Freedom today has what might be called a good press; everyone speaks well of freedom. It is in the same category as motherhood, Sandy Koufax, and pure water. Nobody will admit that he is "agin" freedom. In modern times there has been a booming market for the Four Freedoms, and for Freedom Now. There is a vocal Free Speech Movement on college campuses. We celebrate freedom of the press and condemn censorship; we cherish religious liberty and hail academic freedom. The mood of our time is favorably disposed toward every freedom except one, and that outcast freedom is Freedom of Economic Enterprise.
Economic freedom suffers attrition from within and attacks from without. Individual businessmen often seek to evade market mandates, and intellectuals do not want people to have complete latitude for their peaceful economic transactions. This is how Professor Milton Friedman views the problem: "It has often seemed to me that the two greatest enemies of the free market are businessmen and intellectuals, for opposite reasons. The businessman is always in favor of free enterprise—for everybody else; he is always opposed to it for himself. The intellectual is quite different; he is always in favor of free enterprise for himself, always opposed to it for everybody else. The businessman wants his special tariff or his special governmental commission to interfere with free enterprise, in the name, of course, of free enterprise. The intellectual, too, wants such commissions to control the rapacious man. But he is against the idea of any interference with his academic freedom, or his freedom to teach what he wants and direct his research as he wants — which is simply free enterprise as applied to him."¹
I wish to focus first on economic freedom and demonstrate that maintaining the integrity of the free market is essential to the preservation of every other liberty. Later I shall deal with some of the things on which the free market depends.
Freedom to Think
Liberties of the mind are self-evidently valuable to most intellectuals. No man whose business it is to think and write, no man who deals in ideas, wants his efforts along these lines to be hamstrung. He wants to be free to think daring thoughts and come up with novel ideas that challenge the prevailing orthodoxy. And he is right. Mankind has no way of advancing en masse; every step forward out of primitivism has been accomplished first by some innovator who moved out beyond the herd and then drew the rest of us painfully forward. There is a sort of gravitational pull that operates on the human enterprise, which makes our normal condition one of stagnation. We get on dead center and most of us are content to stay there. Then, along comes some inventor with a new idea which counteracts the pull of gravity, and we move off dead center. Nearly everyone favors the freedom to think. Thus, over the millennia, have people climbed the stiff ascent of civilization — only to slide down over the other side when they neglect the intellectual and spiritual heritage which spurred their climb.
Liberties of the mind are not under serious attack today. Nearly everyone favors the freedom to think, write, teach, preach, and publish. But it seems to many scholars and intellectuals that the grubby concerns of the marketplace are beneath them. They have little concern with what takes place in factories, stores, and banks because, after all, this is the material side of life and the intellectuals are concerned with higher things, with things of the mind. And so it happens that many believers in freedom in general attack economic freedom in particular.
In this they are not only wrong, they are disastrously wrong; there is an economic base supporting every one of the intellectual and spiritual freedoms these people cherish. And if this economic base is not free, if authoritarian controls are wrapped around this economic base, the controls will inevitably and eventually extend to the superstructure. Liberties of the mind and spirit do not and cannot exist in a vacuum; they form, in connection with economic liberty, a package, and this package cannot be picked apart without being destroyed.
The Economic Foundations
The arguments which support the right of a man to spend his energies in any peaceful way he chooses in the editorial office, the classroom, or the pulpit, likewise support his right to the free exercise of those energies in his store or factory. Or, to put it the other way round, every argument for controlling the peaceful exercise of a man’s energy in his workshop is an equally valid argument for controlling him in his study or classroom.Freedom in the marketplace and liberties of the mind go together. Freedom is all of a piece; philosophizing is not the same as digging a ditch, but socialize the ditch digger and the philosopher begins to lose some of his freedom. Freedom in the market place and liberties of the mind go together.
