A Reviewer's Notebook - 1969/6


The other day a young high school teacher who is sympathetic to the rebels among the students asked me what I thought of the wave of protest that is engulfing most of our educational institu­tions. I answered truthfully that I didn’t mind students popping off, even if they happen to be wrong. What I did mind was the rebels’ failure to see that the first duty of anybody is to become competent, to develop some skill that will carry him through life without being forced to beg his sustenance from others.

If I had had Leonard Read’s The Coming Aristocracy (Founda­tion for Economic Education, $3 cloth, $2 paper) at my side at the time, I might have made my mean­ing plainer to the young high school teacher. For Leonard Read’s argument that the true aristocrat is one who pursues excellence comes down to a simple endorse­ment of the duty to achieve com­petence. The worst feature of the campus rebellions that are caus­ing such turmoil is the way they waste everybody’s time. There are all those books in the libraries to be read, all those languages to learn, all those philosophies to in­spect. One doesn’t even need good teachers (though it helps), for a teacher is someone to react against if you think he is wrong.

Leonard Read’s advice to the rebellious student would be to start a rebellion within one’s self against the waste of opportunity. He is a good advocate of his own cause, for he practices what he preaches. Moreover, he doesn’t of­fend as a preacher by trying to bulldoze. He depends on lucidity and logic on a take-it-or-leave-it basis.

Forums for Libertarians

I have known Leonard Read for more than twenty-five years, and have watched him work at the task of perfecting his own understand­ing of what he calls the freedom philosophy. In moments of pessi­mism I have doubted that any Readean band of true aristocrat’s can save the world. With Mao Tse-tung extolling the virtues of power as it comes from the barrel of a gun, with Moscow clobbering the Czechs for tentatively suggest­ing some minor experiments with a free market, and with our own students embracing nihilism and anarchy, who is going to be left alone to try to rise above personal mediocrity?

But then I think of Leonard Read’s contributions to the rise of the Mont Pelerin Society, for example. The Mont Pelerin mem­bers who have gathered once a year to try to make true correla­tions in the Read sense are no longer regarded as a tiny sect with no influence on a world that is bound willy-nilly for collectivism. Last September Warren Nutter was simply a student of the fail­ure of communist economies to become more than inefficient in industrial-military complexes. He appeared at the Mont Pelerin con­ference in Scotland to read a paper on the turmoil in East Europe. Today he is in the Pentagon, acting as Secretary of Defense Melvin Laird’s adviser on the Soviet economic potential. Another Mont Pelerin member, Martin An­derson, is in the White House, doing research that can be trusted to keep President Nixon from re­lying too heavily on state inter­vention in economic matters. We have been developing freedom phi­losophy thinkers to counterbalance the popular John Kenneth Gal­braiths and Arthur Schlesingers, and Mr. Read’s quiet work in pro­viding forums and focus for the libertarians has had much to do with the change.

Obstacles to Surmount

Life is not easy for anybody who wants to perfect his under­standing of the freedom philoso­phy. For, as Mr. Read points out, if we were to try to divorce our­selves from every last activity tainted with socialism, we couldn’t exist. We couldn’t ride on a train (rates set in accordance with the rules of the Interstate Commerce Commission); we couldn’t use the airways (they are subsidized); we couldn’t eat bread (the govern­ment controls wheat plantings); we couldn’t wear cotton clothes (cotton price supports). To live the freedom philosophy to perfec­tion would be suicidal.

But to take life, even one’s own, is contrary to the higher law. So Leonard Read supports compro­mise, but only to the extent that it is absolutely necessary to function in the world. He finds Medicare, for example, to be less tolerable than using the socialized mails, and can forswear accepting its help with less difficulty. He is more of a saint in this than I am: the government has stolen so much from me in a lifetime of taking my taxes to pay for social­ism that I intend to get anything out of it that I can as partial retri­bution. If Medicare can pay me for an expensive operation, I will consider it as a restitution of something that should have been left to me in the first place.

