How an Economy Grows and Why It Crashes is Peter Schiff’s most recent effort in that regard. Bypassing the academic crowd and avoiding an eye-glazing academic approach, Schiff and his brother Andrew have tried to grab readers’ attention with an amalgam of allegorical storytelling and current events. They aim to promote real economic comprehension.

The book’s introduction starts with a lucid explication of the key elements of Keynesian economics—showing how John Maynard Keynes, by making “something simple seem hopelessly complex,” paved the way for acceptance of “some very stupid ideas about what makes economies grow.” In chapter 1 the authors shift into allegorical mode, weaving a tale about a Crusoe-type economy based on fishing. Here they introduce the reader to the rudiments of capital theory. The story progresses logically from there. The use of capital leads to both greater wealth and income inequality. Then comes a cogent discussion of the counterproductive effects of forced income redistribution.

Next they turn to the role of saving—how it serves as the source of credit and a cushion permitting people to get through emergencies and how, contra Keynes, it is the true key to economic growth. In addition the authors correct the common misinterpretation of deflation—not as the disaster depicted by Ben Bernanke and his ilk, but as a key channel through which prosperity spreads. They proceed to describe the benefits of free trade, dissecting the canard that it is a job-killer and pointing out that “it is not the aim of an economy to simply provide jobs, but to create jobs that maximize labor productivity.”

Notable in their discussion of government is an endorsement of restricting voting to those who pay taxes, an idea going back at least to John Stuart Mill. They argue that retreat from this stipulation accelerates a nation’s downward trajectory into an inflationary welfare state. The Schiffs elucidate the unaccounted-for implications of the many popular policies dragging economies down this path. Included among those are the replacement of a commodity standard with fiat money, subsidization of loans to politically favored sectors of the economy, and so-called “stimulus” spending—all central elements of Keynesian monetary and fiscal policy.

They finish their allegory with the inevitable upshot of those policies (given the lack of political will to incur the short-term pain that would stave it off): the decision of our international creditors to cease enabling our profligate ways by redeeming our dollars, unleashing massive price increases, and pushing our standard of living off a cliff.

It’s well argued, but I wonder if the book is written at the right level for its intended audience. It is clearly not aimed at academics, which is too bad because many of them could use it the most. Rather it is aimed at noneconomists. Yet for the totally uninitiated I fear that it may throw too much at them too fast, without sufficient explanation. One can only hope they will be interested enough to seek the requisite explanations from other sources rather than throwing up their hands in frustration.

Also, I found the pervasive fish metaphor tiresome—not to mention that fish are too perishable to ever be used as a monetary commodity. (On p. 159 the Schiff brothers do mention the advantages of precious metals as money.) While I realize this is an allegory in which some literary license is permitted, the cost of this aspect of the story in reader confusion and lack of credibility may be high.

On the other hand I do like the way each allegorical chapter is followed by a takeaway that uses the principles presented to shed light on real-world events. Knowing that the authors of this book wrote it to share the economic insights that enabled them to predict the onset of our current recession, I hope my misgivings are unfounded because the lessons are ones all of us need to master.

Powell opens with four theoretical essays whose common theme is that “the engine of economic growth is not better inputs, but rather an environment in which entrepreneurial activities can be capitalized upon.” That environment is shown to determine whether entrepreneurship gets channeled into uses that make capital more productive, generating prosperity for all, or into such activities as conquest and obtaining sinecures in the bureaucracy, permitting a few to live high at the expense of the many.

A seemingly counterintuitive observation from the last essay in this section is that “those countries with the highest economic freedom . . . have a rate of business failure that is almost twice as high as countries with the lowest economic freedom. . . .” This reminder that capitalism is a profit and loss system, in which the losses play an indispensable role, cannot be emphasized enough to those who have elevated the bailout to the chief economic policy tool.

The next four chapters are devoted to countries that failed to grow because they failed to establish institutions that foster productive entrepreneurship. The wide variety of cultures and circumstances covered in this section adds to the robustness of the findings.

George Ayittey’s discussion of how country after country in Africa opted to throw out the capitalist baby with the colonialist bathwater on independence is a sobering example of libertarian class theory in action. He minces no words, characterizing most African countries as ruled by “unrepentant gangsters.” His essay is replete with details of specific poverty-inducing policies, supporting his contention that most African states direct entrepreneurship into destructive paths. As he pithily summarizes, “Because politics constitutes the gateway to fabulous wealth in Africa, the competition for political power has always been ferocious.” No wonder negative growth is the rule in those countries.

