Dr. Carson has written and taught extensively, specializing in American intellectual history. His most recent book, The Rebirth of Liberty: The Founding of the American Republic 1760-1800 is now available in a 350-page attractive Bicentennial paperback from The Foundation for Economic Education, Irvington-on-Hudson, N.Y.10533.
It baffles me why anyone but children too small to go unattended, and for whom there would be no potential escorts, could be persuaded to submit themselves to the indignities of an amusement park. I, for one, do not like heights, do not like to be raised to them on some creaking chain or cable, to be plummeted downward, sideways, or upside down. I do not care to defy the laws of gravity, be spun around at sickening speeds, or be drenched by showers of water in some device propelled through artificially created streams. Spook houses don’t spook me, though I do fear for my wallet as I pass through dark places with strangers all about. Indian manikins in contrived jungles have extremely limited possibilities for thrilling me.
These thoughts were prompted by a recent visit to one of the more expensive and extensive of such amusement parks in the land, accompanied by my wife with both of us in tow to our two impatient youngsters. My sour reaction may have been the result, in part, of the peculiar circumstances. We were so lacking in foresight as to time our visit for a Saturday in July, a day on which it appeared that all 215,000,-000 Americans and an undisclosed number of foreigners decided to turn up at the same park. I didn’t count them, but if some were not there, they could hardly have been missed.
It was hot and humid. We sweltered, dried out, parched, and dehydrated. The presence of water in various sorts of streams offered no relief, for it would have been unmeet to drink it, and we were not permitted to swim in it. Whichever way we decided to go, great throngs were headed the other way, throngs which we had to find a way to go through. Even so, they arrived at whatever ride or exhibit we were going to and were able to take their place in line ahead of us.
My thoughts should be read in yet another context, too. Life began at Forty for me a while back. My idea of amusement in July is to sit in a lounge chair under a shade tree and watch the sun go down. Moreover, I greatly admire the venturesome entrepreneurs who conceived this mercifully unnamed project and the speculators who had the foresight to invest in it. Nor have I anything but compassion for the intrepid "visitors" to the park who labored so hard to get their money’s worth once they had got there. If there are any adults anywhere who enjoy such experiences, I would appreciate hearing from them, since I am even now setting aside a fund to pay someone to take my children the next time their clamor to go reaches an irresistible pitch.
However, "All things work together for good to them that love the Lord," as the Apostle Paul said, and this experience did lead to some reflections which I would like to share. After pondering the day, I focused upon several aspects of the park which were particularly irritating. One was the long waits in lines before we could take the rides or get into the exhibits. These waits often lasted considerably longer than the rides or the trips through the exhibits. A related irritant was that if you liked the ride and wanted to go again, it was necessary to go back to the end of the line in order to do so. Another was their penchant for measuring the children to determine if they would be able to go on the rides. One of my children was a little too tall for some of them and was excluded from pleasures which the smaller child could enjoy. Then, there was the universal irritant of such places: the high prices of candy, food, and drink, particularly drink. We paid fifty cents for slightly more than a thimbleful of some sort of fruit drink.
A Closed System
These irritants can be attributed to one or both of two aspects of the organization of this amusement park: it is a closed system, and price is not used in allocating many of the goods. The closed system is frequently used to raise prices by eliminating competition. Most of us are familiar with its use when access to alternative sources is not available or is deliberately shut out. Most stadiums, parks, and other places where ball games are played are more or less closed systems. Refreshments are usually higher than in the open market, and the prices charged at concessions are regulated. The same generally applies to fairs, circuses, and many other special events. Almost any kind of public transport—trains, boats, airplanes—constitutes a potential closed system, though competition has thus far been so vigorous among airlines that they have rarely taken advantage of the possibilities.
The operators of the amusement park in question have apparently deliberately devised a closed system. The park is at some distance from any alternate sources of refreshment. This has been made irrelevant, however, by the admission practices. The entrances and exits are by way of turnstiles. The entrance fee is $7.50 per person, and includes the cost of all rides and exhibits. Once inside, the only way to reach alternate sources of refreshments would be to make an exit from the park. To get back in, it would be necessary to pay the fee again. No rain checks are given. This tends to make the park a closed system.
