The humor of the Capitalist, in Chodorov’s view, comes not from some dry wit that goes over most of our heads. Rather it comes from, unbeknownst to him, his self-destructive actions: he funds an ideology counter to his interests (and societies in the long run). Chodorov argues that most capitalists give money to support their alma mater once they are gone but do not realize what is actually being taught.

This is unfortunate. As Nobel Prize-winning Austrian economist F.A. Hayek pointed out, the intellectuals propagate ideas through society. These intellectuals do not necessarily need to be particularly brilliant, they may even be flat out wrong, but this does not stop their ideas from changing the world. Reading Chodorov’s article should make anyone who is a supporter of the freedom philosophy happy that organizations like FEE exist today but also make us realize how much farther we still have to go.

Dowload Frank Chodorov’s “Capitalists are Funny” here.

Only the first two or three serials were ever written (all compiled together here). Rand considered this a side project for herself that would help clarify the ideas and terms needed to defend liberty and individualism. Given this goal for the project Rand thought it would be helpful for FEE’s Trustees and staff.

As she said in a letter to Leonard Read, “I hope your staff and trustees will study it (the Textbook of Americanism) carefully, as I know that it will be valuable to them in helping them to avoid giving our case away.” This file, which you can download at the link below, was the circulated copy. It consists of ten questions and answers (two more questions and their answers can be found elsewhere on line, see here) concerning the difference between individualism and collectivism.

The issues raised in the textbook really do attempt to uphold individualism and destroy any collectivist mind set. For as Rand says on page 14, “Collectivism goes a step below savage anarchy: it takes away from man even the chance to fight back. It makes violence legal – and resistance to it illegal. It gives the sanction of law to the organized brute force of a majority (or of anyone who claims to represent it) – and turns the minority into a helpless, disarmed object of extermination. If you can think of a more vicious perversion of justice, name it.”

Maybe Rand was planning on telling us what she really thought of collectivism in the unwritten parts, but regardless this unfinished textbook makes for an informative and entertaining read.

Download the Textbook of Americanism here.

The scariest word in that sentence is not something. It’s we.

The first-person plural form is not merely a convenience, as in “We’re in for a cold winter.” It indicates that decisions about “the healthcare system” are to be made collectively, with one decision binding everyone.

That’s collectivism.

So why is virtually everyone a collectivist when it comes to heath care? I do not exaggerate. Every prominent participant in the current debate over how to “reform” the medical and insurance industries — regardless of party — approaches the issue in collectivist terms. They have differences at the margin — tax increases versus tax credits, a government-run “public option” versus subsidized nonprofit cooperatives — but there is no disagreement that we must have a policy.

But why must we do anything about health care? Why can’t you do what you want, I do what I want, and he and she do what they want? Isn’t that what’s supposed to happen in a free society? Reformers would say that costs are rising too much and some people can’t afford insurance. But that is no answer. It tells us only that possibly ameliorable conditions exist, not that collectivism is a good approach.

When we see problems in other important markets, most of us don’t expect televised presidential town-hall meetings, congressional committees, and omnibus legislation to give us The One Answer. We individually adjust our behavior in the marketplace and anticipate that entrepreneurs will cater to us. Solutions are micro, marginal, and tailored to individual needs, not macro, holistic, and procrustean.  Out of this arises an orderly marketplace — without a conscious overall plan. That’s why it works so well. No one has found a better way to make masses of people at all income levels better off.

Health Care Is Different?

Why is health care different? Must we collectively and consciously reinvent it? The social knowledge problem that F. A. Hayek spelled out should make us wary of any such response. All of us together acting in the market are wiser than any group of congressmen. (Did I really need to say that?)

The reformers’ stock answer is that this is something only we, working through the “democratic process,” can handle. That’s an assertion. Where’s the proof? What if earlier collectivist decisions gave us rising medical and insurance costs?

In fact they did. Nearly every aspect of medicine and health insurance that the politicians say needs fixing is the result of politicians’ previous attempts to fix something. Much of the escalation of prices comes from consumer demand that is freed from normal cost constraints thanks to third-party payers: government-privileged insurance companies, Medicare, and Medicaid. While that intervention boosts demand by eliminating cost consciousness, others constrict supply: occupational licensing, insurance mandates and barriers to entry, patents on drugs and devices, FDA regulations, certificate-of-need requirements, and more.