Essays on Latin America and Romania show some of the difficulties of overcoming colonial and communist legacies, respectively. The Latin American essay recounts numerous false starts on the road from parasitic to constructive entrepreneurship. Whether it was land reform programs or the neoliberal privatizations of the 1980s and 1990s, the result was the continued fleecing of the weak by the strong, with free markets wrongly getting the blame. The Romanian case shows the harm to entrepreneurship of a radically uncertain regulatory environment based on executive decrees.

This section ends with Sweden, long lionized by American “liberals” for its advanced welfare state. Here we learn how the high taxes, heavy labor-market regulation, and opulent safety net that comprise that welfare state have smothered entrepreneurship. While Sweden could live off its previously accumulated capital for a while, it eventually was beset by a host of predictable problems. The silver lining in Sweden’s case is that when these problems reached crisis level, some of the most counterproductive policies were jettisoned.

The success stories covered in the last part of the book also avoided adopting market-driven reforms until their hands were forced by necessity. Certainly ideology played little role in Ireland, where the same politician whose policies caused the problems (downgraded debt that could not be monetized and abysmal economic growth) conceded to reality and reversed course. Elsewhere, it took some changes in personnel. Once that occurred, crises begat reform in New Zealand (lagging growth induced by protectionism and a sclerotic labor market, plus a 1984 currency crisis), India (a 1991 foreign-exchange crisis), Botswana (the third-poorest nation in the world in 1965), and China (over 36 million dead from disastrous economic policies from 1949–1976). These cases contrast with Robert Higgs’s finding that crises in the United States led to permanent movements away from free markets. One possible explanation is that those countries had run out of margin for error. (As I write these words, the United States may soon find itself in that situation.) The essayists who discuss each of these disparate success stories also document some degree of backsliding once the situation was stabilized.

This book is extremely valuable for anyone who wants to know what works and what doesn’t in national economic development.

The “first book” is replete with unsung heroes, such as industrialist Thomas Weston and nobleman Thomas Dale. These two Englishmen observed, diagnosed, and treated the free-rider problem that subjected the Jamestown and Plymouth Bay colonies to impoverishment, famine, and death. Their prescription was not, as today’s conventional economic wisdom would have it, enlisting the government to provide food, but rather replacing communal property rights with private property rights. Within a year, poverty was succeeded by plenty, initiating a process that would make America the wealthiest country the world had ever known.

The “second book” shows that identity theft has been a problem since long before the Internet, credit cards, and Social Security numbers. The culprit here is mercantilism and the victim capitalism. Few who have not studied the history of economic thought even know what mercantilism is, a problem that wide readership of this book would remedy. Yet this system, in which the state extracts large amounts of resources from the populace to subsidize favored corporate interests, is what most people think capitalism is. This deception has led to a double injustice: the vilification of market entrepreneurs whose wealth came from solving the problems of millions within the capitalist system and the hailing as the “saviors of capitalism” politicians who conjure up phony problems or phony solutions to real problems.

DiLorenzo sets this out clearly and provides many historical examples. For instance, he contrasts the private road systems that sprang up throughout the United States in the early 1800s with the “public improvements” subsidized by state governments that were so corrupt and inefficient that by 1860 most states had banned such boondoggles. Unfortunately, after the Civil War the newly empowered central government picked up where the states left off by subsidizing railroads. While most historians paint all railroad owners as “Robber Barons,” this book makes the crucial distinction between market entrepreneur and political entrepreneur to separate the Vanderbilts and the Hills from politically connected railroad magnates such as Jay Cooke and Thomas Durant, who were truly deserving of that ignominious title.

This book elucidates many other examples of capitalism delivering the goods while its opponents fraudulently take the credit. For one, it demonstrates how capitalism enriched the working class through that most capitalist practice, capital accumulation, while union leaders and politicians claimed their beloved income-redistribution policies had done the trick—and some trick it would have been, since you cannot redistribute what has not been produced. For another, it illustrates how capitalism, in the person of the entrepreneur John D. Rockefeller, solved the problem of providing cheap energy, enabling supply to grow and price to fall year after year. Simultaneously, nearly every measure promulgated by the government to tame the “excesses” of capitalist production of oil, including antitrust prosecutions, worked against the interests of consumers. Especially worthwhile is the discussion of the antitrust bait-and-switch scam, which promises to promote competition while actually seeking to rein in those who compete too successfully.

