FEE seeks candidates who may be unfamiliar with the ideas of a free and prosperous society, but are eager to discover the driving forces behind the maximization of human potential. We strive to impart these principles to our students in order for them to articulate, debate, and defend them when they return home.

For a third consecutive year we will host seminars in our branch office location: Atlanta, Georgia. Taking place in the Georgia Pacific building, our exciting Freedom University seminar series are designed to introduce college students to: Austrian economics, history and current events. For the first time this year we offer a summer seminar only for FEE alumni. Communicating liberty is designed to teach FEE alumni techniques of how to become effective communicators and spread the ideas of liberty.

Our Advanced Austrian economics seminar will take place at the FEE headquarter office in Irvington, NY.

Beautiful Salt Lake City will be the home of two seminars specifically designed for high school-aged students.

The goal of our seminars is not only to educate and engage students with the ideas of the free and prosperous society, but also to create life-long associations between our alumni and the Foundation for Economic Education.

Please visit the seminars page to download and complete the application, and do a friend a favor by forwarding this link!

May you have a prosperous and liberty-filled New Year!

Spend a full or partial day at one of our Freedom University Summer Seminars getting to know more about economics and FEE as an organization.

Please visit our summer seminar webpage for more information and a detailed schedule.

Pick a date from the schedule below that works for you and come experience first-hand all that FEE Summer Seminars have to offer!

OPEN HOUSE REGISTRATION FORM

Thursday, June 2, 2011 – Freedom University: Basic Economics

9:00 am – 10:15 am: Index Card Activity (FEE staff)

10:30 am – 11:45 am: Public Choice (Frank Stephenson)

11:45 am  – 1:00 am: Lunch

1:00 pm – 2:15 pm: Protectionism (Bob Ewing)

2:30 pm – 3:45 pm: Protectionism Skits (Staff)

4:00 pm – 5:15 pm: Monopoly and Antitrust (Ivan Pongracic)

5:15 pm – 6:15 pm: Dinner

6:15 pm – 8:30 pm: The Cartel (movie)

Friday, June 10, 2011 – Freedom University: Introduction to Austrian Economics

9:00 am – 10:15 am: Austrian Economics Today (Steve Horwitz)

10:30 am – 11:45 am: Institutions, Policies, and Economic Development (Frederic Sautet)

11:45 am – 1:00 pm: Lunch

1:00 pm – 2:15 pm: A Critique of Protectionism (Lawrence W. Reed)

2:30 pm – 3:45 pm: Austrians and Other Schools of Thought (Frederic Sautet)

4:00 pm – 5:00 pm: Hot Seat (with Faculty Involvement) (FEE staff)

5:00 pm – 5:30 pm: Action Plan Activity (FEE Staff)

Tuesday, June 14, 2011 – Freedom University: History

9:00 am – 10:15 am: Foundations of Economics and Prosperity Reading Discussion

10:30 am – 11:30 pm: Money & Inflation (Lawrence W. Reed)

11:30 pm – 12:00 pm: Activity

12:00 pm – 1:00 pm: Lunch

1:00 pm – 2:30 pm: Competition & Monopoly (Edward Lopez)

2:30 pm – 3:45 pm: The Meaning of Liberty During the American Founding (Brad Birzer)

4:15 pm – 4:45 pm: Student Tests

4:45 pm – 6:15 pm: Amazing Grace / Cinderella Man

Tuesday, June 21, 2011 – Freedom University: Current Events

9:00 am – 10:15 am: Public Choice (Matthew Mitchell)

10:30 am – 11:45 am: Business Cycles (Ben Powell)

11:45 am – 12:15 pm: Team Tests Activity

12:15 am – 1:00 pm: Lunch

1:00 pm – 2:15 pm: The Housing Boom and Bust (Ben Powell)

2:30 pm – 3:45 pm: Money & Inflation (Anthony Carilli)

4:00 pm – 5:00 pm: Skit Activities

5:00 pm – 6:30 pm: Dinner

6:30 pm – 8:30 pm: The Cartel (movie)

OPEN HOUSE REGISTRATION FORM

Orwell, a man of the “left,” could not remain silent in the face of the horrors of Stalinism. Twice — during the Spanish Civil War and again at the dawn of the Cold War — he refused to permit his comrades to blind themselves to where their collectivism had led and could lead again. For his favor he was called a conscious tool of fascism, a stinging accusation considering he had gone to Spain to fight fascism. (But for a few inches, the bullet that penetrated Orwell’s neck in Spain would have denied us the latter warnings, Animal Farm and Nineteen Eighty-Four. We would have never known what the fascists had cost us.)