George Santayana reflected sadly that the things that matter most in life are at the mercy of the things that matter least. A bullet, a tiny fragment of common lead, can snuff out the life of a great man; a few grains of thyroxin one way or the other can upset the endocrine balance and alter the personality, and so on. But the more we think about this situation and the more instances of this sort we cite, the more obvious it becomes that the things Santayana declared matter least, actually matter a great deal. They are tied in with the things which matter most and the things which matter most depend on them! In precisely the same way, economic liberty matters a great deal because every liberty of the mind is connected with freedom of the market, economic freedom. There’s an old proverb to the effect that whoever controls a man’s subsistence has acquired a leverage over the man himself, which impairs his freedom of thought, speech, and worship. Hayek put it this way: "Economic control is not merely control of a sector of human life which can be separated from the rest; it is the control of the means for all our ends."
The government of a totalitarian country like Russia or China acts as a planning board to direct the production and distribution of goods. In practice, there is bound to be a lot of leakages — as witness the inevitable black market. But to whatever extent the state does control the economic life of a people, it directs every other aspect of life as well.
No Room for Rebels
The masses of people everywhere and at all times are content to drift along with the trend; they pose no problem for the planner. But what happens to the rebels in a planned economy? A man who wants to publish an opposition newspaper in a place like Russia or China would have to obtain presses, paper, and a building from the state — to attack the state! He would have to find workmen willing to risk their necks to work for him; ditto, people to distribute; ditto, people willing to be caught buying or reading the paper. Or take the orator who wants to protest. Where could he find a platform in a country in which the state owns every stump, street corner, and soap box — not to mention every building? Suppose you didn’t like your job, where could you go and what could you do? Your job is pretty bad, but it is one notch better than Siberia or starvation, and these are the alternatives. Strike? This is treason against the state, and you’ll be shot. Listen to George Bernard Shaw, defining socialism, writing in Labor Monthly, October 1921: "Compulsory labor, with death as the final penalty, is the keystone of socialism."
Under primitive economic conditions, a man has to be a jack-of-all-trades, able to turn his hand to a variety of occupations. If a pioneer family wants shelter, it builds a sod house or a log cabin; if it wants clothing, it weaves the cloth and fashions the garment; if it wants potatoes, it raises them; if it wants meat, it shoots a deer; and so on. But we live in a division of labor society where individuals specialize in production and then exchange their surpluses for the surpluses of other people until each person gets what he wants. Most of us work for wages; we produce our specialty, and in return, we acquire a pocketful of dollar bills. The dollars are neutral, and thus we can use them to achieve a variety of purposes. We use some of them to satisfy our needs for food, clothing, and shelter; we give some to charity; we take a trip; we pay taxes; we go to the theater; and so on. Our money is a means we use to satisfy our various ends.
A Science of Means
Economic action by itself does not generate a world view, although Marx believed it does. Economics has often been called a science of means. The economist, speaking as an economist, does not try to instruct people as to the nature and destiny of man, nor does he try to guide them toward the proper human goals. The ends or goals people strive for are, for the economist, part of his given data, and his business is merely to set forth the means by which people may attain their preferences most efficiently and economically. Let me buttress this point by a quotation from Ludwig von Mises: "It is true that economics is a theoretical science and as such abstains from any judgment of value. It is not its task to tell people what ends they should aim at. People are free to spend their money as they please and will often spend it foolishly. It is a science of the means to be applied for the attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends."
When people are free to spend their money as they please they will often spend it foolishly. As consumers, they will demand—and producers will obediently supply —goods that glitter but are shoddy; styles that are tasteless; entertainment that bores; and music that drives us nutty. Nobody ever went broke, H. L. Mencken used to say, by underestimating the taste of the American public. But this, of course, is only half the story. The quality product is available in every line for those who seek it out, and many do. The choices men make in the economic sector will be based upon their scales of values; the market is simply a faithful mirror of ourselves and our choices.
The Realm of Ends
Now, man does not live by bread alone, and no matter how much we increase the quantity of available material goods, nearly everyone will acknowledge that there is more to life than this. Individual human life has a meaning and purpose which transcends the social order; man is a creature of destiny.