Leonard Read is not surprised to see our so-called higher educa­tion in trouble. Working against the philosophy of the Founding Fathers, we set up our primary schooling in the early nineteenth century on a compulsory basis. This, in turn, necessitated a second compulsion: Parents must be taxed to pay the school bill. With the government supplying the schools, it necessarily dictated the curriculum.

As long as the compulsions were limited to the early grades, where the teaching of skills in reading and writing and arithmetic took up the teachers’ time and pre­vented them from going off into realms of philosophy, the danger of indoctrinating the students in favor of socialism was not marked. But when the Federal government began its programs of aid to higher education, we were really in for trouble. College students are all mixed up about the means and ends of higher education. They have come to take it as a right which the state is called upon to provide without charge. But when the state pours in money to support scientific experiment that might help the Pentagon im­prove its military efficiency, the students resent it. They have been so badly educated in logic that they can’t see that the government has a right to get something for its money. In accepting state aid for higher education, the student has, in effect, sold himself to the state whose power he dislikes.

Other Signs of Light

If the young haven’t yet caught up with Leonard Read, they are bound to do so as they fight to escape from a bureaucratized world. The "freedom philosophy" makes inroads in the strangest places. Just the other day Supreme Court Justice William 0. Douglas, of all people, condemned the bu­reaucrats of the Tennessee Valley Authority for proposing yet an­other big dam. Justice Douglas waxed wroth because the project would destroy some of the best trout fishing in America. In other words, the Justice had finally tumbled to the fact that the free­dom philosophy and conservation are not mutually exclusive causes. Then there is the discovery of Larry O’Brien, who was our Post­master General, that a bureauc­ratized Post Office is not an effi­cient distributor of the mail. He suggested a "public corporation" to be run on private enterprise lines. This would not be wholly satisfactory according to the Read point of view, but at least the "freedom philosophy" had had some effect on Larry O’Brien.


DOLLARS AND DEFICITS, by Milton Friedman (Englewood Cliffs, New Jersey: Prentice-Hall, Inc., 1968), 279 pp., $6.95.

THE OPTIMUM QUANTITY OF MONEY, and Other Essays, by Milton Friedman (Chicago: Aldine Publishing Co., 1969), 384 pp., $10.95.

Reviewed by Henry Hazlitt

In the last five or ten years no American economist’s reputation has risen more than Milton Friedman’s. There are solid reasons for this. He is a man of amazingly wide awareness, at home both in the academic and journalistic fields. He is an acute theoretician, a skilled statistician, an expert mathematician, and a formidable controversialist. His thought is penetrating and precise. And his style is clear, lively, and epigram­matic.

Those of us who have known or read him over the last twenty years admire him as a brilliant expositor and champion of the workings of a free market, and as a devastating critic of price, wage, and exchange controls. His essay on "What Price Guideposts?" in Dollars and Deficits is an excellent example of this.

But in the last three or four years he is most often referred to because of his championship of the quantity theory of money. In fact, so thoroughly saturated in the Keynesian ideology have both the academic and journalistic worlds become in the last thirty years, and so ignorant of the past, that Friedman’s quantity theory of money is often referred to as if it were some startling new doc­trine that he had personally orig­inated. Friedman himself makes no such claim. "The emphasis I have just been placing on the stock of money," he even wrote in 1963, "is widely regarded as old-fashioned and out of date." And in his Preface to the essays gathered in his latest book, The Optimum Quantity of Money, he writes: "The quantity theory of money, once relegated to courses on the history of thought as an outmoded doctrine, has re-emerged as a part of the living body of economic theory."

A large part of the credit for that re-emergence belongs to Pro­fessor Friedman himself. A big step forward in this was the mon­umental Monetary History of the United States that he wrote with Anna J. Schwartz in 1963. Fried-man’s special contribution has been to point out, with impressive documentation, how much more accurately changes in the stock of money have predicted the short-term course of the economy than the Keynesian emphasis on fiscal policy or on the relation between investment, government spending, and income.

There is nothing original, either, in Friedman’s insistence that "inflation is always and everywhere a monetary phenome­non, resulting from and accom­panied by a rise in the quantity of money relative to output." "Or­thodox" economists have been shouting this for years. But Friedman has got more people, including former academic Key­nesians, to listen.

