interest is genuine. The corner baker is more apt to take an interest in your life when he knows quite well that you could just as well go across the street to a competitor or bake your own muffins. You may also be more likely to feel a mutual good will toward the baker when you know that you are free not to patronize him.

Private Property

Another characteristic of a free society even more important and powerful for advancing friendships is private property.

What good is wealth, Aristotle asks rhetorically, unless we have people we care about with whom to share it? Ambiguously defined property rights and property that is not private notoriously promote waste and neglect. What matters here, however, is that when property is not private, or when it is otherwise not fully protected as private, individuals have diminished opportunities to cultivate the benevolence characteristic of genuine friendships.

There is a certain sort of kindness that helps to nurture and sustain friendships. This is the kindness manifested by freely sharing one’s belongings with others. Unless one owns property, however, it is difficult if not impossible to show benevolence toward another. With what would one be benevolent? It is not benevolence if you grant another access to some good to which you do not have an exclusive, protected claim.

Benevolence is still a vital ingredient in bringing a relationship to a higher level, one where you spontaneously and willingly contribute to a friend’s well-being. What property does is give individuals a protected sphere of control over some range of action and material goods. It sets up a divide between what is “mine” (and not yours) and what is not “mine” (but someone else’s). “Property” here is not just a material thing but also includes one’s freedom, one’s time, and one’s body. Even the materially poor man can be benevolent toward another; the poor man still owns himself and his time. The authentically benevolent man then freely waives his rights to exclude others from his goods. In doing so, he builds trust and helps to enhance his friend’s welfare. Such gestures lay the groundwork for later reciprocal gestures that, in a complete friendship, come freely and without any thought to some payoff.

A free society enhances the quantity of property individuals own and protects as inviolable whatever property rights individuals enjoy. A free society thereby promotes authentic friendships by giving people added opportunities to engage in meaningful sharing. If resources move from one person to another when they do nothave to, the recipient is better able to gauge the motives of the gesture. Indeed, the one who gave the property away is better able to be sure of his own motives. A free society does well in clearing the air in this fashion. Relationships are voluntary, and property is exchanged and redistributed only through free consent. Such gestures lay the groundwork for the most meaningful sorts of friendships.

Friendships are possible in a variety of circumstances, including in the most repressive of dictatorships. What a free society does is make the discovery, development, and sustenance of friendships of all types—particularly the most meaningful sort—easier. When free, individuals have a diminished need to second-guess the motives of others (and themselves) and they are better in a position to be generous. The freedom not to do what others may want us to do is a valuable liberty. Besides providing a sense of autonomy, that freedom is an important ingredient in expanding the opportunities for the friendships that characterize a successful human life.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1999 • Volume: 49 • Issue: 8.

Illuminating the Unseen – Economic Freedoms Help Transform Our Lives

By Russell Roberts

Russell Roberts is director of the Management Center at the John M. Olin School of Business at Washington University in St. Louis. He is the author of “The Choice: A Fable of Free Trade and Protectionism” (Prentice Hall).

The good effects of laws are often easily seen. The bad effects, unseen. So observed Frederic Bastiat 150 years ago. His basic insight remains true today. We live in busy times. Information bombards us. In such a world, even that which is seen is often overlooked. The unseen is that much more elusive.

If we are to make the case for economic freedom, we have to bring these unseen costs to light. Consider an increase in the minimum wage. What is seen: businesses give some of their low-wage workers a raise. The direct effects of the minimum wage—more money for low-wage workers, less money for businesses that pay them—frame the entire debate. Senator Christopher Bond of Missouri says the minimum wage is bad because it hurts small business—as he argued in his recent re-election campaign. So most people see the minimum wage as a tax on small business that helps the poor. No wonder many people think it’s a good idea.

If we want to dent the consciousness of the average American, we have to talk about how the minimum wage doesn’t just tax small business. We have to show how it bankrupts some firms that hire low-skill workers. That means fewer opportunities for low-skill workers. But even the firms that survive will try to reduce the hours of low-skill workers and their numbers. In short, while the minimum wage helps some low-skill workers by giving them a modest pay increase, it has a devastating effect on others, pushing them out of the work force and into the street. The minimum wage thwarts human possibility among those it tries to help. And as Bastiat understood, it is easy to see those who are helped by the minimum wage. Those who are harmed are much harder to identify.

We’ve done a decent job explaining the hidden costs of the minimum wage. We’ve done such a good job, in fact, that proponents of the minimum wage have actually tried to argue that increases in the minimum wage have no effect on low-skill employment. To paraphrase Orwell, you’d have to be an academic economist to find that argument compelling. But in other areas, we have a long way to go if we wish to cast light on the unseen costs of government intervention.

Free Trade and Protectionism

Here’s how trade often gets discussed in the media: should we destroy jobs in America in order to have cheap imports? That’s like being asked how long you’ve been beating your wife. Why does it get discussed this way?

Opponents of free trade want the American people to think that trade is about destroying jobs in order to get cheap foreign goods. It makes free trade look mean-spirited and mercenary. But another reason is that these are the most obvious effects of free trade. If Americans buy from foreign suppliers, people understand that fewer Americans will be hired in the competing domestic companies. Unseen are the jobs created to make the products we exchange with foreigners. Unseen is the impact of specialization and comparative advantage. Unseen is the power of foreign competition to induce our domestic industries to innovate.

Unless we can illuminate the unseen, making the case for free trade will be an uphill battle. Unfortunately, one of the best things about free trade is extremely difficult to see: free trade allows resources to flow to their highest use. But to make the argument compelling, we have to describe it in a way that allows it to be seen without a semester’s worth of economics.

Freeing Up Opportunity

Somewhere in South Carolina, there’s a high school girl whose mom works in a textile factory. This girl doesn’t know what she wants to do with her life, but like most high school kids in America, she probably doesn’t want to work in the same job or career as her parents. The security of the textile factory is appealing, but she might want to go to college and try something different. It all depends on her options.

That factory is threatened by Chinese competition. Should we let the factory go under or should we protect it from the cheaper Chinese imports? We could spend hours on the pros and cons and the economic impact of that decision. But let’s look at the impact on that girl in high school. If we keep the factory around, we make the choice of working in the factory more appealing. If we let the factory die, we change the available options. We push her out into the world.

Exploring the world is a good thing, but that’s not reason enough for letting the factory go under. What is harder to see is that the world to be explored is a more vibrant and alive place when the factory goes under. Allowing the factory to die frees up capital and management skill that can be used elsewhere. If we maintain all of the factories and all of the companies that cannot survive competition, then the American economy is a much more static place.

If we try to make everything for ourselves and be self-sufficient, we lose the opportunity to specialize in doing what we do best. Our capital gets tied up in industries that do not take the greatest advantage of our unique skills. Free trade allows a high school kid in South Carolina to inherit a world of maximum human potential, with the maximum chance for her to use her gifts, whatever they may be.

A skeptic would ask how the girl in South Carolina is going to achieve her potential if her mom is out of work. And that in turn might lead to a discussion of how past generations have managed to survive and thrive in a dynamic economy. In 1900, one-third of the American work force was in agriculture. Today the number is around 3 percent. Do you think the kids on the farms of 1900 are glad that we let agriculture become more capital intensive with fewer jobs? It wasn’t a trivial transition, but in 1900, we couldn’t see the industries that would arise to use the skills of the next generation. And we can’t know the opportunities that will arise to help that girl in South Carolina if we let the textile factory fail. But they will arise. What they will be depends on the gifts and aspirations of the next generation.

If we want to inspire people to support free trade, we must touch their imagination. Bastiat understood that 150 years ago. Our best chance is to make the unseen, seen. Economics can bring the unseen to light, but only if we leave the jargon behind and show how free trade and other economic freedoms help transform our lives.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1999 • Volume: 49 • Issue: 3.

Philosophy 1 On 1 – The Principles of Classical Liberalism Are Intuitive

by James Otteson

James Otteson teaches in the department of philosophy at the University of Alabama.

It is no secret that classical liberalism receives little attention in American academic philosophy, and then generally only as a historical artifact. What one hears is something like this: “No serious philosopher today believes that people can get on without substantial, organized help from the government. The only issues are in what way the government should help and to what extent; the issue of whether the government should help can no longer be seriously entertained.”

There are of course exceptions—Robert Nozick, David Schmidtz, and Eric Mack come to mind—but they are a decided minority and, in my experience at least, are often not considered to be within the philosophical mainstream. I have thus faced considerable difficulty convincing my colleagues that classical liberalism is worth thinking about at all, let alone worth careful examination. But a free society is worth the effort, and so I have explored many methods of opening the closed intellectual doors I have encountered, believing that if I can get others to think about classical liberalism for just a few minutes, I will find some place where it matches up with—or, if I am lucky, accounts for—a deep moral or political intuition they already have. When that happens, I have found that classical liberalism suddenly gains a footing as a position that has at least the possibility of plausibility. And that is a start.

Connecting to Intuition

In my experience arguments for classical liberalism rarely get off the ground unless they can first make this connection to intuition. Hence the method I have settled on for extending liberty’s cause in my discipline of philosophy is one that, first, seizes on a few of the adversary’s deeply held intuitions and then uses those intuitions as bases on which arguments can be built. I think three intuitions in particular combine to make an initial case for the free society that almost any person, regardless of his political position, will find formidable.

Here’s how I propose going about it.

Begin by asking whether there is anything wrong with rape. Now of course such a question may well shock its hearer, but a shock is sometimes necessary to get people to think hard about a different way of looking at the world. Ask your adversary to answer the question seriously. So: yes, there is something wrong with rape. Well, what is it exactly? It does not suffice to say that rape is self-evidently wrong because it might not be self-evidently wrong to everyone. The rapist, for example, might not think so.

To bring the matter into sharper focus, ask this next: Is rape always wrong—or might there be occasions when it is acceptable? What if raping a person would lead to some greater good? For example, should we consider whether the rapist might not receive such a degree of pleasure from the rape that it effectively cancels out the pain and suffering the victim experiences? On that ground, then, should we judge each rape on a case-by-case basis, asking in each instance whether the act in question led to a net increase or decrease in welfare? This question is typically met with horror: of course rape is always wrong and of course its wrongness is not subject to any utilitarian calculation. It is wrong absolutely and simply so. The following suggestion will now seem quite apt and will almost always meet with approval: rape is wrong always and everywhere because a person’s body is inviolable; a person has an absolute right to his (or her) body, and anyone who breaches that right is acting immorally regardless of his reasons. A person is, as it were, the owner of his own body, and as such he has absolute say over what gets done to it.

At this point the case for a free society has already begun to be built, though one’s adversary probably does not see it. It is time to call up the second intuition, again by asking a question whose answer will seem obvious. Is there anything wrong with slavery? Well, what exactly? Again we must not allow “self-evidence” to justify our belief that slavery is wrong because many people evidently have believed and continue to believe that slavery is at least in some circumstances acceptable. Might slavery be wrong because it violates the dignity of the enslaved by treating him as a means to someone else’s end? Might it be wrong because it dehumanizes the enslaved, treats him as if he were the moral equivalent of a pack animal?

Yes, that is it: slavery is wrong because it treats a man as if he were not a man; it fails to respect his inherent dignity, his inherent worth as a human being. But suppose that Congress—and congressmen, note, are popularly elected—passed legislation requiring the enslavement of some minority of the population. Suppose that to supply vital industries with much-needed cheap labor, the majority of us decided to enslave all, let us say, Irishmen. This would be democracy in action; the whole process would be strictly according to protocol in a democratic country. That would be acceptable, would it not?

Of course not! the reply will come. Slavery can never be justified, no matter how many people voted for it. And now one’s adversary will believe what has already been said with almost unshakable conviction: slavery disrespects the inherent dignity in a human being and is therefore always wrong. A person may not in any way be used against his will for the sake of another person, and his sovereignty over his own life is immune from democratic (or any other) lawmaking.

Is Theft Wrong?

Now the foundations of the free society are almost entirely laid. Only one more element is required. Is there anything wrong with stealing? This matter can be a bit tricky, because there will be those who think that stealing is justified in the case of a poor man stealing from a rich man. Put that possibility off for a moment and ask the hearer to answer whether theft as a general practice is acceptable. Is it all right for anyone who wants something simply to take it regardless of who owns the thing in question? To this question the answer will be “no.” But once again, why is it not all right?

Although the intuition that stealing is wrong is strong, people are often not quite sure what to say about why it is wrong. Proceed, then, with this question. Suppose Congress took a vote, and the majority, which carried the day, passed legislation licensing local police authorities to take anyone’s property whenever in their judgment, and in their judgment alone, they saw fit to do so. Would there be anything wrong with that? Would the fact that such a practice had been signed into law thereby make the practice morally acceptable? Odds are that the answer to this will be “no” as well.

Make, then, this suggestion. People have a right to what they own—that is, to what they have legitimately acquired (through labor, trade, or gift); stealing violates that right and for that reason is wrong. To return to the case of the poor man stealing from the rich man: how wealthy a person is does not seem relevant to our explanation of why theft is wrong. Theft violates a right, and hence it is wrong regardless of whose right is in question. If one’s adversary wavers on this point, remind him that there is always someone poorer than oneself, and thus everyone is a “rich man” relative to someone else—so if he is willing to allow an exception for a “poor man” to steal from a “rich man,” he is effectively licensing not only everyone else but also himself to be robbed. Is he still willing to make this exception?

Government Violates Rights

One can now move in for the coup de grâce: one’s adversary, whether he realizes it or not, is a classical liberal. Everything the state does beyond protecting these basic, negative rights of individuals is a violation of these same rights. Conscription, for example, is a use of your body to which you did not assent. The income tax and the staggering national debt are nothing but obligations on you to labor for the benefit of someone else. Wealth transfers to the poor, subsidies to farmers, support for the arts, and Social Security are all the forcible seizure of some people’s property in order to give it to others. And however noble the cause, however good the intentions, however many people voted in favor—rape, slavery, and theft are still wrong. And hence all the government programs that are merely particular instances of the principles underlying the immorality of rape, slavery, and theft are wrong as well.

One concrete example will show that the strong language of rape, slavery, and theft is justified in the case of government action. Estimated projections are that an average American born in 1999 will face an effective income tax rate of one hundred percent of his lifetime earnings simply to pay off the financial obligations that the American federal government will have incurred—and that is assuming that no more government programs are created. One hundred percent of lifetime earnings to make good on debts that these people played no part in creating and from which they will receive no benefit. How do you define slavery?

My genuine suspicion is that virtually all people are libertarians in their personal, everyday lives. In practice they regard anything that violates the sanctity of a person acting privately to be wrong. Certainly among my colleagues in philosophy I have met no one who would bodily assault another person (except perhaps in self-defense), who would enslave another person, or who would steal from another person. The challenge for the supporter of a free society, then, is threefold. First, he must get his adversaries to see that these three principles—the right to one’s body, the right to one’s labor, and the right to one’s belongings—are the fundamental organizing principles of classical liberalism. Second, he must show his adversaries that they already subscribe to these principles, a fact demonstrated by their reaction to the series of questions raised above. And, finally, he must bring his adversaries to understand that these principles are binding on everyone, including those who work for the government.

This last point is especially difficult since many people are inclined to believe that the government has an authority all its own. That is, they think that if the government says something, it must be right; and if the government tells one to do something, one’s sole duty is to obey. But one can summon a strong impulse to reconsider this thinking by pointing out that the government is nothing more than other people. If one would expect one’s neighbors to live by the three principles of respecting others’ lives, liberty, and property, then one should expect government employees to live by them as well. A person gains no special knowledge and earns no exemption from the requirements of morality merely by becoming an employee of the government.

Now I have not demonstrated that the free society is the only morally acceptable society (though I believe that it is). A philosophically sophisticated person will demand further argument for the principles underlying each of these intuitions, even if he shares them. It does not follow from the fact that one has a certain intuition about a moral matter, or even from the fact that many people have the same intuitions, that the matter is thereby settled. One’s intuitions might after all be wrong.

Moreover, I have not yet shown that the moral principles that I have suggested underlie these intuitions are in fact the principles that underlie them. It is possible to construct moral condemnations of rape, slavery, and theft—and thus justifications for the respect of life, liberty, and property—without appeal to natural rights. It might be possible, for example, to give a utilitarian or consequentialist rationale for these principles, although the sense that these principles deserve absolute recognition will be difficult to preserve within a utilitarian moral framework. It is also quite possible that one either has these intuitions or embraces these principles because one subscribes to Austrian economic thought. A follower of Ludwig von Mises or F.A. Hayek may well adhere to the sanctity of these moral principles without thereby thinking that they are made sacred because of their reliance on natural rights. Mises himself thought that the notion of natural rights was an intellectual fiction. Or one might subscribe to these principles because one is a Christian who believes that each of us, as a child of God, is sacred. A follower of Father Robert Sirico will believe that it is a violation of God’s will to treat another human being as anything other than inherently valuable and inviolable, and that one cannot fulfill one’s Christian duty to others unless one is radically free to choose to do so. Or, finally, one might think that man’s rational autonomy presupposes allegiance to certain universal rules, among which are the principles under consideration here. A Kantian will believe he is categorically commanded to treat others as ends in themselves and never merely as means, and he might for that reason believe that the free, classical liberal society is just the Kantian “kingdom of ends.”

I would not presume to resolve here which of these foundations for believing in the principles of the free society, if any, is correct. But that is not my intent. My belief is that substantially all of us share the intuitions that suggest these principles, regardless of the specific set of background beliefs we hold that lead us to accept them. My purpose rather is to galvanize adherents to a wide array of beliefs to fight for the free society by showing them that anything beyond the minimal, libertarian state violates moral principles they already hold—whatever the basis on which they hold them.

