I’m not the kind of Marxist that you normally think of when that term is used. I have nothing in common with Karl. I am a Groucho Marxist. As the great funny man himself might say, he and Karl were unrelated to each other in many ways. While Karl left a legacy of death and destruction (there was nothing funny about him or his communist nonsense), Groucho still has millions of adoring fans the world over, a third of a century after he passed away.

Count me among those many fans of Julius Henry “Groucho” Marx, born 120 years ago this very month, on October 2, 1890, on the upper east side of Manhattan. But don’t put me anywhere near Karl’s fan club.

The contrast between these two men with the same last name led the American composer Irving Berlin to pen this couplet many years ago:

The world wouldn’t be

In such a snarl

If Marx had been Groucho

Instead of Karl.

What an understatement! No other human being ever concocted a set of ideas that produced more mayhem than Karl Marx, and few were as reprehensible in the way they lived their personal lives. In his book Intellectuals historian Paul Johnson devotes a revealing chapter to the man who wrote Capital and The Communist Manifesto. Karl was an angry, hate-filled man—quarrelsome, neglectful of his family, lazy, and violent. He suffered from hideous carbuncles in part because he almost never bathed. Some of the most memorable phrases from his two books were lifted from others without appropriate credit. He spent almost all his time at home or in libraries, and almost none where the workers he fumed about actually worked. He mooched off of others all his life, prompting his mother to say that she wished Karl would “accumulate capital instead of just writing about it.”

But the worst thing about Karl Marx was not his personality or his hygiene. It was the evil web he spun with deceitful bait that snared and doomed millions. He called the workers of the world to revolution, but, as the Italian writer Ignazio Silone put it, “Revolutions, like trees, must be judged by their fruit.” Without exception, wherever Marxist ideology found root, it grew into monstrous depravity. Some of Karl’s disciples have attempted to explain this away with the old phrase, “To make an omelet, you have to break a few eggs.” The problem is, communists (and socialists and fascists, their kissin’ cousins) only break eggs; they never, ever, make an omelet.

Groucho, on the other hand, did honor to his family’s name and to society at large. In contrast to the loafer Karl, he actually worked at real jobs, enduring many exhausting days for 20 years performing in Vaudeville and in small towns. Early in his show business career, he picked up the nickname Groucho, though he privately chafed at its negative connotation.

After a big break on Broadway in 1924, the Marx brothers team of Groucho, Chico, and Harpo did 13 feature films—including Animal Crackers, Cocoanuts, and Duck Soup. A fourth brother, Zeppo, appeared in five of them. With his trademark cigar, greasepaint mustache and eyebrows, chicken-like gait, zany one-liners, and clever put-downs, Groucho usually stole the show. In later years, he hosted a popular television program, “You Bet Your Life.” His performances are best remembered for pithy wisecracks like these:

• “Please accept my resignation. I don’t want to belong to any club that would have me as a member.”
• “Those are my principles. If you don’t like them, I have others.”
• “Last night I shot an elephant in my pajamas. How he got in my pajamas I’ll never know.”
• “Either this man is dead or my watch has stopped.”
• “I’ve had a perfectly wonderful evening, but this wasn’t it.”
• “He’s honest—but you gotta watch him.”
• “I was married by a judge. I should have asked for a jury.”

Though Groucho in real life called himself a liberal Democrat, he never harbored a blind faith in State power that characterized the warped thinking of Karl. In fact he once opined, “Politics is the art of looking for trouble, finding it, diagnosing it incorrectly and then applying the wrong remedies.” That description of politics was on full display in Duck Soup, regarded by many, including me, as the Marx Brothers’ best film.

