The World's Worst Folly


Mr. Conover is technically retired after many years of research and development for the chemical manufacturing industry, but remains actively self-employed in his special field and in general research for better living.


A large part of the human race lives today i ‘fear of a war in the near future war filled with greater and more numerous hor­rors than any conflict the world has ever known. The fear of such a war is based upon the countless threats of the organized believers in the doctrines of Karl Marx. These doctrines, derived mainly from economic theories, lead up to a demand for the acceptance of a tyrannical government and a fiend­ish code of ethics. Obviously such theories should be thoroughly and critically examined.

Marx’s theories in the field of economics were taken largely from the ideas of men who wrote on the subject of political economy in the late eighteenth and early nine­teenth centuries. These scholars were interested mainly in the eco­nomic problems with which gov­ernments of the period were con­cerned. They showed only a sec­ondary, and rather narrow interest in the subject of the production of wealth. They did not deal with the subject in any comprehensive man­ner and did not attack the view commonly held at the time: that labor alone produces wealth.

The fortune of the Western World might have been much bet­ter if a few of the early economists had developed a lively curiosity about the production of wealth, or still better had interested them­selves financially in some of the new and rapidly growing indus­tries that were springing up at the time, thus learning by firsthand observation and experience how wealth is produced.

But the world was not fortunate in its early economists or their ex­periences. Deep into the twentieth century, most men, including great scholars, were to believe that wealth is produced by labor.

Karl Marx adopted some of the theories of the early political economists and rejected others, and developed his own rather sim­ple set of theories. His basic econ­omic doctrine is that all wealth (wealth in this case being all goods that people desire) is pro­duced by labor (the term "labor" commonly being used in its popu­lar sense). In this doctrine, gifts of nature evidently are taken for granted and capital is incorrectly assumed to be produced by labor alone. The doctrine is an excellent one for propaganda purposes be­cause of its simplicity; its fault is that it demonstrably does not rest upon any foundation of truth.

Continuing with his doctrine claiming unique importance for "labor" in the production of wealth, Marx concluded (using ac­ceptable logic but starting with a false premise) that since "labor" does not receive all the value of the goods produced, it is being "ex­ploited" by the "bourgeois" em­ployers who "filch" the "surplus value" of the goods. He attributed all the discomforts and privations endured by many of the employed workmen of his time to this im­agined exploitation by employers. As a remedy for the imagined in­justice to "labor," Marx urged a violent revolution with limitless destruction and cruelty, followed by the organization of a govern­ment with unlimited power to carry out the notions of a dictator or governing clique.

The Production of Wealth

The production of wealth, a world-wide and ever-changing hu­man activity, is not a simple proc­ess and it is not easy to recognize all factors that take part in it. However, a thoughtful and un­prejudiced person with extensive experience in, or close to, the pro­duction of wealth would doubtless note the importance of "know-how," risk-taking, the chance dis­covery of mineral wealth, and in­vention, and would conclude that many factors are involved in addi­tion to the "capital" and "labor" that are so often mentioned.

A tentative list of factors is given below. Additional factors have been suggested and may de­serve inclusion. The order of the factors in the list is not intended to be significant.

1. Mental capital; knowledge of the methods; technology; know-how

2. Chance discovery

3. Risk-taking

4. Invention

5. Gifts of nature; natural re­sources; "land"

6. Labor

7. Capital

8. Management

9. Research

10. Initiative; enterprise

11. Self-denial

12. Foresight

13. Judgment

Mental Capital

This factor comprises the whole enormous volume of knowledge that is available for carrying on all wealth-producing activities. It is one of the fundamental factors in the production of wealth under the conditions of civilized life, since some portion of this fund of knowledge must be employed in every one of the countless in­dividual operations which make up all the production processes used in manufacturing, construction, mining, and agriculture.

Richness in, or poverty in, men­tal capital can cause the difference in standards of living between a civilized industrial nation and a savage tribe, the same natural re­sources being accessible to both groups and the ability to work be­ing equal. An example from his­tory will illustrate the tremendous effects an abundant flow of mental capital into a particular region can bring about in a relatively short historical period.

