The first edition of Human Action was 889 pages. It was, after all, a treatise on economics. Galbraith, however, barely mentions this. Instead he concentrates his review on Mises’s view of the State. Written in a tone of “Can you believe how irrational this is?,” Galbraith shows how Mises paints the government to be the enemy of the market. There is no need to deny Mises’s distrust of the State. As Galbraith points out, to Mises “Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing and imprisoning.”

Galbraith does seem to show some respect for Mises’s defense of the market. As Galbraith put it, “The market, even more than the wheel, is one of the great commonplace servants of man. Professor Mises powerfully defends it against those who would subvert it to the service of the selfish or shortsighted ends.” But, he continues, “it is possible that the defense is stronger when in the hands of somewhat more moderate men.”

Should the defense of the market, and liberty, be left to more moderate men? I would argue no, it should not. What is moderate will depend on what is popular. Liberty and free markets are not in fashion, just as they were not when Human Action was written. Moderate men would compromise liberty away, just as Mises had warned. And a major reason for this is that many do not see the State for what it truly is. It may make one a radical to claim, as Frederic Bastiat did one hundred years before Mises wrote Human Action, that “the state is the great fiction by which everyone tries to live at the expense of everyone else.” And the State does this through the use of coercion. What the State gives it must take violently away from someone else. One need not be an anarchist to recognize this. (Neither Mises nor Bastiat was an anarchist). If someone doesn’t recognize the danger of fire, we shouldn’t be surprised when he gets burned (which is not to claim that the state is as necessary or useful as fire).

The critics of Human Action should take more time to carefully read it. Mises builds a system of economics from the ground up; thus his beliefs expressed about the State do not appear out of thin air. Perhaps if they read more carefully, those who share Galbraith’s view would realize that such a blind faith in the State to cure the ills of society is really the naive position.

Download Galbraith’s review of Human Action here. 

As economist Wilhelm Röpke put it, “When demanding assistance from the state, people forget that is a demand upon the other citizens merely passed on through the government, but believe they are making a demand upon a sort of fourth dimension which is supposed to be able to supply the wants of all and sundry to their hearts’ content without any individual person having to bear the burden.”

It is as if the state has become an entity that owes us all a living, and its ability to provide that living is almost magical. Individual’s expectations of what the state can do seem to belong more in a Harry Potter novel than reality. As English historian T. B. Macaulay put it, “it is supposed by many that our rulers possess, somewhere or another, an inexhaustible storehouse of all the necessaries and conveniences of life, and from mere hardheartedness, refuse to distribute the contents of his magazine among the poor.”

In reality, we all live in a world of scarcity. Everything we do has trade-offs. This is why Milton Friedman said there is no such thing as a free lunch. When a resource is used in one manner, then the next highest valued use, or the opportunity cost, is given up. Who pays for the goods and services we have in this life, no matter how essential to our lifestyles, is not irrelevant. How resources are allocated is also not irrelevant. If one does not pay for something, but gets it provided nonetheless, then there is a good chance that good will be overused and wasted, and this is no accident.

Sending other peoples money is easy. Why should you care how much it costs as long as you can get the highest value out of what you get? And when we spend other people’s money on other people, we again, don’t care about the cost but also put much less concern into the value others get out of it. In contrast, when we spend our own money we typically want the highest value for the lowest cost we can find. This is why a world in which the consumers foot the bill is more likely than not going to be more efficient and wealthy (and even for the least well off).

The common belief in what the government can provide is indeed a delusion. There is no forth dimension. The government’s ability to provide so-called essentials comes at a cost and is typically very inefficient. If we leave the responsibility to the individuals, the world will work much better than most seem to think. Remember, this is not an argument against charity. There is nothing wrong with voluntarily helping those in need. But a world where individuals are forced to provide for others is unsustainable. We must abandon the fantasy that the state operates outside of constraints and scarcity. We must wake up to the reality, whether we like it or not, that prosperity is created by the desire of man to improve his own lot in life. And, in general, this requires personal responsibility.