Duck Soup, released in 1933, takes place in the fictional, bankrupt country of Freedonia (“Land of the Spree, and the Home of the Knave”). On becoming its leader, Groucho’s character, Rufus T. Firefly, literally sings what a lot of politicians do but never admit: “The last man nearly ruined this place. He didn’t know what to do with it. If you think this country’s bad off now, just wait ‘til I get through with it.” A mere trifle leads Freedonia and neighboring Sylvania to go to war, a clear spoof of the insanity of World War I. In Groucho: The Life and Times of Julius Henry Marx, Stefan Kanfer writes that the satirical depiction of Freedonia’s government didn’t sit well with Benito Mussolini, who banned the film in Italy.

Government was also the object of Groucho’s irreverence outside the movies. His son Arthur once published an account of the time his father got in trouble with airport customs by listing his occupation as “smuggler.”

Groucho once quipped that he had worked himself up “from nothing to a state of extreme poverty.” But actually, his talent and hard work earned him a very good living. He accumulated the capital that Karl only wrote about and left behind a legacy of some of the most original and hilarious comedy ever performed on the stage or silver screen.

The very persona of Groucho Marx is still imitated by comedians the world over. Almost nobody, however, deliberately imitates Karl outside of Pyongyang and Havana. And thankfully, a dwindling number of people remain devoted to his philosophy or what it wrought. In his introduction to The Black Book of Communism: Crimes, Terror, Repression, the definitive catalogue of Marxist-inspired atrocities, editor Stéphane Courtois revealed that communism’s twentieth century death toll of 94 million people was far greater than that of any other political movement.

Karl and Groucho. Two men named Marx. Both brought tears to the eyes of millions but for very, very different reasons.

Portions of this column originally appeared in an op-ed by the author in the August 19, 2002, issue of USA Today.

To recap his critique, which is found in History and Critique of Interest Theories (volume one of Capital and Interest, 1884): Marx (and pre-Marxian thinkers) believed workers are routinely exploited by being paid less than what their products fetch in the market. That’s because, as the Stanford Encyclopedia of Philosophy notes, for Marx labor is priced “in terms of the amount of socially necessary labour power required to produce it,” that is, the products necessary just to keep the worker alive. (Marx derived this from the labor theory of value he inherited from Adam Smith and David Ricardo.) Yet a worker may produce more than that bare amount in a day. In that case the “surplus value” goes to the employer, or capitalist. Capitalists get away with this because they control the means of production. Workers, having been deprived of those means, have no choice but to offer themselves as laborers and take whatever they can get. The alternative is starvation. Thus they are ripe for exploitation.

In focusing on the exploitation question, Böhm-Bawerk took the legitimacy of the “distribution” of the means of production for granted, and of course he rejected the labor theory of value, or of price formation. (I can’t discuss here the legitimate objection that historically governments arranged for the few to control the means of the production at the expense of the many, forcing them onto the labor market. To the extent that is true, the wage system is exploitative, but the culprit is the State, not the market.)

Böhm-Bawerk responded to the exploitation theorists that the difference between what a worker is paid and the market price of his product can be explained without resort to exploitation theory. One component of the employer’s profit is interest on the money he advances workers as wages while the product is being readied for sale. Making and marketing products take time. Typically, Böhm-Bawerk said, workers cannot afford to wait until the product is sold before they are paid. They want a check every week. But how can they be paid before their products have been sold? Their employers pay them out of money accumulated previously. Thus wages are in effect a loan, which like all loans is repaid with interest. This is so because of time preference: We value present goods more highly than future goods, meaning present goods are discounted from their future value. Other things equal, X future dollars are worth less than X dollars today. Or to look at it from the other direction, if you want to use my X dollars today, requiring me to abstain from using them, I’ll want to be paid more than X dollars when the loan comes due. The interest payment is my reward for abstention.

As Böhm-Bawerk wrote, “We have traced all kinds and methods of acquiring interest to one identical source — the increasing value of future goods as they ripen into present goods.”

If Böhm-Bawerk is right, and wages are in effect a loan to be “repaid” when the product sells, then we shouldn’t be surprised if the revenue from the sale is greater than wages paid (and other input costs). No exploitation need have occurred. (“Profit” has other components as well, including pure entrepreneurial profit from arbitrage, that is, from actualizing the hitherto overlooked potential value of undervalued resources.)

