In a cold and snowy land there lived the people of the North Country.  Some of them made a living by plowing and disposing of the snow that seemed to fall endlessly from the skies between November and March.  Though the work was hard, and often took place in the dark hours of the early morning, they frequently prospered, since the snowfalls came each year and the people of the North Country needed their driveways and parking lots free of the beautiful white flakes.  The Snow Plowers were happy.

But in the winter of 2011-12 the snows seemed to stop.  Oh there was a little ice and some snow, but not really enough to plow: Warmer temperatures quickly melted the little that fell.  The Snow Plowers were not happy.  They gathered the people of the town and complained that the lack of snowfall was devastating the economy of the North Country.  Without the income they earned from plowing, they told their fellow citizens, they would have no money to spend at the local grocery store or bars or restaurants.  And their fellow citizens who owned those fine establishments (and worked there too) would see their income fall, leading quickly to an economic disaster.

Saving the Economy

At first the people of the town nodded along in agreement.  “Yes,” they said, “we must save our economy. But how?”  The Snow Plowers suggested a petition to the Clouds, begging them to bring the snow that would save their business and, through the Magic Multiplier, save their town’s economy.  And so a petition was created.

But then a wise old man stepped forward and declared this was foolishness.  When asked by the townspeople to explain, here is what he said:

It is true that the lack of snow hurts our friends the Snow Plowers, and that is truly unfortunate.  However, just because they have lost income and therefore cannot spend it in the town and beyond, that does not mean the town as a whole is suffering.  Consider your own situation.  Most winters you spend perhaps $300 to pay the Snow Plowers to clear your driveways.  This winter you have spent but $50.  What has happened to that other $250?  You have presumably spent it (or perhaps put it in the bank to be lent to others who have spent it).  And where did you spend it?  On the exact same things the Snow Plowers would have spent it on.  You have been able to eat out a few more times, buy some extra beers, or a nicer steak at the grocery store, or even some candles.  The economy hasn’t been harmed; the flow of spending has just been altered.  You must, in the words of a wise man, “see the unseen.”  And what is unseen is what you have done instead of pay the Snow Plowers.

The Difference It Makes

One young man raised his hand and asked, “If this is true, then what you are saying is that it doesn’t make a difference whether it snows or not to our local economy.  So why should we not ask for more snow and help out our friends the Snow Plowers?”

The wise man responded:

Ah, but it does make a difference.  The rest of us are better off when it doesn’t snow.  Think of it this way: Each time it snows we must spend $25 to get the thing back we value: a usable driveway.  So in snowy winters we give up $300 and have a clean driveway — and that is all.

This winter, by contrast, we have both the clean driveway and the $300.  And we are free to spend that $300 on other things we might want, such as a new flat-screen TV.  This winter we are able to have both a new TV and a clean driveway, while in past years we’ve  had only the clean driveway.  Are we not all better off as a result?   It is unfortunate that our Snow Plower friends are worse off, but would we really prefer a world where we spend $300 to get us right back where we were before the snow?

The people pondered his wisdom, and they understood.  Some of them suggested that if their Snow Plower friends were truly suffering, the rest might use some of the money they saved by not plowing to help them through winter, perhaps by asking them to do some other sort of much-needed work around their homes or around the town.  After all, painting a room or installing new thermal windows would make them better off in a way that unnecessary snow plowing would not.

So the Snow Plowers’ petition to the Clouds was ripped up, and the people of the town rejoiced in the windfall created by the absence of snowfall.

(Thanks to Sarah Skwire for some stylistic suggestions.)

Read James Grant’s review in the Wall Street Journal.

Bastiat loved the market economy, and badly wanted it to blossom in full—in France and everywhere else. When he described the blessings of freedom, his benevolence shined forth. Free markets can raise living standards and enable everyone to have better lives; therefore stifling freedom is unjust and tragic. The reverse of Bastiat’s benevolence is his indignation at the deprivation that results from interference with the market process.

He begins his book Economic Harmonies by pointing out the economic benefits of living in society:

It is impossible not to be struck by the disproportion, truly incommensurable, that exists between the satisfactions [a] man derives from society and the satisfactions that he could provide for himself if he were reduced to his own resources. I make bold to say that in one day he consumes more things than he could produce himself in ten centuries.

What makes the phenomenon stranger still is that the same thing holds true for all other men. Every one of the members of society has consumed a million times more than he could have produced; yet no one has robbed anyone else.

Bastiat was not naive. He knew he was not in a fully free market. He was well aware of the existence of privilege: “Privilege implies someone to profit from it and someone to pay for it,” he wrote. Those who pay are worse off than they would be in the free market. “I trust that the reader will not conclude from the preceding remarks that we are insensible to the social suffering of our fellow men. Although the suffering is less in the present imperfect state of our society than in the state of isolation, it does not follow that we do not seek wholeheartedly for further progress to make it less and less.”