Download Henry Hazlitt’s “The Fourth Dimension” here.

Take, for just one of many possible examples, the current drive for stricter immigration laws. Recently Alabama governor Robert Bentley has signed the nations strictest immigration law. The issue is certainly one many Americans take very seriously. One concern many have with allowing more immigration is the loss of American jobs to foreign workers. This logic is not wrong but rather is incomplete. This is a consequence of looking only at the immediate direct effects rather than all the effects in the long run. As Bastiat put it, we need to see the seen, as well as the unseen.

If asked almost everyone would clearly prefer more to less, but by supporting tougher immigration individuals are advocating a desire for less. Meaning they desire to have fewer in the labor force by keeping foreign workers out. Why? Well, mostly out of a false premise. They view the number of jobs as a fixed pie, if an immigrant takes a job then that is one job an American cannot have. They also see that this would also mean lower wages for those “lucky” Americans who still have their jobs. The more labor that enters the market, the more wages are depressed.

These presumptions are, however, false. Immigrants do not steal domestic jobs. This is because in the long run higher number of labor frees up individuals to move on to producing different and new goods and services that were not possible when there were fewer in the labor force. The pie is not fixed; in fact, more labor allows the pie to grow. Wages also don’t end up being depressed either. Why? Well, most immigrants don’t substitute for domestic skill sets, they complement them, again this frees up domestic labor to produce different goods and services, as a result we all become more productive.

Not surprisingly, empirically this is what economists find: over the last 50 years the work force has grown dramatically, but unemployment rates have remained relatively constant. People currently see our high unemployment rate and blame the wrong cause. More labor, from foreign sources, will allow us to produce more at a lower cost. The high unemployment is due to our misguided monetary policy that produced malinvestment. Many are unemployed because producers are struggling to reallocate resources back to what consumers are actually demanding (see this article for more on this). If anything, the more immigrants who join the labor force the faster we can recover.

The problem, as Bastiat pointed out, really boils down to which group the law should care about, producers or consumers. As producers we desire goods on the market to be scarce because it means we can receive higher prices for them. As consumers we want the opposite. The two are critically opposed to one another. As a result only one can be for the betterment of society. And a wealthy society is one where individuals are able to satisfy as many of their desires as possible. This can only be done the more abundance there is. The answer then should be obvious when we think about it in this way.

One thing is clear: Bastiat was and still is very relevant. There should be no doubt Bastiat’s writings have had an important impact on the world and it is up to us to make sure he still continues to do so.

Download Henry Hazlitt’s “Bastiat for ‘65” here.

Joseph Kennedy is, of course, most famous for being the father of President John F. Kennedy and Senator Robert F. Kennedy, but a close second is known for taking part in the notorious trade in which he (possibly) made his family’s fortune; namely bootlegging alcohol during the Prohibition.

Alcohol prohibition is largely considered a failure today and for good reason; see for example, Douglas Roger’s review in the Freeman of Daniel Okrent’s fantastic book Last Call: the Rise and Fall of Prohibition. The negative consequences of America’s noble experiment stretched far and wide. The quality of liquor went down, potency went up, and as result the emerging black markets created environment of secrecy, corruption, and violence, etc. The 18^th amendment even bred contempt for the law, which led many to refer to the 1920s as the lawless decade.

Kennedy’s story, however, shows that not everyone found prohibition to be so bad. Many, like Kennedy, gained greatly from the temperance movement’s ploy. These bootleggers, rumrunners, gangsters, and others operating in the black market not only didn’t find the law a disadvantage but also openly supported it, even financially. This is what Bruce Yandle referred to as the bootleggers and Baptists theory of regulation. All regulation is supported not just by those who viewed as moral, but also by those who stand to gain at the expense of others.