California is generously en­dowed with gifts of nature avail­able for use in the production of wealth; among these are: fertile soils, numberless sources of water power, petroleum, natural gas, timber, and valuable metals. These resources were present and un­touched in the middle of the eighteenth century; and yet at that time the area of the state supported only a scanty population (estimated at 130,000 people) with a standard of living about as low as human beings can endure. Their houses were mere shelters covered with thatch, bark, or earth. Their clothing in good weather was nothing at all for men, only aprons of buckskin or shredded bark for women. Acorns were their main foodstuff; this was supplemented as opportunity offered by rabbits and other small game, grass seed, fish, shellfish, snakes, grasshoppers, snails, slugs, and angleworms.

Why did these people live in such revolting poverty in the pres­ence of such an abundance of natu­ral resources? Were they poor be­cause they were being "exploited" by "bourgeois" employers? It is a silly question, but no sillier than the theory of poverty it has refer­ence to, a theory that has been spread with great zeal by Marxists for more than a hundred years. The truth is, of course, that the aboriginal Californians were al­most totally lacking in knowledge of the methods useful in produc­ing wealth. (One example of their extreme ignorance is that they knew nothing of the use of wheels; another is that they did not know how to make cloth.) To be sure, they not only lacked knowledge, but also lacked physical capital in the form of tools and machines; but even if these had been given them, their conditions could not have been appreciably improved because of their ignorance.

The stupendous natural re­sources of California were little used until the middle of the nine­teenth century. At that time set­tlers from the states to the east and from Europe began bringing in methods of wealth production, of which many had been used for cen­turies in the civilization of Europe, and others had been more recently developed by the invention and ex­perimentation of the continuing Industrial Revolution. The effect of this influx of mental capital has been astounding. The rise in wealth that has taken place in California during the last one hundred years probably has no parallel in a century of the history of any other area of equal size. In­stead of supporting 130,000 people with the lowest possible standard of living, the state now supports 15,537,413 with a standard of liv­ing equal to the best ever known.

An appreciable part of the world’s store of mental capital is an accumulation of practical in­formation which has come down to us from prehistoric times. Un­doubtedly, this fund of knowledge was acquired in the remote past in the same way that additions to it are obtained today; that is, mainly from the results of chance dis­covery, invention, and experimen­tation. It seems probable, for in­stance, that the first process for making leather was developed from a chance discovery, the meth­ods for making cloth from a num­ber of inventions, and the effective use of draft animals from a long series of experiments.

For many centuries in Europe the growth of this fund of useful knowledge was slow and unsteady. In the eighteenth century, how­ever, the rate of growth increased rapidly; it continued to increase throughout the nineteenth century, while in the present century growth has been at a rate un­precedented in human history.

Individuals acquire mental capi­tal in ways of which a part may be classed as labor; among these are, study of the sciences and engineer­ing, study in trade schools, and the practice of manual skills. Another factor also enters into these stud­ies and practices; this is self-denial, which must be exercised by a large proportion of those who choose to study the physical sci­ences, engineering, and the me­chanical arts rather than easier studies. Many people, however, es­pecially those employed in the in­dustries, acquire a great deal of mental capital painlessly and with­out conscious effort simply by lis­tening to verbal instructions, and from their effortless observations resulting from daily contact with production methods in operation.

Interrelationships of consider­able complexity exist among the factors, mental capital, physical capital, labor, invention, chance discovery, and research. Mental capital is necessary in the produc­tion of physical capital, and the reverse is nearly always true. Mental capital, physical capital, and labor are necessary in carry­ing out research; and research in turn is one of the most productive factors in building up the world’s store of mental capital. Also, a kind of mutual aid relationship often is observed among the fac­tors, invention, research, and chance discovery.

Other interrelationships can be pointed out, but no others are needed to lead to the conclusion that the production of wealth is an activity of much greater com­plexity than Marxists ever have admitted.