The Virtue of Consistency

All that would remain is to remind one’s adversaries of the importance of consistency in applying these principles generally. The classical liberal society is not alien or extreme or licentious or bizarre or naïve. It is simply our own moral principles writ large; it is the manifestation and reflection of the person of dignity each of us believes himself to be.

Many years ago Hayek called on classical liberals to “make the building of a free society once more an intellectual adventure, a deed of courage” and to develop a program that would at once inspire us and serve as a blueprint for us to realize freedom under law. I think that such a program must begin by appealing to our deeply held intuitions, our pre-theoretical sense of right and wrong.

It is frequently remarked in America today that voters have a deep distrust for politicians and for politics; they are cynical about the whole political system, a fact that is regularly evinced by their exceedingly low interest in finding anything out about the people running for office. One will probably not understand this distrust and cynicism until one sees the constitutional, if perhaps unconscious, libertarianism that runs through many Americans. I suspect they distrust politicians and dislike politics because they are aware on some level that almost everything that goes on in politics is a violation of moral propriety. When the government bestows largess on them, they are by and large happy to receive it; but I suspect that most of them nevertheless harbor the perhaps vague sense that there is something wrong with this state of affairs.

Even if they think that they cannot but take advantage of the government’s “free money” before someone else does, they would, if they were candid and forced themselves to reflect on the matter, admit that these are dishonorable actions. This, in part, is what stands behind Americans’ general belief that politics is a sordid affair (and that politicians are little better than moral reprobates). What is required, then, is to bring into the open exactly what makes these actions sordid and dishonorable, and to discover explicitly the close connection between people’s notions of impropriety and the libertarian principles that give rise to them.

One way to begin this process of discovery is to get people who spend their time thinking about moral and political issues on a philosophical level—like philosophy professors—to begin to focus their mental energy on the philosophical underpinnings of the free society. The hope is that more and more of them will come to see the classical liberal conception of society as a compelling manifestation of some of their own fundamental moral beliefs, and, further, that they will then teach it to their students. In this way one might get people who are already prone to intellectual investigations to become intrigued with the strong intellectual appeal of the free society and to replace their perhaps present desire for a socialist utopia with a desire for a classical liberal utopia.

The free society is worth fighting for, and even a person in a tiny corner of human life—a person in academic philosophy, for example—can take up the cause of liberty and make a difference. The strategy I have outlined here can be an effective way to make people within academic philosophy open to the power of classical liberalism, but it can also, I believe, bear fruit with people outside philosophy. It can thus be a first step toward answering Hayek’s call. I commend it to you.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1999 • Volume: 49 • Issue: 3.

Bogus Freedom

By James Bovard

James Bovard is the author of “Freedom in Chains: The Rise of the State and the Demise of the Citizen” (St. Martin’s, 1999), from which this article is adapted.

“Freedom from want” is one of the most frequently invoked notions of freedom in our time. However, it is a bogus freedom that politicians and socialists offer to lull people into accepting policies that destroy true freedom. Freedom from want has been most loudly advocated in this century by those who favored removing almost all limits from government power.

For example, Sidney and Beatrice Webb, two of the founders of British socialism and authors of The Soviet Union: A New Civilization?, asserted in 1936: “Personal freedom means, in effect, the power of the individual to buy sufficient food, shelter and clothing.”[1]

The Webbs did not specify how many millions of people government should be permitted to kill in the name of “freedom from want.” But during Stalin’s bloodiest decade, they asserted that for government economic planning to succeed, “public discussion must be suspended between the promulgation of the decision and the accomplishment of the task” and that any criticisms of the master plan should be treated as “an act of disloyalty, or even of treachery.”[2] For government to be able to liberate people with food and clothing, it must have the power to execute anyone who criticizes the official economic plan. After visiting the Ukraine, the Webbs endorsed Stalin’s war on the kulaks (the least impoverished peasants), commenting that “it must be recognized that the liquidation of the individual capitalist in agriculture had necessarily to be faced if the required increase of output was to be obtained.”[3] (Output plummeted.)

Equating liberty with satisfactory living standards became far more common as the twentieth century went on. “Real freedom means good wages, short hours, security in employment, good homes, opportunity for leisure and recreation with family and friends,” wrote Sir Oswald Mosley, the most prominent British supporter of Nazi Germany, in his 1936 book, Fascism.[4] James Gregor noted in his book The Ideology of Fascism that fascism aimed at “restraints which foster the increased effective freedom of the individual.”[5] President Franklin Delano Roosevelt noted in 1937 that “even some of our own people may wonder whether democracy can match dictatorship in giving this generation the things it wants from government.”[6] University of Chicago professor Leslie Pape noted in 1941 that “democracies readily admit the claims of totalitarian states to great achievements in the cause of positive freedom.”[7]

British historian E.H. Carr, writing in 1951, observed that, for the modern era, “freedom from the economic constraint of want was clearly just as important as freedom from the political constraint of kings and tyrants.”[8]Carr justified the array of economic controls in postwar Britain: “The price of liberty is the restriction of liberty. The price of some liberty for all is the restriction of the greater liberty of some.”[9] However, with this standard, there is no limit to the amount of freedom that government can destroy in the name of creating “greater liberty for some.” The British Labour government that Carr championed advanced freedom by conscripting labor for the coal mines and empowering the Ministry of Labour to direct workers to whatever employment was considered in the national interest—empowering over 10,000 government officials to carry out searches (including of private homes) without warrants—prohibiting restaurants from serving customer meals costing more than 5 shillings (less than $2 in 1947)—and fining farmers who refused to plant the specific crops government demanded.[10] The government also “nationalized all potential land uses in the United Kingdom, permitting only continuation of existing ones and requiring ‘planning permission’ for any others,” as law professor Gideon Kanner noted.[11]

The Labour government offered freedom via the solidarity of standing in the same rationing line—liberation via deprivation. (A 1998 New York Times article cited the Labour government’s postwar food rationing, which continued into the 1950s, as a contributing factor to the long-term decline of British cuisine.[12])

The more politicians promise to give, the more they entitle themselves to take. Carr, serving in 1945 as chairman of the UNESCO Committee on the Principles of the Rights of Man, declared that “no society can guarantee the enjoyment of such rights [to government handouts] unless it in turn has the right to call upon and direct the productive capacities of the individuals enjoying them.”[13] Thus, the price of government benefits is unlimited political control over people’s paychecks and work lives.

Once freedom is equated with a certain material standard of living, confiscation becomes the path to liberation. Thus, the more avidly a politician raises taxes, the greater his apparent love for liberty. In the name of providing “freedom from want,” the politician acquires a pretext to destroy the basis of private citizens’ independence. “Freedom from want” becomes a license for politicians, rather than a declaration of rights of citizens.

Anyone who does not have certain possessions is assumed not to be free—and in need of political rescue. President Johnson, justifying a vast expansion of government social programs, declared in 1965, “Negroes are trapped—as many whites are trapped—in inherited, gateless poverty. . . . Public and private poverty combine to cripple their capacities.”[14] Vice President Hubert Humphrey defined a poor person as “the man who for reasons beyond his control cannot help himself.” This perspective on poverty and self-help mocks all of American history. It implies that any individual who earns less than $7,890 a year (the official poverty line for a single person) is incapable of any discipline or resolution.

While advocates of positive freedom insist that government must intervene so that each person “can be all that they can be,” government aid programs are notorious for rewarding people for making the least of themselves. President Roosevelt warned in 1935 that “continued dependence on relief induces a spiritual and moral disintegration fundamentally destructive to the national fiber.”[15] President Clinton declared in 1996: “For decades now, welfare has too often been a trap, consigning generation after generation to a cycle of dependency. The children of welfare are more likely to drop out of school, to run afoul of the law, to become teen parents, to raise their own children on welfare.”[16] A rising tide no longer lifts all boats when the government rewards people for scuttling their own ships.

Faith in freedom from want depends on a political myopia that focuses devoutly on only one side of the ledger of government action. This is measuring freedom according to how much government does for people, and totally disregarding what government does to people. Government provides “freedom” for the welfare recipient by imposing tax servitude on the worker. Federal, state, and local governments collected an average of $26,434 in taxes for every household in the country, or an average of $9,881 for every U.S. resident in 1998, according to the Tax Foundation.[17] In an age of unprecedented prosperity, government tax policies have turned the average citizen’s life into a financial struggle and insured that he will likely become a ward of the state in his last decades.

Some statists insist that taxation is irrelevant to freedom. According to sociologist Robert Goodin,

If what the rich man loses when his property is redistributed is described as a loss of freedom, then the gain to the poor must similarly be described as a gain of freedom. . . . No net loss of freedom for society as a whole, as distinct from individuals within it, is involved in redistributive taxation. Thus, there is no basis in terms of freedom . . . for objecting to it.[18]

What does Goodin mean by “freedom for society as a whole”? By this standard, slavery would not reduce a society’s freedom, since the slave’s loss of freedom would be equaled by the slave owner’s gain. Nor is there any difference, vis-à-vis freedom, between permitting people to retain their earnings and spend them as they choose, and government confiscating their money to hire more regulators, inspectors, and informants to better repress the citizenry.

What are the practical results of the modern “freedom from want”? Economist Edgar Browning, writing in 1993, examined the marginal cost of redistribution—defined as “the ratio of the aggregate loss to the top four quintiles of households to the aggregate gain to the bottom quintile of households.”[19] Browning estimated that the marginal cost to the most affluent 80 percent of households of increasing the income of the poorest 20 percent by $1 was $7.82.[20] The marginal costs of redistribution are much larger than people might presume because of reduced incentives to work, both among the taxpayers and recipients. Also, as Browning noted, “marginal tax rates must be increased very sharply relative to the amount of income that is redistributed.” Combining Browning’s analysis and Goodin’s definition, confiscatory redistribution destroys almost eight times as much “freedom” as it creates.

Once the notion of “freedom from want” is accepted as the pre-eminent freedom, it becomes a wish list justifying endless political forays deeper and deeper into people’s lives. Princeton professor Amy Gutmann, in her 1980 book, Liberal Equality, declared: “Liberal egalitarians want to say that freedom of choice is not very meaningful without a right to those goods necessary to life itself.”[21] Gutmann’s elaboration of “necessary goods” reveals how government would be obliged to control almost everything: “Supplying the poorest with more primary goods will be insufficient if their sense of self-worth or their very desire to pursue their conceptions of the good is undercut by self-doubt.”[22] By this standard, freedom is violated when people suffer self-doubt, and the government is obliged to forcibly intervene to guarantee that all people think well of themselves.

Political scientist Alan Wolfe, a self-described “welfare liberal,” asserted in 1995 that “people need a modicum of security and income maintenance, underwritten by government, in order to fulfill the ideal of negative liberty, which is self-sufficiency.”[23] Government dependency is the new, improved form of self-reliance: dependency on government doesn’t count because government is a better friend to you than you are yourself. But the more dependent people become on government, the more susceptible they are to political and bureaucratic abuse. Freedom from want is conceivable only so long as people are allowed to want only what the government thinks they should have.

Freedom from want supposedly results from government taking away what a person owns so that it can give him back what it thinks he deserves. The welfare state is either a way to force people to finance their own benefits via political-bureaucratic bagmen, or it is a way to force some people to labor for other people’s benefit. In the first case, government sacrifices the person’s freedom to the fraud that government must tax him to subsidize him; in the second, government sacrifices the person’s freedom in order to “liberate” someone else—often someone who chooses not to work. If someone pays the taxes that finance the government benefits he receives, he is less free than he would otherwise have been.

Some “freedom from want” advocates imply that government is a great benefactor when it promises citizens “three hots and a cot”—the old-time recruiting slogan of the Marine Corps. But trading freedom for a full belly is a worse bargain now than ever before. As economist F.A. Hayek observed, “As the result of the growth of free markets, the reward of manual labor has during the past hundred and fifty years experienced an increase unknown in any earlier period in history.”[24] The average worker in industrialized countries can purchase the bare necessities of life with fewer hours of labor than ever before. Comparing current wages and prices with those of 1800, economist Julian Simon found that the average American worker today needs to labor less than one-tenth the time to earn enough to purchase a bushel of wheat than his predecessors did two centuries ago.[25] While the real price of food has plummeted (in spite of government farm policies), the “real price” of political servitude has not diminished.

It is understandable that some well-intentioned people assume that “freedom from want” is the most important freedom. It is difficult for many people to conceive of enjoying anything (much less their freedom) if they lack food, clothing, or shelter. However, freedom is not a guarantee of prosperity for every citizen; the fact that some people have meager incomes does not prove that they are shackled. It is a cardinal error to confuse freedom with the things that free individuals can achieve or produce, and then to sacrifice the reality of freedom in a deluded shortcut to the bounty of freedom. Freedom is not measured by how much a person possesses, but by the restrictions and shackles under which he lives.

Throughout history, politicians have used other people’s property to buy themselves power. That is the primary achievement of the welfare state. The danger of government handouts to freedom was clear to some political writers hundreds of years ago. The French writer Etienne de la Boétie, in his 1577 Discourse of Voluntary Servitude, noted of ancient Rome: “Tyrants would distribute largess, a bushel of wheat, a gallon of wine . . . and then everybody would shamelessly cry, ‘Long live the King!’ The fools did not realize that they were merely recovering a portion of their own property, and that their ruler could not have given them what they were receiving without having first taken it from them.”[26]

“Freedom from want” is not possible unless the government is allowed to control all things people want. Americans must beware of Trojan-horse definitions of freedom—definitions that, once accepted, allow bureaucrats to take over everyone’s life. Government handouts insinuate political power into the deepest recesses of a person’s life. And when the time is ripe, politicians take command where they previously lavished their gifts.


Notes

  1. Quoted in Fritz Machlup, “Liberalism and the Choice of Freedoms,” in Roads to Freedom: Essays in Honour of Friedrich A. von Hayek, Erich Streissler, ed. (London: Routledge & K. Paul, 1969), p. 126.
  2. Sidney and Beatrice Webb, Soviet Communism: A New Civilization?, vol. 2 (New York: Charles Scribner’s Sons, 1936), pp. 1038–39.
  3. Ibid., vol. 1., p. 547.
  4. Quoted in Dorothy Fosdick, What is Liberty? A Study in Political Theory (New York: Harper and Brothers, 1939), p. 28.
  5. James Gregor, The Ideology of Fascism (New York: Free Press, 1969), p. 212.
  6. The Public Papers and Addresses of Franklin D. Roosevelt, 1937 (New York: Macmillan, 1941), p. 361.
  7. Leslie M. Pape, “Some Notes on Democratic Freedom,” Ethics, April 1941, p. 26.
  8. Edward Hallett Carr, The New Society (London: Macmillan, 1951), p. 107.
  9. Ibid., p. 108.
  10. John Jewkes, The New Ordeal by Planning (New York: St. Martin’s, 1968; based on his 1948 book), p. 213.
  11. Gideon Kanner, “Tennis Anyone?,” California Political Review, March-April 1998, p. 17.
  12. William Grimes, “History Explains Disparity Between English and French Cuisine,” New York Times, May 9, 1998.
  13. Quoted in F.A. Hayek, Law, Legislation and Liberty, vol. 2, The Mirage of Social Justice (Chicago: University of Chicago Press, 1976), p. 184.
  14. Quoted in Marvin Gettleman and David Mermelstein, eds., The Great Society Reader (New York: Random House, 1967), p. 256.
  15. Quoted in “The Welfare Bill: Excerpts from Debate in the Senate on the Welfare Measure,” New York Times, August 2, 1996.
  16. “Radio Address of the President,” Office of the Press Secretary, White House, December 7, 1996.
  17. “Total Tax Collections to Reach $2.667 Trillion in 1998, Tax Foundation Says,” Tax Notes Today, June 11, 1998.
  18. Robert Goodin, Reasons for Welfare (Princeton: Princeton University Press, 1988), p. 313.
  19. Edgar Browning, “The Marginal Cost of Redistribution,” Public Finance Quarterly, January 1993, p. 3.
  20. Ibid., p. 3.
  21. Amy Gutmann, Liberal Equality (Cambridge: Cambridge University Press, 1980), p. 8.
  22. Ibid., p. 123.
  23. Alan Wolfe, Review of Passions and Constraint: On the Theory of Liberal Democracy, by Stephen Holmes,New Republic, May 1, 1995.
  24. Friedrich Hayek, Law, Legislation and Liberty, vol. 1, Rules and Order (Chicago: University of Chicago Press, 1973), p. 24.
  25. Julian Simon, “What the Starvation Lobby Eschews,” Wall Street Journal, November 18, 1996.
  26. Etienne de la Boétie, The Discourse of Voluntary Servitude, Murray Rothbard, ed. (New York: Free Life Editions, 1975), p. 70.

This article has been published with FEE‘s permission and has been originally published at The Freeman May 1999 • Volume: 49 • Issue: 5.

Scandal at the Welfare State

Tibor Machan teaches philosophy at Auburn University, Alabama. His recently edited volume “Commerce and Morality” was just published by Rowman and Littlefield, and he is now working on a book titled “Public Realms and Private Rights” for the Independent Institute of San Francisco.

There is much talk these days about government corruption. Scandals abound and usually involve special benefits obtained by organizations from local, state, or federal governments. Government officials are accused of playing favorites as they carry out their duties. They are charged with accepting gifts or campaign contributions in return for giving supporters special treatment.