Hayek, a man of the “right,” risked ostracism and worse in 1944 by publishing The Road to Serfdom, in which this Austrian-turned-Briton, writing in England at the height of World War II, warned that central economic planning would, if pursued seriously, end in a totalitarianism indistinguishable from the Nazi enemy. That couldn’t have been easy to write at that time and place — central planning was much in vogue among the intelligentsia. While a good deal of the reception was serious and respectful, a good deal of it was not. Herbert Finer, in Road to Reaction, called Hayek’s book “the most sinister offensive against democracy to emerge from a democratic country for many decades”; it expressed “the thoroughly Hitlerian contempt for the democratic man.”

Not surprisingly, it was The Road to Serfdom that brought Orwell and Hayek together in print. Orwell briefly reviewed the book along with Konni Zilliacus’s The Mirror of the Past in the April 9, 1944 issue of The Observer. The man who would publish Animal Farm a year later and Nineteen Eighty-Four five years later found much to agree with in Hayek’s work. He wrote:

Shortly, Professor Hayek’s thesis is that Socialism inevitably leads to despotism, and that in Germany the Nazis were able to succeed because the Socialists had already done most of their work for them, especially the intellectual work of weakening the desire for liberty. By bringing the whole of life under the control of the State, Socialism necessarily gives power to an inner ring of bureaucrats, who in almost every case will be men who want power for its own sake and will stick at nothing in order to retain it. Britain, he says, is now going the same road as Germany, with the left-wing intelligentsia in the van and the Tory Party a good second. The only salvation lies in returning to an unplanned economy, free competition, and emphasis on liberty rather than on security. In the negative part of Professor Hayek’s thesis there is a great deal of truth. It cannot be said too often — at any rate, it is not being said nearly often enough — that collectivism is not inherently democratic, but, on the contrary, gives to a tyrannical minority such powers as the Spanish Inquisitors never dreamed of.

This is a significant endorsement, for no one understood totalitarianism as well as Orwell. Indeed, in Why Orwell Matters, Christopher Hitchens points out that Nineteen Eighty-Four impressed Communist Party members behind the Iron Curtain. He quotes Czeslaw Milosz, the Polish poet and Nobel laureate, who before defecting to the West was a cultural attaché for the Polish communist government: “Orwell fascinates them [members of the Inner Party] through his insight to the details they know well…. Even those who know Orwell only by hearsay are amazed that a writer who never lived in Russia should have so keen a perception into its life.” (An audio interview with Hitchens about Orwell is here.)

But true to his left state-socialism, Orwell could not endorse Hayek’s positive program:

Professor Hayek is also probably right in saying that in this country the intellectuals are more totalitarian-minded than the common people. But he does not see, or will not admit, that a return to “free” competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State. The trouble with competitions is that somebody wins them. Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led, and since the vast majority of people would far rather have State regimentation than slumps and unemployment, the drift towards collectivism is bound to continue if popular opinion has any say in the matter.

…Capitalism leads to dole queues, the scramble for markets, and war. Collectivism leads to concentration camps, leader worship, and war. There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics.

Short Shrift

It’s disappointing to see Orwell give such short shrift to Hayek’s positive thesis. He is glib and dogmatic, which is unbecoming a serious intellectual such as Orwell. His ignorance of economics leaps from the page.

“[A] return to ‘free’ competition means for the great mass of people a tyranny probably worse, because more irresponsible, than that of the State.” It’s hard to believe that someone so familiar with Stalinism could have written that. Even without knowing much economics, could he really have thought that what goes on in market-oriented societies, even during depressions, could be worse than the famine Stalin inflicted on the Ukrainians, the show trials and executions, or the labor camps in Siberia?