He wished to emphasize the importance of free exchange for human flourishing. In chapter four he wrote:

Exchange is political economy. It is society itself, for it is impossible to conceive of society without exchange, or exchange without society. . . . For man, isolation means death. . . .

By means of exchange, men attain the same satisfaction with less effort, because the mutual services they render one another yield them a larger proportion of gratuitous utility.

Therefore, the fewer obstacles an exchange encounters, the less effort it requires, the more readily men exchange.

How does trade deliver its benefits?

Exchange produces two phenomena: the joining of men’s forces and the diversification of their occupations, or the division of labor.

It is very clear that in many cases the combined force of several men is superior to the sum of their individual separate forces. . . .

Now, the joining of men’s forces implies exchange. To gain their co-operation, they must have good reason to anticipate sharing in the satisfaction to be obtained. Each one by his efforts benefits the others and in turn benefits by their efforts according to the terms of the bargain, which is exchange.

But isn’t something missing from this account?

Indeed, there is: the subjectivist Austrian insight that individuals gain from trade per se. For an exchange to take place, the two parties must assess the items traded differently, with each party valuing what he is to receive more than what he is to give up. If that condition did not hold, no exchange would occur. There must be what Murray Rothbard called a double inequality of value. It’s in the logic of human action—the discipline Ludwig von Mises christened praxeology. Bastiat, like his classical forebears Smith and Ricardo, erroneously believed (at least explicitly) that people trade equal values and that something is wrong when unequal values are exchanged.

Perhaps I am too hard on Bastiat. After all, he was writing before 1850. Carl Menger did not publish Principles of Economics until 1871. Yet the Austrians were not the first to look at exchange strictly through subjectivist spectacles—that is, from the economic actors’ points of view. The French philosopher Étienne Bonnot de Condillac (1715–1780) did so a hundred years before Bastiat wrote: “The very fact that an exchange takes place is proof that there must necessarily be profit in it for both the contracting parties; otherwise it would not be made. Hence, every exchange represents two gains for humanity.”

Well, perhaps Bastiat was unaware of Condillac’s argument. That is not the case. He reprints the quote above in his book and responds:

The explanation we owe to Condillac seems to me entirely insufficient and empirical, or rather it fails to explain anything at all. . . .

The exchange represents two gains, you say. The question is: Why and how? It results from the very fact that it takes place. But why does it take place? What motives have induced the two men to make it take place? Does the exchange have in it a mysterious virtue, inherently beneficial and incapable of explanation?

We see how exchange . . . adds to our satisfactions. . . . [T]here is no trace of . . . the double and empirical profit alleged by Condillac.

This is perplexing. Clearly, the necessary double inequality of value is not empirical or contingent. Contra Bastiat, the double inequality explains quite a lot, and his questions all have easy answers.

Yet more perplexing still is Bastiat’s statement in the same chapter: “The profit of the one is the profit of the other.” This seems to imply what he just denied.

Bastiat’s failure to grasp this point had consequences for his debates with other economists. For example, he and his fellow “left-free-market” advocate Pierre-Joseph Proudhon engaged in a lengthy debate over whether interest on loans would exist in the free market or whether it was a privilege bestowed when government suppresses competition. Unfortunately, the debate suffers because neither Bastiat nor Proudhon fully and explicitly grasped the Condillac/Austrian point about the double inequality of value. As Roderick Long explains in his priceless commentary on the exchange:

[E]ach one trips up his defense of his own position through an inconsistent grasp of the Austrian principle of the “double inequality of value”; Proudhon embraces it, but fails to apply it consistently, while Bastiat implicitly relies on it, but explicitly rejects it. . . .

Proudhon’s case against interest seems to depend crucially on his claim that all exchange must be of equivalent values; so pointing out the incoherence of this notion would be a telling reply. But Bastiat cannot officially give this reply (though he comes tantalisingly close over and over throughout the debate) because elsewhere—in his Economic Harmonies—Bastiat explicitly rejects the doctrine of double inequality of value.

How frustrating! Bastiat has so much to teach. But here is one blind spot that kept him from being even better.

Bastiat’s definition of socialism, i.e., using the law to take money from some people and give it to other people, could more accurately be translated today as “the welfare state.” Even so, I’ll stick with his term— socialism. And he believed that the idea behind tariffs and other restrictions against free trade was the keystone that supported the legal plunder he saw all about him. He was convinced that if tariffs were abolished, the other elements of socialism would begin to collapse.

He was probably right. For if there were no restrictions against foreign competition— i.e., if foreign goods and capital were treated exactly like domestic goods and capital—the fearful cost we are paying for the other economic compulsions and prohibitions by government would be easily observed by everyone, and would thus soon fall.

