Commanding the Tides

Mr. Smyth works with the Centro de Difusion de la Economia Libre, a libertarian organization in Argentina with aims similar to those of the Foundation for Economic Education in the United States.

The Laws of Nature

Many of us who live in Buenos Aires have only to look out of our windows to see the vast expanse of the River Plate stretching away to the horizon. All of us are aware that the waters of this great estu­ary, which extends 170 miles in­land from the Atlantic and stretches 140 miles wide at its mouth, never stand at one unvary­ing level. Restlessly, ceaselessly, the water level rises and falls ev­ery day.

If somebody should say to us that this variation is an awful nuisance and ask why nothing is done to keep the water at a con­stant level, we would answer that the varying water level could only reach the final state of rest he de­sires if the world were timeless and ageless, standing motionless and changeless through all eternity. But in a world like ours sub­ject to time, motion, and change, nothing can ever escape the gen­eral flux of things. The water level is constantly being altered by the interplay of natural forces — the ebb and flow of the tide, for ex­ample, and the varying volume of water pouring into the River Plate estuary from its tributary rivers.

These changes are not capricious or arbitrary. They are linked to­gether in a chain of cause and effect by irrevocable natural laws. When the attraction of the moon is stronger, the water level rises; when it is weaker, the level falls. Nevertheless, the water level is constantly tending toward the final state of rest he considers so convenient; and if it were no longer affected by the operation of natural forces, it would in fact achieve this permanent level of its own accord. But while it continues to be so affected, we must accept the variability of the water level as inevitable because it is simply not in our power to repeal the laws of nature.

Fluctuating Tides

But suppose that your ques­tioner is a really persistent sort of fellow and replies that if the vary­ing water level were really caused by natural laws, then its variation could be predicted in advance with absolute certainty, just as in chem­istry and physics the same cause must inevitably bring about the same effect. Here, he alleges, it is not so because sometimes the water level varies only a few inches, other times several feet, and occasionally there is a flood which drives the people living in the low-lying riverside suburbs out of their homes and confines the people up in the delta to their stilted houses. You cannot, he says, explain such irregular variations by the regular phases of the moon or the fairly constant seasonal variation of the inflow from the tributary rivers. These people, however, are seriously harmed by such floods, so why doesn’t the government do something to pro­tect them?

As a matter of fact, this is an easy one to answer. In the first place, you can tell him that the irregularity in the variation of the water level is due to a natural force of which the intensity is ir­regular. The height of the River Plate answers very promptly to changes in the wind. When a southerly or easterly wind pre­vails, the water piles back up in the estuary, and consequently the level rises. When a northerly or westerly wind prevails, the water flows down the estuary faster than it can be replaced, and conse­quently the level falls. The fact that we cannot predict the rise or fall of the level with absolute pre­cision does not mean that it hap­pens arbitrarily; it simply means that we cannot accurately predict the precise force, direction, and duration of the wind, and conse­quently its exact effect on the vol­ume of water pouring in from the tributary rivers. If a strong south­east gale blows up and continues for several days, there will inevit­ably be a flood, and there is noth­ing the government can do about it. Obviously, the government can­not decree that any wind above a certain intensity is henceforth for­bidden. On the other hand, it is a simple matter of observation to see that the wind can only drive the water level up just so far before its force and its effects are coun­teracted by other natural forces, and that as soon as this happens, which in all recorded experience of floods never takes more than a few days, if left free to work itself out, the water always subsides to its usual level.

But your questioner, as we have noted, is an obstinate sort of fel­low. He replies that while you are so interested in the causes of the floods, you are heartlessly ignor­ing their effects — the people driven out of their homes in the low-lying suburbs and marooned on their stilted houses up in the delta. He, on the other hand, has a social conscience and is inter­ested only in preventing such mis­fortunes befalling these unlucky people. “If I were the govern­ment,” he mutters, “I’d pass a law or something.”