As soon as we begin talking in these terms, of human nature and destiny, we move into the field of religion — the realm of ends. And a science of means, like economics, needs to be hitched up with a science of ends. The more abundant life is not to be had in terms of more automobiles, more bathtubs, more telephones, and the like. The truly human life operates in a dimension other than the realm of things and means; this other dimension is the domain of religion — using the term in its generic sense.
If we as a people are squared away in this sector of life, we’ll be able to take economic and political problems in our stride. On the other hand, if there is widespread confusion about what it means to be a human being, so that people are at sixes and sevens in this matter of the proper end of human life — some seeking power, others wealth, fame, publicity, or pleasure — then our economic and political problems overwhelm us. If economics is a science of means, that is, a tool, we need some discipline to help us decide how to use that tool. The ancient promise is that if we put first things first, by giving top priority to the search for the Kingdom of God, our actions will then conform to the law of our being, and we’ll get the other things we want as a sort of bonus. You may rephrase this idea, if you wish, to put it into a contemporary idiom; but the truth of it is hardly contestable.
The Rules for Prosperity
I have spoken of economics as a science of means. What is the distinguishing feature of a science, and in what sense is economics a science? Adam Smith entitled his great work, The Wealth of Nations; one of Mises’ books is entitled, The Free and Prosperous Commonwealth. These are works of economics...as they lay down the general rules a society must follow to flourish.It is clearly evident that these works deal with national prosperity, with the overall well-being of a society, with upgrading the general welfare. These are works of economic science, insofar as they lay down the general rules which a society must follow if it would be prosperous.
The distinguishing feature of a science, any science, is that it deals with the general laws governing the behavior of particular things, often reducing these laws to mathematical relationships. Science is not concerned with particular things, except insofar as some particular thing exemplifies a general principle. When we concentrate on a particular flower, like Tennyson’s "flower in the crannied wall," we move into the realm of art and poetry. Should we want the laws of growth for this species of flower, we consult the science of botany. These books by Smith and Mises lay down the rules a society wishing to be prosperous must follow. They do not tell you as an individual how to make a million in real estate, or a killing in the stock market. This is another subject.
The question before the house in an economic inquiry is: "How shall we organize the productive activities of men so that society shall attain maximum prosperity?" And the answer given by economic science is: "Remove every impediment that hampers the market and all the obstructions which prevent it from functioning freely. Turn the market loose and the nation’s wealth will be maximized." The economist, in short, establishes the rules which must be followed if we want society to be prosperous; but no conceivable elaboration of these rules tells John Doe that he ought to follow them.
A Guide for Personal Conduct
There’s a big IF here. If John Doe wants to know how to maximize the general well-being, the economist can tell him which rules to follow. But this might not be the only question we are asking. What John Doe may want to know is, "How can I make a million with no sweat?" Of course, he has a stake in a prosperous society because he knows that it will be easier for him to make a million in a rich society than in a poor one, but his interest in the rules for national prosperity are secondary to his interest in lining his own pocket. He may understand the case for the free market, but nevertheless, decide that he can do better for himself by getting in on a racket.
Economic science can prescribe for general prosperity, but it cannot tell John Doe that he ought to obey that prescription. That job can be performed, if at all, by the moralist. The problem here is to bridge the gap between the economist’s prescription for national prosperity and John Doe’s adoption of that prescription as a guide for his personal conduct. Only a sense of moral obligation —and not additional economic arguments — can persuade John to close this gap.
Enter the moralist. Economics is a science of means. It abstains from judgments of value and does not tell John Doe what ends he should aim at. If you want to persuade John Doe to follow the rules of economics for maximizing prosperity you must argue that he has a moral obligation to conform his actions to certain norms already established in his society by the traditional ethical code. He should deal justly and fairly with his fellows, he should injure no man, he should not steal, and so on. Practice the ethical code and the rules for national prosperity can be taken in stride; but in the absence of an ethical code which John Doe tries to live up to, there’s no reason for any of us to feel any moral obligation for national prosperity when our own enrichment is a much more immediate concern.