“The trouble with competitions is that somebody wins them.” In a market producers compete to better serve consumers. The losers in that competition are not exiled or executed. They find other ways to serve consumers, just as producers are trying to serve them.

“Professor Hayek denies that free capitalism necessarily leads to monopoly, but in practice that is where it has led….” Where has monopoly arisen without the aid of the State? We find no market-generated monopoly in England or the United States. There, major business interests actively promoted protectionism and other interventions precisely to tamp down competition and protect their market shares. Of course, for many people, Orwell presumably among them, that is capitalism, a topic I return to below. (I should note that Hayek forswore laissez faire in his book, but that is a topic for another day.)

“[T]he vast majority of people would far rather have State regimentation than slumps and unemployment….” But that’s a false choice. Slumps and unemployment, as Hayek and his mentor Ludwig von Mises taught, are products of central-bank manipulation of money and interest rates, that is, of government not of the free market. The Great Depression, which must have been on Orwell’s mind, was no exception. The real choice is between freedom and security (including mutual aid) on the one hand, and State “regimentation,” slumps, and unemployment on the other.

I must pause here to focus on Orwell’s disgraceful use of the word “regimentation.” I say “disgraceful” because he committed the sin he himself so eloquently condemned in his justly famous essay “Politics and the English Language”: the sin of euphemism. In that great essay he wrote:

In our time, political speech and writing are largely the defence of the indefensible. Things like the continuance of British rule in India, the Russian purges and deportations, the dropping of the atom bombs on Japan, can indeed be defended, but only by arguments which are too brutal for most people to face, and which do not square with the professed aims of the political parties. Thus political language has to consist largely of euphemism, question-begging and sheer cloudy vagueness. Defenceless villages are bombarded from the air, the inhabitants driven out into the countryside, the cattle machine-gunned, the huts set on fire with incendiary bullets: this is called pacification. Millions of peasants are robbed of their farms and sent trudging along the roads with no more than they can carry: this is called transfer of population or rectification of frontiers. People are imprisoned for years without trial, or shot in the back of the neck or sent to die of scurvy in Arctic lumber camps: this is called elimination of unreliable elements. Such phraseology is needed if one wants to name things without calling up mental pictures of them. Consider for instance some comfortable English professor defending Russian totalitarianism. He cannot say outright, “I believe in killing off your opponents when you can get good results by doing so”. Probably, therefore, he will say something like this:

“While freely conceding that the Soviet regime exhibits certain features which the humanitarian may be inclined to deplore, we must, I think, agree that a certain curtailment of the right to political opposition is an unavoidable concomitant of transitional periods, and that the rigors which the Russian people have been called upon to undergo have been amply justified in the sphere of concrete achievement.”

Regimentation is the least of what goes on under a totalitarian regime.

Capitalism versus the Free Market

“Capitalism leads to dole queues, the scramble for markets, and war.” I think that part of the problem for Orwell is that a truly free market is not among the possible options. For him and many others, the choice is between a system run for employers and one run for workers. (The preferable alternative is not obvious.) In this view, the former is capitalism, sometimes dressed up as “the free market,” and the latter is socialism. We shouldn’t be too hard on Orwell for thinking this way, for many defenders of the market are just as careless when they write about mixed economies such as the one in the United States. Despite pervasive government intervention, we often hear business conduct defended because “under capitalism” consumers have the power to punish firms that ill-serve them. Tell that to consumers who chose not to buy GM and Chrysler cars. Tell that to people who lost land through eminent domain so that a big-box chain might prosper. Generations of business-inspired intervention to some extent must have rigged the market against consumers and workers. If not, what are the economists complaining about?

As for his inclusion of war in his list, let it be said that the scramble for markets and other economic objectives cannot be a sufficient condition for war. War requires the State, that is, the socialization of costs through taxation and conscription.

One wonders how Orwell avoided despair. He couldn’t accept (state) capitalism, and he saw the totalitarian tendencies of socialism up close. Yet he could write, “There is no way out of this unless a planned economy can somehow be combined with the freedom of the intellect, which can only happen if the concept of right and wrong is restored to politics.” (Emphasis added.)