Most of the irritants can be attributed directly to these admission policies. Once the price of admission has been paid, the rides and exhibits are "free." A kind of contest then develops between the "visitors" and the operators of the park. The visitors attempt to avail themselves of as many of the attractions as possible, to get as much for their money as possible, to make the price of admission a bargain, if that is possible. This helps to explain the waiting.
True, I visited the park at the height of the season, and on a Saturday, but there was evidence that lines are common and usual, except at the ticket windows in front of the entrance. Most rides and exhibits can only be reached by threading one’s way through a maze of elongated "stalls." These mazes are used to confine the waiting lines to relatively small areas and keep them from interfering with the flow of traffic generally, among other things.
Waiting Is the Price
What has happened can be readily explained in economic terms. Inside the park, prices are not used to allot these rides and exhibits to the customers. The result is a "shortage" of rides and exhibits and a "surplus" of "customers." Waiting in line becomes a means of paying for the "free" rides and exhibits. It also becomes an effective means of reducing the amount of goods one is from the seller to the buyer. From pushing his goods and wares, the seller can turn his attention to regulating the conditions in which his goods and services can be attained. In short, the seller can shift from attracting to regulating. The advantages to the seller are considerable. The advantages to the buyer are largely illusory or nonexistent. And, thereby hangs a tale.
Aspects of Monopoly
There are closed systems and closed systems. Every merchant attempts to create at least a miniature closed system. He seeks to establish an environment that will induce people to trade with him and not with someone else. He may give trading stamps, offer prizes, give guarantees and warranties, or distinguish his goods and services in whatever ways he can from others. Ordinarily, these miniature closed systems are of no particular interest or concern. If entry to the market is free, they are simply experienced as competition among purveyors of goods. The greater the effort put into establishing a closed system, the more vigorous the competition is likely to be.
Even so, the buyer should beware. What is here being called a closed system is what is ordinarily referred to as monopoly. The advantage of the phrase, "closed system," is that it refers to that aspect of monopoly likely to acquire by paying the general price of admission. For most people, at some point, another long wait in line outweighs any anticipated thrill or pleasure. They may not be sated with rides and exhibits, but they are with waiting in line.
Have the operators of the park deliberately contrived it so that it works out this way? Undoubtedly. I have been to a number of carnivals and the like, where admission is paid to each attraction separately and individually. At these, one can ordinarily purchase as many tickets as he wants, and repeat the ride, or whatever, as long as his tickets last. It is not necessary to get out or off and stand in line again. Moreover, the "free" ride accounts for the eligibility requirements for the children’s rides. I have never seen children measured to determine if they were the right size when tickets for individual attractions were purchased.
There are many advantages to any purveyor of goods of having a closed system. It reduces greatly the effort that needs to be put into selling. In the case of the above amusement park, once the admission ticket has been sold, no more tickets need be sold. It reduces competition. The attractions do not have to compete with one another for customers; the customers compete to get into the attractions. The burden is shifted in significant ways which is disadvantageous to the consumer. Much of the discussion of and action against monopoly has been confused and misguided, confused because monopoly is a generic term which can only be specialized to refer to its harmful aspects by ignoring its basic meaning, and misguided because it aims at effects rather than causes.
There are aspects of monopoly which are essential to freedom and to the free market. Monopoly is the exclusive right to sell. Though it may not be immediately apparent, all ownership of anything constitutes a monopoly, at least all private ownership. The exclusive right to sell one’s services is a monopoly of them. It is also a most vital aspect of freedom. Property in real estate or chattels is a monopoly. The right to have such monopolies is vital and essential to freedom.
There is another aspect of monopoly, too. Every effort to improve goods or services by any vendor has as its tacit aim becoming the only seller in the market. Every enterprising entrepreneur is a potential monopolist, then. But the face that his effort bares ordinarily is competition. The tacit aim is monopoly, but the visible result in a free market is competition. Any general assault on monopoly, such as that of the Sherman Antitrust Act, becomes in effect an assault upon quality goods and services and upon effective competition.
