Canute and the Counting of Noses

Mr. Fox is a market research executive now residing in Costa Rica.

As frequently told, the story of how King Canute tried to sweep back the rising tide and got soaked for his pains makes him appear at best not quite bright and at worst an utter fool. The man who gave Denmark its first national coinage and first written legal code and England a code based on established Saxon law was a strong and able ruler of two realms; and he was endowed with a keen and clear understanding of the limitations of human power, even that of absolute monarchs. His attempted sweeping back of the sea was his dramatic demon­stration that government cannot do everything its subjects may want done.

In the advanced stages of the transformation of the United States from a representative fed­eral republic of limited power to a centralized democracy in which individuals and the several states count for little, Canute’s wisdom is largely forgotten. Citizens and officeholders alike behave as though the counting of noses were the highest wisdom, and the Will of the Majority in no way distin­guishable from the Voice of God. The proposition is absurd. There is no possible way for those elected to know the real views and motives of the majority that elected them.

There is the mail from constitu­ents, of course; but only those persons who are more or less ar­ticulate and who hold pronounced views on a subject under active political consideration will take the time and trouble to write elect­ed or appointed officials. There is no persuasive reason for believing that the division of letters from these people accurately reflects the division of opinion among the silent population.

Polls Untrustworthy

Public opinion polls also are un­trustworthy guides, not so much because of the design and drawing of samples, but primarily because of weaknesses in the questionnaire and secondarily in the behavior of interviewers and respondents.

When respondents are asked about a question of policy, the sur­vey method becomes useless. Put yourself in the position of a re­spondent who knows nothing of economics, confronted by an inter­viewer who puts to him such a hy­pothetical question as this:

The United States balance of pay­ments is “unfavorable” and there is a net export of gold. Among the remedies that have been or may be suggested are the following: (1) raise the rediscount rate; (2) impose an “interest equalization,” tax on purchasers of foreign securities; (3) reduce the amount of duty-free merchandise returning tourists may bring into the United States (or pro­hibit duty-free imports entirely); (4) prohibit, restrict, or discourage direct foreign investment by United States based firms and their foreign subsidiaries; (5) impose import re­strictions (quotas, tariffs, etc.) on foreign goods that can be produced within the United States and its possessions; (6) other actions you consider desirable?

Just how would you answer? Just how much confidence would you place in the answers of 3,000 or any other reasonable number of respondents who happened to fall into either a probability or acci­dental survey sample?

While I have my own pet an­swers, the fact is that what I hap­pen to think is not based on expert knowledge of the problem, and so my views are worthless. Multiply­ing my incompetent answer by 3,000 or any other number of like answers from respondents who as a group are as ignorant as I am may provide an impressive statis­tical report; but it is certainly not going to provide a sound basis for a policy.

What to Do, and How

Asking a sample of the electorate what it wants done is useless. The fact is that a count of noses can­not be used as a means of choosing appropriate courses of public ac­tion. I suspect that such a count of noses would establish that people favor wealth, comfort, health, se­curity, and a color television set in every room and they oppose death, taxes, poverty, ill health, and the neighbor’s radio turned on to full volume.

Involuntary poverty is never sought consciously, since it in­volves a contradiction in terms. Those who seek poverty voluntar­ily need not concern us. If they profess a faith that does not in­clude vows of poverty, they can al­ways choose an ill-paid career or take up beach-combing in the tropics. Voluntary poverty seekers get their compensating psychic income from their poverty and that makes up for other choices fore­gone.

Most people want to avoid pov­erty for themselves and do not want other people to suffer from hunger, disease, and other effects of poverty. So, they would agree that poverty should be abolished. The question that divides them is how to do it. This is a question not of ends but of means, assuming that the end is attainable. It is the business of economics to prescribe the ways that people can use to achieve that end. Politics can con­tribute nothing useful as a means to abolish poverty, except to prevent the private use of force and fraud.

Endless Promises

Canute was astute enough to know this. Yet, modern political leaders throughout most of the world profess to believe that by politically directed measures, which they advocate and stand ready to implement, poverty can be eliminated. Whether they be­lieve this or merely trade on the knowledge that most people want poverty abolished, they know that the way to get the highest count of noses for themselves is to prom­ise such miracles, if elected.

They are persuading people that whatever is wished for can be had. In this, they have a lot going for them. People born around the turn of the century have witnessed the birth of the airplane, television, plastics, antibiotics, frozen foods, nuclear fission, orbiting satellites, the practical development of the automobile and radio, and count­less other discoveries, inventions, and innovations. Some of these things were inspired and paid for by government and taxation. Pri­vate industry might have devel­oped the jet plane and it might conceivably have put satellites into orbit, but probably not as soon as they were actually developed. It might eventually have developed nuclear power for peaceful pur­poses, but not the bomb.

Since government can claim the atomic bomb as its own creation and plausibly assert that it is the agent responsible for the develop­ment of jet planes, radar and other devices that aid air and sea navi­gation, and orbiting satellites, poli­ticians can point to these things as tangible evidence that govern­ment (in their hands) can and does find solutions to complex technical problems.

Lack of Performance

They can also point out the un­deniable fact that the American system of profit-and-loss can and does produce and market an enor­mous range of products and serv­ices. They go on to say quite cor­rectly that the technology exists to permit turning out not only more of what is now being pro­duced but also other new products that have been developed but not yet marketed. Moreover, they as­sert correctly that laboratories are constantly developing new prod­ucts and refinements and improvements on existing products.

Hence, they conclude in a mag­nificent non sequitur, it is obvious that it is only the greed of stock­holders for dividends and of entre­preneurs for profits that limits what is produced to what the mar­ket will absorb. Just let us count your noses in our favor, say they, and we shall produce abundance so that you may never know want or discomfort, from the delivery room of the government hospital to the packing of your ashes into an urn in the crematorium.

They completely ignore the fact of scarcity. In their eyes, or in their pretenses, all goods are as abundant and as readily available as the air. The only thing needed to supply them in unlimited quan­tities to everybody is money and management, both of which they’ll gladly provide if given control of the apparatus of government! Where is the money to come from? That’s easy. Taxes will provide part. The rest, the government can create by such devices as loading more and more government bonds into the commercial banks. If that process creates some inflation, why worry? Inflation breeds optimism which breeds spending, both by consumers and by industry, which breeds prosperity. Should any slackening occur, just a little more of the “hair of the dog” will cure matters. Thus, the road to never-ending prosperity is open and will remain so just as long as the count of noses comes out right.

Of course, this is nonsense. Goods are not free as air. They are scarce and they must be econ­omized and used as wisely as entrepreneurial ingenuity permits to take care of people’s most immediate needs and wants. Gov­ernment has no magic costless way to transform “thin air” into silver which is increasingly in short sup­ply. A bank deposit to the credit of the United States Treasury, created by a book entry in return for some Treasury bonds or notes, is not “capital.” True, it can be spent with some maker of machine tools who will eventually deliver milling machines or automatic lathes or whatever, which are capi­tal items. This, however, merely takes them away from some manu­facturer who would have used them, had he been able to get them, to make something that con­sumers would have freely chosen to buy at the going market price.

Living as he did in the eleventh century when freebooting as a way of life, King Canute knew that government is not omnipo­tent. It has the power to rob Peter and give to Paul from time to time and as often and as long as Peter will consent to being robbed. How­ever, it cannot create economic goods out of thin air, no matter how urgently people want it to do so.

King Canute knew that royal power has its limits. Those who believe that a government has power without limit and the abil­ity to create something from noth­ing, as long as a count of noses favors it, are doomed to a sad discovery.