Among the several “story examples” offered by Bastiat to expose the fallacy of improving the domestic economy by restricting foreign imports, his allegory on prohibiting Belgian iron from entering France is a classic. He begins by following the thoughts and actions of just one French producer of iron. A century and a third after he wrote it, his story reads as though the essence of it were adopted from today’s Congressional Record or from the editorial pages of any one of hundreds of our daily newspapers.

Our French protectionist was well aware that Belgian mine owners were able to produce and ship iron into France at less cost than he and other French mine owners could produce it and sell it at home. That fact was naturally reflected in the comparatively low price of Belgian iron in French markets. And just as naturally, the French people bought most of their iron from Belgian producers instead of from their own domestic producers. That fact displeased the French mine owners exceedingly, and the one we are here discussing decided to do something about it.

At first, he considered the possibility of personally stopping that undesirable trade. He thought that he might take his gun, sally forth to the frontier, and kill the nailmakers, locksmiths, and other users of iron who crossed the border into Belgium to patronize his competitors. That would teach them a lesson!

But, unfortunately, there was the possibility that those buyers of Belgian iron might object to being killed, and kill him instead. Moreover, he knew that he would have to hire men to guard the entire frontier to make his plan effective. That would cost more money than he had. So our hero was about to resign himself to freedom, when suddenly he had a brilliant idea.

He remembered that at Paris there is a large factory engaged in producing laws. He knew that everyone in France is forced to obey the laws, even the bad ones. So all he needed from the Parisian law-factory was just one small law: Belgian iron is prohibited.

Then, instead of having to guard the frontier with his own few employees, the government would send 20,000 guards — chosen from the sons of the very locksmiths and enginemakers who were carrying on this undesirable trade with the Belgians. Better still, the domestic mine owner himself wouldn’t even have to pay the wages of those guards. That money would be taken from the French people in general, much of it from the self-same buyers of Belgian iron. Our hero could then sell his iron at his own price.

With this ingenious plan, our French mine owner proceeded to the law-factory in Paris. (“At some other time,” interjected Bastiat, who was himself a deputy, “I may tell you of his underhand methods, but here I wish to speak only of what was divulged to the public”)

The protectionist ironmaker urged the authorities of the law-factory to consider the following argument: “Belgian iron sells in France for 10 francs per hundred pounds. But I would prefer to sell it for 15 francs. Now if you will only produce a law that says, Belgian iron shall no longer enter France, the following wonderful results will occur. For each hundred pounds of iron that I sell to the public, I shall receive 15 francs instead of 10 francs. As a result, I can expand my business and employ more workers. My workers and I will have more money to spend. This will help the tradesmen in our community. The tradesmen will, in turn, then also buy more goods. That will mean larger orders to their suppliers all over France. Those suppliers, in turn, will also expand their businesses and hire more workers. Thus employment and prosperity will increase throughout France. All this will result from that extra five francs that your law will permit me to charge.”

The producers of the laws in the law-factory were charmed indeed by the logic of our hero. They rushed to produce the requested law. “Why talk of hard work and economy,” they said, “and why use an unpleasant way to increase the wealth of our nation when a single law can do the same thing.”

Familiar Argument

That argument for protection from foreign competition is precisely (word for word) the argument advanced today in Congress and the media in general to support restrictions against Japanese automobiles, Brazilian shoes, Swedish steel, Argentine beef, and Chinese textiles. And, again, that’s the reason Bastiat’s works are as readable today as they were in 1850; he was dealing with ever-present and universal problems.

“OK,” you may observe, “but you’ve got to admit that protectionism works, just as Bastiat’s fictional mine owner claimed. When the owners of the protected industries spend their profits, it does indeed create more jobs. Unrestricted foreign competition would simply wipe out all those jobs and profits. So what’s wrong with the French mine owner’s argument, if anything?”

Bastiat offered an answer to that question when his fellow-legislators advanced it in the 1800s.

Now in all fairness, we must do justice to the arguments of this mine owner who wanted a tariff to increase domestic employment. His reasoning was not entirely false, but rather incomplete. In securing from the government a special privilege, he had correctly pointed out certain results that can be seen. But he completely ignored certain other effects that cannot be seen.

True enough, the five-franc piece thus directed by law into the cash-box of the domestic producer does serve to stimulate the economy along the lines he predicted. That can easily be seen. But what is not seen is this: That five-franc piece comes, not from the moon, but from the pocket of some French citizen who must now pay 15 francs for the thing that cost him only 10 francs in a free market. And while the protected industrialist may well use the five francs to encourage national industry, the French citizen himself would also have used it for the same purpose, if he had been left free to do so. He would have used his five francs to buy a book, or shoes, or some other article or service he wanted. In either case, national industry as a whole would be stimulated by the same amount.