Pure Theory

Böhm-Bawerk was writing pure theory, as if he were saying, “In a free market here is what would happen.” He was not implying that the theory would describe a particular time and place where the market was less than free “[T]he essence of an institution is one thing, and the circumstances which may accidentally accompany it in its practical working out are another,” he wrote.

In fact, Böhm-Bawerk noted, exploitation can occur when competition among employers is suppressed, raising the employer’s rate of interest to a level higher than it would have been under free competition and thus lowering wages. That, he said, was usury.

He writes, “It is undeniable that, in this exchange of present commodities against future, the circumstances are of such a nature as to threaten the poor with exploitation of monopolists.”

Böhm-Bawerk was merely applying the more general exploitation theory held by free-market thinkers at least back to Adam Smith: Monopolies and oligopolies (suppressed competition) harm consumers and workers through higher prices and lower wages. For Smith monopoly was essentially the result of government privilege. This largely has been the view of later Austrians, also. (Mises allowed for the theoretical possibility of a resource monopoly without government privilege.) However, Böhm-Bawerk did not explicitly attribute monopolistic exploitation to the State in this discussion.

“[E]very now and then,” he wrote, “something will suspend the capitalists’ competition, and then those unfortunates, whom fate has thrown on a local market ruled by monopoly, are delivered over to the discretion of the adversary…. [H]ence the low wages forcibly exploited from the workers — sometimes the workers of individual factories, sometimes of individual branches of production, sometimes — though happily not often, and only under peculiarly unfavourable circumstances — of whole nations” (emphasis added).

Böhm-Bawerk doesn’t say what that “something” might be. Maybe he means private collusion; maybe he means government protection from competition. He gives only this clue: “[L]ike every other human institution, interest is exposed to the danger of exaggeration, degeneration, abuse; and, perhaps, to a greater extent than most institutions.” (Alas, thanks to government-corporate collusion, what he thought was rare has actually been the rule in so-called “capitalist” countries.)

He cautions that “what we might stigmatise as ‘usury’ does not consist in the obtaining of a gain out of the loan, or out of the buying of labour, but in the immoderate extent of that gain…. Some gain or profit on capital there would be if there were no compulsion on the poor, and no monopolising of property…. It is only the height of this gain where, in particular cases, it reaches an excess, that is open to criticism, and, of course, the very unequal conditions of wealth in our modern communities bring us unpleasantly near the danger of exploitation and of usurious rates of interest.”

The Essence of Interest

Böhm-Bawerk takes pains to emphasize that he is not condemning interest per se: “But what is the conclusion from all this? Surely that, owing to accessory circumstances, interest may be associated with a usurious exploitation and with bad social conditions; not that, in its innermost essence, it is rotten.”

Yet he asks, “[W]hat if these abuses are so inseparably connected with interest that they cannot be eradicated, or cannot be quite eradicated?” His response:

Even then it is by no means certain that the institution should be abolished…. Arrangements absolutely free from drawback are never allotted to us in human affairs….

Instead of the absolute good, which is beyond reach, we must choose what, on the whole, is the relative best, where the balance, between attainable advantage and the drawbacks that must be taken into the bargain, is the most favourable possible for us.

In the end he doesn’t believe abuse is inseparably connected to interest: “There is no inherent blot in the essential nature of interest. Those, then, who demand its abolition may base their demand on certain considerations of expediency, but not, as the Socialists do at present, on the assertion that this kind of income is essentially unjustifiable.”

There are unanswered questions about Böhm-Bawerk’s position, but we do know that the thinker who refuted Marx’s exploitation theory had one of his own.

That man was Karl Marx.