Monopoly is not the villain of the piece, then, but that aspect of it that is here called a closed system is. A closed system is one which shuts off alternative sources of goods, services, employment, land, or whatever. "Alternative" is the key word. It is of no untoward consequence that I am the only seller of my services, of this particular apple, of that particular knife, of a given house and lot, or whatever, so long as there are alternative sources of similar goods and services. When we are cut off from alternatives, it is then that we experience the notorious consequences that have been improperly attributed to monopoly in general. The closed system produces high prices, low quality, shortages, surpluses, busybody regulations, and a hundred other unwanted results.
Buyers Keep System Open
Each of us is inclined—more deeply than we are apt to suppose—to want and to seek a closed system within which to operate. It would free us of the necessity to compete. It would enable us to order people around rather than having to appeal to them and attract them. Think how effectively we could plan our lives if we only had a closed system! The ideal position would be similar to that of, say, a Federal judge: appointment for life, a jurisdiction from which others were excluded, the power to compel "customers" to use our service, and the authority to punish those who disobeyed our orders. This is the motive power behind the thrusts toward building closed systems.
The buyer must beware, as I have said, if he wishes to avoid the tangles of a closed system. Indeed, it is the awareness of buyers that turns the thrust of merchants to make closed systems into competition. The fear of large corporations and other such conglomerates in the latter part of the nineteenth and in the early twentieth century arose from a sound instinct. The instinct was that a large business operating over extensive territory had the potentiality for erecting a closed system. So it does, but there is a counterweight to it in the open market. Other entrepreneurs can and do enter the market on a similar scale to put at naught the efforts of those who appear about to succeed in establishing a closed system. In short, customers are a match for the makers of closed systems in a free market. Customers may indeed tolerate some degrees of closed systems, but they will limit the extent and sway of them.
Closed systems are a threat in direct proportion to the duration of their hold and extent of their sway and in, inverse ratio to the ease with which the hold can be broken and the sway be limited. If one can refuse the good or service, walk out, turn off, or quit without drastic consequences, the system is not really closed and poses no great threat.
The buyer should beware in the market place, then, beware not only of the price and quality of what he buys but also of the extent to which he entangles himself in some system. But there is an arena where he needs to beware much more than in the market place. It is the arena of the epitome of closed systems, the closed system to top all closed systems— the State. Note, I say "the State," not government, is the epitome of closed systems.
The Power of the State
The State is that area, any area, ruled over by a single independent power. The State is an abstraction, but the area is quite real. It is the nature of the State to be an absolutely closed system, to have boundaries which outsiders may not cross to enter and insiders may not cross to get out. The existence of the State consists entirely of these boundaries which are usually invisible and are largely imaginary. The more firmly the boundaries inhibit entry or exit, the more nearly the State approaches the realization of its "stateness." To put it another way, the State becomes a visible reality, as much as any abstraction can, when its boundaries are marked with high walls or barbed wire fences and the openings guarded by cannons and machine guns. The amusement park, with which this essay began, is, of course, a miniature state, but only a temporary one.
Government exercises power over the people within a state. Government determines the extent to which the State is a closed system. We have no choice as to whether or not we will reside in a state. We have no choice as to whether or not we will have a government. We can choose what kind of government we have and how extensive and restrictive it will be. It is in these choices that the buyer must beware. By nature, the State is a closed system. By nature, whatever government regulates or controls it tends to make of that area a closed system. Government is not a closed system, but its method of operation makes it force out alternatives.
The necessity for government is to maintain the peace within the State. It is interesting and encouraging that so long as it does this task well, and is restricted to this task, it opens rather than closes the system. Freedom can only be exercised effectively where life and property are reasonably secure. Liberty is broadened to the extent that men are not greatly threatened by murder, theft, fraud, and conspiracies against them. The free market is a phenomenon of the security of life and property.