Finally, no discussion of how government problem-solving makes matters worse would be complete without surveying its sorry record of ameliorating the business cycle. DiLorenzo’s detailed analysis of the policies adopted from the onset of the Great Depression obliterate any justification for believing that Herbert Hoover was a practitioner of capitalism and Franklin Roosevelt was its savior.

The author writes with a clarity and passion rare for economists. How Capitalism Saved America is scholarly yet accessible. While not theoretical, it uses theory to help us understand the facts. I did note a couple of inaccuracies, however. For example, the author says a worker must generate at least as much profit as the wage he is paid, when he means revenue. He also confounds the First and Second Banks of the United States. While neither of these undermines the main themes of this powerful work, they are the kind of errors that will be pounced on by those who cannot counter his arguments on the merits.

The first sentence of The Case for Big Government reads, “It is conventional wisdom in America today that high levels of taxes and government spending diminish America’s prosperity.” While this is, indeed, wisdom, it is hardly conventional, at least in our national and state capitals, and that wisdom has not had a meaningful role in policy for over 80 years.

From that sentence on it’s all downhill. The book’s theme is that principled calls to limit government’s power to benefit the few at the expense of the many are nothing but rigid ideology, which must now make way for “pragmatic solutions.” Of course, such “pragmatism” has long been a cover for removing all restraints on government power and trusting that those who wield it will do the right thing. To prove my point, Madrick favorably cites Alexander Hamilton’s view that laissez faire “was to be respected but to be violated when necessary.” Translation: It is to be routinely violated.

The book is divided into three parts. The first recaps how well “pragmatic” government has served us in the past (according to Madrick anyway); the second avers that change is inevitable and sees more government power as the only way to deal with it; the finale lays out the specific policies the author believes will cure our ills. Naturally, all call for further expansions of government power to tax and control us.

What passes for analysis in this book is an embarrassment. Inconsistencies abound. For instance, the author correctly asserts that flexible labor markets are indispensable for economic growth, yet two pages later he endorses a higher minimum wage and the reinvigoration of labor laws to facilitate the spread of unions into new industries. He also demonstrates difficulty distinguishing free-market rhetoric from free-market policies. He correctly points out that the Reagan and Bush administrations practiced Keynesianism, yet blames their nominally laissez faire policies for our recent stagnation. Since Keynesian policies are the antithesis of laissez faire, one cannot logically blame problems originating from those policies on laissez faire.

Madrick invariably fails to appreciate the implications of the things he does get right. For instance, he admits that the post-World War II demobilization spurred a recovery rather than the relapse into depression unanimously expected by those who relied on Keynesian analysis, yet he doesn’t acknowledge that this is strong evidence of just how mistaken that analysis is. He also admits that governments err and that the programs they create tend to live forever, but he gives them a pass since businesses too make errors and are as hard to shut down. Not only is that last statement factually inaccurate—faltering businesses are much easier to shut down than wealth-draining government programs (56 percent of new businesses fail within four years; the number of government programs that have ever been terminated is miniscule)—but the examples he gives, such as Chrysler, are still in business only because of government bailouts. The attempt to equate business fallibility with government blundering is absurd.

In setting forth his wish list in part 3, Madrick asserts that giving the federal government control over an additional 5 percent of our GDP will do no harm—in other words, it has no opportunity cost. He offers no theoretical basis for that assertion. Much of the evidence he cites in support of particular programs is provided by some of the likely beneficiaries. Madrick sees only the nice hoped-for results and never realizes that politically connected big business and big labor groups will gain the most from mushrooming government.

Worst of all, however, Madrick is blind to the fact that expansion of government means contraction of liberty. The big-government policies he advocates won’t just waste resources; they will also further whittle away at our freedom. Look at the authoritarian details of the recent “health care reform” legislation, such as the mandate for individuals to purchase insurance whether or not they want it, and you see that big government is not a kindly uncle.