If we want a free market and a free society, we need a genuine ethic. This genuine ethic is available to us in the traditional moral code of our culture, which extols justice, forbids murder, theft, and covetousness, and culminates in love for God and neighbor. This is old stuff, you say; true, but it’s good stuff!There is a realm of life outside the realm of economic calculation, on which the market depends.
The market is not something which comes out of nothing. It emerges naturally whenever the conditions are right, and those right conditions provide a framework for the market to keep it functioning smoothly. In other words, there is a realm of life outside the realm of economic calculation, on which the market depends. Let me cite Ludwig Mises again, when he speaks of beauty, health, and honor, calling them moral goods. He writes: "For all such moral goods are goods of the first order. We can value them directly; and therefore have no difficulty in taking them into account, even though they lie outside the sphere of monetary computation."4 In other words, the market is generated and sustained within a larger framework consisting of, among other things, the proper ethical ingredients. There are also political and legal elements in this framework, and a theological dimension as well.
Scarcity of Resources
As well as being a science of means, economics is also a science of scarcity. Goods which are not scarce, such as air, are not economic goods. Economics deals with things which are in short supply, relative to human demands for them. Our situation on this planet is an unbalanced equation with a man and his wants on one side and the world of raw materials on the other. The human being is a creature of insatiable wants, needs, and desires; but he is placed in an environment where the means of satisfying those wants, needs, and desires are scarce. Unlimited wants on one side of the equation; limited means for satisfying them on the other.
Now, of course, it is true that no man, nor the human race itself, has an unlimited capacity for food, clothing, shelter, or any other item singly or in combination. But human nature is such that if one want is satisfied, the ground is prepared for two others to come forward with their demands. A condition of wantlessness is inconceivable, short of death itself. Even if a condition of repletion and satiety can be imagined, this condition itself begets a want — the desire to be left alone for rest and relaxation. Rest and leisure, however, are breeding grounds for a renewed set of wants and demands.
This creature who demands more, whose wants are insatiable, is placed in an environment where there is not, and can never be, enough. Almost everything is scarce. In the first place, the planet is crowded; there is not enough elbow room in the pleasant places of the earth to accommodate everyone with as much Lebensraum as he would like. Second, resources, the raw material which we must by our labor transform into consumable goods, are limited in quantity. Third, our individual supply of energy is limited; we get tired, and so we have to economize our strength with laborsaving devices. Fourth, time is always running out on us, and time is valuable. Finally, the planet’s physical energy is scarce, nor will the common use of atomic power alter this fact; not even an atomic reactor is a perpetual motion machine.
An Eternal Problem
What does this all mean? The upshot of all this is that the economic equation will never come out right. It’s insoluble. There’s no way of taking a creature with unlimited wants and satisfying him by any organization or reorganization of limited resources. Something’s got to give.
Economics is the science of scarcity, but the scarcity we are talking about in this context is a relative thing. Whenever we drive in city traffic or look vainly for a place to park, we are hardly in a mood to accept the economictruism that automobiles are scarce. But of course they are, relative to our wants. Who would not want to replace his present car or cars with a Rolls Royce for Sundays and holidays, plus an Aston Martin for running around?
These simple facts make hash of the oft-repeated remark that "we have solved the problem of production, and now if we could just distribute our abundance more equitably — which of course is a problem that only government can solve…," and so on. Economic production does involve engineering and technology, in that men, money, and machines are linked to turn out airplanes, or automobiles, or tractors, or typewriters, or what not. But resources are limited, and the men, money, and machines we employ to turn out airplanes are not available for the production of automobiles, or tractors, or anything else. No matter who makes the decision something needs to be sacraficed. The dollar you spend for a package of cigars is no longer available to buy a movie ticket. With the resources available to us we might produce a number of different commodities, but obviously we could not produce as much of every commodity as everyone would want. The problem of deciding to use our resources to produce the gizmo rather than the thing-a-ma-jig is an entrepreneurial decision, but no matter who makes the decision, something has to be sacrificed when we commit our resources to one thing rather than to the other possibilities.