But there is reason to believe that the more obvious improprieties are merely routine behavior carried out somewhat ineptly. In other words, it is very doubtful that politics in our society involves anything more noble than playing favorites, serving special interests—and neglecting what could be reasonably construed as the true public interest.

Although the distinction between the public and the private interest is quite meaningful, the democratic welfare state totally obscures it. Such a system favors majority role regarding any concern that some member of the public might have (if it can be brought to public attention). It treats everyone’s project as a candidate for public support. And, of course, most every person or group has different objectives. Thus, so long as these objectives can be advanced by political means, they can gain the honorific status of “the public interest.”

It is noteworthy that this may be the result of what Professor Benjamin Barber of Rutgers University has called a strong democracy—a political system that subjects all issues of public concern to a referendum. This approximation of strong democracy—where, for example, just wanting to add a porch to one’s home must be cleared with the representatives of the electorate—has produced our enormous “welfare” state. Yet it was just this prospect that the framers of the U.S. Constitution wanted to avoid. That in part accounted for their insistence on a Bill of Rights, namely, on denying to government-democratic, monarchical, or whatever—the kind of powers that strong democracy entails.

To see how confusing things have become in this kind of strong democracy/welfare state, consider a few current topics of “public concern.” Take, for example, wilderness preservation, an issue that appeals to many and cannot be considered a bad example—environmentalists who favor interventionist policies certainly believe that government preservation of wilderness areas is in the public interest.

Yet it is not unreasonable to suppose that many people do not have the wilderness as their top priority. Sure, they might like and even benefit from some of it. But in the main, they might prefer having at least part of the wilderness given up in favor of, say, housing development which might better suit their needs.

Or take all those Ralph Nader-type crusades for absolutely safe automobiles, risk-free medical research, and the banning of genetic experiments. Mr. Nader is the paragon of the so-called public-minded citizen, presumably without a self-interested bone in his body. Whatever his motives, however, his concerns quite legitimately are not shared by many citizens—.g., those who would prefer more powerful, maneuverable automobiles that can quickly get out of tight spots. These people might well lead better lives without all this worry about safety—they might be good drivers for whom Nader’s concern about safety is superfluous.

Jeremy Rifkin, a Nader type who would ban all genetic experimentation, is another of those who bill themselves as public interest advocates, presumably without a tinge of self- or vested interest to their names. But such persons in fact serve quite particular interests. These and similar-minded individuals clearly do not favor the general public. They favor, instead, some members of it. The rest can fend for themselves when Mr. Rifkin and others gain the political upper hand.

The point is that when government does so much—in behalf of virtually anyone who can gain political power or savvy—it is difficult to tell when it is serving the true public interest. Everyone is pushing an agenda on the government in support of this or that special interest group.

There is under such a system hardly any bona fide public service at all. In this case, laws often serve a private or special purpose—.g., smoking bans in restaurants, prohibition of gambling, mandatory school attendance, business regulations that serve the goals of some but not of others. Such a bloated conception of the “public” realm even undermines the integrity of our judicial system. Courts adjudicating infractions of such special interest laws become arms of a private crusade, not servants of the public.

An Erosion of Confidence

One consequence of this is that confidence in the integrity of government officials at every level, even those engaged in the essential functions of government, is becoming seriously eroded. The police, defense, and judicial functions all are suffering because government has become over-extended.

As government grows beyond its legitimate functions, scandals become the norm. They certainly should not be surprising. They merely represent the more obviously inept ways of trying to get the government to do your own private, special bidding.

It is all just a matter of getting your part of the pie out of Washington—whether it be day care for your children, a monument to your favorite subjects, help to unwed mothers, support of faltering corporations, or protection of the textile industry from foreign competition. Everyone wants to get the government on his side. Some people do this in ways that make it all appear on the up and up. They hire the necessary legal help to navigate the complicated catacombs of the welfare state. Others aren’t so adept.

In such a climate it is actually quite surprising that not more scandals erupt. Probably that is due to even more corruption—in this case cover-ups.

Were government doing something more nearly within its range of expertise—protecting individual rights from domestic and foreign threats—some measure of ethical behavior could be expected from it. But when, despite all the failures and mismanagement of government, people continue to go to it to ask for bailouts, why be surprised when some do it more directly, without finesse? And why wonder at their claim, when caught seeking favors openly and blatantly, that they are innocent?

In light of this, an old adage gains renewed support: the majority of people get just the kind of government they deserve. It is they who clamor for state favors by dishonestly calling their objectives the “public” interest. Notice how many look to political candidates for future favors, how many support this or that politician because they expect something in return once the political office has been gained. Unfortunately, many of us who choose not to play the political game have the results imposed on us in the form of higher taxes and more burdensome regulations.

It may be surprising, after all this, that there are certain matters which are of genuine public interest the Founding Fathers had a clear idea of the public interest, as have most classical liberals. The public interest amounts to what is in everyone’s best interest as a member of the community—the defense of individual fights from domestic and foreign aggression. Here is where our individual human rights unite us into a cohesive public, with a common interest. We are justified in establishing a government, with its massive powers, only if this is our goal to protect and maintain the public interest so understood.

Once we expand the scope of the public in effect make the concept “public” quite meaningless the powers of the state get involved in tasks that serve only some of the people, and often at the expense of other people. And that simply breeds bad government—whether hidden, by phony legislation and regulation, or by means of out- and-out corruption and subsequent scandal.

It is therefore not surprising that the welfare state is so susceptible to misconduct. The lesson we ought to take away is that the scope of government should be reduced to proper proportions—the defense of individual rights.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1989 • Volume: 39 • Issue: 3.

Socialized Medicine: The Canadian Experience

by Pierre Lemieux

Mr. Lemieux is an economist and author living in Montreal.

The Canadian public health system is often put forward as an ideal for Americans to emulate. It provides all Canadians with free basic health care: free doctors visits, free hospital ward care, free surgery, free drugs and medicine while in the hospital—plus some free dental care for children as well as free prescription drugs and other services for the over-65 and welfare recipients. You just show your plastic medicare card and you never see a medical bill.

This extensive national health system was begun in the late 1950s with a system of publicly funded hospital insurance, and completed in the late 1960s and early 1970s when comprehensive health insurance was put into place. The federal government finances about 40 percent of the costs, provided the provinces set up a system satisfying federal norms. All provincial systems thus axe very similar, and the Quebec case which we will examine is fairly typical.

One immediate problem with public health care is with the funding. Those usually attracted to such a “free” system are the poor and the sick those least able to pay. A political solution is to force everybody to enroll in the system, which amounts to redistributing income towards participants with higher health risks or lower income. This is why the Canadian system is universal and compulsory.

Even if participation is compulsory in the sense that everyone has to pay a health insurance premium (through general or specific taxes), some individuals are willing to pay a second time to purchase private insurance and obtain private care. If you want to avoid this double system, you do as in Canada: you legislate a monopoly for the public health insurance system.

This means that although complementary insurance (providing private or semi-private hospital rooms, ambulance services, etc.) is available on the market, sale of private insurance covering the basic insured services is forbidden by law. Even if a Canadian wants to purchase basic private insurance besides the public coverage, he cannot find a private company legally allowed to satisfy his demand.

In this respect, the Canadian system is more socialized than in many other countries. In the United Kingdom, for instance, one can buy private health insurance even if government insurance is compulsory.

In Canada, then, health care is basically a socialized industry. In the Province of Quebec, 79 percent of health expenditures are public. Private health expenditures go mainly for medicines, private or semi-private hospital rooms, and dental services. The question is: how does such a system perform?

The Costs of Free Care

The first thing to realize is that free public medicine isn’t really free. What the consumer doesn’t pay, the taxpayer does, and with a vengeance. Public health expenditures in Quebec amount to 29 percent of the provincial government budget. One-fifth of the revenues comes from a wage tax of 3.22 percent charged to employers and the rest comes from general taxes at the provincial and federal levels. It costs $1,200 per year in taxes for each Quebec citizen to have access to the public health system. This means that the average two-child family pays close to $5,000 per year in public health insurance. This is much more expensive than the most comprehensive private health insurance plan.

Although participating doctors may not charge more than the rates reimbursed directly to them by the government, theoretically they may opt out of the system. But because private insurance for basic medical needs isn’t available, there are few customers, and less than one percent of Quebec doctors work outside the public health system. The drafting of virtually all doctors into the public system is the twit major consequence of legally forbidding private insurers from competing with public health insurance.

The second consequence is that a real private hospital industry cannot develop. Without insurance coverage, hospital care costs too much for most people. In Quebec, there is only one private for-profit hospital (an old survivor from the time when the government would issue a permit to that kind of institution), but it has to work within the public health insurance system and with government-allocated budgets.

The monopoly of basic health insurance has led to a single, homogeneous public system of health care delivery. In such a public monopoly, bureaucratic uniformity and lack of entrepreneurship add to the costs. The system is slow to adjust to changing demands and new technologies. For instance, day clinics and home care are underdeveloped as there exist basically only two types of general hospitals: the nonprofit local hospital and the university hospital.

When Prices Are Zero

Aside from the problems inherent in all monopolies, the fact that health services are free leads to familiar economic consequences. Basic economics tells us that if a commodity is offered at zero price, demand will increase, supply will drop, and a shortage will develop.

During the first four years of hospitalization insurance in Quebec, government expenditures on this program doubled. Since the introduction of comprehensive public health insurance in 1970, public expenditures for medical services per capita have grown at an annual rate of 9.4 percent. According to one study, 60 percent of this increase represented a real increase in consumption.[1]

There has been much talk of people abusing the system, such as using hospitals as nursing homes. But then, on what basis can we talk of abusing something that carries no price?

As demand rises and expensive technology is introduced, health costs soar. But with taxes already at a breaking point, government has lit-fie recourse but to try to hold down costs. In Quebec, hospitals have been facing budget cuts both in operating expenses and in capital expenditures. Hospital equipment is often outdated, and the number of general hospital beds dropped by 21 percent from 1972 to 1980.

Since labor is the main component of health costs, incomes of health workers and professionals have been brought under tight government controls. In Quebec, professional fees and target incomes are negotiated between doctors’ associations and the Department of Health and Social Services. Although in theory most doc tors still are independent professionals, the government has put a ceiling on certain categories of income: for instance, any fees earned by a general practitioner in excess of $164,108 (Canadian) a year are reimbursed at a rate of only 25 percent.

Not surprisingly, income controls have had a negative impact on work incentives. From 1972 to 1978, for instance, general practitioners reduced by 11 percent the average time they spent with their patients. In 1977, the first year of the income ceiling, they reduced their average work year by two-and-a-half weeks.[2]

Government controls also have caused mis-allocations of resources. While doctors are in short supply in remote regions, hospital beds are scarce mainly in urban centers. The government has reacted with more controls: young doctors are penalized if they start their practice in an urban center. And the president of the Professional Corporation of Physicians has proposed drafting young medical school graduates to work in remote regions for a period of time. Nationalization of the health industry also has led to increased centralization and politicization. Work stoppages by nurses and hospital workers have occurred half a dozen times’ over the last 20 years, and this does not include a few one-day strikes by doctors. Ambulance services and dispatching have been centralized under government control. As this article was being written, ambulance drivers and paramedics were working in jeans, they had covered their vehicles with protest stickers, and they were dangerously disrupting operations. The reason: they want the government to finish nationalizing what remains under private control in their industry.

When possible, doctors and nurses have voted with their feet. A personal anecdote will illustrate this. When my youngest son was born in California in 1978, the obstetrician was from Ontario and the nurse came from Saskatchewan. The only American-born in the delivery room was the baby.

When prices are zero, demand exceeds supply, and queues form. For many Canadians, hospital emergency rooms have become their primary doctor—s is the case with Medicaid patients in the United States. Patients lie in temporary beds in emergency rooms, sometimes for days. At Sainte-Justine Hospital, a major Montreal pediatric hospital, children often wait many hours before they can see a doctor. Surgery candidates face long waiting lists—it can take six months to have a cataract removed. Heart surgeons report patients dying while on their waiting lists. But then, it’s free.

Or is it? The busy executive, housewife, or laborer has more productive things to do be-sides waiting in a hospital queue. For these people, waiting time carries a much higher cost than it does to the unemployed single person. So, if public health insurance reduces the costs of health services for some of the poor, it increases the costs for many other people, it discriminates against the productive.

The most visible consequence of socialized medicine in Canada is in the poor quality of services. Health care has become more and more impersonal. Patients often feel they are on an assembly line. Doctors and hospitals already have more patients than they can handle and no financial incentive to provide good service. Their customers are not the ones who write the checks anyway.

No wonder, then, that medicine in Quebec consumes only 9 percent of gross domestic product (7 percent if we consider only public expenditures) compared to some 11 percent in the United States. This does not indicate that health services are delivered efficiently at low cost. It reflects the fact that prices and remunerations in this industry are arbitrarily fixed, that services are rationed, and that individuals are forbidden to spend their medical~care dollars as they wish.

Is It Just?

Supporters of public health insurance reply that for all its inefficiencies, their system at least is more just. But even this isn’t true.

Their conception of justice is based on the idea that certain goods like health (and education? and food? where do you stop?) should be made available to all through coercive redistribution by the state. If, on the contrary, we define justice in terms of liberty, then justice forbids coercing some (taxpayers, doctors, and nurses) into providing health services to others. Providing voluntarily for your neighbor in need may be morally good. Forcing your neighbor to help you is morally wrong.

Even if access to health services is a desirable objective, it is by no means clear that a socialized system is the answer. Without market rationing, queues form. There are ways to jump the queue, but they are not equally available to everyone.

In Quebec, you can be relatively sure not to wait six hours with your sick child in an emergency room if you know how to talk to the hospital director, or if one of your old classmates is a doctor, or if your children attend the same exclusive private school as your pediatrician’s children. You may get good services if you deal with a medical clinic in the business district. And, of course, you will get excellent services if you fly to the Mayo Clinic in Minnesota or to some private hospital in Europe. The point is that these ways to jump the queue are pretty expensive for the typical lower-middle-class housewife, not to talk of the poor.

An Enquiry Commission on Health and Social Services submitted a thick report in December 1987, after having met for 30 months and spent many millions of dollars. It complains that “important gaps persist in matters of health and welfare among different groups.”[3] Now, isn’t this statement quite incredible after two decades of monopolistic socialized health care? Doesn’t it show that equalizing conditions is an impossible task, at least when there is some individual liberty left?

One clear effect of a socialized health system is to increase the cost of getting above-average care (while the average is dropping). Some Ix)or people, in fact, may obtain better care under socialized medicine. But many in the middle class will lose. It isn’t clear where justice is to be found in such a redistribution.

There are two ways to answer the question: “What is the proper amount of medical care in different cases?” We may let private initiative and voluntary relations provide solutions. Or we may let politics decide. Health care has to be rationed either by the market or by political and bureaucratic processes. The latter are no more just than the former. We often forget that people who have difficulty making money in the market are not necessarily better at jumping queues in a socialized system.

There is no way to supply all medical services to everybody, for the cost would be astronomical. What do you do for a six-year-old Montreal girl with a rare form of leukemia who can be cured only in a Wisconsin hospital at a cost of $350,000~a real case? Paradoxically for a socialized health system, the family had to appeal to public charity, a more and more common occurrence. In the first two months, the family received more than $100,000, including a single anonymous donation of $40,000.

This is only one instance of health services that could have been covered by private health insurance but are being denied by hard-pressed public insurance. And the trend is getting worse. Imagine what will happen as the population ages.

There are private solutions to health costs. Insurance is one. Even in 1964, when insurance mechanisms were much less developed than today, 43 percent of the Quebec population carried private health insurance, and half of them had complete coverage. Today, most Americans not covered by-Medicare or Medicaid carry some form of private health insurance. Private charity is another solution, so efficient that it has not been entirely replaced by the Canadian socialized system.

Can Trends Be Changed?

People in Quebec have grown so accustomed to socialized medicine that talks of privatization usually are limited to subcontracting hospital laundry or cafeteria services. The idea of sub-contracting hospital management as a whole is deemed radical (although it is done on a limited scale elsewhere in Canada). There have been suggestions of allowing health maintenance organizations (HMO’s) in Quebec, but the model would be that of Ontario, where HMO’s are totally financed and controlled by the public health insurance system. The government of Quebec has repeatedly come out against for-profit HMO’s.

Socialized medicine has had a telling effect on the public mind. In Quebec, 62 percent of the population now think that people should pay nothing to see a doctor; 82 percent want hospital care to remain free. People have come to believe that it is normal for the state to take care of their health.

Opponents of private health care do not necessarily quarrel with the efficiency of competition and private enterprise. They morally oppose the idea that some individuals may use money to purchase better health care. They prefer that everybody has less, provided it is equal. The Gazette, one of Montreal’s English-speaking newspapers, ran an editorial arguing that gearing the quality of health care to the ability to pay “is morally and socially unacceptable.”[4]

The idea that health care should be equally distributed is part of a wider egalitarian culture. Health is seen as one of the goods of life that need to be socialized. The Quebec Enquiry Commission on Health and Social Services was quite clear on this:

The Commission believes that the reduction of these inequalities and more generally the achievement of fairness in the fields of health and welfare must be one of the first goals of the system and direct all its interventions. It is clear that the health and social services system is not the only one concerned. This concern applies as strongly to labor, the environment, education and income security.[5]

A Few Lessons

Several lessons can be drawn from the Canadian experience with socialized medicine.