I could go on, but that should suffice. The underlying problem not only of this book, but also of would-be central planners of every stripe, is the denial of the primordial fact of scarcity. Madrick’s frequent denunciations of “the age of limits” can mean nothing else. Since scarcity and the human actions to deal with it are the ultimate foundations of economics, the case for big government is based not on economics but rather on special pleading devoid of principle and logic.

But tu quoque is the least of the logical errors informing this book’s misguided policy conclusions. Once we get beyond the silly comparison of an infant industry with his six-year-old son, we see the real shortcoming of his attack on free trade: his attenuated understanding of entrepreneurship. Entrepreneurs use resources for which they are responsible (either their own or those they have borrowed and must repay) based on their appraisals, in the face of uncertainty, of consumer demand and resource availability in the future. The infant-industry argument central to this book implicitly assumes that the only investments that can contribute to economic growth are those that compete with imports. But of all the import-competing industries in any developing country, which ones should be fostered through protectionism? Also, there’s no reason to presume that government leaders making those choices would do so on the basis of objective appraisal of their profitability. Favoritism towards relatives and cronies is far more likely.

Rather than let real entrepreneurs bear the risk and reap the rewards, infant industry protectionism is little more than a socialization of risk. While it may yield more investment, the investment to be protected is likely to be misdirected and thus less conducive to growth than investment that must meet a harsher market test.

The author rails against “neo-liberal” ideologues (the bad Samaritans of his title), blissfully unaware of his own ideological biases—namely, a touching faith in the ability of government leaders to make the right choices more often than private entrepreneurs risking their own capital. Entrepreneurs are not necessary in this view, since the government can do their job at least as well. The government can determine pragmatically which industries to protect, how much inflation will maximize growth, which foreign investments to permit, and which enterprises it should own.

Not only does Chang get the big picture wrong, he commits a lot of smaller errors along the way. He misplaces Jean-Baptiste Colbert’s tenure as France’s finance minister by 200 years (1865–1883 instead of 1665–1683). He cites the “failure of electricity deregulation in California, which resulted in the infamous blackout in 2001,” oblivious to the continued price controls that made “deregulation” a terrible mischaracterization of what really went on. He avers that “[s]trengthening of the welfare state . . . will also help reduce political corruption by making the poor less vulnerable to vote buying,”—as if the welfare state were much more than vote-buying on a wholesale basis. Another howler is his description of the late socialist John Kenneth Galbraith as a non-leftist. I guess he was just another non-ideological pragmatic centrist like Chang himself.

He also sneaks some subtle premises into his work, which helps explain why he supports so many bad policies. His tacit approval of Britain’s ban on the migration of skilled workers in the 1700s could only come from someone who believes the state owns its residents. Much of his discussion of less-developed countries’ lack of respect for intellectual property rights seems to be based on the premise that if you need something you can’t afford you have the right to steal it. Throughout the book he cites the existence of specific policies as prima facie evidence that they are justified. For example, “When they were backwards themselves in terms of knowledge, all of today’s rich countries blithely violated other people’s patents, trademarks and copyrights.”

Even when Chang raises interesting points his statist views put him on the wrong side of the issue. For example, he is critical of what he calls the unholy trinity of the IMF, World Bank, and WTO, but for the wrong reasons—downplaying the high taxes and additional regulations they impose in exchange for the putative “benefits” they provide.

Overall, Bad Samaritans gives us a good picture of what we champions of freedom are up against. The author J. Wallace Day once said, “Always keep your friends close, but your enemies keep closer.” That is the best rationale I can come up with to recommend that supporters of economic liberty read this book—to know what enemies of free trade are saying today.

Reviewed by Robert Batemarco

Although it was Tolstoy who said that “the highest wisdom has but one science—the science of the whole,” these words express with uncanny accuracy the practice of the Austrian school of economics. One of the hallmarks of that school is that it sees economics as an integrated whole, with a few initial principles underpinning every theory. It is in this spirit that Roger Garrison of Auburn University has written Time and Money, an in-depth exploration of Austrian, Keynesian, and monetarist macroeconomic theory. The three principles Garrison deploys as the launching pad for his excursion into these issues are scarcity, the market for loanable funds, and the time structure of production. Each is represented throughout this work by a simple diagram—production possibilities frontiers, supply and demand curves, and Hayekian triangles, respectively. Tying these together enables Garrison not only to furnish a standard account of the Austrian (that is, Mises-Hayek) theory of business cycles, but also to draw other implications of Austrian macroeconomics as well as to obtain penetrating insights regarding the nature of Keynesian and monetarist alternatives.