Similarly with John Kenneth Galbraith and his Affluent Society. We do have an economic abundance that would astonish Adam Smith, but this merely confirms the free market economics that Smith expounded. There is not, as Galbraith claims, a new economics of abundance which outmodes the old economics of scarcity, for however abundant commodities become they will still be scarce relative to human wants and desires.
No Short-Cut Solutions
The economic equation can never be solved; to the end of time, there will be scarce goods and unfulfilled wants. There will never be a moment when everyone will have all he wants. "Economics," in the words of Wilhelm Roepke, "should be an anti-ideological, anti-utopian, disillusioning science, "5 and indeed it is. A candid economist is a man who comes before his fellows with the bad news that the human race will never have enough. Organize and reorganize society from now till doomsday and we’ll still be trying to cope with scarcity. But the modern mind takes the dogma of inevitable progress for granted. Most of our contemporaries assume that day by day, in every way, we are getting better and better, until some day the human race will achieve perfection. The modern mind is passionately utopian, confident that some piece of social machinery, some ideological gadgetry, is about to solve the human equation. Minds fixed in such a cast of thought, minds with this outlook on life, are utterly immune to the truths of economics. The conclusions of economics, in their full significance, are incompatible with the facile notions of automatic human progress which are part of the mental baggage of modern man.
There is genuine progress in certain limited areas of our experience. This year’s color television set certainly gives a better picture than the first set you bought in, say, 1950. The jet planes of today deliver you more rapidly and in better shape than did the old prop jobs. Automobiles have improved, we have more conveniences around the house, we are better equipped against illness. There has been true progress in certain branches of science, technology, and mechanics. But are the television programs improving year by year? Are the novels of this year so much better than the novels of last year, and last century? Are the playwrights whose offerings we have seen on Broadway this season that much better than Shakespeare? Has the contemporary outpouring of poetry rendered Homer, Dante, Keats, and Browning obsolete? Is the latest book on the "new morality" superior to Aristotle’s Ethics? Are the prevailing economic doctrines of 1966, reflecting the Samuelson text, sounder than those of a generation ago, nourished on Fairchild, Furness, and Buck? Are today’s prevailing political doctrines sounder than those which elected a Grover Cleveland? Henry Adams in his Education remarked that the succession of presidents from Washington, Adams, and Jefferson down to Ulysses Grant was enough to disprove the theory of progressive evolution! What would he say if he were able to observe the recent past?
The dogma of inevitable progress does not hold water. Perfect anthills and beehives are within the realm of possibility; but a perfect human society, never! The man is the kind of a creature for whom complete fulfillment is not possible within history; unlike other organisms, he has a destiny in eternity which takes him beyond biological and social life. This is the world outlook of serious religion, and the conclusions of economics are just what a person of this cast of mind would expect. Economic truths are as acceptable to this worldview as they are unacceptable to the worldview premised on automatic progress into an earthly paradise. If there is another dimension of being which transcends the natural order — which is comprised of the things we can see and touch, weigh and measure — and if a man is truly a creature of both orders and at home in both, then he has an excellent chance of establishing his priorities in the right sequence. He will not put impossible demands on the economic order, nor will he strive for perfection in the political order. He’ll leave heaven where it belongs, beyond the grave! Let us strive for a more moderate goal, a tolerable society, and we may make it!
The Need for Government
Man is the kind of a creature who seeks to economize scarce goods, and so he invents laborsaving devices. The primordial labor-saving device is the market, which enables men to freely exchange the results of their specialization for items they prefer. In a typical economic transaction you walk into a bookstore and stumble upon a volume which you need to complete a set; it is in good condition and the price of $2.00 is right, so you buy it. You are delighted to exchange your two dollars for the book, and the proprietor who had been anxious to sell it is happy to have your money. Satisfaction on both sides of this exchange has been enhanced.
But there are other kinds of action in a society where goods and services are not exchanged for goods and services to the benefit of both parties; there is theft, and predation, and violence. The same human drives which issue in economic action, namely, the need to economize on scarce means, might drive a man into theft for, as has been observed: robbery is the first labor-saving device. There is only one way by which wealth comes into being, and that is by production; but there are two ways by which wealth may be acquired: first, by producing it, and second, by helping yourself to the fruits of someone else’s production.