Flood Control

Suppose now that this fellow ignores your warning that the laws of nature are irrevocable and that anything the government does to try and alter their effects without first studying their causes and ac­cepting such causes as unrepeal­able laws can only bring about more harm than good. Suppose that by some incredible chance he should succeed in convincing the electorate that he can repeal the laws of nature, and that he there­upon enacts his law forbidding floods in Buenos Aires. The next time a strong southeast gale blows, there will be a flood, law or no law, and that will be the end of that. But he may take it into his head to pass a law saying, “The govern­ment hereby guarantees that no more damage will be caused by floods in Buenos Aires.” Then there is no end to the follies he will embark on and the blunders he will commit as long as he re­fuses to recognize that the effects he wants to eliminate are due to natural laws unrepealable by any government.

He will exhaust the public treas­ury in building a dyke 170 miles long across the mouth of the River Plate, so as to stabilize its level. He will then discover that the tidal variation thus eliminated is only a couple of feet. He will also dis­cover that he is damming up the inflow of water from the tributary rivers and that his dyke will raise the level of the River Plate estu­ary to almost any level he chooses to block the inflow of water. So far from eliminating occasional floods, his dyke will thus guarantee a permanent inundation. He will then put enormous flood gates in his dyke and regulate the rate of outflow so as to maintain a con­stant water level — and the next time a southeast gale blows up, it will pile this water back up the estuary just as it did before. He will then run a whole series of in­ner dykes across the estuary to block the path of the wind-driven backwash. And when this doesn’t work satisfactorily, he will build a wall twenty feet high round the entire coast line.

But by this time the farmers in­land will be objecting that if the government is spending such enor­mous sums of public money — to which they have contributed — on protecting Buenos Aires from floods, why does it not spend a cent on protecting them from drought, cyclones, hailstorms, ero­sion, and so forth and so on ? There is not a person in the country who is not apt to be harmed by the ever-changing balance Of natural forces and who will not claim government protection from their ill effects.

There will then be no end to the demands made on the government for protection from every passing natural phenomenon, and there will be no limit to the government’s follies and bungling and compro­mising and fruitless meddling and squandering until the total bank­ruptcy of the country demon­strates once and for all that no government of mortal men can ever repeal or ignore or modify the irrevocable laws of nature.

The Laws of Economics

Many of us who live in Buenos Aires have only to look out of our windows to see the vast pampas of Argentina stretching away to the horizon. All of us are aware that the prices of goods in this great country, which extends 1,000 miles from east to west and stretches 2,500 miles from north to south, never stand at one unvarying level. Restlessly, ceaselessly, the price level rises and falls every day.

If somebody should say to us that this variation is an awful nuisance and ask why nothing is done to keep prices at a constant level, we would answer that the varying price level could only reach the final state of rest he desires if the world were timeless and age­less, standing motionless and changeless through all eternity. But in a world like ours subject to time, motion, and change, nothing can ever escape the general flux of things. The price level is constantly being altered by the interplay of economic forces — the ebb and flow of demand, for example, and the varying volume of goods pouring into the market from the sources of production.

These changes are not capricious or arbitrary. They are linked to­gether in a chain of cause and effect by irrevocable economic laws. When the attraction of demand is greater, the price level rises; when it is weaker, the level falls. Never­theless, the price level is constantly tending toward the final state of rest he considers so convenient; and if it were no longer affected by the operation of economic forces, it would in fact achieve this per­manent level of its own accord. But while it continues to be so affected, we must accept the variability of the price level as inevitable because it is simply not in our power to repeal the laws of economics.

Fluctuating Prices

But suppose that your ques­tioner is a really persistent sort of fellow and replies that if the varying price level were really caused by natural laws, then its variations could be predicted in advance with absolute certainty, just as in chemistry and physics the same cause must inevitably bring about the same effect. Here, he alleges, it is not so because sometimes the price level varies only a few cents, other times several dollars, and occasionally there is a steep rise which drives people in the lower income groups to stop buying and restricts buy­ing by people in higher income groups. You cannot, he says, ex­plain such irregular variations by regular variation in demand or the fairly constant variation in the supply from the sources of pro­duction. These people, however, are seriously harmed by such steep rises, so why doesn’t the govern­ment do something to protect them?