Making Things Worse

With each so-called reform, we (in reality, they, the politicians) made things worse. It’s time we — collectively — stopped trying to reinvent the medical and insurance industries.  Instead that task should be left to us individually — acting, transacting, competing, and cooperating in the marketplace. Only then will solutions emerge from people’s — not politicians’ —  choices, as entrepreneurs (neither aided nor impeded by the State) pursue profit by producing goods and services that make us better off.

Notice that entrepreneurship is missing from the public debate over medical care. Typical of the politicians’ arrogance, they can’t appreciate the role entrepreneurs— without privileges of any kind — play in bettering our lives. In a free market they look for unmet or poorly met consumer demand and devise ways to meet it. To do that job well, they need price signals that convey accurate information about consumer preferences and resources — which means prices undistorted by government policy. The successful entrepreneur’s payoff is profit, the result of transforming lower-value inputs into higher-value outputs.

Profit is the key, but “profit” is a dirty word in the current debate, one more arrow against freedom in the demagogues’ quiver. Insurance company profits are condemned not because the corporate state bulks them up through anticompetitive regulation, but rather in principle. The politicians are always ready to exploit people’s deep suspicion that profit is added to the price rather than extracted from the costs. If government interferes with profit-making, it suppresses entrepreneurship, which in turn cripples the market’s ability to serve us. To paraphrase Hayek, profit-seeking is a discovery procedure. The government condemns profit at our peril — especially in the medical industry.

Let’s hear no more about what we — collectively and coercively — must do about health care. If government would get out of the way we — individually and cooperatively — would figure out what to do. Collectivism and government planning trample freedom and foster social stupidity. Individualism and free markets respect each person’s dignity and liberty while getting the most out of the “wisdom of crowds” in the marketplace.

Reed explains:

Examples of collective terms are “society,” “community,” “nation,” “class,” and “us.” The important thing to remember is that they are abstractions, figments of the imagination, not living, breathing, thinking, and acting entities. The fallacy involved here is presuming that a collective is, in fact, a living, breathing, thinking, and acting entity.

The good economist recognizes that the only living, breathing, thinking, and acting entity is the individual. The source of all human action is the individual. Others may acquiesce in one’s action or even participate, but everything which occurs as a consequence can be traced to particular, identifiable individuals.

Consider this: could there even be an abstraction called “society” if all individuals disappeared? Obviously not. A collective term, in other words, has no existence in reality independent of the specific persons which comprise it.

It is absolutely essential to determine origins and responsibility and even cause and effect that economists avoid the fallacy of collective terms. One who does not will bog down in horrendous generalizations. He will assign credit or blame to non-existent entities. He will ignore the very real actions (individual actions) going on in the dynamic world around him. He may even speak of “the economy” almost as if it were a big man who plays tennis and eats corn flakes for breakfast.

A corollary to this is “in the public interest.”  People like Ralph Nader demand that government regulate every aspect of our lives “in the public interest,” yet they are demanding that government engage in activities which will make it more difficult for firms to produce goods, thus making millions of people poorer.

Indeed, when we hear the pundits demanding certain policies are “in the public interest,” what they really are saying is that such policies serve the interests of people in certain politically-connected groups.  For example, politicians and editorial writers tell us that the “nation’s economic security” depends upon “energy independence.”

What they mean is that unless all fuel consumed in this country is produced domestically, most Americans face economic disaster.  This is most interesting, since Americans have imported fuel for many decades, and even during the short-lived Arab oil embargo in 1973 and 1974, the American economy did not “collapse.”  (The “energy independence” scam really is nothing more than attempts by politicians and politically-connected producers of “alternative” energy sources, like corn-based ethanol, to raid taxpayers’ wallets because people would not purchase these “alternatives” unless forced to do so by government.)

Reed stresses the point about “collective terms” noting that economic analysis by its very nature must begin with the individual.  Socialists view human beings simply as a collective, be they “workers” or “capitalists” or “proletariat.”  The good economists know that one cannot understand markets without understanding the behavior and preferences of individuals.  There is no such thing as “social utility,” even though some economists – not the good ones – attempt to “construct” the fraudulent apparatus known as the “social utility function.”

When individuals are left out of the picture, then human beings are seen by those in power as little more than putty to manipulate.  The mass murders by totalitarian governments over the last century took place only because the powers that be decided to define people solely in collective terms.

Therefore, one cannot understand “good” economic thought unless one realizes that collective terms like “country” or “the economy” are useful only in the informal setting, as they are words of convenience.  However, they are useless and even harmful when government agents attempt to foist policies upon people in the name of “helping society.”

Next week: The fallacy of composition