Thus the new tariff law has resulted in this: The protected industry now makes a high profit to which it is not justly entitled. The average French citizen has been duped out of five francs by his government, and must therefore do without the article or service he would have bought with it. One segment of the economy has profited at the expense of many others. True enough, because of the artificial price increases, new jobs have been created in the protected industry. But what is not seen is the fact that the extra money now spent for iron must necessarily result in reduced spending for other products and services, and thus fewer jobs in those industries. And worst of all, the people have been encouraged to think that robbery is moral if it is legal.

A popular argument today (one that Bastiat never heard) is that those five francs spent by the owners would actually be more productive than the same amount spent by U.S. consumers. The economists who support that argument assume that efficiency under “protected prices” will remain the same as under competition, and that the promised profits will be there as specified, and that those profits will be spent on new equipment, e.g., the United States Steel Corporation will actually use its government-created profits to modernize its facilities and not use them to buy an existing oil company. For the most part, however, reality simply doesn’t work out in harmony with that theory that’s still supported by so many of our leading economists.

As Bastiat said, all tariffs result in a net loss to the national economy and to the people in general. He demonstrates this net loss (both in products and satisfaction) in one of his stories on “compensatory tariffs,” i.e., retaliation against foreigners when they have an advantage (natural or artificial) that’s not possessed by our own producers. He was referring to cheaper labor costs abroad, subsidies and tax concessions given to native producers by their governments, and other advantages that foreign producers are said to have over domestic producers.

A poor peasant in France had planted a few grape vines of his own. After much sweat and time, he harvested enough grapes to make a cask of wine. “I shall sell this wine,” he said to his wife, “and buy enough material to enable you to make a trousseau for our daughter.”

Our honest peasant took his cask of wine to the nearest town. There he met an Englishman and a Belgian, and began to bargain with them about exchanging his wine for cloth.

The Belgian said, “Give me your wine, and I will supply you with 15 parcels of the material you want.”

Then the Englishman entered the bargaining with this offer, “Since we English can manufacture cloth at less cost than the Belgians, I will give you 20 parcels for your cask of wine.”

The peasant was about to sell to the Englishman when a customhouse official, who had heard the conversation, spoke to the wine owner, “My friend,” he said, “trade with the Belgian if you wish, but I have orders to stop you from trading with the Englishman.”

The astounded countryman exclaimed, “What! You wish me to be content with 15 parcels of material that come from Brussels when I can get 20 parcels that come from Manchester?”

The customhouse official answered, “Certainly, don’t you understand that France would suffer if you receive 20 parcels instead of 15?”

The peasant didn’t understand it at all, and said so in no uncertain terms.

Replied the customhouse official, “Well, I’m sorry I can’t explain it, but there is no doubt that it’s true. You see, all our government officials and journalists have agreed that the more a nation receives in exchange for its products, the more it is impoverished.”

Thus because of the protective French tariff against low-cost English textiles, the peasant got just as good a bargain by exchanging his wine for high-cost Belgian textiles. As a result, his daughter got only three-fourths of her trousseau. And those unsophisticated countrymen are still wondering to this day how it happens that a person is ruined by receiving four yards of cloth instead of three. They still don’t understand why a person with nine towels is richer than a person with 12.

A Modern Application

I sometimes suggest to my students in international marketing that the use of compensatory tariffs by the European Common Market today gives precisely the same result that Bastiat pointed out in his story, i.e., tariffs cause higher prices and a decrease in products and services always. The students seem to understand the idea better when I put the transaction in story form, a la Bastiat.

“Take wheat, for example,” I begin. “And let’s follow the American owner as he enters a European port with a shipload of wheat grown in Kansas. The American owner wants to sell his wheat for, say, $3 a bushel. But the officials in the European Economic Community refuse to accept that low price and insist that the European purchasers must pay a much higher price.”

At that, my students begin to look at me strangely. “You mean the European people insist on paying more for the wheat to bake their daily bread than they need to?”

“That’s right,” I answer. And in spite of their doubting expressions, I continue with my story.

“You see, while the Europeans believe in competition, it must be fair competition. And those vast wheat lands in Kansas are just better suited to grow wheat than are the small European farms. So it’s not fair competition—obviously. Further, those Kansas farmers have another big advantage, i.e., vast amounts of capital (farm machinery) that’s just not available to European farmers. The result is unfair competition, i.e., the costs of production for many wheat farmers in Europe are perhaps twice as high as in Kansas. And while most Europeans claim to favor the free market economy and open competition, naturally it must be fair competition. Everybody is in favor of competition, as long as it’s fair. And since fair competition is obviously impossible when the Americans enjoy those two big advantages, tariffs must be used to equalize the situation. Fair’s fair, you know.