As a matter of fact, this is an easy one to answer. In the first place, you can tell him that the irregularity in the variation of the price level is due to an eco­nomic force of which the intensity is irregular. The height of the price level answers very promptly to changes in supply and demand. When a strong demand prevails, a backlog of unfulfillable orders piles up in the market, and consequently the price level rises. When an abundant supply prevails, goods flow into the market faster than there are orders for them, and consequently the price level falls. The fact that we cannot predict the rise or fall of the level with absolute precision does not mean that it happens arbitrarily; it simply means that we cannot ac­curately predict the precise force, direction, and duration of the de­mand, and consequently its exact effect on the volume of goods pour­ing in from the sources of pro­duction. If a strong demand arises and continues for some time, there will inevitably be a steep rise in prices and there is nothing the gov­ernment can do about it. Obvi­ously, the government cannot de­cree that any demand above a cer­tain intensity is henceforth for­bidden. On the other hand, it is a simple matter of observation to see that the demand can only drive the price level up just so far before its force and its effects are coun­teracted by other economic forces, and that as soon as this happens, which in all recorded experience of rising prices never takes more than a short period if left free to work itself out, the prices always subside to their usual level.

But your questioner, as we have noted, is an obstinate sort of fel­low. He replies that while you are so interested in the causes of the price rises, you are heartlessly ignoring their effects — the people forced to stop buying in the lower income groups and restricted in the higher income groups. He, on the other hand, has a social conscience and is interested only in preventing such misfortunes be­falling these unlucky people. “If I were the government,” he mutters, “I’d pass a law or something.”

Price Control

Suppose now that this fellow ignores your warning that the laws of economics are irrevocable and that anything the government does to try and alter their effects without first studying their causes and accepting such causes as unrepeal­able laws can only bring about more harm than good. Suppose that by some (not so incredible) chance he should succeed in con­vincing the electorate that he can repeal the laws of economics, and that he thereupon enacts his law forbidding price rises in Buenos Aires. The next time a strong de­mand blows there will be a price rise, law or no law, and that will be the end of that. But he may take it into his head to pass a law saying, “The government hereby guarantees that no more harm will be caused by price rises in Buenos Aires.” Then there is no end to the follies he will embark on and the blunders he will commit as long as he refuses to recognize that the effects he wants to eliminate are due to economic laws unrepeal­able by any government.

He will exhaust the public treas­ury in setting up a price control bureau with 170 separate depart­ments across the entire market, so as to stabilize its level. He will then discover that the variation thus eliminated is only a couple of points. He will also discover that he is damming up the inflow of goods from the sources of production and that his price control bu­reau will raise the level of prices to almost any level he chooses to block the inflow of goods. So far from eliminating occasional price rises, his bureau will thus guaran­tee a permanent increase in prices. He will then put enormous stabi­lizers in his price control system and regulate the rate of production so as to maintain a constant price level — and the next time a sudden strong demand arises, it will pile up a backlog of unfulfillable orders in the market just as it did before. He will then run a whole series of price ceilings across the economy to block the path of the demand-driven backlog. And when this doesn’t work satisfactorily, he will put armies of price inspectors 20,000 strong round the entire city limits.

But by this time the population of the rest of the country will be objecting that if the government is spending such enormous sums of public money — to which they have contributed — on protecting Bue­nos Aires from high prices, why does it not spend a cent on pro­tecting them from monopoly, com­petition, lack of capital, lack of demand, high interest rates, low dividends, insufficient wages, and so forth and so on? There is not a person in the country who is not apt to be harmed by the ever-changing balance of economic forces and who will not claim gov­ernment protection from their ill effects.

There will then be no end to the demands made on the government for protection from every passing economic phenomenon, and there will be no limit to the government’s follies and bungling and compro­mising and fruitless meddling and squandering until the total bank­ruptcy of the country demon­strates once and for all that no government of mortal men can ever repeal or ignore or modify the irrevocable laws of economics.

***

Ideas On Liberty

The Way of Persuasion

When we hear a statesman say that no man has a right to be wrong, when we pay those who rely on the method of force the compliment of imitating them as we do when we say that we cannot combat totalitarianism except by totalitarian methods, when in the professed interests of security we are in danger of destroying the way of life which we want to protect and thereby of undermining the national security which we wish to safeguard, freedom and science are in danger and it behooves their friends to gird on their armor. The way of persuasion is hard and long but it is the only way of hope for a tortured and perplexed humanity; for we cannot bring about a desirable state of affairs by means which are inconsistent with the end which we pursue.

 
A. Macbeath, A Plea for Heretics