First of all, socialized medicine, although of poor quality, is very expensive. Public health expenditures consume close to 7 percent of the Canadian gross domestic product, and account for much of the difference between the levels of public expenditure in Canada (47 percent of gross domestic product) and in the U.S. (37 percent of gross domestic product). So if you do not want a large public sector, do not nationalize health.

A second lesson is the danger of political compromise. One social policy tends to lead to another. Take, for example, the introduction of publicly funded hospital insurance in Canada. It encouraged doctors to send their patients to hospitals because it was cheaper to be treated there. The political solution was to nationalize the rest of the industry. Distortions from one government intervention often lead to more intervention.

A third lesson deals with the impact of egalitarianism. Socialized medicine is both a consequence and a great contributor to the idea that economic conditions should be equalized by coercion. If proponents of public health insurance are not challenged on this ground, they will win this war and many others. Showing that human inequality is both unavoidable and, within the context of equal formal rights, desirable, is a long-run project. But then, as Saint-Exupéry wrote, “Il est vain, si l’on plante un chêne, d’espérer s’abriter bientôt sous son feuillage.”[6]

Notes

1.   Report of the Enquiry Commission on Health and Social Services, Government of Quebec, 1988, pp. 148, 339.

2.   Gérard Bé1anger, “Les dépenses de santé par rapport à l’éonomie du Québee,” Le Médecin du Québec, December 1981, p. 37.

3.   Report of the Enquiry Commission on Health and Social Services, p. 446 (our translation).

4.   “No Second Class Patients,” editorial of The Gazette, May 21, 1988.

5.   Report of the Enquiry Commission on Health and Social Services, p. 446 (our Ixanslation).

6.   “It is a vain hope, when planting an oak tree, to hope to soon take shelter under it.”

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1989 • Volume: 39 • Issue: 3.

Government Investment

by John Semmens

John Semmens is an economist with the Laissez Faire Institute in Chandler, Arizona.


The idea that the government should spend money as a means of stimulating the economy and boosting employment has been a formal part of U.S. policy since the Employment Act of 1946. This law was clearly rooted in Keynesian economics. The idea was that government spending would make a splash in the economic pond that would send out ripples that would impact the rest of the economy in a positive way.

The plausibility of this idea is enhanced by the very visible employment of those working on the specific projects funded by the government. For example, government subsidies to public transit are often urged as a means for achieving the dual objectives of improved urban transportation and stimulation of employment.

The buses and trains used to provide this transportation are there for everyone to see. These vehicles have drivers. The systems also employ mechanics, ticket sellers, administrators, accountants, etc. The American Public Transit Association proudly observes that over 300,000 people are employed due to public transit spending programs.

In 1992 around $20 billion was “invested” on public transit in the United States. Because this spending does “ripple” through the economy and eventually become someone else’s income, it could be said that, in all, public transit may account for the employment of 800,000 people.

This sounds very impressive and is, no doubt, part of the reasoning behind plans to boost the U.S. economy by increased spending on public transit. The flaw in this thinking, though, is its failure to account for what economists call the “opportunity cost” of using resources on transit subsidies. That is, what opportunities may have been sacrificed while funds were being spent on public transit? What gains might have resulted if the funds committed to transit “investments” had been invested in something else?

Since 1965, when the federal government began subsidizing transit, U.S. taxpayers have paid over $60 billion into this program. State and local taxpayers have paid a similar amount. In total, over $125 billion in tax dollars have been “invested” in public transit. If the transit subsidy program had not existed and this money had instead been invested in other businesses, would we now be better off in terms of employment and economic activity?

If we assume that our investment alternative produced only average results, our economy and employment options would be far more robust than they are now. Business assets would be nearly $100 billion higher than they now are. Gross domestic production would be $400 billion higher. There would be over 8 million people employed in these alternative business enterprises.

These private sector benefits would have been augmented by substantial public sector gains, as well. Current federal tax receipts could have been $80 billion per year higher than they now are. State and local government tax receipts could have been $60 billion per year higher. These gains from economic growth could have meant fewer tax increases or less government borrowing, either of which would have stimulated economic growth even more than the above estimates.

The reason for the great disparity in results is that it makes a difference whether investments make profits or losses. Since the federal government subsidies began in 1965, public transit has failed to make a profit in any year. In fact, losses have grown larger in every single year since 1965. For 1992, public transit’s financial losses amounted to around $13 billion.

Losses mean that the economy is not being stimulated by transit subsidies. Rather, it is being drained. Every year, other, more profitable business activities have been taxed to provide the funds to prop up public transit. The long-term consequences of this parasitic relationship have been very costly.

The economy is weaker. Virtually every sector, save those directly benefitting from the subsidies, has been harmed. There has been a net loss of over 7 million job opportunities. Wages are lower. Business sales are lower. Interest rates are higher. The federal government’s budget deficit crisis is worse.

These unpleasant consequences are the result of ignoring the essential role of profit in creating resources and stimulating the economy. Profit results when the value of the outputs of an economic enterprise is worth more than the cost of the inputs. Profits mean that the economic enterprise has added to the economy’s wealth. Each increment of profit on each subsequent transaction adds more to the economy’s wealth. The compounding of these increments over time is what enables us to enjoy a higher standard of living than earlier generations.

Profits accrue to those businesses that have satisfied their customers. Profits act as both a message and a means for these businesses to continue and expand. Losses send a different message. Losses indicate that the business’s output is worth less than the cost of its inputs. A business must heed this message by improving its efficiency or changing its product. Failure to heed the message will result in a loss of resources and endanger its ability to remain in business.

The lack of profit in government enterprises should not be surprising. Government’s ability to tax means its businesses are insulated from the need to earn a profit in order to stay alive. Consequently, they don’t earn profits. The absence of profits means that government businesses consume rather than create resources.

Despite consuming a huge quantity of resources over the last 25 years, public transit is still a sickly industry. Its share of the passenger travel market has declined. Most buses and trains run mostly empty most of the time. Passenger fares pay less than 35 percent of the cost of each ride. Today the total number of public transit passengers is barely above where it was before all this government “investment” started.

This pathetic record of non-achievement is all too typical for government “investments.” If we truly want to stimulate our economy we need to stop “investing” in government’s money-losing ventures.

This article has been published with FEE‘s permission and has been originally published at The Freeman April 1994 • Volume: 44 • Issue: 4.

Private Property and Social Order

by Butler Shaffer

This is chapter seven from Butler Shaffer’s recent book “Boundaries of Order: Private Property as a Social Order” (pdf-version).

Every thing that tends to insulate the individual to surround him with barriers of natural respect, so that each man shall feel the world is his, and man shall treat with man as a sovereign state with a sovereign state;—tends to true union as well as greatness.

— Ralph Waldo Emerson[1]

Because life is dependent upon the use and consumption of property, it is the nature of any property system—whether private or collective in form—to generate divisions between those who will, and those who will not, be entitled to the enjoyment of various resources. It is the entropic nature of life itself, not some belief system, that dictates such harsh realities. The competition that invariably exists among all living things for negentropic resources injects an element of conflict into the life process that cannot be wholly excised. There will also be disappointments or even hard feelings over the outcomes of such contests. Nothing in the holographic model of social systems suggests that billions of people will suddenly develop a collective mindset, and agree to allocate resources in a manner that reflects a cheerful unanimity. Such illusions of group-think are what have turned the dreams of utopian thinkers into the nightmares under which others have suffered and died. Society will become more peaceful and cooperative only as individuals transform the nature of their conduct with others. Such changes will arise marginally, at the boundaries where people transact their relationships and exchanges with one another. Like the young boy at the party chaperoned by my daughter, such individual transformations in consciousness are more likely to arise in an environment in which one’s claims to ownership are respected by others. As a means of harmonizing our needs for both self-centered activity and social cooperation, a system of private ownership allows us to experience the deeper meaning of being human.

Again, what is being proposed here is not a utopian ideology, in which humanity will miraculously march off together, in lockstep cadence, to yet another visionary millennium. Utopian thinking is premised on the delusion of universally shared preferences, as well as the idea of a fixed end state. But a creative and vibrant society is a continuously changing one, comprised of people with a multitude of varied tastes, preferences, ambitions, and skills. And as history has demonstrated, creative change is not necessarily favorable to all mankind. There were many contemporaries for whom the Renaissance or the Industrial Revolution were not beneficial. The Luddite riots, for instance, were greatly influenced by the reaction of many artisans to the threats that industrialization posed to their established economic interests.

Regardless of the form of the social or political system under which we live, it is unavoidable that each of us will be entitled to use and consume particular resources to the exclusion of everyone else. This is but a fact of existence. Again, we witness the interrelatedness of apparent opposites: both individual liberty and social order depend upon a system grounded in the division that inheres in the nature of property. But lest any be inclined to treat this only as a paradoxical feature of privately owned property, it must be noted that collective ownership fosters the same divisiveness, but without a concomitant benefit to our sense of individuality, a topic to be explored more fully in chapter nine. Whether we live in the most ideologically repressive Marxist state, with its insistence upon state ownership of all productive property, or in a stateless community of cooperative, uncoerced individuals, some method will have to be arrived at for determining the answer to the question: who gets to make decisions about what resources? Whether the process involves voluntary, marketplace negotiations among competing interests, or the arbitrary determinations of bureaucratic agencies, the use of a given item of property will be enjoyed by some to the exclusion of others.

Given the nature of property, there must be some arrangements for deciding who gets to stand or sleep or work or play within a given space and period of time, and who gets to consume what resources to the exclusion of everyone else, in our efforts to sustain ourselves. One thing is clear: all five billion of us cannot sleep in one bed at the same time, or eat the same hamburger. Whether I decide—by my act of asserting a claim to and taking control of previously unowned resources, or by purchasing the claim of another—where I am to live and sleep, or whether this decision is imposed upon me by some state bureaucrat, the inescapable fact remains that I will end up someplace, if only by default, and to the exclusion of everyone else on the planet. What this means is that any method of making such decisions will always separate the “occupier” or the “consumer” from the “non-occupier” or “non-consumer,” the best intentions of the market participants or the noblest state housing commissar to the contrary notwithstanding.

Whether property is to be controlled privately by individuals, or collectively by the state, tells us much about our existential sense of being. Are human beings ends in themselves, or only means to the ends of others? Do we regard ourselves as unique individuals, or as undifferentiated parts in some giant piece of social machinery? Are our individual interests to be considered inviolate, or subject to preemption by those who enjoy power?

Private property, as a system of social order, reflects the extent to which we are willing to acknowledge one another’s autonomy and to limit the range of our own activities. Private property is the operating principle that makes real Immanuel Kant’s admonition: “Act so that you treat humanity, whether in your own person or in that of another, always as an end and never as a means only.”[2] It is a tenet that not only diffuses authority in society, but helps us reconcile our seemingly contradictory natures as self-seeking individuals who, at the same time, require some form of social organization in order to survive. Such a system of social individualism reflects the paradoxical nature of reality, in which self-interest finds expression in cooperation with others.

Respecting the inviolability of the boundaries that enclose our neighbors’ property claims accords them our respect for the autonomy that is essential to any meaningful form of individual expression. In acknowledging one another’s realms of unimpeded activity, we not only confirm our sense of their self-justifying existence but, in so doing, dissolve the barriers of distrust that separate us. Only in a condition of such mutual respect can we expect to find a reasonable basis for social harmony. Knowing that our claims to immunity from trespass are likely to be respected, and being aware of the advantages of cooperation, we are more inclined to organize ourselves in peaceful and productive ways than we are when, as now, organization tends to be grounded in fear and the violent and divisive assumptions of coercive power.

The property principle operates as a buffer, separating the realm of your decision making from mine. We need to have our will free of coercion, and the inviolability of our sense of self acknowledged, before we will feel comfortable enough to cooperate with others and feel safe within groups. Our social organizations must reflect these qualities with a sense of wholeness and integrity before we can live in harmony with our neighbors, instead of the counterfeit forms offered by the state. It is only within systems in which each of us enjoys the unrestrained autonomy to act in furtherance of our individual interests that our personal and social interests can merge. When decision-making is decentralized into a system of privately owned property, individual self-interest and cooperation coalesce to maximize personal liberty and social harmony. With authority diffused into the hands of individuals, each of us enjoys control over some portion of the world within which we can pursue our interests in our own way. What we share in common are our individual needs for a sphere of action in which we can be as autonomous, spontaneous, arbitrary, self-indulgent, and as unanswerable to others as we care to be, without being subject to any coercive preemption by others. At the same time, cooperation with others is premised upon sharing or exchanging with one another that which belongs to each of us (e.g., our personal energies or our material resources).

The decentralization of decision-making that is implicit in a system of privately-owned property provides another instance of the unity that inheres in apparent opposites. By distributing authority widely rather than narrowly, private property provides a greater flexibility allowing individuals to voluntarily join with others in concentrated communities in which they can choose to associate with others in pursuit of shared interests. The Silicon Valley, artists colonies, Detroit automobile manufacturing, Hollywood film production companies, and religious communes, are just a handful of examples of the interrelated dynamics of decentralized and concentrated activity.

Whether our relationships with others will be increasingly based upon state-driven coercion, or will find a more creative expression in agreements, depends upon our attitudes about the inviolability of property claims. When we acknowledge property boundary lines, rather than statutes or court decisions, as confining the range of our personal actions, mutual respect for one another’s boundaries integrates our individual and social needs and, as a consequence, generates liberty and order in society.

One need not rely on hypotheticals or theoretical analyses to demonstrate the social, or transactional, negotiation for property claims. There is an emerging field of study in law regarding the role played by social norms—enforced informally by interpersonal pressures rather than coercive state power—in maintaining peaceful and orderly behavior. The Amish have used such methods for decades to provide for an orderly, productive, and mutually-supportive society.[3] In Northern Ireland, a nation bloodied by political and religious divisiveness, many of those desiring to end such violence have taken to publicly shaming the participants into changing their ways.[4]

There is a well-documented history of the respect accorded to property and contract rights along the overland trails in nineteenth-century America. In a harsh and uncertain environment in which there were no courts, judges, prisons, administrative agencies, or other government law enforcement officials, emigrants freely and peacefully negotiated with one another over claims to all kinds of chattels and intangible property interests. High levels of respect were accorded the property claims of both acquaintances and total strangers, even in situations in which scarcity existed. Such negotiated rights were sometimes so sophisticated as to provide for contract terms designed to benefit future wagon trains. In one such case, a wagon train had built a raft for use in fording a river. Upon completion of its crossing, the wagon train company sold the raft to the next wagon train, with the understanding that it would later be sold to subsequent trains at a price no higher than that agreed to by the original contracting parties. When a much later wagon train tried to sell the raft to its successor at a higher price than the original one, the successor was able to successfully invoke the terms of the initial contract to which neither group had been a party.[5] Such an example attests not only to the power of social respect for property interests, but to the effectiveness of information systems, even on the undeveloped frontier, in communicating terms of agreements to unknown strangers!

A more recent study involves residents of Shasta County, California and their methods for dealing with damage done to farmers’ lands by ranchers’ cattle. Some parts of this agricultural county were legally defined as “open range,” and other parts were designated “closed range” territories. In open range areas, cattlemen were lawfully free to allow their livestock to wander freely, without being legally responsible for damages that might accrue to the crops of neighboring farmers. If the farmers wanted to prevent such trespasses, they would be expected to build fences to keep out the offending cattle. In closed range areas, by contrast, the cattlemen had the legal duty to fence in their cattle, and would be liable for damages done to neighboring property owners should the fences not keep their animals in.

Those trained in purely positivist definitions of proper behavior would intuit that, if X’s cattle got off his property and wandered onto Y’s land and did damage, the question of X’s liability would depend upon which legally defined area was implicated. It did not. The residents of this county had their own understanding of the rights and obligations of property ownership totally apart from what the formal legal system dictated. It was understood, both by the cattlemen and the farmers, that if X’s cattle caused damage to Y’s property, X was obligated to compensate Y for his loss, even though, in an open range district, he would not have any legally enforceable duty to do so. Because such expectations were contrary to formal legal requirements, the residents developed their own informal, nonviolent ways of enforcing these community standards upon the occasional recalcitrant cattleman. Subtle methods of communication, informal accounting practices, and economic inducements, helped provide the social pressures to keep this system working.[6] These examples illustrate how peaceful, long-term systems of order can be voluntarily maintained, not only in the absence of state rules, but in spite of them.

Nowhere was the order produced through mutual respect for property claims more vivid than in the early gold mining camps in the western states. So prevalent was the regard for one another’s property interests that miners’ gold, bank deposits, and even gambling stakes could be freely left in the open by their absent owners without fear of loss. One early scholar observed:

The miners needed no criminal code. It is simply    and literally true that there was a short time in California, in 1848, when crime was almost absolutely unknown, when pounds and pints of gold were left unguarded in tents and cabins, or thrown down on the hillside, or handed about through a crowd for inspection. . . . Men have told me that they have known as much as a washbasinful of gold-dust to be left on the table in an open tent while the owners were at work in their claim a mile distant. . . . There was no theft, and no disorder; few troublesome disputes occurred about boundaries and water-rights.[7]

A writer from that period, Sarah Royce, stated: “I had seen with my own eyes, buckskin purses half full of gold-dust, lying on a rock near the road-side, while the owners were working some distance off. So I was not afraid of robbery.”[8] Based upon his personal experiences, an Idaho attorney from this period declared that “life was safe, property was safe” in the mining camps.[9]

Although another student suggested that widespread honesty among the miners was brought about by a respect for “the summary justice likely to be dispensed by the crowd,”[10] such presumed fears did not seem to dissuade the criminal types who swarmed into California following the discovery of new gold fields in 1849. The divergent behavior of the early miners and the plunderers was more likely due to dissimilarities in character of the two groups, as is reflected in the observation of one contemporary that the latter group “were a different kind of people; more of the brute order.”[11] Such behavior differences demonstrate, as Carl Jung and others have insisted,[12] that the quality of life in any society is the consequence of the character of the people who comprise it—that social order is a product not of the fear of punishment, but of the respect neighbors accord one another’s interests. In our dealings with the state, we do not negotiate from the position of an uncoerced free will, but are compelled by threats of violence to our interests. In contrast, our informal, social negotiations are premised upon a mutuality of respect for our individualities.