He has also got more people to listen to the misgivings that some of us have been expressing for many years, not only regarding the wisdom of the managers of the Federal Reserve System, but the wisdom of having a Federal Re­serve system at all.

Friedman’s own objections are based on his opinion, which other libertarians ought to share, that monetary policy should be based on strict, objective, invariable rules rather than on the unpredict­able discretion or, as he puts it, on "the day-by-day whim of political authorities." He holds that, in the first place, the concept of a cen­tral bank as an independent branch of government is not reconcilable with the concept of politi­cal democracy. He points to the mistaken goals that the Federal Reserve authorities have followed and to the costly errors they have made again and again since the Federal Reserve System was es­tablished in 1913.

I do not recall that Friedman has gone so far as to say, as some of us would, that practically every central bank, including the Fed­eral Reserve System, has served primarily as an inflation factory. But he has repeatedly pointed out that "central banks are a neces­sary—and today almost a suffi­cient—condition for a balance-of­-payments problem."

It is when we get a little beyond this point that some of us must part company with Milton Fried­man—on both economic and polit­ical grounds. He advocates an ir­redeemable paper currency. He would do away altogether with the gold standard and the requirement of the convertibility of the cur­rency unit into a fixed amount of gold.

His argument here seems to me clearly untenable. "The funda­mental defect of a commodity standard," he writes, "from the point of view of the society as a whole, is that it requires the use of real resources to add to the stock of money. People must work hard to dig something out of the ground," et cetera.

Now so far from this being the fundamental defect of a gold standard, I should call it its fun­damental virtue. The vice of a paper money is that it is sub­ject to the day-by-day whim of the politicians in power. They can run off on the printing press any amount they see fit. They can de­preciate everybody’s money-sav­ings, or even make them worthless. But the value of a commodity cur­rency, that has to be discovered and dug and processed and refined, is not dependent on political whim. Gold money retains its value pre­cisely because it costs something to produce, and its supply cannot be arbitrarily increased simply by turning a printing press.

It is absolutely necessary to make the increase in the quantity of money independent of political wishes. The cost of production of the monetary metal is the unavoid­able price paid for the preserva­tion of a sound monetary system. And it happens today to be a ri­diculously low price. The total world gold production is less than $1.5 billion a year. The total na­tional income of the United States alone is some $750 billion a year. The total income of the other six­teen-seventeenths of the world’s population must be at least equal to this. This means that gold pro­duction today costs the world less than one-tenth of 1 per cent—less than one-thousandth—of its total annual productive output. An ab­surdly cheap rate for monetary insurance.

For this Milton Friedman would substitute the following type of paper money system: "My choice at the moment would be a legis­lated rule instructing the mone­tary authority to achieve a spe­cified rate of growth in the stock of money" rising "month by month… at an annual rate [ (somewhere) ] between 3 and 5 [ (per cent) ]." (D. & D., p. 193)

Friedman has several times changed his mind about this fig­ure. The above was originally written in 1962. In his new book, The Optimum Quantity of Money, he candidly admits that as a result of further study he would now prefer a monetary increase of only 2 per cent a year instead of his previous advocacy of 4 or 5 per cent a year.

Perhaps this is a good place to remind him that during the past century gold production has in­creased at an average rate of about 2¹/2 per cent a year, com­pounded annually, which is amaz­ingly close to his own latest esti­mate of the ideal annual rate of increase of the monetary stock.

Friedman’s personal vacillation is, of course, not a major argu­ment against the monetary for­mula he proposes. But it does serve to remind us that there is no objective way of determining what the quantity of money, or the annual increase in the quantity of money, ought to be. This must remain a value judgment. What­ever the growth formula adopted, some people will be relatively helped by it and others will be relatively hurt by it. If the money stock is arbitrarily increased by 2 or 5 or X per cent per year, the unavoidable question arises: Who will get the new money in the first instance? Whoever gets it first will benefit at the relative expense of the rest of us.