Contingencies of this sort in society create a demand for the protection of the peaceful and productive activities of men, that is to say, for the government. The market is simply a name for the peaceful and voluntary exchanges of goods and services occurring constantly between people who trade the results of their specializations. It is the organization of peaceful means. Policing, by contrast, is the regulated use of force against peacebreakers for the protection of peaceful people; it is the organization of coercive means. When a policeman overtakes a thief and forces him to disgorge the items he has stolen, he may use something stronger than persuasion; he may use a club or a gun. In any event, the policing transaction, in contrast to an economic exchange, does not enhance the general level of well-being of both parties to the exchange. Policing, in other words, cannot be organized as a market transaction; although policing costs money, it is not within the domain of economics.
Carry the argument through one more stage: Two men differ in wealth today because their marketplace offerings of goods and services yesterday and the day before met with varying receptions. Because the buying public appreciates the man who sings like a Beatle more than the man who philosophizes like a Socrates, the former is rich, the latter poor — relatively speaking. The former buys three Cadillacs while the latter must content himself with a 1958 Chevrolet. When we understand the reasons for wealth differentials of this sort, we realize that such disparities are in the nature of things. Our sense of justice and fair play is not offended, however much our good taste may suffer.
But if the singer commits a crime and, because of his wealth, is able to buy himself out of jeopardy, we know in our bones that an additional evil has compounded the original crime. Legal justice is not a marketable commodity; justice which becomes an item of merchandise ceases to be justice. Justice is not for sale, and the market cannot allocate things which — by their very nature — are not salable. It is right that people acting voluntarily in the marketplace should decide that one man be given three times as many cars as another; but any voluntary action which metes out to one man only a third as much justice as it accords to another is on the order of mob rule, lynch law, violence, and moral evil.
Earmarks of Good Law
Things human tend to get out of hand, and the government is the prime example of this tendency. Time and again throughout history, the government has become a cancer-like growth detrimental to social health and individual wellbeing. Seeking to curb this tendency, those in the old-fashioned Whig and Classical Liberal tradition laid down the earmarks of good law.A good law will take human shortcomings into account; it will reflect our limited understanding and sinful nature. They may be briefly summarized. In the first place, a good law makes no pretensions to perfection. No human laws are, in fact, perfect, and the attempts of some to apply their "perfect" laws to imperfect human beings have been disastrous. A good law will take human shortcomings into account; it will reflect our limited understanding and sinful nature.
In the second place, a good law will be written so as to correspond to what the eighteenth century referred to as the Higher Law. A good law, in other words, will not violate our ethical code; it will not supplant morality with mere legality.
Generality is a feature of a good law. Everyone should be equal before the bar of justice, and so a good law is one which applies to all men alike and without exception. Men are different in several important ways; some are bright and some dull; some are rich, others are poor. There are differences of nationality, color, and religion; there are employers and employees, and so on. These are important distinctions and classifications — but not to the law! The law should be blind to such differences, and any law which is general, applying to one man as to all, cannot have much wrong with it.
Besides being imperfect, moral, and general, a good law is conditional; it has an "iffy" quality about it. It says, if you steal, or if you defraud, or if you drive on the left side of the road, you will be punished. A good law takes the side of the negative, saying "Don’t," or "Thou shalt not." This means that it is theoretically possible for a man to negotiate life without encountering the law, provided he sticks to the positive. The fifth and final point in this abbreviated list is something like the first; a good law reflects the customs and habits of a people — otherwise, it is an attempt to reform them by law, and the reformist law is bad law.
Economics is a discipline in its own right but, as I have tried to show, it has some larger meanings and implications. Its nature demands a political and social framework, comprising religious, ethical, and legal ingredients. Establish these necessary conditions and, within this framework, the economic activities of men are self-starting, self-operating, and self-regulating. Given the proper framework, the economy does not have to be made to work; it works itself, and it pays dividends in the form of a good society.