Prohibition transformed the market for alcohol into a violent and dangerous trade by weakening property rights and driving its activities underground. Supporters of various prohibitions today, such as the prohibition of drugs and tobacco, should learn a lesson from this story. We must, as Frederic Bastiat warned, look at not only what is seen but also what is unseen. Sure people are gaining from these laws, but is this at the expense of everyone else? We need to ask whether these laws are achieving the real desired ends or helping to line the pockets of some while harming many others. Lets face the facts, just like alcohol before, drugs have not gone anywhere and violence has increased. No matter what your feelings on such substances are, there must be a point where you step back and say, “this is just not working and not worth it.”

Download the Kennedy to Read Letter here.

*This post is dedicated to my very good friend and colleague Douglas Rogers. The world has been robbed of a great mind. Doug’s work on organized crime was an important part of seeing the unseen effects of all prohibitions. He was also a passionate teacher of economics and advocate of liberty. I feel wealthier for having known him and I am sure I’m not alone.

In reality, a voluntary society cannot be opened as a gift. Freedom is an outcome of a societal process where many individuals act and cooperate with one another. This requires a certain type of ideology, which the majority of it members must hold. We must learn to respect and uphold private property rights. We must learn that personal responsibility is important. Liberty is not something that can just be given. It must be understood and it must be wanted. We face many different competing views and so the supporters of a voluntary society must study and understand what a free society could be.

Today’s document will not likely bring the gift of a free society but it does contain a list of 100 hundred books F.A. “Baldy” Harper deemed worth studying for anyone wishing to understand the merits of a free society. It is Harper’s “A Bibliography on the Voluntary Society: 100 Selected Titles in Economics, History, and Philosophy.” Many of these books would make great gifts (some are even available free online) for ourselves and our friends, family, and even (and possibly more important) our intellectual opponents.

Harper collected these books in March of 1953. It is, of course, not comprehensive but it is quite impressive. As many of the great classical liberal economists are present from Frederic Bastiat, Eugen von Boehm-Bawerk, John Bates Clark, Fred Rogers Fairchild (one of the original founders of FEE), Frank Fetter, F.A. Hayek, Frank Knight, Carl Menger (which Harper spells his first name wrong, Karl was his son who was also a noted mathematician and economist), John Stuart Mill, Ludwig von Mises, David Ricardo, Lionel Robbins, J.B. Say, Henry Simons, Adam Smith, and Phillip Wicksteed, among many more!

It is probably safe to say that the more people who studied this list, the better off the world would be. Of course this list was made almost 60 years ago, so many more wonderful and important works have been done since. What important books do you think should be added? Let us know in the comments.

Download “Baldy” Harper’s A Bibliography on the Voluntary Society here.

Still, even FEE has long given Bastiat credit for the quote. In today’s document Leonard Read writes, in a September 16, 1952 letter, to Rose Wilder Lane, one of the great classical liberals of the 20^th century herself, asking her for the source. It is doubtful she found it. Still, while it is still possible Bastiat is the originator, we do know there is a quote from Otto T. Mallery, a late 19^th century liberal, in his “Economic Union and Enduring Peace” which states, “If soldiers are not to cross international boundaries, goods must do so. Unless the Shackles can be dropped from trade, bombs will be dropped from the sky.” So, the question remains, are we falsely attributing Mallery’s words to Bastiat? Or did Mallery get it from Bastitat or somewhere else?

Regardless of its source these words ring true. The idea can be traced back even further to the 18^th century in Montesquieu’s 1748 work L’esprit des Lois or the Spirit of the Laws. In this work Montesquieu discusses the civilizing effect commerce has upon societies. Further, in a more modern context, Ludwig von Mises in Human Action discusses the importance of social cooperation, which Henry Hazlitt also uses as the foundation of his book the Foundations of Morality; trade has the effect of increasing social cooperation by allowing us to specialize and expand the division of labor. This is beneficial for everyone in society because it allows us to do more than is possible if everyone was in isolation. In other words, trade allows us to work together for our own benefits. We become dependent, in a good way, upon each other, which allows for greater cooperation and wealth. Take this away and conflict is the likely alternative outcome.

So irrespective of who said it, the lesson is clear and important: free trade not only increases the wealth of different societies, it might also be necessary for peaceful interaction.