Advocates of liberty often suffer bouts of despair. How can the cause of freedom ever triumph in a world so dominated by interventionist and welfare-statist ideas? Governments often give lip service to the benefits of free markets and the sanctity of personal and civil liberties. In practice, however, those same governments continue to encroach on individual freedom, restrict and regulate the world of commerce and industry, and redistribute the wealth of society to those with political power and influence. The cause of freedom seems to be a lost cause, with merely temporary rear-guard successes against the continuing growth of government.

What friends of freedom need to remember is that trends can change, that they have in the past and will again in the future. If this seems farfetched, place yourself in the position of a socialist at the time that Marx died in 1883, and imagine that you are an honest and sincere advocate of socialism. As a socialist, you live in a world that is predominantely classical liberal, with governments in general only intervening in minimal ways in commercial affairs. Most people—including those in the “working class”—believe that it is not the responsibility of the state to redistribute wealth or nationalize industry and agriculture, and are suspicious of government paternalism.

How could socialism ever be victorious in such a world so fully dominated by the “capitalist” mindset? Even “the workers” don’t understand the evils of capitalism and the benefits of a socialist future! Such a sincere socialist could only hope that Marx was right and that socialism would have to come—someday—due to inescapable “laws of history.”

Yet within 30 years the socialist idea came to dominate the world. By World War I the notion of paternalistic government had captured the minds of intellectuals and was gaining increasing support among the general population. Welfare-statist interventionism was replacing the earlier relatively free-market environment. And the socialist ideal of government planning was put into effect as part of the wartime policies of the belligerent powers beginning in 1914.

Socialism triumphed during that period because while socialists advocated collectivism, they practiced a politics of individualism. They understood that “history” would not move in their direction unless they changed popular opinion. And implicitly they understood that this meant changing the minds of millions of individual people.

So they went out and spoke and debated with their friends and neighbors. They contributed to public lectures and the publishing of pamphlets and books. They founded newspapers and magazines, and distributed them to anyone who would be willing to read them. They understood that the world ultimately changes one mind at a time—in spite of their emphasis on “social classes.”

They overcame the prevailing public opinion, defeated powerful special interests, and never lost sight of their long-term goal of the socialist society to come, which was the motivation and the compass for all their actions.

The Superiority of Freedom

What do friends of freedom have to learn from the successes of our socialist opponents? First, we must fully believe in the moral and practical superiority of freedom and the free market over all forms of collectivism. We must be neither embarrassed nor intimidated by the arguments of the collectivists, interventionists, and welfare statists. Once any compromise is made in the case for freedom, the opponents of liberty will have attained the high ground and will set the terms of the debate.

FEE’s founder, the late Leonard E. Read, once warned of sinking in a sea of “buts.” I believe in freedom and self-responsibility, “but” we need some minimum government social “safety net.” I believe in the free market, “but” we need some limited regulation for the “public good.” I believe in free trade, “but” we should have some form of protectionism for “essential” industries and jobs. Before you know it, Read warned, the case for freedom has been submerged in an ocean of exceptions.

Each of us, given the constraints on his time, must try to become as informed as possible about the case for freedom. Here, again, Read pointed out the importance of self-education and self-improvement. The more knowledgeable and articulate we each become in explaining the benefits of the free society and the harm from all forms of collectivism, the more we will have the ability to attract people who may want to hear what we have to say.

Another lesson to be learned from the earlier generation of socialists is not to be disheartened by the apparent continuing political climate that surrounds us. We must have confidence in the truth of what we say, to know in our minds and hearts that freedom can and will win in the battle of ideas. We must focus on that point on the horizon that represents the ideal of individual liberty and the free society, regardless of how many twists and turns everyday political currents seem to be following. National, state, and local elections merely reflect prevailing political attitudes and beliefs. Our task is to influence the future and not allow ourselves to be distracted or discouraged by who gets elected today and on what policy platform.

