JANUARY 01, 1967
Dr. Paton is Professor Emeritus of Accounting and of Economics, University of Michigan, and is known throughout the world for his outstanding work in these fields. His current comments on American attitudes and behavior are worthy of everyone’s attention.
No, this piece doesn’t deal with the High Cost of Living, at least not directly. I am concerned here with a less familiar and important HCL, hydrochloric acid.
A few months ago, while doing a bit of traveling, I developed a troublesome canker — "a corroding and sloughing ulcer," often called "canker of the mouth." This is a difficulty that has bothered me from time to time for some seventy-five years, but I long ago learned how to deal with it effectively. The remedy: drench a compact dab of cotton with a 10 per cent solution of HCL and apply same to the canker spot, being careful to avoid contact with other membrane areas or the teeth. One application, for a few seconds, is usually sufficient to effect a complete cure. Preferably, of course, the treatment should be applied early.
This time, not having my HCL bottle with me, I carelessly let the canker grow substantially before taking action. Finally, prodded by the soreness, I went to the drug department of a big chain store, in the capital city of an important state, and asked for an ounce of 10 per cent HCL. To my astonishment and disgust I was not allowed to make the purchase, even after seeing and talking to the chief pharmacist. The gentleman explained that I would have to present a doctor’s prescription before he could sell me an ounce, or any other quantity, of dilute hydrochloric. He also explained that his refusal to serve me was required by Federal regulation, not by any local or state statute or ruling. He added that he recently had been plagued by a "government snooper" and didn’t propose to take any chances — even to accommodate a white-haired and harmless-appearing out-of-stater.
Was there ever anything more ridiculous? It would be no more absurd to require a prescription in order to buy a can of shoe polish, or a container of "Soaky" for my granddaughter’s bath, or any of a hundred other commonplace products of everyday use. Doubtless, some I don’t know about are on the restricted list.
And what do you think I had to do to get around this senseless effort to interfere in my personal affairs, to limit my freedom of action in my own private realm? I didn’t want to take time to hunt a doctor, and I had a strong urge not to knuckle under. A couple of blocks down the street I found a builders’ supply store, well stocked with muriatic acid. The proprietor wanted to sell me a full carboy of the stuff but I persuaded him to let me have a much smaller amount — a pint (enough to last me for a couple of centuries). As everyone knows, "muriatic" and hydrochloric acid are the same thing, although commercial muriatic may be somewhat less pure than the HCL of the drug stores.
Here is truly a kettle of fish! I can’t buy an ounce of 10 per cent hydrochloric acid without a prescription, but I can go down the street a block or two and buy gallons of the same thing, but several times as strong, without any interference. This is — for me — a fresh example of the foolish rulings by government agencies that are increasingly encountered on every hand.
More Harm than Good
Years ago I heard Professor Ludwig von Mises, an outstanding, if not the greatest, living economist-philosopher, suggest that the Federal "Food and Drug" control program had probably done more harm than good. At the time — still under the spell of the assumption that government inspection had helped to clean up the meat business — I was inclined to question the Professor’s position; but long before my HCL experience I had become sympathetic with his pessimistic view of the impact of this government activity.
For some time the Food and Drug people have been feeling their oats, becoming noticeably more tyrannical, and at least a few of us have been disturbed by this development. Among the publicized activities that have impressed me unfavorably was the fuss made a while back when two women out my way died of botulism, including the closing for months of a West Coast cannery employing 800 people. In my state about 300 persons perished by drowning in the first nine months of 1966, and in my county alone during the same period 50 persons were killed on the highways and many hundreds injured; but no one has proposed closing our lakes and rivers to boating and swimming, and there has been no curtailment to date of motor vehicle traffic. A case of fatal food poisoning is unfortunate, but let’s not lose our heads completely over a very minor disaster in the face of much more serious problems. And it might be a blessing if our regulators would leave more of the control job to the discipline of the keenly competitive production standards and marketing methods prevailing in the food and drug fields.