Another comparison of various macroeconomic paradigms may sound to many economists like flagellation of an expired equine. Yet Garrison rises above such potential ugliness and draws a number of fresh insights. One of these may be a triumph of style over substance—but in a good way. His coining of the term “capital-based economics” not only captures one of the most important distinctions between the Austrian approach to macroeconomic theorizing and its rivals, but may also be a public relations coup as well. Just as the “supply-side” designation effectively pointed out a fundamental deficiency of the Keynesian approach and re-popularized a basic truth that had gone out of fashion, Garrison’s use of the term “capital based” points to another shortcoming of conventional analysis and has the potential to lend new appeal to bygone verities.

Garrison uses his graphical tools judiciously. He takes them as far as they are applicable, but no further. Yet the graphics employed in Time and Money are not mere window-dressing. Their role is twofold: demonstrating the coherence of the Austrian vision and exposing the limited scope of its Keynesian and monetarist rivals. They permit us to see that those two paradigms are really special cases of the Austrian theory, obtained by disabling or ignoring the market mechanisms that, when functioning properly, align the capital structure with consumer desires.

It is a tribute to his powers of analysis that Garrison can do this without resorting to caricatures of those theories. Rather, he treats the theories of Keynes and Friedman fairly, frequently using their own words by way of exposition, and examining several versions of each of their models. One of the more interesting lessons to emerge from this procedure is that Keynes’s theory of unemployment had both cyclical and secular components, with the latter having even more statist implications than the former. His critique of monetarism is less severe, finding that framework to be more incomplete than erroneous; indeed, he sees Austrian economics and monetarism as complementary approaches, each useful in helping us to understand different situations.

A major strength of this book is its avoidance of one-dimensional analyses. The author incorporates into many parts of this work the recognition that “how” may be at least as important as “how much.” This is obvious in Austrian business-cycle theory, which posits that where new money is injected affects the ultimate impact of the injection. Garrison uses this same notion to advance our understanding of fiscal policy. He sees the variety of ways in which a deficit can be financed (borrowing domestically, borrowing abroad, and monetizing debt) as the potential source of much of its economic damage, in that it creates uncertainty, which dissuades many entrepreneurs from lengthening the structure of production, thus hampering economic growth. Another implication of this is that each method is used only as long as it meets little political resistance. Once experience reveals the true costs of the method, policymakers switch to another. Garrison uses this fact to explain a good deal of U.S. fiscal history in the ’80s and ’90s.

The book’s target audience is professional economists, but with only a few dozen graphs, a handful of equations and a clear style, it is more accessible to the educated layman than most of what’s being written about economics nowadays. Still, it will be the reaction of professional economists that will make or break this book. Time and Money has the potential not merely to improve the way economists look at macroeconomics, but to take it to the next level. It sends out a message of utmost importance: that economists cannot adequately understand macroeconomic phenomena if they neglect the role of capital.

Reviewed by Robert Batemarco

This book is about the choices American parents struggle to make regarding the balance between work and home life. The author, Brian C. Robertson, a research fellow at the New Economy Information Service, has found those choices, over the past four decades, reflective of an increasingly shallow materialism that shortchanges the children who are parents’ prime responsibility. There’s No Place Like Work is at once both an explanation of the origin of this state of affairs and an appeal to alter both our individual choices and the government policies that influence them.

As is so often the case with drastic changes in the way people order their priorities, new ideologies served as the catalyst.

Specifically, Robertson points the finger at the transformation of feminism from a movement that sought to assist women in the exercise of their maternal responsibilities to one that demonizes women who opt to care for their own children in preference to earning money outside the home. One reason this ideology was so readily accepted, especially among the educated classes, was that it justified sacrificing the welfare of one’s children for greater material comforts.

The change also proved congenial to the ambitions of the business and government sectors. The wholesale movement of mothers of young children into the paid labor force satisfied the desire of businesses to tap into a theretofore unavailable source of labor. The weakening of maternal bonds occasioned by employment outside the home provided another opportunity for the government to achieve one of its priorities—to expand its power.