Hadn’t he just read Hayek’s Chapter 11, “The End of Truth,” in which Hayek described how a serious commitment to central planning must produce “contempt for intellectual liberty”?

The word “truth” itself ceases to have its old meaning. It describes no longer something to be found, with the individual conscience as the sole arbiter of whether in any particular instance the evidence (or the standing of those proclaiming it) warrants a belief; it becomes something to be laid down by authority, which has to be believed in the interest of unity of the organized effort and which may have to be altered as the exigencies of this organized effort require it.

The general intellectual climate which this produces, the spirit of complete cynicism as regards truth which it engenders, the loss of the sense of even the meaning of truth, the disappearance of the spirit of independent inquiry and of the belief in the power of rational conviction, the way in which differences of opinion in every branch of knowledge become political issues to be decided by authority, are all things which one must personally experience — no short description can convey their extent.

But of course Orwell had experienced those things in Spain and knew how it was in Russia. He certainly put a heavy burden on that word “somehow.” How restoring the concept of right and wrong to politics would make central planning either decent or practical is a mystery no one has solved. (Of course, Mises had long before shown that socialism could not be practical because without prices arising out of the exchange of privately owned means of production, the socialist planner could not make rational calculations with respect to what should be produced, in what manner, and in what quantities.)

To end on a partly optimistic note, though Orwell presumably would not agree, central economic planning is not on the modern agenda. The threat today is not state socialism. It’s bureaucratic corporatism dressed up as progressive democracy.

This is most obvious when the advocate of a State solution says, as President Obama said, “The scary thing is to do nothing.” Anyone who thinks that the free-market solution means doing nothing is either ignorant or dishonest. Sorry, I see no other alternative. It doesn’t take much looking to see that we have nothing like a free market in medical services and insurance. Insisting we do is an effective way to assure that the free market is never considered as an alternative to the current State-ridden system.

The statist also shows his lack of understanding (or of honesty) by loosely accusing the free-market advocate of “being in the pocket of the insurance and drug companies.” Is it impossible that someone could sincerely believe that the market solution is just and efficient? Those who throw this charge around miss a perhaps subtle point. A free-market advocate and big entrenched insurance companies could oppose the same proposal — say, a government-run insurance program — without having any other positions in common. The market advocate rejects not only the so-called public option; he also favors dismantling the entire protectionist-regulatory-monopoly-privilege system the insurance companies have enjoyed for generations. No insurance company favors that. Similarly, libertarians and pharmaceutical companies oppose government’s negotiating drug prices. But no Big Pharma company is likely to favor repealing the FDA, the monopolistic patent system, and other privileges because these interventions protect it from upstart competition.

There’s a deeper barrier keeping the honest advocate of nationalized medical care from truly hearing what the libertarian says: the (implicit) belief that medical care is a right, and its corollary, that no one should have to pay (very much) for these services.

This is where the discussion needs to be but usually isn’t, which accounts for the mostly unsatisfying outcome. There is no meeting of the minds on what is in dispute, much less on what ought to be done.

Someone who believes that medical care is a right will never accept that consumption of medical services should have anything at all to do with one’s income or wealth. That’s just wrong, he will think. What’s more, he’ll think there’s something deeply wrong with the market advocate for thinking this way. “What’s the market got to do with it?” he’ll wonder in horror. “We’re talking about medical care!”

The libertarian may never convince the statist, but the first (and perhaps the last) thing to be discussed should be whether medical care is a right. Of course, it can’t be a right. In the absence of a contract, no one can have a right to anything that must be provided by someone else’s labor. It really is that simple. The alternative proposition is in essence a slave proposition. Most people will never be persuaded by the excellent efficiency arguments against nationalized medicine — the fact that bureaucratic rationing and triage are inevitable with government in charge — if they cling to the medical-care-is-a-right theory. So we may as well have the debate there.

No Right, No Service?

The libertarian must also head the statist off at this pass: the inference that if you don’t believe health care is a right, you must believe that people of modest means would be — and even should be — without adequate medical attention.