“First, the EEC officials check around Europe to find the cost of producing a bushel of wheat by the most inefficient wheat producer in all of Europe. The chances are that’ll be a French farmer who insists on growing grain on his land when the market says grapes or vegetables.

“Once the costs of this most inefficient wheat farmer in all of Europe are determined, then the compensatory tariff to wipe out the American production-advantage is set so that European consumers will find little or no advantage in buying American wheat over French wheat. The price to them will be about the same.

“That’s what most people seem to mean by ‘equal competition,’ i.e., tariffs to wipe out any advantage (natural or man-made) enjoyed by the foreign producer over the domestic producer. The result is that the Europeans must pay perhaps 100 percent more for their daily bread than would be necessary under free trade. And since there are always low-cost producers in any industry, those European wheat farmers who are more efficient than that marginal French wheat farmer just automatically reap high profits—while the people in general have less bread and other goods and services.”

Paying More Is Good?

By now, the students are horrified, of course. It’s just inconceivable to them that any people are so gullible as to pay twice as much as they need to pay for products and services. Then, to give them an even worse example, I take them to Japan and the “orange situation.” I explain that the Japanese insist on paying perhaps four times as much for their inferior domestic oranges as they need to pay for superior California oranges. We Americans have been trying for years to sell our excellent oranges to them at exceedingly low prices. The Japanese refuse to let us do it, however, and continue to insist that they’re better off when they pay three and four times as much as we are willing to charge.

At that point, some of my students become so angry at this “Japanese inscrutability” that they seem almost willing to go to war again to straighten those people out. You doubtless have guessed what I do next — I bring them back home and point out that we Americans insist on forcing ourselves to pay at least 50 percent more for an American car than the Japanese are willing to charge us for a similar or better car.

A chill settles over the classroom. The students who’ve been deriding those inscrutable Japanese are suddenly quiet. Then I begin to hear the all-too-familiar arguments you hear every day in Congress and read every day in your local newspaper—precisely the same arguments Bastiat heard as a member in the French Chamber of Deputies in 1848. “But we must protect American jobs. Those Japanese have the advantage of efficient and disciplined labor. It’s a part of their culture, and it’s obviously not fair. We Americans truly believe in the free market, of course, and competition. But the competition must be fair.” And so on and so on.

Truly, most of us Americans honestly believe that a nation prospers by paying more and getting less. Were that not so, tariffs and all other restrictions against peaceful people freely exchanging their goods and services would disappear immediately. We blind ourselves to reality by concentrating on the producers and their problems instead of on us consumers and our problems. We worry about who produces, instead of what is produced and at what price. We just don’t seem to understand that a nation and its people are better off when we get more for our money, i.e., when we have more products and services, not less.

I now understand what Bastiat meant when he observed that logic is not in any way related to laws that (in various ways) take money from people who have earned it and give it to people who have not earned it. According to Bastiat, that process is the mainspring of socialism, and it’s a sure way to the destruction of both the producers and the consumers in any nation.

I am inclined to think that the grass roots of our trouble is our tax-supported school system. It is teaching by example that might makes right; that the end justifies the means; that there is no law superior to the will of the majority. How can we expect the youth of the land, when the public generally believes in tax-supported schools, to believe in freedom, the American way, or a definite limited government?

In place of a tax-funded and compulsory school monopoly, Hoiles argued passionately for a voluntary, private system. It was an argument he sustained throughout his long, remarkable life.

Raymond Cyrus Hoiles (1878–1970) epitomizes the American dream. Born into comfortable but modest circumstances, he rose through hard work and merit. At his death at the age of 91, his corporation, Freedom Newspapers, Inc., owned 16 daily newspapers, including the influential Orange County Register (originally the Santa Ana Register), with a collective circulation of over half a million. The California Press Association honored him posthumously as a “Great Crusader for Individual Freedom” who was respected for “his conservatism.”

Hoiles is often mischaracterized as conservative. At a quick glance the confusion is understandable. For one thing, Orange County, California, became a center of conservatism in the decades following World War II. As the county’s foremost newspaper, the Register often ran conservative columnists and letters to the editor. But it was Hoiles’s libertarian voice that dominated through editorials.

Hoiles insisted the editorial page was “a daily school room made available to its subscribers.” In that schoolroom Hoiles taught what he called “voluntaryism.” A November 1953 editorial, “Articles of Faith,” distilled its essence: “[A] government is a good government that only does what each and every individual has the moral and ethical and just right to do.” If it was not right for an individual to take money by force, then it was not right for a government to do so in the name of “taxation.” Another of the “Articles” stated, “I have faith that our government would better protect every person’s inalienable rights if it was supported on a voluntary basis rather than by taxes.”