Nor does a government which maintains the peace, and is restricted to that, produce the infelicities associated with a closed system. There is no crush of people willing and waiting to have government exercise its powers upon them. No lines form to get arrested. Men present themselves before courts under the threat of dire consequences if they do not. The number seeking to be imprisoned is surely infinitesimal, if there is any such number. Prudent men avoid occasions of contact with government which may bring them to the unfavorable attention of those who enforce the law.
Government in the Market
In short, the basic task of government is such that there is no market for the activities which it engages in. In the performance of its basic task, government offers nothing for sale in the market and so far as it makes purchases in the market may do so in a non-governmental way, that is, without the use of force.
All this changes when government becomes an active factor in the market. Then, the movement is toward a hampered market and a closed system. Government can become an active factor in the market in two ways: it can offer goods and services in the market or it can regulate and control those who do. In either case, it makes entry to the market more difficult and reduces the number of alternative sources of goods and services.
Let us deal first with government as a provider of goods and services. Let it be noted that there are no free goods. There are no free rides, even in an amusement park. There are no free lunches. There is no free medical care. There are no free schools.
A sound instinct tells us that when a salesman in the market tells us that he is going to give us something absolutely free, we had best beware. At the least, he is trying to break down our sales resistance to something else by making us feel obligated to him. Quite likely, he may be going to give us something whose use is going to depend on something he has for sale. It is a "come on," we say, and we have learned to be wary of these. It is even more important that we beware of "free" goods offered by government, for they carry with them a lot of hidden costs.
"Free Goods" Become "Rights"
If goods were free, they would cease to be goods. This is an economic fact. But the psychological and political dimensions need to be explored a little further. We say with confidence that there are no free rides or free lunches. Our meaning is clear to us: we mean that they have to be paid for by somebody, somewhere, at some time. True enough, and a most important truth. But it is also true that a situation can be created where rides become "free," so far as any direct charge for them is concerned, and lunches can be and are given away.
It has been little noticed, but there is a tendency for these free items to become something other than or different from goods. Free lunches or free rides become not so much goods to be sought as rights to be asserted. If my impression was correct, many people in the amusement park were not being amused; they were asserting their rights to the rides and exhibits. Certainly, it is this that leads to the legalistic approach of establishing eligibility requirements for certain of the rides.
Much more importantly, welfare payments, food stamps, and such like, are now commonly referred to as rights. There are now welfare recipients who bend every effort to get everything that is coming to them. They are not the only ones. School systems frequently employ a person whose task is to discover government aid programs and make sure that the system receives them. "Free" goods have become rights, and there are people determined to have all that is coming to them whether they need, want, or can use them or not.
Some "free goods" cease to be thought of as goods at all by recipients; they become "bads" This is so for many of the children in "free" schools much of the time and for most children some of the time. In fact, governments do not simply offer schools in the market but compel attendance at some school. The government determines what is "good," not the child or even his parents. In consequence, some schools take on the aspect of part-time prisons with armed guards and some of the other paraphernalia of compulsion.
The schools, too, are a good example of how government in the market reduces alternatives and tends to close the system. Government not only compels school attendance but also prohibits the young from working in many employments until they reach a certain age. They have very few alternatives to going to school even if they were not compelled to do so. Most states have lengthy prescriptions for what must be taught in any acceptable school, public or private. The result is severe limitation of what is appropriate to education. Moreover, the Federal courts, Congress, and HEW have in significant ways federalized the schools with regulations, prescriptions, and rulings. The direction is toward a standard school for all America.
The Post Office is an even better example of closing the system when government offers a service. The government long ago eliminated all competitors in delivering first class mail. It behaves in a fashion which is typical of monopolies. It continually raises prices, reduces service, and regulates the customers. More and more of the services once performed by clerks are now performed by the patrons.