Let us remember that over the last hundred years virtually every form of collectivism has been tried—socialism, communism, fascism, Nazism, interventionism, welfare statism—and each has failed. There are very few today who wax with sincere enthusiasm that government is some great secular god that can solve all of mankind’s problems. Statist policies and attitudes continue to prevail because of institutional and special-interest inertia; they no longer possess the political, philosophical, and ideological fervor that brought them to power in earlier times.

There is only one “ism” left to fill this vacuum in the face of collectivism’s failures. It is classical liberalism, with its conception of the free man in the free society, grounded in the idea of consent, peaceful association, and individual rights. If we keep that before us, we can and will win.

Americans have lived with the welfare state for so long—more than 70 years—that for most, it is simply a fact of life. Asking whether it is justified would seem about as pointless as asking whether rain is justified. Furthermore, among the relatively few people who might be inclined to ponder the ethics of the welfare state, most subscribe to philosophies (for example, egalitarianism, positive-rights liberalism, and communitarianism) that find no fault with our panoply of welfare programs. Indeed, they generally favor expanding welfare.

Those of us who oppose the welfare state therefore have a Herculean task before us if we want to see voluntary programs replace coercive government ones. Fortunately, we have just gotten some help.

Professor Daniel Shapiro’s book, Is the Welfare State Justified?, makes a strong effort at persuading nonlibertarians that, based on their own philosophical principles, they ought to give up their support for government programs such as Social Security and Medicare. It is a first-rate effort that should get intellectually honest defenders of the welfare state saying, “Well, that is a good point. . . .”

Readers should understand, however, that this is a work of scholarship. If you’re simply looking for a few anti-welfare anecdotes to use against political opponents, you will have to go elsewhere. Throughout his analysis, Shapiro’s writing displays a refreshing humility; he isn’t looking for quick “gotcha!” points, but grapples earnestly with opposing perspectives.

Perhaps the reason Shapiro is so successful is that he used to be one of those liberal welfare advocates. But then he began to consider the libertarian critique. He writes, “Once I realized how free markets really worked, and how government programs that were supposed to realize their seemingly compassionate or just goals didn’t really do so, I realized that the attitude of distrust I had toward government power and the view I had about the value of individual freedom applied to economic as well as personal matters.” For quite a few years Shapiro (who teaches philosophy at West Virginia University) has been writing articles with titles like “Why Rawlsian Liberals Should Support Free Market Capitalism.” In this book he brings decades of professional thought to bear on this important project.

All right, then—is the welfare state justified? No, but a short review can’t do justice to Shapiro’s work. He covers a great array of philosophical arguments, objections to arguments, and rejoinders to objections.

Let’s briefly consider health care. Overwhelmingly, those on the political left reject free-market provision of health care, contending that everyone has a right to “adequate” medical services and concluding that we must adopt some version of a single-payer system to effectuate that claimed right. Shapiro responds that every sort of health-care system must deal with the rationing problem, then strongly argues that the free market more fairly solves that problem than any politically driven system can.

Similarly with old-age insurance and support for the indigent, Shapiro carefully shows why voluntary and market-based systems are preferable for meeting the needs of people—preferable from the standpoint of those who are inclined to believe that government does a better job.

In my view, Shapiro’s most devastating argument against all forms of government welfare is his observation that there is no such thing as a governmental welfare guarantee. Here is what he writes:

Exactly! It is merely an illusion that government can create rights to welfare. All that politicians can do is to promise that they (including future officeholders) will use their coercive powers in an effort to deliver money, medical care, or other things to certain members of the population. But political promises are completely unenforceable, unlike contracts. That’s one of the main reasons why Shapiro regards individual saving for retirement, medical care, and other needs as better than reliance on the state. With respect to money you have earned and saved, you really do have rights—contractual rights. You aren’t just a supplicant begging politicians to tax others for your benefit.

A splendid book that throws welfare state advocates on the defensive.

George Leef is book review editor of The Freeman.