Perhaps no single issue better captures the libertarian spirit of Hoiles than his feisty stand on education. The “Articles” declared, “I have faith that we will be better educated by voluntary, competitive schools than by government schools.” This statement must have startled conservatives who viewed the public schools as a success story. Indeed, a then-favored conservative strategy was to enter school board races. By contrast, Hoiles insisted he had no more right to vote for a school official than he did to vote for a trustee within a government-owned brothel. (Perhaps for shock value, Hoiles repeatedly compared public schooling to prostitution; he once declared, “A house of prostitution is voluntary, grade school is not.”)

Opposition to tax-supported schools became a dominant theme in Hoiles’s writing; his last editorial in the Register dealt with “something-for-nothing schools that have had a great influence in conditioning pupils to believe in something for nothing.” On occasion, Hoiles even found it necessary to defend the considerable amount of space school issues occupied in his paper. On October 15, 1945, he wrote, “The amount of space the Register is devoting to the junior college bond issue might cause some to think we are overestimating the importance of the issue. There is nothing more important than the principles back of the issue.”

An Integrated System of Beliefs

The “principles back of the issue” involved an integrated system of beliefs about government, society, morality, and human nature.

Hoiles rooted his theory of government in the Declaration of Independence—a document he quoted frequently—namely, that government derives its just power from the consent of the people and ultimately from the consent of the individual himself, who possesses inalienable rights.

“Articles of Faith” expressed this theory of society: “[G]aining understanding of nature’s laws is the best way to be useful to one’s self and to his fellow man.” One of nature’s fundamental laws was “the superiority of voluntary, competitive human endeavor over compulsory activity.” Freedom of association, including a free market, fueled the goodwill that civil society depended on; forced association destroyed it.

Hoiles based his morality largely on the Ten Commandments and insisted on “a single standard”: Everyone without exception should act according to the same moral code. What was wrong for a private individual was equally wrong for a government official. In a later policy statement, Hoiles offered the essence of this universal code: the Ten Commandments, the Golden Rule, and the Declaration of Independence.

His theory of human nature stressed the perfectibility of man through effort and the exercise of moral character. He believed this perfectibility resided in each human being, which seemed to make him somewhat blind to differences of race, gender, and social status. Former employees often commented on how he would engage a janitor in intellectual discussion as quickly as he would a writer.

Hoiles’s evolution on education began in a “little red schoolhouse” across from his family’s large farmhouse in Alliance, Ohio, where, he later explained, he learned “that the State, or a majority of citizens, had the right to use taxation to support the public school system.” His school texts exposed the political “error” of the divine right of kings but “they never explained the error in the divine right of the majority. It simply substituted the divine right of the majority for the divine right of kings.” Nor did his school books explain “the basic principle that governments derive their just powers from the consent of the individual; that the government had no right to do anything that each and every individual did not have the right to do. Instead, they had to teach that the government or the local school district, if the majority so willed, had a right to force a Catholic parent, or a childless person, or an old maid, or an old bachelor to help pay for government schools. . . .”

At the same time as they legitimized taxation, however, Hoiles’s teachers spoke of the Ten Commandments, including “Thou shalt not steal” and “Thou shalt not covet.” He observed wryly, “[T]he government school I attended made no attempt to be consistent and teach me to recognize contradictions.” The contradictions did not surprise Hoiles, who explained, “They cannot teach the single standard of rightness because they are practicing a double standard.” They could not teach moral values “any more than a robber can teach honesty.”

Hoiles’s higher education must have also imbued him with skepticism about government education. The knowledge he valued most had been self-taught and came from experience. While studying electrical engineering at the Methodist Mt. Union College (Alliance), Hoiles worked part time at his brother Frank’s daily paper, the Alliance Review, and discovered what became a lifelong passion for the newspaper business. Hoiles must have wondered if his college education had been wasted. Later in life he complained of the common perception that “going through the public schools and colleges is education.”

In 1932 Hoiles temporarily left the newspaper business and began to read insatiably. Even though he had shown little interest in philosophy to date, he acquired the background to sprinkle future writing with quotations from an amazing range of authors: from Frédéric Bastiat to Ayn Rand, from John Locke to Spinoza.

The most influential was Bastiat. In a 1955 editorial Hoiles wrote, “He was the first man who awakened me to the errors, taught in government schools and more Protestant colleges, that the state doing things that were immoral if done by an individual made these acts become moral. In other words, he was the first man that pointed out that there was only one standard of right and wrong.”

In 1935, at 56, Hoiles arrived in Orange County, where he had purchased an established newspaper. With him, Hoiles brought not only his family but also an evolved philosophy of freedom, which he aggressively applied, especially to public education.