Thus the issue would inevitably and persistently lead to a political tug-of-war. Even if Friedman could get a 2 per cent monetary increase written into law in the first year, "economic-growth" fa­natics, and groups whose money incomes weren’t rising as fast as they thought they should, would soon be demanding a legislative change to a 3 per cent annual in­crease, and others to a 5 or 7 per cent increase, and still others to a "temporary" 10 per cent increase, and so on and on.

Once we explicitly gave the gov­ernment the power to increase the quantity of money, there would be no practicable way to limit that power. The political Outs would constantly be agitating for a high­er rate of increase, and the politi­cal Ins would adopt whatever rate of increase they thought most likely to prolong their stay in office.

But Friedman’s efforts to find a solution for what has become one of the world’s most difficult and controversial economic and polit­ical problems are unfailingly thoughtful and stimulating.

Both of the books under review here are mainly collections of essays written over a period span­ning nearly two decades. The chief difference is that those in Dollars and Deficits are selected as "in­telligible to the public at large," and those in The Optimum Quantity of Money are more technical and addressed primarily to fellow economists.  


SO HUMAN AN ANIMAL by Rene Dubos (New York: Charles Scrib­ner’s Sons, 1968), 267 pp., $6.95.

Reviewed by Robert M. Thornton

This is an age of pseudo-science and scientific superstition. For many of our contemporaries, as Jacques Barzun observed, science "is at once a mode of thought, a source of strong emotion, and a faith as fanatical as any in his­tory."’ The description fits many popularizers and mere technicians, but the really great scientists tend to be humble men who regard cre­ation with feelings of awe, feel­ings which deepen as their knowl­edge expands. Rene Dubos, the noted biologist, is one such.

He bids us in this book to rise above the simple-minded and de­grading notion that man is a ma­chine, to forswear the idea that the conquest of nature and the moulding of minds are proper hu­man goals. He demolishes the opin­ion that we ought to do something (like put a man on the moon) merely because we have the tech­nical capacity; such a position is operationally and ethically meaningless, and reflects an intellectual abdication as well. Dubos urges scientists to become more con­cerned with questions about the nature and purpose of man, adding that the material satisfactions made possible by technology have added little to human happiness nor deepened our sense of the sig­nificance of life.

These are startling words for our time coming, as they do, not from a theologian or a philosopher but from a scientist. They set the mood for the book. Instead of the presumptuous airs of today’s "in­tellectuals" we find Dubos speak­ing of the mysterious relation be­tween man and nature. Some read­ers may recall the scene in the film, The Treasure of the Sierra Madre, in which the characters played by Walter Huston and Humphrey Bogart are leaving the mine they had dug in a mountain. With a fortune in gold dust and bandits nearby Bogart is anxious to leave quickly, but Huston in­sists on taking the time to "tidy up the mountain." It isn’t right to open holes in the earth and not seal them up. The mountain was good to them, he goes on to say, and they should be good to the mountain. Quaint, we say, but along comes Dubos saying much the same thing even more elo­quently about man’s continuity with the past and the rest of creation about the nonmaterial—or spiritual, if you will—relation between man and the rest of cre­ation. It is the quality of this relationship that measures the humanness of life.

Dubos, like Joseph Wood Krutch, does not believe we learn as much about animate nature from dissec­tion and analysis as from sym­pathetic observation of living crea­tures. Both men stress the im­portance of a communion with nature and nature’s creatures —a welcome relief from self-styled realists, unconcerned about pre­serving our natural heritage, and from sentimentalists whose good intentions sometimes do more harm than good.

Dubos takes a balanced view of man, viewing him as the creative user of biological, psychological, political, environmental, and eco­nomic factors. Dubos recognizes that man becomes truly human only as a member of society but he also sees that one of the dis­tinguishing characteristics of man is his freedom to choose, to make value judgments. "The life of a particular person becomes to a very large extent what he wants it to be, through a succession of de­liberate choices… steered at ev­ery step by the vision of… goals."


¹ The Glorious Entertainment (N. Y.: Harper, 1964), p. 3.


June 1969

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December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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