Chance Discovery and Risk Taking

One of the most dramatic epi­sodes in the history of the human race began in the year 1859. This was the initiation and develop­ment of the petroleum industry. The first well ever drilled for the purpose of obtaining petroleum was a success; and an industry that is now one of the world’s greatest began with a burst of en­thusiasm and excitement that has never completely subsided.

Karl Marx was at the height of his career at this time; he could have learned all about this new industry if he had wished to do so. But if he had learned all the facts about this new way of producing wealth, he would have found that those facts exposed the falsity of the dogmas which had already won him fame. The petroleum industry in its early stages depended al­most wholly on chance discovery for its establishment and growth; and chance discovery was neces­sarily coupled with risk taking. And chance discovery and risk tak­ing certainly are not labor, which the Marxists insist is the only pro­ducer of wealth.

Marxist theories to the contrary notwithstanding, the early oil in­dustry produced wealth at a mar­velous rate, as statistics will show; and chance discovery, and risk tak­ing, together with initiative, con­tinued to be the main factors in producing this flood of new wealth. Labor, capital, and knowledge of the methods played secondary roles.

A single example will illustrate the relative unimportance of labor and capital with respect to the amount of wealth produced. A blacksmith living near Franklin, Pennsylvania, wishing to drill for oil, thought it a good idea to start drilling in an abandoned salt well, to which he had access. He began work on his project by making his own drilling tools; he obtained a boiler and engine; then he and his sons built a derrick, and when all was ready they worked as their own drilling crew. The outlay of money was about $200. Oil was struck after the salt well had been deepened only a short distance. The well was such a good producer that the blacksmith received an of­fer of $100,000 for it.

It may be pointed out here, parenthetically, that in the first several decades of the petroleum industry capital for testing un­proved but prospective oil fields always was easy to obtain. Money that poured in from rich new fields commonly was applied in part in exploration; and people always could be found who would risk money on wildcat wells.

In the latter half of the rela­tively short history of the petro­leum industry, scientific research, systematic experimentation, inven­tion, and the accumulated knowl­edge of years have revolutionized the methods of finding new oilfields. The risks involved in this exploratory work have been re­duced to a notable degree. How­ever, risk taking is still an im­portant feature of such explora­tory work and unexpected results still are obtained.

By the methods followed throughout its history, the petro­leum industry has built up its pro­duction from an annual rate of about 2,000 barrels in 1859 to 7,126,980,000 barrels in 1959.

Chance discovery, in addition to the part it plays in producing new mineral wealth, is of the highest importance in building up the store of mental capital, which in turn adds to the world’s wealth and to humanity’s standards of liv­ing. Electron tubes, which have made possible many marvels of the present age, are examples of the remarkable results that may spring from a single chance dis­covery. The phenomenon discov­ered was called the "Edison ef­fect." The discovery was a mere observation, a by-product of in­dustrial research, which to the great gain of science and industry was correctly interpreted and promptly reported. The "Edison effect" has been put to practical use in the numerous kinds of elec­tron tubes which have been in­vented and designed, and these tubes have been fundamental in the development of such useful adjuncts of an advanced culture as television and digital computers.

Research concerned with indus­trial chemistry often has been ac­companied by interesting chance discoveries. For example, in the 1890′s a chemist was trying to find conditions under which sulfuric acid would act as an oxidizing agent for the conversion of naph­thalene to phthalic anhydride, an organic chemical used at that time mainly in making synthetic dyes. Many experiments covering a wide range of conditions were carried out without any indications of eventual success. Finally, in one experiment a minor accident oc­curred and a thermometer im­mersed in the batch was broken; later it was found that the mer­cury from the thermometer bulb had acted as a catalyst and had brought about the desired reaction. From this accidental discovery a valuable large-scale process even­tually was developed.


Marxists do not recognize in­vention in itself as a factor in the production of wealth. Possibly they profess to believe that inven­tion is simply a form of labor. If so, they may be right in a small proportion of cases, but wrong in most. An invention at times may be the result of concentrated and prolonged mental effort which, by stretching definitions, can be in­terpreted as labor. But much more often an invention results from the effortless following of an interest­ing line of thought—in other words, from day dreaming, which by any sophistry cannot be con­strued as labor.