I understand that a mass of new requirements and rules have been drafted by Food and Drug, to go into effect at an early date; and I note that this proposed increment to the heavy burden of existing controls and interferences is viewed with alarm and actively opposed by some pharmaceutical manufacturers and freedom-loving consumer groups. More power to them!
One Interference Begins an Endless Chain of Others
Advocates of the merits of a free-market economy have often pointed out that any interference with the intricate market mechanism and the consumers’ wishes leads to other interferences, in an almost endless chain, if the initial requirement or restriction is to be made completely effective. This tendency may be illustrated by reference to the regulation that makes it unlawful for me to buy a spoonful of dilute HCL at a drug store without a doctor’s prescription. Obviously, to fully implement this rule, the sale of the same product under another name should be restricted. Moreover, this step would still leave open the possibility that an especially obstinate consumer might acquire some common salt and sulphuric acid, and the necessary materials to construct a small facility for making hydrochloric acid ("spirits of salt"), for his own — and perhaps others’ — use. To block such an endeavor the government must step in again with special controls which will cut off the supply of salt and sulphuric acid, both staple products, from the recalcitrant; and perhaps also institute restrictions which will deny him the opportunity to acquire the pans, brick, and other materials needed to construct a suitable acid-making still.
Invitation to Lawlessness
Experience shows that there are two main directions in which ordinary folks are affected by having their freedom to assume responsibility and make choices curtailed or destroyed by government. One is an increased leaning toward lawlessness, a growing disrespect for all restraints, rules, and regulations imposed by the state, at all levels. In the case of the mine-run citizen inclined to be law-abiding, this rebellious attitude develops as he contemplates the verbotens and controls that have no moral significance, do not conform to his basic concepts of justice and equity, and perhaps fly in the face of what he regards as plain common sense. For example, you can scarcely expect Joe Doakes to have much sympathy for a law or ruling that makes it illegal for a farmer to grow wheat on his own land to feed his own chickens, and subjects the violator to penalties more severe, very likely, than those ordinarily applied to persons found guilty of purse snatching. (A longstanding example, world wide, is found in the tolerant view of smuggling. To many, the professional smuggler is more of a hero than a criminal, unless he indulges unnecessarily in violence and deals in wares that are highly objectionable; and apparently few of those who travel abroad feel that it is a sin to get the better of "Customs.")
Today the array of such legalized but obnoxious interventions, in virtually all lines of activity, including personal affairs, is almost unbelievably lengthy; and there is literally no possibility of behaving in such a way as to avoid all taint of being lawless. This state of affairs was repeatedly noted — and criticized — a decade ago by a retiring member of the Federal Trade Commission; and the point has increased validity now, in view of the mass of additional legislation and the growth of bureaucracy, in areas old and new, to which we have been subjected in recent years.
It is not a very long step from annoyance with laws and rules encountered which appear to trespass beyond constitutional and traditional limits to a willingness to violate the "rule of law" generally. This is especially true of persons with a relatively low threshold when it comes to urges to ignore restraints. Just as attempts by government to fix prices always bring black markets, so do inroads on inherent rights in other areas bring resistance and loss of respect for law. Most people — to give another example —feel that they have a right to rent or sell their own land or buildings to someone of their own choosing; and when government at any level outlaws this right, many will not comply if they can find a way around the law without going to jail. Resentment regarding a particular ruling readily crystallizes into continuing antagonism, and when the institution of government finally becomes an enemy, in the individual’s view, he is well on the way to habitual lawbreaking at every opportunity.
Apathetic Acceptance and Learning to Live with It
The second kind of attitude that may develop or be fortified by increasing encroachment of government power on the domain of the individual citizen is one of apathetic acquiescence, supine acceptance of a dependent status. This result of expanding government, for the long pull, is likely to be more widespread than increased rebellion and lawlessness. Even persons endowed with a dash of spunk tend to be baffled when it comes to finding ways and means of resisting the pressures of legislative and administrative requirements and restrictions imposed by a complex central government.
And the many who have a wide streak of dependence in their make-ups find it relatively easy to let Big Brother take charge.