A September 3, 1946, editorial in the Register titled “Most Sacred of All Popular Idols, Government Education,” typifies both Hoiles’s style and content in approaching the issue. The editorial is clearly answering critics who argued that public education is a necessary good because it leads to a literate population.

Hoiles opened by quoting an anonymous “lover of freedom” (Leonard Read) who defined the proper role of government as a “restraining force rather than a force to compel people to do good.” Considering government education from this angle, the “lover of freedom” concluded “it has all the characteristics of other forms of socialism.”

Some people, Hoiles continued, may see little difference between the earliest “red schoolhouses” that were voluntarily supported and the subsequent tax-funded ones. “True,” he stated, “the socialism incident to the ‘little red school’ was only a slight departure from the procedure of a few neighbors pooling their resources, voluntarily, to employ a teacher to instruct their children. But once the socialistic principle is admitted, once the idea is sanctioned of using government’s powers of coercion to take the fruits of the individual’s labor for the ‘collective good,’ there is no logical stopping point.”

Hoiles went on to quote Isabel Paterson’s The God of the Machine: “There can be no greater stretch of arbitrary power than is required to seize children from their parents, teach them whatever the authorities decree they shall be taught, and expropriate from the parents the funds to pay for the procedure.” Thus, continuing the quote, “[n]eighborly, small-scale socialism in education has expanded and developed until today we are faced with the disaster of national socialism in education.”

The “disaster” was partly economic. Hoiles cited statistics showing how the costs of educating one individual had increased more than ten times from 1880 to 1940, with no corresponding increase in quality. Indeed, quality had declined—partly due to increased bureaucratization, partly to the severing of connection between a teacher’s wages and his or her need to satisfy customers (the parents and children). Modern teachers needed only to satisfy the government, their new source of income.

“Government educators are becoming less and less servants of those from whom revenues are extracted or from whom their pupil raw material is conscripted,” Hoiles wrote. “More and more they are becoming vested interests, concerned with their own employment and tenure. More and more they are allying themselves as a pressure group with other bureaucratic interests. More and more they are using their strategic position to turn the minds of the young towards statism and interventionism.”

Attacking on yet another front, Hoiles explained the terrible impact that government teachers have on the character development of children. “I take the stand against tax-supported education because I believe . . . that the advantage of being able to read and write is far outweighed by the destruction of individual initiative, enterprise and responsibility brought about by government education’s poison of statist psychology. Practically every youth in the land is a socialist at heart. How can he help but be unless he comes from a family that is steeped in the belief in true liberty and the dignity of man and recognizes that multiplying a robbery does not make it right?”

It is not possible to understand the passion with which Hoiles and other advocates of individual freedom addressed public education without establishing the context. In the early twentieth century, education in America underwent a political revolution, becoming the lynchpin of the Progressive Era—a period of social reform, from the 1880s to the 1920s. A central tenet was that government needed to play a larger role in solving social problems and in promoting the “social good.” “Popular,” or public, education was viewed as a prerequisite and the key to reconstructing society by molding generations to come. In his watershed book, Democracy and Education (1916), John Dewey advocated using popular education as a conscious tool to remove social evil and promote social good. Slowly, the classical curricula that aimed at rigorous education—such as familiarity with Latin, a stress on history—were replaced by programs aimed at creating “good citizens.”

Hoiles was outraged by his children’s curriculum.  In a 1961 editorial he reminisced about an incident involving his daughter Jane. After reviewing one of her school textbooks, he appeared before the directors of the Santa Ana Chamber of Commerce to protest against school books that “set forth the principles of Karl Marx.” Hoiles’s purpose was not to ban or censor but to assert a parent’s right to guide his children’s education. Nevertheless, the book was pulled.  Why, then, did Hoiles’s children attend public school? He told a Newsweek reporter, “There was no place else to send them.”

A particularly provocative strategy of his was spelled out in the May 23 letter to Read. Hoiles explained, “I have repeatedly offered a member of the Board of Education in Santa Ana, who is a preacher, $100 if he would publicly attempt to harmonize tax-supported schools with quotations from Jesus. He will not undertake it. I also made the offer to the superintendent of schools. He will not undertake it.” Hoiles wondered if he should up the ante to $500 and construct the discussion as a debate, perhaps with Isabel Paterson, Rose Wilder Lane, or Read himself. Hoiles considered the offer a fail-proof maneuver. If the preacher accepted, the flaws in his argument would be exposed. If he refused, then the refusal would “cause the people of the community to wonder . . . whether tax-supported schools are doing what they think they are doing.”

R. C. Hoiles died on October 30, 1970, at 91. Within his lifetime he made no lasting impact on public schooling. But times change. Current discontent with government education is so deep and widespread that homeschooling has become a phenomenon and others grasp at any route out. I can only imagine Hoiles’s response to a revival of his moral crusade against public schooling.

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.