The Western World has a bril­liant record in the field of inven­tion. The period of the Industrial Revolution (roughly the last two centuries and a quarter) is recog­nized as an unprecedented epoch in history. It has been characterized by the production of an enormous number of inventions, which have brought about an extremely rapid rise in total wealth, in standards of living, and in enlightenment, and a corresponding rapid reduc­tion in the total burden of heavy, tedious labor.

The Industrial Revolution started in England early in the eighteenth century. The first evi­dence of this intellectual outburst was a group of inventions which effected great improvements in the production of pig iron. Another series of inventions concerned with the textile industries fol­lowed (and partly overlapped) the first group. The textile industries were completely revolutionized. This wave of invention continued with a rising crest into and throughout the nineteenth cen­tury; it surged to still greater heights during the last quarter of that century, and has continued to rise (at least apparently) past the middle of the present century.

A sharp upturn which took place in the output of important inven­tions and discoveries late in the nineteenth century coincides ap­proximately in time with the es­tablishment of numerous research organizations for studying the ap­plication of science to the im­provement of industrial processes and products. An invention often stimulates ideas for other inven­tions, and still more often it sug­gests ideas to be tested by sys­tematic experimentation, that is, by research; and research often produces chance discoveries in ad­dition to the anticipated discover­ies which were the original aim of the investigation. As a conse­quence, invention, research, and chance discovery frequently aid each other to such an extent that results are obtained which are both unexpected and fortunate.

Society Revolutionized

In its progress the Industrial Revolution has created countless new industries, has transformed or greatly modified many old ones, and has affected human life in so many ways that a new type of civilization has been created. In its most recent phase, a period of the last seventy-five or eighty years, invention has added so much to the mental capital and total wealth of the world that only a very few of its contributions to the fulfillment of human wishes can be cited as a partial measure of its value. Tele­vision, moving pictures with sound, and radio broadcasting have been developed since 1920. The airplane in all its forms and applications is wholly a product of the twentieth century. Power driven machines for planting, cul­tivating, and harvesting agricul­tural crops, displacing the horse-drawn counterparts, are also mainly a twentieth century devel­opment. The gasoline engine, the automobile, the phonograph, the general distribution of electric current for domestic use, and the telephone were developed earlier, mainly in the last quarter of the nineteenth century. It is astonish­ing to reflect that these inventions have revolutionized Western civili­zation within the lifetime of many people still living.

That substantial benefits have been conferred on the Western World by the Industrial Revolu­tion cannot be denied. (The most gratifying of the benefits is per­haps the enormous improvement in standards of living.) And it should be remembered that it was inven­tion that started the revolution, and that it has been invention and its two allied factors, chance discovery and research, that have kept it going and which still keep adding one benefit after another as the revolution continues. An ortho­dox Marxist who tries to convince himself or others that the remark­able era in which we are living was brought about by "labor" will find all the facts of its history against him.


It is useless to discuss this es­sential factor in wealth production unless it is first defined with some precision, because the term "labor" brings up widely differing mental pictures, and carries various con­notations, for different groups and persons. But difficulties have been found in arriving at a precise and satisfactory all-purpose definition of the factor; even Marx never de­fined "labor" precisely. However, labor in every popular and tradi­tional sense is tiring, and this characteristic may be used to set it apart from other production fac­tors which do not in themselves cause fatigue.

Hence, for the purposes of the present discussion, "labor" is any effort, directed toward the produc­tion of wealth, which produces fatigue. It follows that chance dis­covery, whether the result of pure luck, or partly brought about by the exercise of initiative, fore­sight, and judgment, is not labor;and neither is invention of the flash inspiration type; nor is the effortless and unintentional ac­quisition of mental capital by daily contact with methods and proces­ses of production. By the same test, that of being tiresome in themselves, risk taking, initiative, judgment, foresight, and self-de­nial are not labor.


Since "capital" is by definition that portion of wealth that is ap­plied to the production of more wealth, the numerous factors that are usually involved in wealth pro­duction are involved also in the production of capital; and the demonstrable facts of the existence of these multiple factors definitely prove the falsity of the Marxian dogma that capital is produced solely by labor.