Such examples provide evidence of how individual liberty, social harmony, and responsible behavior are measured by the respect we accord to one another’s property interests. Likewise, tyranny, social disorder, and irresponsible conduct derive from property violations, which become formalized as the modus operandi of all political systems.

If we are to learn to live responsibly, we must begin by understanding that the “wrongs” others perpetrate upon us, and from which we desire protection, are nothing more than trespasses to our property interests. A peaceful social order consists, in major part, of men and women conducting their affairs without causing injury to one another, an end that requires us to focus our attention on understanding the social implications of property. Such crimes as murder, rape, assault and battery, and kidnapping, are not—despite the pronouncements of government officials—wrongs committed against an amorphous, collectively-defined “society,” but violent trespasses against the property interest the victim has in his or her person. When we declare such actions to be “crimes against the state,” we are implicitly recognizing the state’s claim to the ownership of our person.[13] Likewise, acts of burglary, theft, embezzlement, arson, forgery, and shoplifting, are not offenses against the state, even though the state brings the criminal action against the accused, but invasions of the real or personal property interests of an owner.

It is the distinction between crimes in which there are property trespasses, and those in which such trespasses do not occur, that constitutes the difference between “victimizing” and “victimless” crimes (once again, a failure to heed Pynchon’s warning about the adverse consequences of asking the wrong questions). So accustomed have we become to blurring the meaning of property in our lives that we have reduced the distinction to a vague abstraction that begs the question of what kinds of acts these are. Stated in property terms, a victimless crime (e.g., drug use, gambling, prostitution, pornography, smuggling, etc.) is one in which the state, for reasons of its own, chooses to criminalize conduct that would not otherwise amount to a property trespass against another. Criminalizing such conduct, in fact, violates the property interests of the purported criminal as well as his customers by depriving them of the legal right to exercise control over their own property.

The same analysis can be applied to other types of injuries. The tort of injuring another through the negligent operation of an automobile, for instance, amounts to a trespass to the boundaries of the victim, as well as to other interests (e.g., the victim’s car) damaged by the defendant’s act. The defendant’s wrong was not that he had been driving in a negligent or reckless manner—even though such behavior may have produced the injury—but that he had failed to control his property in such a way as to prevent a trespass upon the interests of his victim. A world organized on the principle of the inviolability of property interests is a world that reduces injuries to others. Responsible behavior is thus encouraged, as the scope of one’s liberty to act ends at his or her property boundaries.

Likewise, a breach of contract action arises out of an alleged violation of a property interest. A and B enter into an agreement by which A is to sell B her claim to the ownership of a new television set, and B agrees to pay A $500 for the set. When it comes time to perform, A delivers B a used television set. Because a contract is nothing more than an agreement to transfer ownership claims, B has not received the ownership claim for the agreed upon property.

Most of our societal problems arise from a failure to stay out of one another’s way. Schools interfere with children’s learning, not only by thwarting their wills, but in replacing intellectually significant learning with politically-based indoctrination; government agencies impede our lives by economic regulations that increase production costs which, in turn, generate higher prices and increased unemployment and, as a consequence, foster greater tendencies toward concentration that accelerate entropic processes;[14] state-licensed medical professions and the Food and Drug Administration dictate what health care services we may lawfully select, and what treatments and medications we may consume; governments hinder the free expression of ideas and lifestyles; and countless coveys of people-pushers demand legislation mandating standards of personal behavior ranging from child-rearing practices to smoking, to the kinds of food and other substances we may ingest, to our safety, to our bodily weight, to how we speak to one another, to whether we can own guns, and other practices that are regularly added. This madness has gone so far as to produce a bill in the California legislature making it a crime punishable by as much as a one-year prison sentence to spank a child.[15] Whether as parents, or in social relationships, or in efforts to make the world better, we insist on getting in one another’s way because we have not learned that most important of social graces: respecting the inviolability of one another’s boundaries. Like young puppies, most of us are not housebroken. We babble our bromides about the insignificance of property principles, because to do otherwise would limit our ambitions to control the lives of others and reveal our mutual contempt for one another’s independence.

Such attempts to micromanage the daily lives of others seem to be part of the continuing effort by adherents to the vertically-structured social model to maintain its established position. As suggested earlier, the continuing process of change that is bringing about decentralized, horizontal networks poses a threat to members of the institutional order who are disinclined to participate in the transformation. To such people, social systems that run themselves without formal direction and superintendence is not only disturbing to their ambitions for power, but represents a form of fanciful thinking. With an effort that approaches a kind of religious reaffirmation of the old order, the statists resort to a constant repetition of their centralist, coercive methods at ever more detailed levels of human behavior. Such conduct is reminiscent of the behaviors Abraham Maslow saw exhibited by brain-injured patients who, in their repetitious patterns “manage to maintain their equilibrium by avoiding everything unfamiliar and strange and by ordering their restricted world in such a neat, disciplined, orderly fashion that everything in the world can be counted upon.”[16]

Much like Maslow’s patients, statists see their world of centralized power structures being enervated by life forces over which they are losing control, and imagine that the rote repetition of familiar patterns will reconfirm its vibrancy. At an unconscious level, perhaps, it may be sensed that if the ancien regime is undergoing its decline and fall, the dying model might be revivified—or at least its vital signs made to so appear—by the proliferation of new, centrally-imposed restraints upon the lives of unfettered men and women. Such obsessive efforts seek to reconfirm the validity of an antiquated system that no longer satisfies people’s expectations. War, of course, is the most dramatic expression of politically-structured violence as well as being an undertaking that brings fearful people back into a herd mentality, which is why it has become the cornerstone of modern statist efforts to preserve power over people. Perhaps this is why expansions of the war system have been such frequent precursors to the collapse of previous civilizations.

Because the power of the state directly correlates with the extent to which it usurps control over privately-owned property, political and legal systems have little interest in generating a fundamental respect for property principles. As we have seen, alternative rationales (e.g., “health,” “safety,” “offenses against the state”) are offered as the basis for resolving wrongs or disputes that would otherwise be subject to a property analysis. When “reasonableness,” the “balancing of interests,” “fairness,” “justice,” and other amorphous vagaries become substituted for an owner’s objections to a more clearly defined trespass, it becomes quite easy for people to call upon the state to force a neighbor to cease doing what a property principle would otherwise allow him to do.

This is how the violation of property interests underlies most of our social difficulties. Conflict arises from the failure of people to effectively identify or to respect property boundaries. When we regard one another’s ownership interests as inviolable, interpersonal conflicts do not arise. But as we have seen, every act of the state involves a forcible intrusion upon the interests of property owners. Whether such governmental action takes the form of regulations that restrict an owner’s control of his or her property, or forcibly transfers ownership claims to others (e.g., eminent domain), or amounts to outright confiscation (e.g., taxation), actions by the state invariably produce conflicts between owners who seek to control their property for their own ends and non-owners who use state power to force owners to conform their behavior to their purposes. The state, whether through statutory enactments or judicial holdings, thus introduces contradiction and conflict into society. The peaceful and harmonious relations that would otherwise follow from a respect for property claims, collapse into a formal system of predation, with people organizing into groups to achieve what would otherwise have to depend upon contracts among owners.

Intellectuals, most of whom have their own preferences for political intervention into people’s lives for redistributive purposes, have not been very supportive of a system that would extend liberty into the realm where people most need it: the conduct of their daily lives. In the world of ideas, where intellectuals are most protective of the inviolability of their boundaries, most accept, as an expression of the essence of liberty, the principle erroneously attributed to Voltaire: “though I disapprove of what you say, I will defend to the death your right to say it.” But why are such sentiments so narrowly confined to intellectual matters, and rejected when applied to the more mundane actions that are central to and comprise so much more of our daily lives? How much freer would both our intellectual and material lives be if we were to modify the aforesaid proposition by telling our neighbor: “though I disapprove of how you conduct your life, as long as you do not violate the property boundaries of others, I shall defend to the death your right to act as you choose”? We might then move beyond the empty bromides by which we feign “love” for our fellow humans while, at the same time, seeking ways to force them to conform to our expectations.[17]

Social order arises not so much from learning to love our neighbor, as in learning to respect him. We do not exhibit such respect when, in order to accomplish our purposes, we insist upon violating his will regarding what is his to control. Neither do our professions of love for others mean much when we are prepared to deny others their existential individuality. There is nothing quite so destructive of social harmony as arrogant, self-righteous men and women mobilizing against the tastes and lifestyles of their neighbors.

When we insist upon the use of legalized force to address what we perceive as social problems, we not only subvert the conflict-resolving role property plays throughout much of nature, but we foreclose any alternative practices. The assumption that only coercive intervention by the state is worthy of practical consideration in such matters ignores the role of informal, interpersonal methods of resolving our differences with one another. Worse still, our resort to force sends a message of contempt to our fellow beings whose purposes we find incompatible with our own, further alienating ourselves from one another and fostering more conflict. We have too often failed to heed the warning of Emerson: “Good men must not obey the laws too well.”[18] We have also overlooked the value of our own life experiences for lessons in resolving disagreements without having to resort to formalized coercion.

As long as we live in society, we will always have a need for standards of conduct, a condition necessitated by the property question. If the inviolability of property boundaries is a civilizing standard that makes for a free, creative, and orderly society, the question arises: how is such a principle to take form in the interactions of people? Historically, we have too often turned to the state to have rules of conduct generated by fiat and enforced by coercive means. But when force is employed, property interests are at once violated. The state becomes the very problem it had, in theory, been created to prevent.

But what if rule-making and enforcement is confined to property owners themselves, beginning with the self-ownership principle? What if our respect for the inviolability of property claims began with the recognition that each person was the sole authority over their respective interests, and was obligated to no one else unless he or she had voluntarily chosen to be bound? What if we recognized that, if I wanted to enjoy some property interest of yours, I would have to enter into a contract with you to do so?

This approach raises the question: what if one party breached the contract, or intentionally or unintentionally trespassed the interests of another? How would the inviolability principle be enforced? Would it be possible to do so without the use of coercion, whether employed by the state or the offended individual? Is it possible to use boycotts, ostracism, marketplace pressures, or other social means—which do not forcibly deprive the offender of his property interests—to persuade him to rectify his wrong? Might we also resort to contracts of insurance to compensate us for our losses? Because we are so unaccustomed to thinking in such non-coercive ways, and regard rule-breaking as an invitation to resort to force, we are apt to dismiss these suggested alternatives as “impractical.”

Albert Einstein informed us that “problems . . . cannot be solved by thinking the way we thought when we created them.”[19] If our prior learning leads us to react with an angry “no” to the question of seeking alternative practices, let us remember that such prior learning is what is destroying us! If we are to resolve our problems before they consume us, we might begin by taking the responsibility that is inseparable from decision-making control over our lives. To the degree we insist upon directing our own conduct, we hasten the decline of the prevailing model of state authority. In the course of doing so, we may actually generate—rather than just think or talk about—a system of rule-making and enforcement of horizontal dimensions with no hierarchy of authority, and in which all rules arise through the peaceful means of contract, custom, and manners.

As suggested earlier, the property concept qualifies as an informal system of manners, a way of respecting the worthiness and inviolability of others and, in reflection, ourselves. The word “manners” has a common ancestry with the word “manage,” meaning “to control and direct,”[20] which has property connotations. Perhaps our more distant ancestors understood what we have chosen to ignore at the cost of the conflict and violence that permeates modern society: namely, that proper and well-mannered behavior is intrinsically related to the decision making of property owners.

Each of us experiences trespasses in our life, although mostly in de minimis ways. A neighbor’s dog makes a mess in our yard, or barks incessantly at night; a teenager annoys us with a “boom-box” turned up as loud as it will play; or we are bumped and jostled as we get onto a subway or elevator. We may feel anger at the disrespect shown to us by the other person, although an apology—which acknowledges our claim to not be trespassed—usually subdues our reaction. Once again, we see the role played by manners in giving respect to individual boundaries in situations, usually of a transient nature, in which property interests are not clearly defined. Unfortunately, in a culture in which people have internalized the idea that “property rights are not absolute,” an appeal to manners often avail us not. We tend to become more confrontational, looking upon every such trespass, no matter how trivial, as a call to more aggressive responses.

Part of learning to live as mature individuals in society consists in our willingness to absorb unintended and relatively insignificant trespasses by others, without developing a self-righteous need for retribution. Implicit in failing to do so is much of what we see in our current world: the breakdown of harmonious interconnectedness as so many treat every slight or encroachment as a cause for angry reaction if not a lawsuit. But how much of such a reflexive response is occasioned by a widespread disrespect for property interests perhaps leading one who has been subject to even a relatively minor intrusion to overreact to its significance?

Because the control of private property and the corruption of language are central to the functioning of political systems, it is not surprising to discover the property concept twisted in ways that make it increasingly difficult for people to distinguish trespasses by others from crude, ill-mannered, or offensive behavior that does not result in a trespass. Herein are found the seeds of “political correctness.” More and more of us seem prepared to regard repulsive and contemptible language and behavior as we would a physical trespass. In some instances, there is a willingness to impose harsher penalties upon vulgar or abhorrent conduct than upon physically intrusive offenses. Expressions of racial, ethnic, or gender-based hatred or other forms of bigotry; motorists’ “road rage”; or ill-chosen words that do not comport with fashionable attitudes, are often met with demands for punishment that exceed any injury-in-fact.

Personally offensive behavior can generate reactions that, to the recipient, may be more upsetting than a physical trespass. One person may make vulgar comments, or walk down a public street in the nude, greatly annoying others, even though no property violation occurs. It is in such instances that manners have particular application, with non-violent social pressures— such as ostracism being a more effective means of reforming rude behavior than resort to governmental trespasses upon the offending person.

The distorted thinking that conflates trespassing and non-trespassing behavior has reduced the capacity for making critical distinctions in other areas. Thus, at least one prominent feminist has written that “intercourse”—the means by which reproduction takes place among most species—is a “violation of boundaries” of women, who are “forced” to submit to “those who dominate them.” She proceeds to analogize women, politically, to “occupied people.”[21] Likewise, school administrators have found themselves unable to distinguish between a child bringing a cough drop to school from one bringing heroin; airport security agents periodically bring ridicule upon themselves by failing to differentiate a genuine weapon from fingernail clippers or other harmless items; while the criminal justice system continues to insist that no important distinction exists between victimizing and victimless crimes. It is the essence of intelligence to be able to discriminate, i.e., to make relevant distinctions between and among various facts and principles and alternative courses of action. Not that many years ago, it was considered a compliment to tell another that he or she had a “discriminating” mind. Thanks to the politically generated corruption of language and thought, such a statement now stands as an accusation, a generic offense to human decency!

Discrimination is essential to all intelligent thinking and behavior, and depends upon one having clear boundary lines, worthy of the respect of rational minds, that define a speaker’s basis for making distinctions. It has been the failure to discriminate amongst the various standards by which people do discriminate that produces so much of our social confusion. Is a property owner discriminating—on grounds of which we disapprove—against another being allowed to enjoy access to his property, or is the state doing so when it compels an owner to act in accordance with standards it has mandated? Because the state enjoys a monopoly on the use of force, it has long been thought that its discriminatory acts ought to be kept to a minimum (e.g., criminal statutes that treat murderers, rapists, and thieves differently than non-criminals). But if an owner is the absolute authority over what he or she owns, upon what basis, other than a trespass, can another claim a forceful liberty to enter against the owner’s will? Why should a private owner be precluded from denying others the enjoyment of his or her property on any grounds whatever? The intolerance exhibited by one who refuses to associate with those of another race, religion, or lifestyle, is more than matched by others who refuse to tolerate such a bigoted person’s decisions regarding his or her own property. As suggested earlier, we pay too little attention in both thought and behavior to the importance of boundary lines. This makes it easy for some to conclude that if a given opinion or act of another is sufficiently offensive, even though not amounting to a trespass, it may be suppressed or punished by the state.

Smoking in public (e.g., in restaurants, airliners, place of employment) is another issue that can most appropriately be seen as raising not health, but trespass questions. In popular and political discussions on this topic, the issue is usually framed in terms of the smoker’s freedom to smoke and the nonsmoker’s right to be free of unhealthful substances. Rarely is the question raised as to the restaurant owner’s liberty of deciding whether to allow smoking or not. If the restaurateur has a stated policy of permitting people to smoke in his establishment, a customer who is aware of this fact would seem to have contractually agreed to the possibility of breathing unwanted smoke, thus eliminating any trespass claim. When the question is posed in such abstract ways, without any clear lines of definition and limitation, one can understand why the courts and legislative bodies respond by trying to “balance” such “competing” interests. Again, if we rephrase the question, we discover that conflict has been generated because the property principle has been abandoned. If reframed as a property trespass issue, the amorphous and uncertain nature of the invasion is eliminated. As between a smoker and nonsmoker there are no interests to be “balanced” when one person trespasses the boundaries of another.