How customers are regulated can be illustrated by a homely example. The local post office which I use often has fairly long lines. Post offices are not the only places where lines form, of course; they form at banks, checkout counters of grocery stores, and other places. There is a difference, however, as I discovered. In private establishments, customers often shift from line to line in the hope of getting service sooner. Indeed, it is not uncommon in grocery stores, when another checkout counter is opened, for the clerk to beckon to those at the end of the line to come and be served. Not so, in this post office. I was near the end of the line one day when I observed that another window had been opened. I moved toward it, as I probably would have done in the grocery store. I was ordered back into line by an officious clerk, who thereafter took the people one at a time who were nearest to the originally open window. The post office has since roped off an area to assure that everyone stays in a single line. It may be that they will shortly install a maze of stalls through which the patrons must proceed.
It is debatable, I suppose, whether in strict justice a newly opened counter should be used to serve those nearest to the original counter before which the line had formed or the newest comers to the line. I have observed, however that when the customers are free, those about to be waited on will stay in the original line while those furthest back are most likely to shift to the new line. The clerks at the grocery store attempt to keep the lines short and see to it that everyone’s wait is as brief as possible. The grocery clerks are attuned to service. The line in this post office has been politicized. Everyone is going to have as long a wait as anyone else, if possible, regardless of race, creed, color, religion, age, infirmity, or what not. The grocery clerk beckons; the postal clerk orders. The grocery store competes in the open market; the Post Office operates as a closed system.
Examples are abundant of how government acting in the market tends to close the system. If all that come to mind were reported this would become a book instead of an article. Suffice it to say, then, that wherever government intervenes in the market it tends to reduce alternatives.
When government franchises, licenses, regulates, prescribes, inspects, sets standards, or in whatever manner intervenes in the market it reduces alternatives. When it offers goods or services in the market it tends to eliminate all competitors. Its activities produce surpluses, shortages, and imbalances. It turns its power on its "customers" to make them conform to its rules and winnows them through sets of eligibility requirements. The more government acts on the market in these ways the more hampered it becomes, the less open, and the more nearly closed. The thrust toward intervention in our day is socialistic, and the end result is the closed system.
State vs. Market
It is common in our day for economists to speak of the market in terms of the "public sector" and "private sector" These phrases have never struck me as particularly apt, and I have always avoided the use of them. For one thing, they smack of jargon which it is usually well to avoid. But there is a much more important reason than this. They do not fully describe what is involved nor do they reveal the character of the actions they purport to bring to our attention. Much better distinctions are available, but they need a little introduction.
Man lives out his life within the orbit of two great abstractions. One is the State. The other is the Market. The State, as already indicated, is the epitome of the closed system. By nature, it is a barrier, confining those within its boundaries and shutting others out: restricting, limiting, and inhibiting all activity. The Market, on the other hand, is by nature open and free. The consumer welcomes all to the market, seeking as he does to buy the highest quality he can discover for the lowest price. He can do this best if all who have goods or services are available to him in the market. Any appearances to the contrary, the Market is the arena of the buyer or consumer. The seller is there at the consumer’s behest and is tolerated only so long as he pleases.
Government is the instrument of force which determines whether and to what extent the State or the Market holds sway. If the Market is to prevail, the government maintains the peace and allows freedom for it to unfold and helps to remove the barriers to its expansion. If the government throws its weight behind the State, it acts to inhibit the Market and increase the barriers. The more government intervenes in the market the more it increases the power of the State. The "public sector" is, in reality, Statism. The "private sector" is none other than Freedom. The issue is not between the "public sector" and the "private sector?’ It is between Statism and Freedom. The end toward which Statism moves is the totalitarian state with its massive barriers at the frontiers to prevent entry or exit of peoples and goods. Its appropriate symbols are the Berlin Wall and the fugitive shot down as he tries to escape.
Amusement parks do not matter much. I can take them or leave them. Hopefully, my children will grow up and can do likewise one day. In any case, life is long and visits to them are brief, and you can leave any time you wish. It is not so with the State. To move from one state to another is a great inconvenience, is costly, and frequently requires the mastery of another language and the adoption of another way of life. Moreover, the likelihood today is that Statism will be as prevalent, or more so, in the new state as in the old. Better to focus on government, limit its functions, beware the siren song of the State, and recover the freedom of the Market.