Marxists refer to our relatively free economic system as the capi­talistic system or as capitalism. By long-continued propaganda they have succeeded in attaching such a degree of odium to these names that they serve as smear terms. The implication of these terms is that the use of capital is character­istic of our economic system and is not a feature of a hypothetical Marxian system. The implication is ludicrously false—an economic system that does not segregate capital and use it in wealth production never has existed and can­not be imagined.


The search for new and useful materials and for new and im­proved methods for producing de­sired articles must have begun as soon as the human race had ac­quired moderate powers of im­agination. Certainly at very low levels of culture men have carried on crude industries. For example, they have made pottery and have built boats; and it seems certain that these accomplishments neces­sarily must have been preceded by the development of workable meth­ods, and that such development would require extensive experi­mentation. Further, it is probable that in some cases a program of experimentation was well enough planned and carried out with enough thoroughness to represent a primitive form of research.

Alchemy was a field of experi­mentation in which an enormous amount of misdirected energy was expended during the first fifteen or sixteen centuries of the Christian era. It is the subject of a large amount of specialized literature and has been dealt with adequately by historians. The alchemists ut­terly failed to reach their avowed objective of making synthetic gold or silver. They ended their search of a millennium and a half without a trace of success—and without even hope or honor. Their fault was of course that they held too tenaciously to groundless beliefs and unsound theories. However, they made many valuable contribu­tions to the world’s store of useful knowledge in the fields of chemis­try and metallurgy.

Modern research is carried on in permanent organizations. It is characterized by the use of a ra­tional technique of experimenta­tion and by the employment of all applicable scientific knowledge. This kind of research was not ap­plied to the problems of the peace­time manufacturing and process­ing industries until the last two decades of the nineteenth century. Once established, however, re­search supported its own growth with the abundance of the discov­eries it produced, and as a result it has grown during the twentieth century at a rate that may be de­scribed as explosive. This rapid growth of well-organized research—such research being reciprocally stimulated and aided by inventions and by chance discoveries—un­doubtedly is connected with the similar tremendous increase in the world’s store of mental capital that has taken place simultaneously.

A method for making iron that was worked out in the early cen­turies of the iron age and used for many following centuries produced the metal only in batches; and the batches had to be small enough to be lifted out of the smelting fur­nace by manpower. The batches as taken from the furnace consisted of white-hot, semisolid iron and liquid slag. The slag had to be separated from the iron by an ex­tremely laborious process of press­ing and hammering. The furnace was partly or completely cooled down between batches. This meth­od, wasteful of labor and fuel, was used with little variation or im­provement for over two thousand years. For many hundreds of these years it was known that iron could be melted in the smelting furnace and would flow out of the furnace as a liquid; but apparently this happened only accidentally and was considered a misfortune. Iron was not commonly used for castings during these centuries, al­though methods for casting other metals were known.

All that was needed to give the primitive iron industry a much wider field of usefulness in human affairs and to effect a great re­duction in the cost of producing the metal was a program of sys­tematic experimentation—that is, practical research.

Evidently the necessary experi­mental work finally was carried out, since the production of molten iron in the smelting process even­tually became standard practice.

The improved methods made cast iron cheap and abundant, and a rise in wealth and standards of liv­ing took place. A little research could have revolutionized the iron industry a thousand years earlier.

Initiative, Risk Taking, Self-denial, Foresight, and Judgment

These factors have character­istics in common and hence are grouped together for the purposes of the present brief review. All are intangible; all are derived from mental abilities or traits of char­acter or both; none is labor as labor is defined in this discussion. Self-denial, foresight, and judg­ment do not involve labor when exercised; initiative and risk tak­ing may involve labor and other factors.

Initiative is of first rank impor­tance in the production of wealth since it is the factor that always starts the chain of events that lead to the creation of new production facilities. The chain of events may bring about the testing of a new machine, the discovery of a new process, the building of a new manufacturing plant, or even the creation of a new industry. Some­what less directly, it may start re­search projects which will lead eventually to new production means.