Suppose you are having dinner in a restaurant, and a patron at the next table begins smoking a cigarette. Her smoke enters your lungs, gets embedded in your hair and clothing, and causes your eyes to water. You object to this. It should be evident that this smoker has committed a trespass upon you. Whether or not second-hand smoke constitutes a health hazard, your claim to be free from such unwanted invasions of what is yours, i.e., your body and clothing, should be a sufficient basis for your objection. For the smoker to suggest that her freedom to smoke encompasses the right to commit such trespasses is to fail to understand that liberty has a principled meaning only insofar as it is grounded in, and defined by, a mutual respect for one another’s property boundaries. If an issue of this sort should come to court—and, in our confrontational society it probably will—the only inquiry necessary for a court to make would be a factual one: did the trespass occur? There would be no room for the court to step in and start “assigning” and “balancing”— or, more accurately, confiscating and reassigning—the property rights of individuals.

The same analysis could be applied to what was, a number of years ago, one of the more controversial issues in California: the aerial spraying, with malathion, of entire cities, for the purpose of trying to prevent the spread of the Mediterranean fruit-fly. Those who objected to having their bodies, homes, cars, plants, and pets sprayed with this pesticide had to rest their arguments on presumed health problems that might arise. In so doing, the burden of proof shifted to them to show the harm that would result from such spraying, a burden they were unable to meet. Relatively few people saw this as a property trespass issue to be resolved only by a determination of whether an invasion had occurred, not the degree of physical harm suffered by the owner, or whether he or she was being “unreasonable” in making an objection. At the same time, the State of California exhibited its usual confused commitment to mixed premises: in spite of tens of thousands of people expressing strong opposition to such spraying, the state, more attuned to benefiting commercial and agricultural interests, continued to spray. In a clear demonstration of where human beings rank in the state’s hierarchy of concerns, the government halted the spraying in a region in which kangaroo rats resided.[22]

One sees, in such examples, how the elements of “boundary,” “claim,” and “control” coalesce to provide a property-based analysis of political issues. Who has the ultimate authority (“claim”) to exercise decision-making (“control”) over any given item of property (“boundary”)? How we answer that question determines whether society will be characterized by peaceful relationships or by conflict.

Politics is the mobilization of property trespasses and despoliation. All political quarrels come down to a failure to identify and/or respect property boundaries. Nowhere is this more evident than in such an emotionally charged issue as abortion. This question illustrates, as clearly as any issue, the confusion and conflict that arises from asking the wrong questions. By failing to address the issue in terms of property principles, each side has contributed to an irresolvable—and politically advantageous—conflict.

The abortion debate has pitted the “pro-choice” advocates against “pro-life” supporters, abstract concepts whose inconsistent application further clouds any clear meaning. Most “pro-choice” supporters are nonetheless disposed to deprive people of their right to make decisions in other areas (e.g., to discriminate against others on a variety of matters, or to support various governmental programs), while most “pro-life” defenders have proven themselves eager supporters of wars and capital punishment. It should not surprise us that such utter confusion has generated much heat but little light in our world.

In an effort to obscure the lethal nature of abortions, and thus make the practice less disturbing to the otherwise humane sentiments of its proponents, most people allow the state to define who is and who is not a “person.” History should remind us of the dangers inherent in conferring such authority upon political systems. The American government defined the rights of slaves and Indians out of existence, while greatly restricting those of married women; and twentieth-century tyrannies such as Nazi Germany, China, and the Soviet Union defined whole categories of people out of legal existence. Such historic experiences should inform our intelligence before we become enthusiasts for current listings of non-persons.

It is unfashionable to state, albeit undeniable, that from the moment of conception onward, an embryo is a living being with a distinct DNA of its own, a DNA that derives from, but is other than, that of either parent. Contrary to the reductionists who would debase the embryo as the functional equivalent of a wart or a cyst, it is a genetically unique individual, a fact known to even a first year biology student. Nor should one accept, without examination, the argument that an embryo is still in a “developmental” stage and is, therefore, not a “person.” Because of the negentropic nature of life, each of us is in a continuing state of development up until the time of our death. I continue to write, into my seventies, and have recently taken up painting, one way of expressing the changes that continue to occur within me throughout my life. This characterization of embryos by the pro-abortion advocates is but another manifestation of a mechanistic vision of nature.

Attributing “self-ownership” to an embryo may pose some difficulties, however, since it is unlikely that embryos have ever consciously asserted such claims. The same can be said, however, of any infant or, for that matter, most adults: who, among us, has ever made a conscious declaration to be a self-owner? Have you or I done so, if we continue to acknowledge the rightful authority of the state to regulate, tax, and conscript us into its service? When I ask my first year law students whether they own themselves—and whether they understand the implications of whatever answer they give—most sit in stunned silence at the audacity of such an existential question. Thus, if a claim of self-ownership is dependent upon an individual giving conscious voice thereto, the “right” to kill an infant or, perhaps, an adult, could be as justified as the killing of an embryo. It is more plausible, perhaps—and much safer—to presume a claim of self-ownership derived from the self-sustaining, self-controlling actions of each individual, whether embryo or octogenarian.

If we are prepared to acknowledge self-ownership for any genetically identifiable human being, an intentional abortion amounts to an invasion of the embryo’s property interest, and the mother and her doctor have trespassed upon that interest. On the other hand, the mother is also a self-owning being, and is entitled to not have her property boundaries trespassed by others (e.g., the state). The pro-abortion advocate would likely argue that the embryo is a trespasser upon the woman, but as almost all pregnancies are occasioned by a volitional act of the woman—and never as the result of a conscious entry by the embryo—such a contention would fail. But even if the embryo were the product of a rape—a non-volitional act by the woman—the embryo is not the wrongdoer but an unintended consequence of the crime. He or she would be, at worst, an unintentional trespasser, to which the question must be answered as to whether a property owner may rightfully take the life of a trespasser. From a property perspective, we are thus left with the seemingly anomalous situation that the embryo, as a self-owning person, is entitled to not be aborted, while the mother, also a self-owning person, is entitled to not have the state trespass upon her in order to restrain the exercise of her decision-making. When abortion becomes a political (i.e., divisive) issue, devoid of respect for property principles, different groups become polarized out of a failure to refine the question. For the state to intervene in the matter in order to enjoin the abortion would constitute a trespass to the mother.

If both the embryo and the mother are persons with separate but necessarily interconnected property interests, and the state’s intervention would amount to a trespass of the mother’s boundaries, does this mean that, in a society that fully respected property interests, a mother would be free to kill this other person? If the answer is “yes,” as it applies to a pregnant woman, would it also apply to the rest of us: that we are free to kill—or, as a friend of mine used to remind me, free to try to do so— another person? Precisely! We are free, not because the state, or a religion, or a constitution, or an ideology tells us that we are, but because each one of us is in control of our energies and conduct. How each of us chooses to exercise our freedom determines not only the content of our own character, but whether we will live in peace or conflict, cooperation or confrontation, with others. Here again, however, we find ourselves confronted by the fear of being responsible for our own liberty—Kaufmann’s “decidophobia”—that causes so many of us to look to constituted “authorities” to render moral decisions for us when we are faced with irresolvable conflicts. As with all property questions, who will make decisions about what?

Social order arises when the values of “peace” and “liberty” are integrated through respect for the inviolability of property boundaries. When social issues are severed into mutually-exclusive categories such as “pro-life” and “pro-choice,” the foundations of political division are set in place. Groups compete for control of the coercive machinery of the state in order to enforce their visions upon others. When our thinking is free of conflict and contradiction, however, we are able to discover that “pro-life” and “pro-choice” imply one another. Liberty, exercised within the self-limiting nature of property ownership, is the condition in which individuals are able to make the choices upon which the quality of their lives depend.

Our daily newspapers are filled with abundant empirical evidence that each of us is free to engage in all kinds of harmful actions, in spite of numerous laws to the contrary. To say that we are free to commit injuries upon others does not imply, however, that we are entitled to do so, or that such acts are justifiable. Recalling the common origins of the two words, “proper” behavior is that which a “property” owner is entitled to make, i.e., decision-making within the boundaries of what one owns. If we are to be self-owning, self-controlling beings, we must be prepared to acknowledge that our boundaries serve not only to exclude the intrusions of others, but to circumscribe the range of our actions. Without the concept of property boundaries to define the limits of our actions, our claims become, quite literally, boundless. The propriety of our behavior then becomes measured by the constantly shifting fashions of legislation, public opinion polls, cultural tastes, and prejudices formed by unconscious forces.

Perhaps it is time for us all to walk away from both the practice and the self-righteous thinking that presumes the legitimacy of the power of the state to usurp both control over and responsibility for our actions. As people become aware that their responsibility extends to the full range of their actions, and can neither be limited nor increased by the dictates of political fashion, perhaps they will discover their own way to responsible behavior. If not, no amount of political maneuvering or religious/ideological commitment seems capable of forestalling the entropic fate of our civilization.

Herein lies the challenge for all who understand the importance of human freedom: am I able to insist upon the full range of my authority over my own life and, at the same time, respect the inviolability of the boundary lines that distinguish my authority from that of my neighbors? It is the nature of political systems to be dominated by short-term thinking that pays little attention to transcendent principles having no immediate, observable consequences. Violating the will of individuals concerning what is theirs to control is the ultimate default response by the state. Such a mindset is not only incapable of sustaining a productive society but, worse, the failure to see the interconnected nature of respect for property boundaries helps to destroy civilized societies. This is what living in a condition of liberty is all about: making our own choices and accepting the responsibility for those choices, not by participating in state-induced deceptions designed to conceal the consequences of our self-indulgent actions.

Notes


[1] Ralph Waldo Emerson, “The American Scholar” (1837), in Brooks Atkinson, ed., The Selected Writings of Ralph Waldo Emerson (New York: The Modern Library, 1950), p. 62.

[2] Immanuel Kant, Critique of Practical Reason and Other Writings in Moral Philosophy, trans. and ed. by Lewis White Beck (Chicago: University of Chicago Press, 1949), p. 87.

[3] See, e.g., John A. Hostetler, Amish Society, 3rd ed. (Baltimore: The Johns Hopkins University Press, 1980); Steven M. Nolt, A History of the Amish (Intercourse, Penn.: Good Books, 1992); Donald B. Kraybill, ed., The Amish and the State (Baltimore: The Johns Hopkins University Press, 1993).

[4] See, e.g., David Barash, The Survival Game: How Game Theory Explains the Biology of Cooperation (New York: Macmillan, 2003), p. 98.

[5] John Phillip Reid, Law for the Elephant: Property and Social Behavior on the Overland Trail (San Marino, Calif.: The Huntington Library, 1980), pp. 300–01.

[6] Robert C. Ellickson, Order Without Law: How Neighbors Settle Disputes (Cambridge, Mass.: Harvard University Press, 1991).

[7] Shinn, Mining Camps, pp. 111, 112; also quoted in Vardis Fisher and Opel Laurel Holmes, Gold Rushes and Mining Camps of the Early American West (Caldwell, Idaho: The Caxton Printers, Ltd., 1968), p. 275.

[8] Fisher and Holmes, ibid.

[9] Ibid.

[10] J.D. Borthwick, Three Years in California, Joseph Gaer, ed. (Edinburgh and London: William Blackwood & Sons, 1857); quoted in Fisher and Holmes, ibid., p. 276.

[11] Daniel Knower, The Adventures of a Forty-Niner (Albany, N.Y.: Weed-Parsons Printing, 1894), quoted in Fisher and Holmes, ibid., p. 276.

[12] C.G. Jung, Psychological Reflections (Princeton, N.J.: Princeton University Press, 1970), p. 178.

[13] Lest any doubt that government regulation amounts to the state’s claiming an ownership interest in people, consider Justice Harlan’s dissenting opinion in Lochner v. New York (198 U.S. 45 (1905)), a case striking down state legislation limiting the number of hours employees could work in bakeries. In Harlan’s view, long hours “may endanger the health and shorten the lives of the workmen, thereby diminishing their physical and mental capacity to serve the state and to provide for those dependent upon them” (p. 72; emphasis added).

[14] See, Walter Adams, “The Military-Industrial Complex and the New Industrial State,” American Economic Review 58 (May, 1968): 652–65; reprinted in Ralph Andreano, ed., Superconcentration/Supercorporation (Andover, Mass.: Warner Modular Publications, 1973), R-337-2; Murray L. Weidenbaum, Government-Mandated Price Increases: A Neglected Aspect of Inflation (Washington, D.C.: American Enterprise Institute for Public Policy Research, 1975).

[15] San Francisco Chronicle, January 21, 2007, p. E-7.

[16] Abraham Maslow, “A Theory of Human Motivation,” in Psychological Review (1943): 370ff.

[17] If we were to apply such thinking to the realm of learning with as much unfocused facility as we do to economic matters, we would quickly see the absurdity of such ideas. Does knowledge come in some fixed quantity, with the more learned having garnered an “unfair” share at the expense of the unlearned? Perhaps it is the function of the government school system to “redistribute” the ignorance, to the end that all can be equally unknowledgeable and operate from a “level playing field.” Were the creative geniuses of human history—Aristotle, Copernicus, Shakespeare, Francis Bacon, Dante, Lao Tzu, Newton, Beethoven, the Curies, Leonardo da Vinci, Einstein, Blake, George Washington Carver, Edison, to name but a few—nothing more than pillagers, “robber intellects,” who stole from some common storehouse of human inventiveness and insight?

[18] Ralph Waldo Emerson, Politics, published in 1844 and included in The Selected Writings of Ralph Waldo Emerson, p. 427.

[19] Alice Calaprice, ed., The Expanded Quotable Einstein (Princeton, N.J.: Princeton University Press, 2000), p. 317.

[20] Partridge, Origins, p. 378; Webster’s Third New International Dictionary, p. 1372.

[21] Andrea Dworkin, Intercourse (London: Secker & Warburg, 1987), pp. 122–24.

[22] Los Angeles Times, May 3, 1990, Sect. B, p. 12.

This excerpt has been published with the permission of the Ludwig von Mises Institute.

Justice and Freedom

by Leslie Snyder

Leslie Snyder has specialized in finance and economics, business and investments.

The administration of a republic is supposed to be directed by certain fundamental principles of right and justice, from which there cannot, because there ought not to, be any deviation; and whenever any deviation appears, there is a kind of stepping out of the republican principle, and an approach toward the despotic one.

—Thomas Paine

Justice is the only foundation upon which a society of free and independent people can exist. Justice is a concrete, recognizable, and objective principle. It is not a matter of opinion.

In our day and age the word justice is rarely used in political and economic discussions. The entire reason for the existence of communities, laws, governments and court systems has been forgotten. But if life and property are to be protected and secured, which is the purpose of society, then justice must be the rule. To quote Paine again, “A republic, properly understood, is a sovereignty of justice.”

According to a 1931 Webster’s dictionary, justice is the “quality of being just; impartiality.” Just is “conforming to right; normal; equitable.” A 1961 Webster’s dictionary says justice is “The principle of rectitude and just dealings of men with each other—one of the cardinal virtues. Administration of law . . .” A 1975 edition of a Grolier Webster dictionary says justice is “Equitableness; what is rightly due; lawfulness . . . .”

Since 1931 a new meaning of the word justice has been added, that of lawfulness, which is not only erroneous, but deceitful and misleading. Justice is not based on law; rather, law ought to be based on justice. It is only common sense, for men lived and worked together before laws were formed. Generally laws are passed to formalize what has preceded under common practice, what has stood the test of time as being just and equitable. Laws are common practice put down in black and white for all to see and know.

The ancient philosophers said that justice is speaking the truth and paying your debts, giving to each man what is proper to him, doing good to friends and evil to enemies. Therefore, there must be something more basic, more fundamental than laws on which to found justice. In fact, the French jurist Charles de Montesquieu (16891755) ably contended that “before laws were made, there were relations of possible justice. To say that there is nothing just or unjust but what is commanded or forbidden by positive laws, is the same as saying that before the describing of a circle all the radii were not equal.”

Minding One’s Own Business

The Greek philosophers had the simplest definition of justice. To Plato (c. 428-348 B.C.), in The Republic, Book IV, justice is simply “doing one’s own business, and not being a busybody . . . . A man may neither take what is another’s, nor be deprived of what is his own . . . . This is the ultimate cause and condition of the existence of all” other virtues in the State, “and while remaining in them is also their preservative.”

In Book XII of Plato’s Laws, the conclusion is drawn that “by the relaxation of that justice which is the uniting principle of all constitutions, every power in the state is rent asunder from every other.” In other words, without justice the threads of society unravel and society disintegrates into barbarism.

Aristotle (384-322 B.C.) in Nicomachean Ethics, Book V, gives greater perception to what justice is. It “is found among men who share their life with a view to self- sufficiency, men who are free . . . . Thereforejustice is essentially something human.” (Emphasis added.) In other words, free men may choose to be just or unjust. Justice, as an ethical term, is voluntary; “. . . a man acts unjustly or justly whenever he does such acts voluntarily.” When wrong is done and done voluntarily, it then becomes an act of injustice. In short, “All virtue is summed up in dealing justly,” said Aristotle.

More concretely, Aristotle claims, in Rhetoric, Book I, “Justice is the virtue through which everybody enjoys his own possessions in accordance with the law; its opposite is injustice, through which men enjoy the possessions of others in defiance of the law.” There is the problem of using the law to legalize theft and to redistribute the property of one group to another group, but for the time being, we must assume Aristotle means the use of laws that are rightful and just. For when he says “justice has been acknowledged by us to be a social virtue, and it implies all others,” he has laid the foundation of a just society.