In Milton Friedman: A Biography, Lanny Ebenstein presents a highly readable account of Friedman’s life and an introduction to his economics, including his advocacy of libertarian ideas and government reform. The book is based on published material and personal interviews, and it was completed shortly before Friedman’s death in late 2006. The appendix contains a “Bibliographical Essay” further elaborating on Friedman’s life, work, and influence.

The first chapters describe Friedman’s youth and early career. His family life, the TV program and book Free to Choose, his Nobel Prize, the Friedman Prize, and his work as adviser to Barry Goldwater and Presidents Nixon and Reagan are all discussed, but the book’s major focus is on Friedman’s mature career (1946–1976) at the University of Chicago. This is followed by a discussion of his life as a public figure following retirement.

Personal interviews reveal a number of interesting tidbits about him that will be new to most readers. For example, his family was apolitical and for much of his early life he was not much interested in politics.

Friedman is known worldwide now for his view that “Inflation is always and everywhere a monetary phenomenon.” His early views on inflation, however, were quite different. In congressional testimony on how to avoid inflation during the early years of World War II, he focused on taxation as a way to reduce consumer spending.

Early on he proposed the free market as the most suitable vehicle to achieve “political freedom, economic efficiency, and substantial equality of economic power,” even though he supported the welfare aspects of Roosevelt’s New Deal as a young man. At the time the conventional wisdom among the public, as well as economists, was that government could manage the economy better than the market order could.

Friedman identified the Chicago school of economics with three attributes—efficacy of free markets, skepticism of government regulation, and emphasis on quantity of money in producing inflation. He contended that the University of Chicago was never primarily free market in outlook, but only seemed so; the distinguishing characteristic of Chicago “was not the presence of market-oriented scholars at Chicago but rather the absence of them elsewhere.”

Friedman’s A Monetary History of the United States, 1867–1960, coauthored with Anna Schwartz, was a major critique of Keynesianism. That work suggested that the economic turmoil of the 1930s was not due to excesses in the market order, but Federal Reserve policy that allowed the money supply to fall, which turned what might have been an ordinary recession into the Great Depression. This book had an important effect on economists’ views on the appropriate role of government generally, but Ebenstein says little about the policy implications drawn by Friedman from the pathbreaking work in A Monetary History.

For much of his professional career Friedman was viewed as a heretic on the fringe of economics. It is hard to overstate the hostility to his policy ideas when Capitalism and Freedom—a libertarian guide to public policy—was published in 1962. It was reviewed only by the American Economic Review, even though accessible to a wide audience.

Ebenstein stresses Friedman’s philosophical debt to F. A. Hayek, a colleague at Chicago from 1950 to 1962. Friedman considered Hayek the most important intellectual figure in the worldwide movement toward freer markets. Although each favored freer markets and less government, Hayek disagreed with Friedman’s monetarism and his positivist approach to economics. Friedman, in contrast, considered his work in positive economics to be his primary intellectual contribution. Ebenstein discusses the shortcomings of the Hayekian subjectivist approach to economic analysis, but a similar discussion of the limitations of Friedman’s positivist approach would have been informative.

The book’s shortcomings mainly relate to what is omitted—discussion of Austrian, Keynesian, and other critiques of Friedman’s work. It would have been interesting, for example, if Ebenstein had queried Friedman on his response to the Austrian position that governmental control over the supply of money and credit is so dangerous to economic stability that we would be better off if we could replace the Federal Reserve with some market alternative. Friedman once said that the gold standard led to the waste of resources in mining gold, but even if that is a waste, how does it compare with the damage done by governmental manipulation of money and credit?

Friedman’s libertarian ethical view of the world was rooted in John Stuart Mill’s On Liberty. Most readers will be surprised to learn that Mill put forth the idea of school vouchers almost a century before Friedman. Friedman’s views on the financing of education evolved over time, and eventually he came to view vouchers as a means, not an end; by 2005 his ideal was government completely out of education.