Download the September 16, 1952 letter from Leonard Read to Rose Wilder Lane here.

The Pamphleteers, inc. was an imprint for Read and his friends from the L.A. Chamber of Commerce, including William Mullendore, who was Read’s mentor and good friend. The goal of this publishing organization was to distribute individualist writings. They issued and distributed many works by writers such as Frederic Bastiat, Rose Wilder Lane, and, of course, Ayn Rand. Rand believed Anthem was a perfect fit for the Pamphleteers because she thought it was too short and not important enough to follow the fountainhead, which had just been released to great success. Anthem had come first but was only published in England, so, by releasing it as a pamphlet under the pamphleteers imprint, the short novel could find an audience in the US.

In the other half of the letter, Rand asks Read for some information about business concerns for the atomic bomb. This was a topic which Read had studied with great passion, though it is unclear what information Read was able to pass along. Similarly, Rand did spend sometime in Hollywood working on screenplays. She wrote the screenplay for the film version of her novel the Fountainhead, which stared Gary Cooper. The screenplay she discusses here is part of the work she did for film producer Hal Wallis. He had hired her to work as a screenwriter and script editor.

Download the Letter from Ayn Rand to Leonard Read on February 13, 1946 here.

Dean Russell tackled this cliché by discussing Sweden’s much acclaimed state housing projects. Russell admitted the system did indeed look good and upon his visit to the country, since he was “a reasonably honest person,” gave credit to the housing situation. But upon closer inspection things were not so dandy. The government control of housing created a shortage and those waiting for government housing could end up on a waiting list for ten years! And it got worse, since private housing was non-existent due to the incentives the system created. So Russell stuck with his original hypothesis that government cannot outperform the market.

Russell uses only this one example, but what about other areas? Today the health care issue is all the rage and Sweden (along with England and Canada, which all have different types of state-run systems) is counted as a rousing success. But again, a closer look into all the consequences, including the long-run effects, is necessary. Horror stories, like patients being forced to wait for months despite being in pain, abound.  The system also forces patients to attend extremely understaffed local clinics.  These are just a few of the problems.

Supporters of the recently passed Obamacare should seriously analyze the bill as Bastiat suggests all good economists should, by seeing the seen and the unseen effects. This means looking at all groups and in the long-run. It’s not that free market advocates are heartless in opposing free health care for all, it’s that we are “reasonably honest people” who analyze the issue by looking at all the consequences and find that state run health care will make us all worse off in the long-run, particularly those who will need it most. The US health care system has its problems, but they are due to too much regulation, not too little.

What long-run consequences do you see from Obamacare?

Download Clichés of Socialism 66 here.

I was honored to be a part of the event, and I warmly thank my hosts, especially  Paweł Toboła-Pertkiewicz and Jan Malek, for their kind hospitality. They are most eager to bring FEE to the attention of the Polish public, so they arranged for me to be interviewed by an Internet television host, a radio reporter, and a business-newspaper reporter. They also arranged for me to speak to a gathering of students who were eager to hear the libertarian perspective on the financial turmoil. A lively discussion followed. All this occurred immediately after my overnight flight and arrival in Warsaw, but the enthusiasm was a tonic for this weary traveler. (Pawel’s pictures of the events are here.)

It was certainly a pleasure to see such enthusiasm for Bastiat and his work in Poland. The two-day conference drew 90 highly motivated people. I learned, among other things, that Bastiat was first translated into Polish in the 1860s. So the Poles are not newcomers to the great French liberal economist, who lived from 1801 to 1850. American and French fans of Bastiat have long been amused by the fact that he is better known in the United States than in France. Apparently he is better known in Poland too. Paweł, who organized the conference, explained that when he asked the French Institute in Warsaw about holding the conference there to honor a French economist, the official was delighted by the request. He had just one question: Who is this Bastiat?