Furthermore, Aristotle maintains that “legal justice is the discrimination of the just and the unjust.” And, “Of political justice part is natural, part legal—natural, that which everywhere has the same force and does not exist by people’s thinking this or that.” Natural justice must precede law and form the basis of law thereon.

In the sixteenth century Michel de Montaigne (1533-1592), in his The Essays, eloquently said: “The justice which in itself is natural and universal, is otherwise and more nobly ordered, than that other justice, which is special, national, and constrained to the ends of government.” He continues, “There cannot a worse state of things be imagined, than where wickedness comes to be legitimate, and assumes with the magistrate’s permission, the cloak of virtue . . . . The extremest sort of injustice, according to Plato, is where that which is unjust, should be reputed for just.”

Hobbes on Natural Justice

In Thomas Hobbes’ (1588-1679) Leviathan, further ground is laid on which to base natural justice. The names just and unjust, says Hobbes, when they are attributed to men’s actions, signify conformity or nonconformity to reason. Therefore, “Justice . . . is a rule of reason by which we are forbidden to do anything destructive to our life, and consequently a law of nature.”

Then Hobbes leads beautifully into the virtue of just actions: “That which gives to human actions the relish of justice is a certain nobleness or gallantness of courage, rarely found, by which a man scorns to be beholding for the contentment of his life to fraud, or breach of promise. This justice of the manners is that which is meant where justice is called a virtue; and injustice, a vice.”

Earlier it was established that justice is the social virtue on which a just society is constructed. Hobbes adds to this not only by tying virtues to the laws of nature, but to moral philosophy as well. “Now the science of virtue and vice is moral philosophy; and therefore the true doctrine of the laws of nature is the true moral philosophy . . . . For moral philosophy is nothing else but the science of what is good and evil in the conversation and society of mankind.” Thus, Hobbes establishes the fact that a just society is a moral society.

Saint Augustine (354-430) in The City of God, Book XIX, declares “Where, therefore, there is no true justice there can be no right. For that which is done right is justly done, and what is unjustly done cannot be done by right.” Hence, justice precedes “rights.”

Joseph Joubert eloquently phrased justice as truth in action.

Since practicing the virtue of justice is voluntary, man ought to have the courage to stand up and fight for what is right and against what is wrong. Cato the Younger said it this way: “. . . a man has it in his power to be just, if he have but the will to be so, and therefore injustice is thought the most dishonorable because it is least excusable.”

Another way to consider what justice is, is to compare it with injustice. For example, in Utilitarianism, John Stuart Mill (1806-1873) states that” . . . it is just to respect, unjust to violate, the legal rights of any one.” Second, “. . . injustice consists in taking or withholding from any person that to which he has a moral right.” Third, “It is universally considered just that each person should obtain that (whether good or evil) which he deserves.” Fourth, “It is confessedly unjust to break faith with any one: to violate an engagement, either expressed or implied . . . .” Fifth, “It is, by universal admission, inconsistent with justice to be partial.”

A Moral Issue

Mill, too, sees justice as a moral issue. He concludes: “Whether the injustice consists in depriving a person of a possession, or in breaking faith with him, or in treating him worse than he deserves, or worse than other people who have no greater claims, in each case the supposition implies two things—a wrong done, and some assignable person who is wronged. Injustice may also be done by treating a person better than others; but the wrong in this case is to his competitors, who are also assignable persons . . . . Justice implies something which it is not only right to do, and wrong not to do, but which some individual person can claim from us as his moral right.”

Thomas Paine’s Dissertations speak about justice where the public good is concerned. He maintains that, “The foundation-principle of public good is justice, and wherever justice is impartially administered, the public good is promoted; for as it is to the good of every man that no injustice be done to him, so likewise it is to his good that the principle which secures him should not be violated in the person of another, because such a violation weakens his security, and leaves to chance what ought to be to him a rock to stand on.”

The great American constitutional lawyer of the nineteenth century, Lysander Spooner, wrote a pamphlet entitled: Natural Law, or The Science of Justice, which succinctly summarizes what justice is:

The science of mine and thine—the science of justice—is the science of all human rights; of all a man’s rights of person and property; of all his fights to life, liberty, and the pursuit of happiness.

It is the science which alone can tell any man what he can, and cannot, do; what he can, and cannot, have; what he can, and cannot, say, without infringing the rights of any other person.

It is the science of peace; and the only science of peace; since it is the science which alone can tell us on what conditions mankind can live in peace, or ought to live in peace, with each other.

These conditions are simply these: viz., first, that each man shall do, towards every other, all that justice requires him to do; as, for example, that he shall pay his debts, that he shall return borrowed or stolen property to its owner, and that he shall make reparation for any injury he may have done to the person or property of another.

The second condition is, that each man shall abstain from doing to another, anything which justice forbids him to do; as, for example, that he shall abstain from committing theft, robbery, arson, murder, or any other crime against the person or property of another.

So long as these conditions are fulfilled men are at peace, and ought to remain at peace, with each other. But when either of these conditions is violated, men are at war. And they must necessarily remain at war until justice is re-established.

Through all time, so far as history informs us, wherever mankind have attempted to live in peace with each other, both the natural instincts, and the collective wisdom of the human race, have acknowledged and prescribed, as an indispensable condition, obedience to this one only universal obligation: viz., that each should live honestly towards every other.

The ancient maxim makes the sum of man’s legal duty to his fellow men to be simply this: “To live honestly, to hurt no one, to give to every one his due . . .”

Never has such a complex subject as justice been treated so clearly and simply. To summarize justice thus far: Justice means that each must be accountable for his own actions, entitled to the reward of his labor, and responsible for the consequences of his wrong doings.

The love of justice should be instilled in every man, woman and child—all should wish to see justice done. For without justice the rule of men (dictatorship), not of law, assumes power. Without justice, society disintegrates into barbarism, where courts of law are administered by favor and pull instead of objective law, and without objective laws, the individual is at the mercy of the ruling power and its agents. The ancient atrocities return, such as no trial by jury, confiscatory taxes on life and property, the purchasing of judges, legislators, and sheriffs; all previous forms of the prior administration of justice become part of the current machinery which administers not justice, but injustice or tyranny.

In short, all that is good rests on justice. Where there is no justice, there is no morality—no right or wrong—anything goes and usually does. Justice is a social virtue to be practiced by individuals. Justice demands that the individual reward or recognize good and condemn evil. To practice justice one should know a man for what he is and treat him accordingly, whether he be honest, dishonest, friend or thief. The good should be rewarded, the bad punished.

The Highest Goal

Society cannot place before it a higher or nobler goal than the administration of justice. Thus, here is a bit of advice from Conversations with Goethe, March 22, 1825: “A great deal may be done by severity, more by love, but most by clear discernment and impartial justice.”

Once the meaning of justice has been established, next comes the understanding of freedom and liberty, which are crucial because only under freedom can the individual achieve his highest potential and pursue his happiness.

To speak of liberty and freedom is to speak first of natural laws or the right of nature. Hobbes lays an excellent foundation of natural laws or rights. He affirms that the right of nature is the liberty each man has to use his own power for the preservation of his own life, and his own judgment and reason are the best means for achieving it.

The first law of nature, according to Jean Jacques Rousseau (17121778), results from man’s nature. “His first law is to provide for his own preservation, his first cares are those which he owes to himself; and, as soon as he reaches years of discretion, he is the sole judge of the proper means of preserving himself . . . .”

Therefore, if man’s first obligation is to provide for his own life, he must live under the proper conditions in which to sustain his life, namely, liberty. By liberty is understood the absence of external impediments, the absence of opposition.

Hayek on Liberty

In The Constitution of Liberty, Nobel-prize winner Friedrich A. Hayek points out that liberty is a negative concept like peace. “It becomes positive only through what we make of it. It does not assure us of any particular opportunities, but leaves it to us to decide what use we shall make of the circumstances in which we find ourselves . . . .” He continues, “Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions and will receive praise or blame for them. Liberty and responsibility are inseparable.” (Emphasis added.)

To expound further, Mill explains that one cannot take away another’s freedom no matter how sincerely one tries to protect another. Only by our own hands can any positive and lasting improvement in our lives be worked out. And through “the influence of these two principles all free communities have both been more exempt from social injustice and crime, and have attained more brilliant prosperity, than any others . . . .”

Further, “. . . any restriction on liberty reduces the number of things tried and so reduces the rate of progress. In such a society freedom of action is granted to the individual, not because it gives him greater satisfaction but because if allowed to go his own way he will on the average serve the rest of us better than any orders we know how to give.”

In short, liberty is the only object which benefits all alike and should provoke no sincere opposition. Liberty “is not a means to a higher political end. It is itself the highest political end,” says Lord Acton. It is required for security in the pursuit of the highest objects of private life and civil society.

Morality Requires Freedom

If liberty is to live upon one’s own terms and slavery is to live at the mercy of another’s, then it follows that to live under one’s own terms means the individual has a choice of actions. He can be virtuous or not; he can be moral. Therefore, morality requires freedom. Thus, only free men can be just men!

In his The Road to Serfdom, Hayek ties liberty to morality. Since morals are of necessity a phenomenon of individual conduct, to be moral one must be free to make choices. Where man is forced to act by coercion, the ability to choose has been pre- empted. Only under liberty and freedom can man be moral. As a result, only “where we ourselves are responsible for our own interests . . . has our decision moral value. Freedom to order our own conduct in the sphere where material circumstances force a choice upon us, and responsibility for the arrangement of our own life according to our own conscience, is the air in which alone moral sense grows and in which moral values are daily recreated in the free decision of the individual. Responsibility, not to a superior, but to one’s conscience, the awareness of a duty not exacted by compulsion . . . and to bear the consequences of one’s own decision, are the very essence of any morals which deserve the name.”

The facts have been established thus far that man must live under liberty to become as productive, as noble, and as just as he can, since liberty is the condition under which morality thrives. Also, only the individual knows what is best for himself. And finally, liberty does not provide opportunities, but leaves the individual free to choose those ac tions which he thinks will best suit him and to bear the consequences of those actions.

The Price of Freedom

There is one more thing to consider about freedom and liberty—the price. Tocqueville remarked, “Some abandon freedom thinking it dangerous, others thinking it impossible.” But there is a third reason. Some abandon freedom thinking it too expensive. Freedom is not free. “Those who expect to reap the blessings of freedom, must, like men, undergo the fatigues of supporting it,” noted Paine.

“Freedom is the most exacting form of civil government—it is, in fact, the most demanding state of all for man. That is because freedom demands—depends upon—self- discipline from beth the governed and the governing. The foundation of freedom is self- government and the foundation of self-government is self-control,” explains author Rus Walton, of One Nation Under God. Freedom requires more, however. It requires a strong and vigilant defense. ‘The greater the threat of evil, the stronger that defense must be. That which is right does not survive unattended; it, too, must have its defenders . . . .”

Is liberty worth the effort? According to Frederic Bastiat, all you have to do is look at the entire world to decide. That is, which “countries contain the most peaceful, the most moral, and the happiest people? Those people are found in the countries where the law least interferes with private affairs; where government is least felt; where the individual has the greatest scope, and free opinion the greatest influence; where administrative powers are fewest and simplest; where taxes are lightest and most nearly equal, and popular discontent the least excited and the least justifiable; where individuals and groups most actively assume their responsibilities, and, consequently, where the morals of . . . human beings are constantly improving; where trade, assemblies, and associations are the least restricted; . . . where mankind most nearly follow its own natural inclinations; . . . in short, the happiest, most moral, and most peaceful people are those who most nearly follow this principle: although mankind is not perfect, still, all hope rests upon the free and voluntary actions of persons within the limits of right; law or force is to be used for nothing except the administration of universal justice.”

What this means to us today is that our society, so filled with government regulations and laws, has taken away many of our liberties. For example, we cannot go into some businesses without being licensed, taxed, and regulated. We are presumed guilty (of dishonesty) until proven innocent (which is impossible). Our reputations are continually under attack and, for the most part, stand for nothing. Honesty and integrity, once the backbone of our society, have been replaced by government regulations and promises. Under this system of injustice all of us are losing our liberties, wealth, and happiness.

What better way to summarize the spirit of liberty and freedom and justice than to quote Tocqueville, who said, “I should have loved freedom, I believe, at all times, but in the time in which we live I am ready to worship it.”

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1980 • Volume: 30 • Issue: 3.

Inflation

By Ludwig von MIses

Ludwig von Mises, 1881-1973, was one of the great defenders of a rational economic science, and perhaps the single most creative mind at work in this field in the 20th century.

If the supply of caviar were as plentiful as the supply of potatoes, the price of caviar—that is, the exchange ratio between caviar and money or caviar and other commodities—would change considerably. In that case, one could obtain caviar at a much smaller sacrifice than is required today. Likewise, if the quantity of money is increased, the purchasing power of the monetary unit decreases, and the quantity of goods that can be obtained for one unit of this money decreases also.

When, in the sixteenth century, American resources of gold and silver were discovered and exploited, enormous quantities of the precious metals were transported to Europe. The result of this increase in the quantity of money was a general tendency toward an upward movement of prices. In the same way, today, when a government increases the quantity of paper money, the result is that the purchasing power of the monetary unit begins to drop, and so prices rise. This is called inflation.

Unfortunately, in the United States, as well as in other countries, some people prefer to attribute the cause of inflation not to an increase in the quantity of money but, rather, to the rise in prices.

However, there has never been any serious argument against the economic interpretation of the relationship between prices and the quantity of money, or the exchange ratio between money and other goods, commodities, and services. Under present day technological conditions there is nothing easier than to manufacture pieces of paper upon which certain monetary amounts are printed. In the United States, where all the notes are of the same size, it does not cost the government more to print a bill of a thousand dollars than it does to print a bill of one dollar. It is purely a printing procedure that requires the same quantity of paper and ink.

In the eighteenth century, when the first attempts were made to issue bank notes and to give these bank notes the quality of legal tender—that is, the right to be honored in exchange transactions in the same way that gold and silver pieces were honored—the governments and nations believed that bankers had some secret knowledge enabling them to produce wealth out of nothing. When the governments of the eighteenth century were in financial difficulties, they thought all they needed was a clever banker at the head of their financial management in order to get rid of all their difficulties.

Some years before the French Revolution, when the royalty of France was in financial trouble, the king of France sought out such a clever banker, and appointed him to a high position. This man was, in every regard, the opposite of the people who, up to that time, had ruled France. First of all he was not a Frenchman, he was a foreigner—a Genevese. Secondly, he was not a member of the aristocracy, he was a simple commoner. And what counted even more in eighteenth century France, he was not a Catholic, but a Protestant. And so Monsieur Necker, the father of the famous Madame de Stall, became the minister of finance, and everyone expected him to solve the financial problems of France. But in spite of the high degree of confidence Monsieur Necker enjoyed, the royal cashbox remained empty—Necker’s greatest mistake having been his attempt to finance aid to the American colonists in their war of independence against England without raising taxes. That was certainly the wrong way to go about solving France’s financial troubles.

No Secret Source of Funds

There can be no secret way to the solution of the financial problems of a government; if it needs money, it has to obtain the money by taxing its citizens (or, under special condi tions, by borrowing it from people who have the money). But many governments, we can even say most governments, think there is another method for getting the needed money; simply to print it.

If the government wants to do something beneficial—if, for example, it wants to build a hospital—the way to find the needed money for this project is to tax the citizens and build the hospital out of tax revenues. Then no special “price revolution” will occur, because when the government collects money for the construction of the hospital, the citizens—having paid the taxes—are forced to reduce their spending. The individual taxpayer is forced to restrict either his consumption, his investments or his savings. The government, appearing on the market as a buyer, replaces the individual citizen: the citizen buys less, but the government buys more. The government, of course, does not always buy the same goods which the citizens would have bought; but on the average there occurs no rise in prices due to the government’s construction of a hospital.

I choose this example of a hospital precisely because people sometimes say: “It makes a difference whether the government uses its money for good or for bad purposes.” I want to assume that the government always uses the money which it has printed for the best possible purposes—purposes with which we all agree. For it is not the way in which the money is spent, it is the way in which the government obtains this money that brings about those consequences we call inflation and which most people in the world today do not consider as beneficial.

For example, without inflating, the government could use the tax-collected money for hiring new employees or for raising the salaries of those who are already in government service. Then these people, whose salaries have been increased, are in a position to buy more. When the government taxes the citizens and uses this money to increase the salaries of government employees, the taxpayers have less to spend, but the government employees have more. Prices in general will not increase.

But if the government does not use tax money for this purpose, if it uses freshly printed money instead, it means that there will be people who now have more money while all other people still have as much as they had before. So those who received the newly- printed money will be competing with those people who were buyers before. And since there are no more commodities than there were previously, but there /s more money on the market—and since there are now people who can buy more today than they could have bought yesterday—there will be an additional demand for that same quantity of goods. Therefore prices will tend to go up. This cannot be avoided, no matter what the use of this newly-issued money will be.

And most importantly, this tendency for prices to go up will develop step by step; it is not a general upward movement of what has been called the “price level.” The metaphorical expression “price level” must never be used.

When people talk of a “price level,” they have in mind the image of a level of a liquid which goes up or down according to the increase or decrease in its quantity, but which, like a liquid in a tank, always rises evenly. But with prices, there is no such thing as a “level.” Prices do not change to the same extent at the same time. There are always prices that are changing more rapidly, rising or falling more rapidly than other prices. There is a reason for this.