Of course, this is ridiculous. Opposition to nationalized agriculture or housing doesn’t imply that people of modest means should starve or go homeless. When you consider how concentrated wealth was throughout history, it is astonishing how competent market-oriented society — despite all the State’s efforts to cripple it  — has been at delivering necessities and one-time luxuries to the masses. From the Industrial Revolution onward, to the extent people have been free to engage in enterprise, it was regular people whose living standard increased by orders of magnitude.

The point is that markets deliver, and medical care has been no exception. If the price of basic care has soared since World War II, we can largely thank all the ways government has unhinged demand from cost considerations. Much medical care is optional or marginal, and  if government, by disguising the true cost, makes it possible for people to overconsume it, those of modest incomes who don’t qualify for handouts will suffer the consequences.

It is simply wrong to believe that in a “freed market,” as Charles Johnson calls it, large numbers of people would  go without medical attention. A free society would be richer at all levels than our semi-free society because it would have none of the barriers that today impede economic self-advancement. (See Johnson’s article on the matter.) A freed medical system would be competitive, entrepreneurial, and innovative in getting services to greater numbers of people at reasonable prices. How do we know? We’ve see the same pattern in other industries that are far less straitjacketed than the medical industry. In case after case, what began as luxuries for the rich have become commonplace items for nearly everyone. A government-free medical industry would have no income-preserving professional licensing, no paternalistic drug prescriptions, no competition-inhibiting patents, no monopolistic certificates of need, no protectionist medical guild. In their place would be competition and entrepreneurship, the discovery process that serves consumers in ways we cannot imagine in advance

Demand-Side Innovation

Innovation would also emerge on the demand side. Again we can refer to history. In an earlier time Americans (and Britons and Australians) of modest means, including new immigrants, obtained medical care through sophisticated mutual-aid societies and in particular the institution called lodge practice. Exemplifying what Tocqueville identified as an American penchant for setting up associations, early Americans established “friendly societies” not only for social contact but for the safety net later provided, in coercive and much inferior form, by the welfare state. One member benefit of these societies was access to a family physician with whom the group contracted on an annual basis. “Lodge practice,” historian David Beito writes, “became particularly extensive in urban and industrial centers. In 1915, for example, Dr. S.S. Goldwater, Health Commissioner of New York City, went so far as to assert that in many communities it had become ‘the chosen or established method of dealing with sickness among the relatively poor.’” Lodge practice flourished until State-empowered organized medicine, whose members’ incomes were threatened by this unorthodox competition, put the screws to the “lodge doctors” it reviled. Who knows how mutual-aid would have evolved had it not been crowded out by “Progressives” aping Bismarck and wielding the power of taxation? What we do know is that people found a way to make medical care “universal and affordable,” that holy grail the politicians still haven’t located.

Free people are resourceful even when their resources are modest. The key is to keep government out of the way.

Admittedly, the sick and destitute would have had trouble joining a mutual-aid society. But a free and prosperous society would also be a generous society. History demonstrates it. As in the past, philanthropic foundations, charity hospitals, teaching hospitals, and pro bono medicine would all combine to provide for those who truly could not make it on their own. Government intervention undoubtedly makes these things less common. If laws mandate that all hospital emergency rooms treat whoever shows up with whatever ailment, we can anticipate that charitable efforts will be less abundant than in a free society.

We will never achieve the medical system — indeed, the society — worthy of free people as long as we are trapped in the juvenile mindset that someone owes us medical care. It is an absurd doctrine — is that someone also owed medical care? But worse, it is fodder for political opportunists, who will exploit this demand to increase State power at the expense of freedom and therefore dignity. If we follow this path, rationing of medical care might be the least of our worries.

But some defenders of government control acknowledge that rationing is the logical consequence of their ambition. They parry objections by saying in effect: “So we’ll have to ration. Big deal. We already have rationing — by the market.”

For example, Uwe Reinhardt, an economics professor and advocate of government-controlled medicine, writes, “In short, free markets are not an alternative to rationing. They are just one particular form of rationing. Ever since the Fall from Grace, human beings have had to ration everything not available in unlimited quantities, and market forces do most of the rationing.”