Initiative is always personal. The forces of destiny may make all preparations for an important new event in wealth production; but only a person can produce or recognize a key idea, make the resolution to take action, and per­form the first act leading to the reduction of the idea to practice. An element of chance is thus intro­duced into the inception of proj­ects for increasing the production of wealth. Circumstances, time, and place may be favorable, but the right person may not be pres­ent. In this way the beginning of a project that eventually will be of great value may be delayed in­definitely. Strange intervals of stagnation which have occurred in the progress of industry may be attributed, at least in part, to this uncertainty in the appearance of the needed personal influence.

An example is known of a ma­chine that gave excellent service in one industry, and which after a long lapse of time was adapted to a very different kind of work, where it was badly needed and where again it served well. The machine was designed in the 1790′s for shearing the nap of cer­tain kinds of woolen cloth. Knives, each of which was bent into the form of an elongated helical curve, were fixed in parallel around a horizontal axle; in operation the knives were rotated rapidly about the axle. The cutting was done by the rotating knives coming into sliding contact with a fixed straight knife.

This method of cutting even­tually was applied in the design of a well-known kind of lawn mower, only the means for rotating the knives being changed. But some seventy years elapsed before this much-needed adaptation was made. It seems highly probable that a lack of initiative was the only cause of the delay.

Risk taking is present in nearly all wealth-producing activities, but is most prominent in research and in new industries. Its function in helping to create new sources of wealth makes it one of the most productive of all factors. Practi­cally all investments of capital in­volve risks, and risk taking is one of the contributions to the produc­tion of wealth for which investors have every right to receive com­pensation.

Self-denial plays a prominent part in the accumulation of physi­cal capital by an individual, and a similar role in the acquisition of mental capital by individuals.

Foresight and judgment, like risk taking, are most valuable in research and in the development of new wealth-producing means.


The fundamental doctrine of the Marxists in the field of economics is that all wealth is produced by labor. However, evidence of a kind that can be tested by observation and by personal experience shows that this doctrine is false. Such evidence shows that the produc­tion of wealth is not a simple proc­ess but a complicated one involving many factors besides labor. It fol­lows that all conclusions based on the main Marxian dogma are fal­lacious because based on a false premise.

Starting with their basic dogma and other false premises, the ad­herents of the Marxian cult reach the conclusion that "labor," a part of humanity they never precisely define, is grievously "exploited." As a remedy for this imagined in­justice they ceaselessly advocate, and when possible bring about, violent revolutions with limitless destruction and atrocious cruelty, followed by the formation of gov­ernments with unlimited powers.

It must be concluded that Marx­ism, because of its record of vio­lence, cruelty, and tyranny, and be­cause of its complete lack of any foundation of truth, is Humanity’s worst folly.




Ideas on Liberty

Individual Freedom

There is much written and said these days about the need for discovering—or rediscovering—our national purpose. In these times of swiftly changing social conditions and shifting political and economic ideas we believe it is vital that Americans under­stand and tie fast to the values which made the nation great.

These values—the national purpose itself—are set forth clearly in the Declaration of Independence and the Constitution. Nowhere have these values been better translated into practical, positive action than in our free enterprise system.

This system today is in peril. Outside our country formidable forces are determined to replace it with a totalitarian concept. Within, it is in danger of being eaten away, piece by piece, by steadily encroaching socialism disguised in such clothing as social welfare and "public benefit" regulation.

As said by William Penn: "Governments, like clocks, go from the motion men give them, and governments are made and moved by men, so by them they are ruled also. Therefore, governments depend upon men rather than men upon governments."

From a release of August 1960 by the Phillips Petroleum Company


November 1960

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November 2014

It's been 40 years since F. A. Hayek received his Nobel Prize. His insights, particularly on the distribution of knowledge and the impossibility of economic planning, remain hugely important today. In this issue, we look back on the influence of his work. Max Borders and Craig Biddle debate whether liberty must be defended from one absolute foundation, further reflections on Scottish secession, and how technology is already changing our world for the better--including how robots, despite the unease they cause, will only accelerate this process.
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