Early Beneficiaries

Consider the case of the government employee who received the new money added to the money supply. People do not buy today precisely the same commodities and in the same quantities as they did yesterday. The additional money which the government has printed and introduced into the market is not used for the purchase of all commodities and services. It is used for the purchase of certain commodities, the prices of which will rise, while other commodities will still remain at the prices that prevailed before the new money was put on the market. Therefore, when inflation starts, different groups within the population are affected by this inflation, in different ways. Those groups who get the new money first, gain a temporary benefit.

When the government inflates in order to wage a war, it has to buy munitions, and the first to get the additional money are the munition industries and the workers within these industries. These groups are now in a very favorable position. They have higher profits and higher wages; their business is moving. Why? Because they were the first to receive the additional money. And having now more money at their disposal, they are buying. And they are buying from other people who are manufacturing and selling the commodities that these munition makers want.

These other people form a second group. And this second group considers inflation to be very good for business. Why not? Isn’t it wonderful to sell more? For example, the owner of a restaurant in the neighborhood of a munitions factory says: “It is really marvelous! The munition workers have more money; there are many more of them now than before; they are all patronizing my restaurant; I am very happy about it.” He does not see any reason to feel otherwise.

The situation is this: those people to whom the money comes first now have a higher income, and they can still buy many commodities and services at prices which correspond to the previous state of the market, to the condition that existed on the eve of inflation. Therefore, they are in a very favorable position. And thus inflation continues step by step, from one group of the population to another. And all those to whom the additional money comes at the early stage of inflation are benefited because they are buying some things at prices still corresponding to the previous stage of the exchange ratio between money and commodities.

Others Must Lose

But there are other groups in the population to whom this additional money comes much, much later. These people are in an unfavorable position. Before the additional money comes to them they are forced to pay higher prices than they paid before for some—or for practically all—of the commodities they wanted to purchase, while their income has remained the same, or has not increased proportionately with prices.

Consider for instance a country like the United States during the Second World War; on the one hand, inflation at that time favored the munitions workers, the munition industries, the manufacturers of guns, while on the other hand it worked against other groups of the population. And the ones who suffered the greatest disadvantages from inflation were the teachers and the ministers.

As you know, a minister is a very modest person who serves God and must not talk too much about money. Teachers, likewise, are dedicated persons who are supposed to think more about educating the young than about their salaries. Consequently, the teachers and ministers were among those who were most penalized by inflation, for the various schools and churches were the last to realize that they must raise salaries. When the church elders and the school corporations finally discovered that, aider all one should also raise the salaries of those dedicated people, the earlier losses they had suffered still re mained.

For a long time, they had to buy less than they did before, to cut down their consumption of better and more expensive foods, and to restrict their purchase of clothing—because prices had already adjusted upward, while their income, their salaries, had not yet been raised. (This situation has changed considerably today, at least for teachers.)

There are therefore always different groups in the population being affected differently by inflation. For some of them, inflation is not so bad; they even ask for a continuation of it, because they are the first to profit from it. We will see, in the next lecture, how this unevenness in the consequences of inflation vitally af fects the politics that lead toward inflation.

Under these changes brought about by inflation, we have groups who are favored and groups who are directly profiteering. I do not use the term “profiteering” as a reproach to these people, for if there is someone to blame, it is the government that established the inflation. And there are always people whofavor inflation, because they realize what is going on sooner than other people do. Their special profits are due to the fact that there will necessarily be unevenness in the process of inflation.

Inflation as a Tax

The government may think that inflation—as a method of raising funds—is better than taxation, which is always unpopular and difficult. In many rich and great nations, legislators have often discussed, for months and months, the various forms of new taxes that were necessary because the parliament had decided to increase expenditures. Having discussed various methods of getting the money by taxation, they finally decided that perhaps it was better to do it by inflation.

But of course, the word “inflation” was not used. The politician in power who proceeds toward inflation does not announce: “I am proceeding toward inflation.” The technical methods employed to achieve the inflation are so complicated that the average citizen does not realize inflation has begun.

During one of the biggest inflations in history, in the German Reich after the First World War, the inflation was not so momentous during the war. It was the inflation after the war that brought about the catastrophe. The government did not say: “We are proceeding toward inflation.” The government simply borrowed money very indirectly from the central bank. The government did not have to ask how the central bank would find and deliver the money. The central bank simply printed it.

Today the techniques for inflation are complicated by the fact that there is checkbook money. It involves another technique, but the result is the same. With the stroke of a pen, the government creates fiatmoney, thus increasing the quantity of money and credit. The government simply issues the order, and the fiat money is there.

The government does not care, at first, that some people will be losers, it does not care that prices will go up. The legislators say: “This is a wonderful system!” But this wonderful system has one fundamental weakness: it cannot last. If inflation could go on forever, there would be no point in telling governments they should not inflate. But the certain fact about inflation is that, sooner or later, it must come to an end. It is a policy that cannot last.

In the long run, inflation comes to an end with the breakdown of the currency—to a catastrophe, to a situation like the one in Germany in 1923. On August 1, 1914, the value of the dollar was four marks and twenty pfennigs. Nine years and three months later, in November 1923, the dollar was pegged at 4.2 trillion marks. In other words, the mark was worth nothing. It no longer had any value.

Some years ago, a famous author wrote: “In the long run we are all dead.” This is certainly true, I am sorry to say. But the question is, how short or long will the short run be? In the eighteenth century there was a famous lady, Madame de Pompadour, who is credited with the dictum: “Après nous le déluge” (“After us will come the flood”). Madame de Pompadour was happy enough to die in the short run. But her successor in office, Madame du Barry, outlived the short run and was beheaded in the long run. For many people the “long run” quickly becomes the “short run”—and the longer inflation goes on the sooner the “short run.”

How long can the short run last? How long can a central bank continue an inflation? Probably as long as people are convinced that the government, sooner or later, but certainly not too late, will stop printing money and thereby stop decreasing the value of each unit of money.

The Flight from Money

When people no longer believe this, when they realize that the government will go on and on without any intention of stopping, then they begin to understand that prices to morrow will be higher than they are today. Then they begin buying at any price, causing prices to go up to such heights that the monetary system breaks down.

I refer to the case of Germany, which the whole world was watching. Many books have described the events of that time. (Although I am no German, but an Austrian, I saw everything from the inside: in Austria, conditions were not very different from those in Germany; nor were they much different in many other European countries.) For several years, the German people believed that their inflation was just a temporary affair, that it would soon come to an end. They believed it for almost nine years, until the summer of 1923. Then, finally, they began to doubt. As the inflation continued, people thought it wiser to buy everything available, instead of keeping money in their pockets. Furthermore, they reasoned that one should not give loans of money, but on the contrary, that it was a very good idea to be a debtor. Thus inflation continued feeding on itself.

And it went on in Germany until exactly August 28, 1923. The masses had believed inflation money to be real money, but then they found out that conditions had changed. At the end of the German inflation, in the fall of 1923, the German factories paid their workers every morning in advance for the day. And the workingman who came to the factory with his wife, handed his wages—all the millions he got—over to her immediately. And the lady immediately went to a shop to buy something, no matter what. She realized what most people knew at that time—that overnight, from one day to another, the mark lost 50% of its purchasing power. Money, like chocolate on a hot oven, was melting in the pockets of the people. This last phase of German inflation did not last long; aider a few days, the whole nightmare was over: the mark was valueless and a new currency had to be established.

Lord Keynes, the same man who said that in the long run we are all dead, was one of the long line of inflationist authors of the twentieth century. They all wrote against the gold standard. When Keynes attacked the gold standard, he called it a “barbarous relic.” And most people today consider it ridiculous to speak of a return to the gold standard. In the United States, for instance, you are considered to be more or less a dreamer if you say: “Sooner or later, the United States will have to return to the gold standard.”

Yet the gold standard has one tremendous virtue: the quantity of the money supply, under the gold standard, is independent of the policies of governments and political parties. This is its advantage. It is a form of protection against spendthrift governments. If, under the gold standard, a government is asked to spend money for something new, the minister of finance can say: “And where do I get the money? Tell me, first, how I will find the money for this additional expenditure.”

A Restraint on Spending

Under an inflationary system, nothing is simpler for the politicians to do than to order the government printing office to provide as much money as they need for their projects. Under a gold standard, sound government has a much better chance; its leaders can say to the people and to the politicians: “We can’t do it unless we increase taxes.”

But under inflationary conditions, people acquire the habit of looking upon the government as an institution with limitless means at its disposal: the state, the government, can do anything. If, for instance, the nation wants a new highway system, the government is expected to build it. But where will the government get the money?

One could say that in the United States today—and even in the past, under McKinley—the Republican party was more or less in favor of sound money and of the gold standard, and the Democratic party was in favor of inflation. Of course not a paper inflation, but of silver.

It was, however, a Democratic president of the United States, President Cleveland, who at the end of the 1880s vetoed a decision of Congress, to give a small sum—about $10,000—to help a community that had suffered some disaster. And President Cleveland justified his veto by writing: “While it is the duty of the citizens to support the government, it is not the duty of the government to support the citizens.” This is something which every statesman should write on the wall of his office to show to people who come asking for money.

I am rather embarrassed by the necessity to simplify these problems. There are so many complex problems in the monetary system, and I would not have written volumes about them if they were as simple as I am describing them here. But the fundamentals are precisely these: if you increase the quantity of money, you bring about the lowering of the purchasing power of the monetary unit. This is what people whose private affairs are unfavorably affected do not like. People who do not benefit from inflation are the ones who complain.

A Worldwide Plague

If inflation is bad and if people realize it, why has it become almost a way of life in all countries? Even some of the richest countries suffer from this disease. The United States today is certainly the richest country in the world, with the highest standard of living. But when you travel in the United States, you will discover that there is constant talk about inflation and about the necessity to stop it. But they only talk; they do not act.

To give you some facts: aider the First World War, Great Britain returned to the prewar gold parity of the pound. That is, it revalued the pound upward. This increased the purchasing power of every worker’s wages. In an unhampered market the nominal money wage would have fallen to compensate for this and the workers’ real wage would not have suffered. We do not have time here to discuss the reasons for this. But the unions in Great Britain were unwilling to accept an adjustment of wage rates to the higher purchasing power of the monetary unit, therefore real wages were raised considerably by this monetary measure. This was a serious catastrophe for England, because Great Britain is a predominantly industrial country that has to import its raw materials, half-finished goods, and food stuffs in order to live, and has to export manufactured goods to pay for these imports. With the rise in the international value of the pound, the price of British goods rose on foreign markets and sales and exports declined. Great Britain had, in effect, priced itself out of the world market.

The unions could not be defeated. You know the power of a union today. It has the right, practically the privilege, to resort to violence. And a union order is, therefore, let us say, not less important than a government decree. The government decree is an order for enforcement for which the enforcement apparatus of the government—the police—is ready. You must obey the government decree, otherwise you will have difficulties with the police.

The Impact of Unions

Unfortunately, we have now, in almost all countries all over the world, a second power that is in a position to exercise force: the labor unions. The labor unions determine wages and the strikes to enforce them in the same way in which the government might decree a minimum wage rate. I will not discuss the union question now; I shall deal with it later. I only want to establish that it is the union policy to raise wage ratesabove the level they would have on an unhampered market. As a result, a considerable part of the potential labor force can be employed only by people or industries that are prepared to suffer losses. And, since businesses are not able to keep on suffering losses, they close their doors and people become unemployed. The setting of wage rates above the level they would have on the unhampered market always results in the unemployment of a considerable part of the potential labor force.

In Great Britain, the result of high wage rates enforced by the labor unions was lasting unemployment, prolonged year after year. Millions of workers were unemployed, production figures dropped. Even experts were perplexed. In this situation the British government made a move which it considered an indispensable, emergency measure: it devalued its currency.

The result was that the purchasing power of the money wages, upon which the unions had insisted, was no longer the same. The real wages, the commodity wages, were reduced. Now the worker could not buy as much as he had been able to buy before, even though the nominal wage rates remained the same. In this way, it was thought, real wage rates would return to free market levels and unemployment would disappear.

This measure—devaluation—was adopted by various other countries, by France, the Netherlands, and Belgium. One country even resorted twice to this measure within a period of one year and a half. That country was Czechoslovakia. It was a surreptitious method, let us say, to thwart the power of the unions. You could not call it a real success, however.

Indexation

After a few years, the people, the workers, even the unions, began to understand what was going on. They came to realize that currency devaluation had reduced their real wages. The unions had the power to oppose this. In many countries they inserted a clause into wage contracts providing that money wages must go up automatically with an increase in prices. This is called indexing. The unions became index conscious. So, this method of reducing unemployment that the government of Great Britain started in 1931—which was later adopted by almost all important governments this method of “solving un employment” no longer works today.

In 1936, in his General Theory of Employment, Interest and Money, Lord Keynes unfortunately elevated this method—those emergency measures of the period between 1929 and 1933—to a principle, to a fundamental system of policy. And he justified it by saying, in effect: “Unemployment is bad. If you want unemployment to disappear you must inflate the currency.”

He realized very well that wage rates can be too high for the market, that is, too high to make it profitable for an employer to increase his work force, thus too high from the point of view of the total working population, for with wage rates imposed by unions above the market level, only a part of those anxious to earn wages can obtain jobs.

And Keynes said, in effect: “Certainly mass unemployment, prolonged year aider year, is a very unsatisfactory condition.” But instead of suggesting that wage rates could and should be adjusted to market conditions, he said, in effect: “If one devalues the currency and the workers are not clever enough to realize it, they will not offer resistance against a drop in real wage rates, as long as nominal wage rates remain the same.” In other words, Lord Keynes was saying that if a man gets the same amount of sterling today as he got before the currency was devalued, he will not realize that he is, in fact, now getting less.

In old fashioned language, Keynes proposed cheating the workers. Instead of declaring openly that wage rates must be adjusted to the conditions of the market—because, if they are not, a part of the labor force will inevitably remain unemployed—he said, in effect: “Full employment can be reached only if you have inflation. Cheat the workers.” The most interesting fact, however, is that when his General Theory was published, it was no longer possible to cheat, because people had already become index conscious. But the goal of full employment remained.

Full Employment

What does “full employment” mean? It has to do with the unhampered labor market, which is not manipulated by the unions or by the government. On this market, wage rates for every type of labor tend to reach a level where everybody who wants a job can get one and every employer can hire as many workers as he needs. If there is an increase in the demand for labor, the wage rate will tend to be greater, and if fewer workers are needed, the wage rate will tend to fall.

The only method by which a “full employment” situation can be brought about is by the maintenance of an unhampered labor market. This is valid for every kind of labor and for every kind of commodity.

What does a businessman do who wants to sell a commodity for five dollars a unit? When he cannot sell it at that price, the technical business expression in the United States is, “the inventory does not move.” But it must move. He cannot retain things because he must buy something new; fashions are changing. So he sells at a lower price. If he cannot sell the merchandise at five dollars, he must sell it at four. If he cannot sell it at four, he must sell it at three. There is no other choice as long as he stays in business. He may suffer losses, but these losses are due to the fact that his anticipation of the market for his product was wrong.

It is the same with the thousands and thousands of young people who come every day from the agricultural districts into the city, trying to earn money. It happens so in every industrial nation. In the United States they come to town with the idea that they should get, say, a hundred dollars a week. This may be impossible. So if a man cannot get a job for a hundred dollars a week, he must try to get a job for ninety or eighty dollars, and perhaps even less. But if he were to say—as the unions do—“one hundred dollars a week or nothing,” then he might have to remain unemployed. (Many do not mind being unemployed, because the government pays unemployment benefits—out of special taxes levied on the employers—which are sometimes nearly as high as the wages the man would receive if he were employed.)

Because a certain group of people believes that full employment can be attained only by inflation, inflation is accepted in the United States. But people are discussing the question: Should we have a sound currency with unemployment, or inflation with full employment? This is in fact a very vicious analysis.

Clarifying the Problem

To deal with this problem we must raise the question: How can one improve the condition of the workers and of all other groups of the population? The answer is: by maintaining an unhampered labor market and thus achieving full employment. Our dilemma is, shall the market determine wage rates or shall they be determined by union pressure and compulsion? The dilemma is not “shall we have inflation or un employment?”

This mistaken analysis of the problem is argued in England, in European industrial countries and even in the United States. And some people say: “Now look, even the United States is inflating. Why should we not do it also.”

To these people one should answer first of all: “One of the privileges of a rich man is that he can afford to be foolish much longer than a poor man.” And this is the situation of the United States. The financial policy of the United States is very bad and is getting worse. Perhaps the United States can afford to be foolish a bit longer than some other countries.

The most important thing to remember is that inflation is not an act of God, that inflation is not a catastrophe of the elements or a disease that comes like a plague. Inflation is a policy—a deliberate policy of people who resort to inflation because they consider it to be a lesser evil than unemployment. But the fact is that, in the not very long run, inflation does not cure unemployment.

Inflation is a policy. And a policy can be changed. Therefore, there is no reason to give in to inflation. If one regards inflation as an evil, then one has to stop inflating. One has to balance the budget of the government. Of course, public opinion must support this; the intellectuals must help the people to understand. Given the support of public opinion, it is certainly possible for the people’s elected representatives to abandon the policy of inflation.

We must remember that, in the long run, we may all be dead and certainly will be dead. But we should arrange our earthly affairs, for the short run in which we have to live, in the best possible way. And one of the measures necessary for this purpose is to abandon inflationary policies.

This article has been published with FEE‘s permission and has been originally published at The Freeman March 1980 • Volume: 30 • Issue: 3.