I believe a general observation is warranted with respect to prevailing opinions as to the relative merits and disadvantages of government operation and private business. We all know, at least at the subconscious level, that when a government monopoly provides postal service, water, or any other product, the consumer is seldom if ever consulted about anything and usually gets nowhere by complaining. Hence, we learn to accept, without much criticism or challenge, the level of performance by government enterprise with which we are familiar.
We all also know, at least in the backs of our minds, that in making purchases on the competitive market our desires and complaints are usually promptly and carefully considered and often result in changes, and that if we continue to be dissatisfied with the job done by a particular producer, we can turn to one of his competitors with the assurance that we will be welcome customers. What is often lacking, however, is clear recognition of these differences. We are not always actively aware of the limitations of government service, or of the blessings afforded by a competitive market.
Roadblock to Progress
On second thought, perhaps my HCL story does have a slight bearing on the High Cost of Living. If the phrase "cost of living" means anything specific from a group or community standpoint, it presumably refers to the volume or level of per-capita consumption of economic goods, including services. This volume, of course, depends on the per-capita accomplishment of those who are engaged in the production and distribution processes throughout the economic pipeline. It follows that any development that impairs or discourages efficiency in the employment of human energy, as well as in the use of available physical resources, will have an adverse influence on output and hence on consumption per person.
I submit that the massive and growing weight of government intervention, penetrating nowadays into almost every nook and cranny of our affairs, is a substantial roadblock in the way of getting worth-while things done. If the citizen decides to resist one or more interferences, he will use up a lot of time and energy studying the problem and trying to find a safe way around the roadblock. If he decides to comply, he still will consume much time and energy trying to find out just what the legal requirements are and what procedures must be followed in the process of conforming. A combination of maximum practicable resistance plus minimum compliance will be no less burdensome.
The brunt of this ever-changing and waxing control program falls on business managements, including their lawyers, accountants, engineers, chemists, and other expert professional advisers; and at a top management meeting these days it is often necessary to devote so much time to relations with government (including tax matters) that only cursory attention can be given to the technical problems of operation.
The crucial fact is that talent, such as that required in executive and professional activities, is currently a scarce article. (Despite views to the contrary, the U.S. population includes a lot of folks with very ordinary native abilities and potential.) The acute shortage of high-grade personnel is evidenced by the intensity of the recruiting efforts on college campuses by accounting firms, business corporations, and other employers of people of managerial and professional caliber, and the starting salary scales prevailing ($750 to $1,000 per month) for promising graduates from the technical programs.
An important element of the demand side of this active market for talent is of course rooted in the pressures of government interferences and controls, and if these pressures were removed ‘or substantially abated, a host of able persons would become available for the basic tasks of innovation, improvement of methods, and general development of the economy. In other words, we are using up, frittering away, a major part of one of our important resources—talented people — in trying to live with our governmental colossus and its crews of cockalorums.
There are many other wastes in our system, and by no means all of them may be laid at government’s door; but the wheel-spinning to which many of our most able people are currently committed, in trying to make headway in a web of governmental interventions, is one of the most discouraging aspects of the "mixed" economy in which we are now living.
Almost every day I see a newspaper report of a grant by some foundation of several hundred thousand dollars to support a "research" project that strikes me as trivial or silly. I wish one of these organizations would encourage some group of capable accountants and statisticians to launch a study of the cost of governmental intervention in the economic processes, including the direct costs incurred by the government agencies so engaged as well as the costs of compliance (and resistance) incurred by private businesses.
Controls Affect People
A point which the well-intentioned advocates of more Government "protection" for the buyers of goods and services seem to miss entirely is that controls do not affect things. Controls affect people — the very people they are intended to "help." As Government controls wax, personal freedoms wane. When the Government proposes, for example, that packaging be standardized, the result is that the controls will be on people. Business people will be deprived of much of their freedom and incentive to innovate. But more important, there will be an unwarranted diminution of free choice for all our people — the very consumers such additional regulation is intended to help….
C. W. COOK, President, General Foods Corporation, 1966 annual meeting of stockholders