The passion for liberalism (libertarianism), Bastiat, and Austrian economics that I saw during my brief visit bowled me over. After Bastiat’s, the most common picture at the conference was Ludwig von Mises’s. The conference audience couldn’t have been more eager to exchange ideas and ask questions of the speakers. Thanks to Pawel, the great liberal works are being translated into Polish, including FEE founder Leonard Read’s I, Pencil and FEE president Lawrence Reed’s Great Myths of the Great Depression. The latest to be translated are the collected works of Bastiat, in two beautifully produced volumes.

Lack of Respect

Although I’ve read a lot about Bastiat over the years, I learned much from the lectures. Professors Jan Klos of John Paul II Catholic University  and Witold Kwasnicki of Wroclaw University spoke about Bastiat’s place in the modern world and in economic education. Unfortunately Bastiat has not gotten the respect he deserves in surveys of the history of economic thought. Joseph Schumpeter, for example, dismissed him as a mere journalist. On the other hand, Murray Rothbard had glowing praise for Bastiat’s work, though it lacked critical insights related to subjectivism and marginalism later developed by Carl Menger, founder of the Austrian school. (See Henry Hazlitt’s two-part discussion here and here. For an interesting discussion of what is missing from Bastiat’s theoretical framework, see Roderick Long’s article here.)

Robert Gwiazdowski, a lawyer and economist, and Mateusz Machaj of the Institute of Economic Sciences and a policy analyst with the Polish Mises Institute spoke on Bastiat’s economic theories, particularly his emphasis on the economic harmony of all “classes” in the free market. Kris Mauren of the Michigan-based Acton Institute for the Study Religion and Liberty, drawing on unpublished correspondence, discussed Bastiat’s struggle and eventual coming to terms with his Catholic faith. Jaroslaw Romanchuk, president of the Scientific Research Mises Center in Belarus, spoke about the nature of pro-freedom reform in the former Soviet-bloc countries, offering a radical program including free banking and competitive courts.

My own lecture covered Bastiat’s classic The Law, in which he argued that the only legitimate function of law is the protection of life, liberty, and property. When law is used in opposition to those things — when it authorizes “legal plunder” — it is destructive of the good and prosperous society, regardless of motives. I applied Bastiat’s thinking to some current issues, including the housing-financial turmoil and the push for government-run medicine. I also participated in a spirited panel with Romanchuk and activist-blogger Janusz Korwin-Mikke on the nature, role, and future of government. In response to comments by Korwin-Mikke, I emphasized that the first modern peace movement was launched by the liberals, such as Bastiat (who sat on the left side of the French Assembly with “socialist” Pierre-Joseph Proudhon), and his free-trade counterparts in England, Richard Cobden and John Bright.

The conference concluded with a summation by Jacques de Guenin, founder and president of the Circle Frédéric Bastiat in France. I was gratified to hear Jacques twice praise FEE for its long-time promotion of Bastiat’s ideas.

A high point of the conference was the screening of the Acton Institute’s latest film, The Birth of Freedom, a sweeping and stirring look at the historical evolution of individual liberty. Kris Mauren led an energetic discussion at its conclusion.

Scant Economic Reform

The former communist countries have made only halting progress in the transition to freedom since 1989. They have more political freedom but have made much less headway in reforming their economies. State businesses have often been privatized more in appearance than fact. The same goes for Poland, where the government holds life-and-death control over business through the central bank and licensing power. In a long dinner discussion with a Polish businessman, I learned that 20 years after the fall of communism there, the government still pervades the economy, dispensing favors and burdens in order to reward and cultivate friends and punish opponents. The economy is far from free. In some cases, the same people who ran businesses under the communist regime run them today. They’ve simply changed hats.

The lesson here is that firms’ outward forms are of secondary importance. What matters is who controls them. Nominal private ownership under political control is essentially the same as direct state ownership. Regular people are still victimized — by being denied economic opportunity and a chance for a better standard of living. All the while, they are told the regulation is for their own good. This leads me to conclude that politics is the art of seducing people into cooperating in their own exploitation.

This is why it is a hopeful sign that Bastiat is being promoted in Poland. If his essays, which are so effective at conveying basic economic lessons in terms accessible to everyone, can be disseminated and discussed widely, perhaps people will understand the damage done by government and demand that the politicians stop the legal plunder.