Government had already usurped the role of fathers for a large segment of the population through various welfare programs, and now saw the chance to provide day care to preschoolers as an opening to assume one of the traditional roles of mothers. Noting that the family is one of the mediating institutions between the individual and the state, the author shows how dangerous these trends are. This is particularly so when the combination of ideology and interests makes the trend in that direction seem unstoppable.

Some would argue that if people choose to pursue the fruits of a further extension of the division of labor, who is Robertson to say them nay? However, the care provided by mothers is not like making pins, since who provides the care is of vital importance. The author marshals a formidable body of evidence to show why. His research faults daycare centers for their inability to provide stability and continuity, their regimentation (the better to prepare children for a socialist future?), and the higher rates of pathological behaviors among those raised in such settings. No wonder the author agrees with child psychologist John Bowlby that “a home must be very bad before it is bettered by a good institution.”

While the argument presented here accords the prime responsibility for greater use of institutional day care to feminist ideology, the author does not dismiss the role of economic necessity. He cites polls showing over half of working mothers saying they would prefer to stay home with their children if it were economically feasible. The Dependent Care Tax Credit (available only to those with children in commercial day care) and the erosion of personal exemptions by inflation are but two of the ways government has increased the burden of mothers who do stay home with their children.

Not content with ending government subsidies to behavior that he sees as harmful in the long run, however, Robertson wants to use government to subsidize his preferred behaviors. This desire is manifest most clearly in his nostalgia for the “family wage” and other “protective” policies of the earlier part of the twentieth century. Robertson’s seeming acceptance of “pro-family” coercion betrays a lack of understanding of the economics of wage determination. Indeed, economics is the Achilles’ heel of the book. For example, the author erroneously states that higher consumption leads to greater economic growth.

Its lack of economic sophistication and its willingness to use state power to further a pro-family agenda undermine the important message of this book, namely, that children who don’t receive care from their mothers often suffer harmful long-term consequences.

The Founding Fathers were well aware that it takes more than ideas, as important as they are, to permit freedom to flourish. It takes institutions—private property, foremost, and political institutions that will protect rather than plunder it. Thus the political system they established was designed with an intricate system of checks and balances. Their intent was to create competition among the branches of government (legislative, executive, and judiciary) as well as between various levels of government (central, state, and local) to keep any one of them from amassing too much power.

When this competition breaks down, all our freedoms are in jeopardy. Likewise, a breakdown in the competition between current government officeholders and would-be officeholders can also make citizens’ lives and property less secure. James Miller ably analyzes this breakdown and its consequences in his book Monopoly Politics.

To make his case Miller compares “commercial markets” and “political markets” (an oxymoron if I ever heard one). He draws analogies between these methods of satisfying human wants, likening voters to consumers. More telling are the differences he describes between the commercial and the political realms. The key is that commercial decisions are made individually and political decisions are made collectively. This guarantees dissatisfaction with the latter, since many, perhaps even the majority, do not get what they selected. Such dissatisfaction is compounded by the virtual impossibility of removing an unsatisfactory government official until his term is up. In contrast, suppliers of commercial services can usually be terminated in short order.

Monopoly Politics is at its most convincing when it demonstrates the lengths to which politicos go to squelch competition. “They pass ambiguous laws and promote complicated regulations in part to increase the demand for constituent service—which only they can provide.” They also vote themselves free mailings to constituents, limit ballot access to third-party candidates, and buy votes with tax dollars.

Miller puts his expertise as a public-choice economist to good use as he shows how proposed campaign-finance “reforms” currently being bandied about would make the problem he describes even worse, piling more obstacles on those which already make it difficult for outsiders to successfully challenge entrenched incumbents. He counters with his own solutions. Since he sees the contrived advantages of incumbency as playing the major role in weakening political competition, his logical cure is to remove those advantages. He would do that by ending the congressional privileges of unrequested franked mail and free access to Capitol TV and radio studios, restricting officials’ ability to collect “protection” money by controlling the proliferation of legislation and limiting the discretion of regulatory agencies, and making it more difficult to buy votes by eliminating budgetary “pork” and replacing the current tax code with a flat tax. He would also repeal all laws limiting campaign contributions.