Last week I mentioned that I traveled to Warsaw, Poland, to participate in the Liberty Weekend Devoted to the Life and Legacy of Frédéric Bastiat. I can report now that the conference, sponsored by PAFERE, the Polish-American Foundation for Economic Research and Education, was a smashing success.

The rest of TGIF is here.

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!

The sheriff is patrolling his town one day when he walks between the general store and the window shop, across the street from each other, and sees that the latter is in shambles, while the former is thriving. This situation strikes him as quite unfair. Why, he asks himself, should the proprietors of these two stores, who (he presumes) spent comparable amounts of time and money in building their businesses, be separated by a large and growing disparity in their wealth and consequently their living conditions?

The sheriff decides he will take it upon himself to remedy the situation—to level the playing field—so he puts a brick through each of the general store’s windows. The window store is immediately flooded with business replacing all the general store’s damaged property. The sheriff is satisfied. He has succeeded in spurring the business of a struggling entrepreneur. His town is once again in harmony.

A month or so later the sheriff is walking the same beat. He notices that once again the general store, having recovered from the vandalism of the previous month, is maintaining a healthy business, while the window store is once again struggling. He decides to repeat his previous actions, once again tossing a brick through each of the former’s windows. And once again, the window store’s business surges as it is charged with replacing the damaged panes in the general store.

But the sheriff realizes that, left to its own devices, the general store will once again recover and resume its thriving business, while the window shop will again falter. So he decides to repeat his window-breaking routine every so often. By doing so, he reasons, he will be supporting an industry that would otherwise fail. He acknowledges the price that the general store will have to pay, but immediately dismisses this thought, realizing that such a thriving business certainly has the money to replace its windows every now and again.

Before this rampage of vandalism by the community’s civil servant, the owner of the general store had been contemplating ways in which to reinvest the revenue that his business was creating. He boiled the situation down to two options. On the one hand, he had been considering an expansion of his facilities. His business had been doing so well that he began to buy more products of more varieties, and, after a while, needed additional storage and shelf space. On the other hand, he thought, he owed much of his success to the hard work of his dedicated employees and felt they deserved a pay raise.

But before he could decide which of the alternatives suited him better, someone had begun to break the windows of his shop regularly. Although his business was not at risk, the costs associated with replacing the windows added up. He had to forgo his plans either for a physical expansion of his business or a bonus for his employees. (See Frédéric Bastiat’s discussion of the “broken-window fallacy.”)

After numerous occasions of vandalism at his shop, the owner of the general store goes to the sheriff and explains to him that the costs of replacing his shop’s windows are hampering his business and that he would like the sheriff to investigate. Much to the shopkeeper’s surprise, the sheriff admits that he, in fact, has been wreaking the destruction on the general store. The sheriff explains his logic, telling the owner that if those windows had not been broken, the business across the street would have gone belly up. As an officer of the law, the sheriff continues, he is charged with safeguarding the public—providing not just physical protection, but financial protection as well. He says that he cannot very well sit idly by and watch as members of the community who have entrusted their well-being to him are driven out of business and forced into poverty.

The general-store owner protests, but what can he do? Under threat of force (that is, of the law) he is told that he must endure the violation and destruction of his personal property for the benefit of the community. The sheriff continues to hurl bricks through the general-store window, and eventually the owner learns to live with this nuisance. Rather than expand his business—and the public service that it offers—or pay his employees more, he is forced to endure the oppression of the law for the sake of a business that could not survive on its own.

This is the crime of the state. Pragmatically, taxation is the enemy of innovation, the broken window in the general store. Philosophically, taxation is the moral—and universalized, or at least nationalized—equivalent of the sheriff’s vandalism. The state feels, in the service of the public, that it must violate the property of some for the benefit of others.

One need not advocate anarchism, however, to see the problems inherent in such a policy. Taxation arguably serves its purpose in providing public services. If the sheriff had restricted his duties to the physical protection of the community’s citizens, he would have been doing his job aptly. Likewise, the role of government must be restricted to the protection of the life, liberty, and property of its citizens. The state oversteps its bounds, however, when it violates one of those three rights—as the sheriff did, and as the federal government of the United States does—even for the benefit of others.

If the sheriff had not intervened, the owner of the window store may have realized that the community did not provide sufficient demand for his product for him to run a successful business. He could then have opened his own general store and competed with the one across the street. He could have vacated the building and rented it to the general-store owner, who needed additional space. But the sheriff’s violation of the right to property, actions that embody the spirit of welfarism and coercive equality espoused by so many in our own government, cannot be justified on any terms.

The United States is moving dangerously close to (and has maybe even arrived at) a system under which those charged with protecting and trusted to honor our rights regularly violate them in the name of mindless rhetorical utopianism and forceful egalitarian mediocrity.