Sadly, interventionist economists are not the only economists who talk this way. Most free-market economists would agree that where there is scarcity there must be rationing and that the most efficient way to ration is by price, that is, through the market.

This is factually wrong and strategically ill-advised. As we’ll see, markets do not ration. Thus the healthcare debate is not about which method of rationing — State or market — is superior.

Let me be clear about what I am not denying. I am not denying that economic goods are by definition scarce and that at any given time we must settle for less of them than we want. I am also not denying that the marketplace is relevant in determining who gets how much of those scarce goods.

I am denying that this is appropriately called “rationing.”

Markets Don’t Do Anything

To see that the market does not ration one need only see that “the market” doesn’t do anything. To talk as if it does things is to reify the market — worse, it is to anthropomorphize the market, ascribing to it attributes — purposes, plans, and actions — that only human beings possess. We may also see this as another instance of literalizing a metaphor, which, as Thomas Szasz has so often warned, is fraught with peril.

I’m not saying that economists don’t realize this diction is a metaphor. Of course they do, and there’s no harm in using this shorthand among those who understand it as such. The problem, as I see it, is that the general public doesn’t fully grasp the metaphorical nature of these statements. For the sake of public understanding, free-market advocates should not welcome a debate in which they begin by saying, “Our method of rationing is better than your method of rationing.”

Better to respond to the interventionists this way: The market does not ration or allocate. The market does not do anything. It has no purposes or objectives. It is simply a legal framework in which people do things with their justly acquired property and their time in order to pursue their own purposes.

This is squarely in the Austrian conception of the market as set out by Ludwig von Mises and F. A. Hayek. The market order “has no specific purposes but will enhance for all the prospects of achieving their respective purposes,” Hayek wrote in volume two of Law Legislation, and Liberty.

The market was never set up by people to achieve a purpose. It is not a device or an invention aimed at satisfying an intention. “Market mechanism” is a metaphor. The market — as a set of continuing relations among people — emerged, unplanned and unintended, from exchanges, initially barter, in which the parties intended only to improve their respective situations. Lecturing at FEE this week, Israel Kirzner recalled that one of the first things Mises said to him as a graduate student was, “The market is a process,” by which he meant “a series of activities.” This is similar to what the French liberal economist Destutt de Tracy (1754–1836) wrote in A Treatise on Political Economy, “Society is purely and solely a continual series of exchanges.”

Mises, Hayek, and Tracy help us to sort out the rationing question. I submit it makes no sense to say that an undesigned series of exchanges rations goods. If we were to observe a free market (wouldn’t that be nice?), what would we see? Rationing? Allocation? Of course not. We would see people exchanging things — factors of production, services, and consumer goods — for money. Where would they have gotten those things? From previous exchanges or original appropriation from nature.

When a person buys five apples in a grocery store rather than ten because he wishes to use the rest of his money for other purposes, it seems entirely wrong to say the market (or even the grocer) has rationed the apples. The customer makes his choice on the basis of his preferences and the money available (which is the result of previous transactions).

It is true that as a result of market exchanges, goods and resources change hands and (except for land) locations. But in no sense is this rationing or allocation. The resulting arrangement of resources is simply a product of many transactions. Of course, people’s choices of what and what not to buy and sell at which prices create an arrangement of goods and resources that tends to be intelligible in terms of consumers’ subjective priorities. But that does not warrant calling the process rationing or allocation.

Those words — especially ration, which shares its root with rational – suggest conscious decision-making — as part of a plan — by an agent. In a free market there is no consciousness overseeing this “distribution” — another inappropriate word when it comes to describing the market process.

I am not saying anything that a good economist or thoughtful person doesn’t know. I am merely pointing out that we can be more effective in the healthcare debate if we are more precise in our language. We do not face a choice between methods of rationing medical services. We face a choice between rationing according to a bureaucratic plan and being freed to engage in mutually beneficial exchanges.

Without socialized education, how would the poor get their schooling? Without the socialized post office, how would farmers receive their mail except at great expense? Without social security, the aged would end their years in poverty! If power and light were not socialized, consider the plight of the poor families in the Tennessee Valley!” –Leonard Read