Just as competition within free markets leads to economic efficiency, Miller claims that more political competition would generate “political efficiency.” And that is the main problem I have with the book—its obeisance to political efficiency. What Miller means by that phrase is meeting the demands of voters, specifically the “median voter.” This is a dubious goal in my mind. If the “median voter” wanted to protect domestic industry by high tariffs, or to guarantee “fairness” by taxing away all incomes over $200,000, then the enactment of such meretricious policies would be construed as efficient. This is not to imply that the author favors any of those policies, merely that raising “political efficiency” to an ideal does nothing to defend us against them.

To the extent that they constrain the ability of current officeholders to exercise power and increase political competition, Miller’s ideas are sound, but unfortunately they only deal with some of the symptoms of our underlying illness. A greater degree of political competition might make things marginally better from the standpoint of those of us who believe in liberty and limited government. As long as people feel themselves entitled to handouts from the state, however, politicians will find ways to cater to them. Only if people were to become as mindful of their liberties as the Founding Fathers were will we restore the proper relationship between government and individual.

Robert Batemarco is a vice president of a marketing research firm in New York City and teaches economics at Marymount College in Tarrytown, New York.

In this volume, editor Randall Holcombe, professor of economics at Florida State University, has assembled 14 economists of no small stature themselves to discuss these great ones. Among the most prominent contributors are Murray Rothbard, Israel Kirzner, Roger Garrison, Joseph Salerno, and Hans-Hermann Hoppe. They cover over 400 years of “Austrian” economics, from the mid-sixteenth century to the closing years of the twentieth.

That early starting date demonstrates that the ideas today labeled “Austrian” did not emerge from Carl Menger’s fecund mind out of nothing. Thus, the first five chapters feature pre-Mengerian writers who made use of such quintessentially Austrian themes as subjective value, entrepreneurship, time preference, and the ability of markets to coordinate plans to explain economic phenomena. They include Juan de Mariana, Richard Cantillon, A.R.J. Turgot, J.B. Say, and Frederic Bastiat.

Mariana, a Spanish Jesuit in the scholastic tradition, is probably the least well known. The chapter dealing with his contributions actually covers a number of Spanish scholastics. The reader will learn that their serving as sources of ideas for Menger was no accident, given the close relations between Spain andAustria resulting from their having once been part of the same Hapsburg Empire.

The authors of these essays are steeped in the history of economics, not just the Austrian school. Salerno’s piece on Carl Menger, for example, provides a fine description of the strengths and weaknesses of classical economics, a necessity in demonstrating what was so distinctive about Menger’s opus. In Menger we see all three aforementioned hallmarks of greatness. The path-breaking analytical tool for which he is perhaps best known is subjective marginal utility. In addition, his theory of imputation and his distinction between goods of higher and lower orders were to become building blocks for Austrian capital theory. Furthermore, Menger constructed an original value and price theory that not only linked consumer and producer behavior in ways classical economics never was able to, but also demolished the intellectual foundations of the labor theory of value. I’d say that qualifies for greatness.

Yet this book is not titled 15 Great Economists, but rather 15 Great Austrian Economists. No comprehending reader could come away from these pages without a clear picture of what constitutes Austrian economics. The praxeological method, that is, the use of logical deduction from indisputable axioms, is shared by every economist profiled in these pages. Not far behind is the recognition of the role subjective value plays in economic activity. Thus the classification of Phillip Wicksteed and W. H. Hutt as Austrians can be justified by their application of subjectivism to cost and labor supply, respectively.

Interestingly, not taking subjectivism seriously enough was a criticism cast in Eugen von Böhm-Bawerk’s direction from within the Austrian school. This criticism notwithstanding, Roger Garrison’s chapter makes clear that by building on Menger’s depiction of the role of time in the production process to create a theory of capital that serves as the foundation of Austrian macroeconomics Böhm-Bawerk secured his position in the pantheon of great Austrian economists.

Fittingly, with the exception of Menger, Ludwig von Mises receives the most extensive treatment of all. Murray Rothbard’s essay describing Mises’s achievements relates not only how he integrated monetary and value theory, leading to his business cycle theory and radical critique of socialism, but also how his personal integrity cost him numerous opportunities for academic positions. In addition, it shows how Mises went one step further than his predecessors in political economy, taking their “rather vague commitment to the market economy,” and hammering it into “a logical, consistent, and uncompromising adherence to laissez-faire.”