It happened again. On page 31 I came across this:

Socialists look upon people as raw material to be formed into social combinations. This is so true that, if by chance, the socialists have any doubts about the success of these combinations, they will demand that a small portion of mankind be set aside to experiment upon. . . . And one socialist leader has been known seriously to demand that the Constituent Assembly give him a small district with all its inhabitants, to try his experiments upon.

Two things occurred to me as I read this. First, you don’t have to be socialist to believe that people are raw material to be experimented upon. And second, in modern America, doubts or no doubts about success, experiments can be run on the entire country at once. No need to first try things out on a small district. When Americans appreciated the virtue of decentralizing power — “federalism” — grand experiments at worst could be done only in individual states because according to the consensus, the national government was supposed to be limited by the Constitution. (As I’ve written before, such a reading of the Constitution, a political document full of compromises and deliberate ambiguities, is at best a loose construction. However, I’m glad it was the dominant interpretation for some years after Thomas Jefferson’s election in 1800, and I would love to see it become dominant again.) That consensus essentially died in the War Between the States, and Alexander Hamilton’s revived vision of a consolidated nation has endured fairly continuously ever since.

As for point one, I have in mind the current administration. The word “socialist” (as well as “fascist”) is thrown around too glibly today, and everyone ought to be more careful. Lots of bad things are being proposed that would interfere with the market process, but no one in power is calling for replacement of the market with central planning. Ludwig von Mises called the philosophy behind the mixed economy “interventionism, and we ought to be working to make that word the pejorative we know it deserves to be.

Point two, of course, refers to the Obama administration’s experiments for the health-insurance, financial, and energy industries. Without getting into details here, I want to emphasize the sheer presumptuousness of those experiments. Those are our lives they are fooling with.

Bastiat brimmed with controlled outrage at the French politicians and writers who so blithely presumed that other people’s lives were theirs to dispose of in grand experiment. He dissected the classical notion, popular among the pundits of his day and ours, that individuals are inert until a wise leader comes along invests them with a principle of motion.

[T]hese writers on public affairs begin by supposing that people have within themselves no means of discernment; no motivation to action. The writers assume that people are inert matter, passive particles, motionless atoms, at best a kind of vegetation indifferent to its own manner of existence. They assume that people are susceptible to being shaped — by the will and hand of another person — into an infinite variety of forms, more or less symmetrical, artistic, and perfected….

These socialist writers look upon people in the same manner that the gardener views his trees. Just as the gardener capriciously shapes the trees into pyramids, parasols, cubes, vases, fans, and other forms, just so does the socialist writer whimsically shape human beings into groups, series, centers, sub-centers, honeycombs, labor-corps, and other variations. And just as the gardener needs axes, pruning hooks, saws, and shears to shape his trees, just so does the socialist writer need the force that he can find only in law to shape human beings. For this purpose, he devises tariff laws, tax laws, relief laws, and school laws.

This superior attitude is palpable throughout the Obama administration. One sees it in the words and tone of the president, Geithner, Summers, Emanuel, Sebelius, Clinton, and their allies in Congress. In a profound way, they are the anti-egalitarians. They know better than we. They exercise powers that we mere individuals out of government can never possess. They dictate to us, but we can’t dictate to them. They get to determine our lives in important ways — which means that in those respects we don’t.

Yes, they claim they are our representatives. It’s a baseless claim! They are not our representatives. They don’t know us, and they can’t really care about us. They are our rulers, gratifying their ambitions to “make a difference” — whether we want it made on our lives or not. If we don’t comply, they can take our liberty, our property, even our lives.

Depriving them of that power is a long and arduous intellectual process, requiring a philosophical sea change. In the meantime, those of us who know that we, and not they, own our lives, need a battle cry. In dedication to Bastiat, I propose this:

We shall not be experimented upon!

If this is true, it is a serious fact, and moral duty requires me to call the attention of my fellow-citizens to it.

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