Dr. Barry Asmus is an economist and national speaker living in Phoenix, Arizona. Dr. Don Billings is Professor of Economics at Boise State University.
This article is taken from their book, Crossroads: The Great American Experiment, published in 1984 by University Press of America. Reprinted by permission of the publisher.
“Why should it be,” asked Walter Lippmann, a famous observer of the American scene, “that in a time when men are making the prodigious claim that they can plan and direct society, they are so profoundly impressed with the unmanageability of human affairs?” Especially in the twentieth century, we have seen more elaborate attempts through government to manage and control the private actions of individuals, yet, as Lippmann observed, “ . . . this more elaborate organization can be operated only if there is more intelligence, more insight, more discipline, more disinterestedness, than exists in any ordinary company of men. Unfortunately this is the sickness of an overgoverned society, and at this point the people must seek relief through greater freedom if they are not to suffer greater disasters.” Even the casual observer senses that government actions to solve problems are not working, and that as government attempts to do more, the less successful it becomes.
Much of the reason for this can be understood by looking at how, we as individuals, organize ourselves in society. The rise, decline, and restoration of the market economy is in large part about the relative advantages and disadvantages of two overarching principles of social organization. Following the work of the German sociologist Franz Oppenheimer, Albert Jay Nock distinguishes between the “political means” and the “economic means” as social organizers or delivery systems. Which of these institutions works better when organizing social and economic behavior and which most closely conforms to the basic nature of man?
The political means necessarily requires the use of the coercive apparatus of government. It forces individuals to take actions which are contrary and in opposition to their own desires and goals. After all, the essential characteristic of government is its claim to a monopoly right on the use of force in society. As individuals, you and I would be arrested if we attempted to do those things which governments do as a matter of course.
The Economic Means versus The Political Means
The “economic” or market means refers to social arrangements in which only voluntary transactions between persons are permitted. In a market economy involuntary or forced exchanges would be criminal acts legitimately subject to appropriate penalties and government action. The fundamental distinction is between mine and thine. Individuals would pursue their own goals through the voluntary exchange of justly acquired rights in property.
The market means is consistent with both human nature and the purposeful action of individuals. In contrast, the political means operates at cross-purposes to human nature and individual choice. Minimum wage laws, rent controls, usury laws, price controls, tariffs, subsi dized rents, interest rate ceilings, agricultural price supports, Federal loan guarantees, passenger rail service subsidies, and fixed public utility rates are just a few of the ways that government tries to alter human behavior. In every case it limits the number of exchanges that would have normally taken place and necessarily involves government force to ensure compliance. Constraining the purposeful behavior of individuals reflected in the laws of supply and demand, government tries to supersede the market in the name of the “public good.”
But, the use of government force to restrict private actions presents important difficulties. Before government can create a miracle for one group, for example farm price subsidies for agriculture or rent subsidies for current renters, the money must first be taken away from some one else. Taxes are the anti-miracle imposed on people who would rather spend their money in a different way. This raises a fundamental question regarding the morality of allowing person A to meet with person B to determine how the money of person C will be used to help person D. The issue is a matter of justice in the acquisition of things (i.e., property) and therefore an important topic of discussion.
There is also the question of economic efficiency. Does government intervention in fact produce the intended consequences? Do minimum wage laws really help the poor? Have price supports in agriculture helped the farmer in the long run? Did price controls on energy solve the “energy crisis” or create it? Although many of government’s actions are sincere and well intended, they have for the most part been disastrous in their unintended consequences. Government inherently demands that individuals act contrary to their personal objectives. This creates a situation analogous to the problem of forcing water to run uphill; although it can be done, it is very costly in terms of economic efficiency. But more importantly, the process involves a continual and growing abridgment of liberty.
In contrast, the market means encourages the spontaneous and mutually beneficial exchange of property which is in perfect harmony with the purposeful actions of free and sovereign human beings. As Adam Smith pointed out more than two hundred years ago in his Wealth of Nations, if the organizing principles of society agree with and are complementary to human nature, then “. . . the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably and the society must be at all times in the highest degree of disorder.”
The mystery, posed by Walter Lippmann in The Good Society, regarding the simultaneous increase in the growth and power of government and our receding confidence in government’s ability to deal with society’s ills, disorder, decay, and malaise should be no surprise. Chaotically, we have come to rely on coercive institutions of social organization that operate at cross purposes to the essential nature of purposeful human beings. Every individual has his or her very own principle of motion. There is no mystery at all; pushing square pegs into round holes simply does not produce socially beneficial results.
Crossroads is an important and comprehensive presentation of the rise, decline, and restoration of freedom and the market economy. The authors do an outstanding job of introducing readers to the history and nature of the American free market experiment. Copies can be ordered from the American Studies Institute, 3420 East Shea, Suite 266A, Phoenix, Arizona 85028: Paper $14.25, Cloth $26.75. Please add $1.50 for shipping and handling.