Mises left us not only a formidable system of economic analysis, but also a number of talented students who built on that system. Two of them, Rothbard and F. A. Hayek, earned places among the 15 great Austrians of this volume. Both made contributions within Austrian economics itself: Hayek in business cycle theory, the role of knowledge, and competition as a discovery procedure, and Rothbard in welfare economics. The essays in this volume also touch on their scholarship beyond the realm of economics: Rothbard’s forays into history, using Austrian economic theory as an interpretive framework, and his integration of Austrian economics with libertarian theory to develop a theory of liberty, and Hayek’s influential Road to Serfdom and works on psychology, philosophy, and politics.

The volume is rounded out with discussions of Frank Fetter, Henry Hazlitt, and Wilhelm Röpke, whose main achievements were clarifying the valuation process for capital goods, providing a blow-by-blow refutation of Keynes’s General Theory, and exploring the ethical foundations of market economies, respectively.

There is plenty in this slim volume to stimulate interest in Austrian economics and its greatest proponents. It belongs on every economist’s bookshelf.

The central theme of this book is that the idealist theory of the state, which depends on the concealment of government’s coercive nature, has made the American republic something that would be unrecognizable to its Founders. They were so keenly aware of the clear and present danger of state coercion that they painstakingly sought to establish institutions designed to minimize it.

Freedom in Chains is proof positive that ideas have consequences. The author alternates between identifying the origins in political philosophy of the ideas that have corrupted the American experiment in limited government and providing numerous concrete examples of the unhappy results of such wayward thinking. The first culprit singled out is Jean Jacques Rousseau, who “effectively made self-delusion about the nature of government into the highest political virtue” by using the notion of the General Will to “prove” that any depredation visited on subjects by their government, no matter how egregious, was done with their consent. Bovard then shows how those ideas reached American shores by the late nineteenth and early twentieth centuries via Germany and England.

As the idea of the state’s benevolence grew, more American thinkers came to see coercion as a small price to pay for the “blessings” it could bestow on us. Thus John Dewey was only slightly ahead of his time (1916) when he opined that “no ends are accomplished without the use of force. It is consequently no presumption against a measure, political, international, jural, economic, that it involves a use of force.” Indeed, those sentiments today probably have the tacit support of the great majority of Americans.

Each chapter of this book is organized around an idea that has served as cover for the power grabs by the state. Prominent among them are democracy, fairness, sovereignty, equality, and pragmatism. Bovard’s chapter on democracy is particularly well done. He takes on not democracy itself, but rather the extent to which democracy has been oversold as a protector of liberty. Democracy is merely a means to select leaders. Like government itself, “Democracy can be more noble for what it prevents than for what it achieves.” Of far greater import to the health of our liberty are restrictions placed on what those leaders can do. As the author aptly puts it, “since there is no sure-fire method of choosing good rulers, the amount of power available to any ruler, good or bad, must be minimized.”

To illustrate the consequences of the idealist theory of the state, Bovard produces a depressing parade of trampled rights ranging from the state-sanctioned murders of the Branch Davidians at Waco to killing with kindness those it has entrapped in its welfare system. Indeed, the litany of depredations at times makes the reader feel things are hopeless. But, if things were that hopeless, this book would not have been written; indeed it would not have been allowed to be written.

Bovard writes with an admirable passion for liberty. Occasionally, that passion leads him to overstate his case. For instance, he cites the fact that 6 percent of the entire U.S. population was arrested in 1996 as prima facie evidence of government perfidy. It would have been helpful had he broken down the arrests into those resulting from violations of the “traditional, accepted principles of justice” and those from running afoul of arbitrary edicts.

As one might expect from a book that identifies the root of the problem as the glorification of the state, Bovard’s solution begins with demystification and desanctification of the state. This requires that we call things by their right names, and Bovard does so with gusto. Thus he unmasks trade policy as the “arbitrary power to restrict Americans’ freedom to buy from and sell to 96 percent of the world’s population,” labels the community service some states now require for a high school diploma “a Kiddie Draft,” and characterizes the Motor-Voter Act as making “it a federal crime for state and local governments to be vigilant against voter fraud.” Statism thrives on the use of language to manipulate people’s thinking. Bovard fights back hard.

Freedom in Chains is a wonderful polemic aimed at alerting Americans that they are being duped into surrendering their freedom bit by bit to government. I recommend it enthusiastically.