Readers interested in Friedman’s ideas, work, and personal life will gain by reading this book.

E. C. Pasour, Jr. is Professor Emeritus of Agricultural and Resource Economics at North Carolina State University.

“If you’re depressed about the state of politics these days, read The Commanding Heights. . . . Step back and look at the big picture, a picture that spans the whole planet and comes into focus over decades. Look at the big picture and see that our side—the side of human freedom—is winning.” This review, written by Brink Lindsey in Reason in 1998 could be the first paragraph of his The Age of Abundance, a book that celebrates the virtues of liberty.

Lindsey, vice president for research at the Cato Institute, documents the advances in human freedom that Americans have enjoyed during the past century. He sees this age as one in which “most Americans were insulated from nature by an enormous edifice of human-created technologies and institutions.” America’s “age of abundance,” he contends, is a product of and a contributor to Western modernity, whose four key elements are: reliance on open-ended experimentation rather than received knowledge; reliance on free markets and the trust required for their functioning rather than on command and personal ties; a political system in which government (at least in principle) arises from and answers to the people rather than despotism; and a social life in which individual and group advancement challenges traditional stratification.

In one of the book’s many felicitous phrases, Lindsey asserts, “Despite all of the talk of raging ‘culture wars,’ most Americans are nonbelligerents.” He concludes that most Americans are libertarians, happy to enjoy the economic fruits of the market system and willing to accept, if not embrace, the social diversity that system engenders.

Lindsey acknowledges the existence and importance of the culture wars. Indeed, he states the dilemma of the libertarian majority in an unpromising fashion: “The prevailing ideologies of left and right are mirror images of one another. . . . The . . . left celebrates mass affluence’s diversity and inclusiveness, while lacking due appreciation for the institutional and moral framework that sustains and advances progressive values. The right . . . defends that framework, but does so on the basis of dogmatic beliefs that remain unreconciled to mass affluence’s cultural openness. [Politically, those in the libertarian majority must] choose which illiberal bedfellows they dislike least.”

The disproportionate influence of voices on the left and right militates against the articulation of the liberal position that Lindsey thinks those in the upwardly mobile middle class would favor.

As a result, “the modus vivendi that has emerged . . . is an unspoken and unloved compromise rather than a well-articulated and widely embraced consensus.”
Here the author might have fruitfully incorporated some insights offered by Bryan Caplan in his book, The Myth of the Rational Voter. Caplan’s analysis warns that the problem is not just lack of confidence. Rather, the average voter’s economic sophistication compares to the average flat-earther’s geographic sophistication. This endemic lack of sophistication, coupled with the strength with which statists hold on to their views, suggests that Lindsey’s admirable attempt to show the way to a truly liberal society will convince too few.

The book’s generally excellent review of history suffers from a related pair of weaknesses. His treatment of labor reads like New Deal court history. “Confrontations between capital and labor were frequently bloody,” says Lindsey. Then he cites cases that actually show that the violence was among laborers: “On May 3, 1884, labor trouble . . . sparked a confrontation between locked-out workmen and strikebreakers.” The ingrained notion that workers and capitalists are opponents is an obstacle to a more liberal society, but unfortunately Lindsey gives it some support.

A second point is that much of the advancement by minorities before 1950 is underplayed. Thomas Sowell has shown that economic progress among blacks was substantially greater prior to the Great Society programs aimed at assisting them, but he isn’t mentioned. This early progress strongly backs Lindsey’s thesis that freedom works.

Readers, libertarian or otherwise, will find The Age of Abundance a pleasure to read. Almost every page contains at least one phrase that either amuses or enlightens—sometimes both. Entertaining anecdotes and witty writing pepper the book throughout. On a single page, for example, Marilyn Monroe, Hugh Hefner, Peyton Place, Brigitte Bardot, and “Itsy Bitsy Teenie Weenie Yellow Polka Dot Bikini” appear. Lindsey also weaves together disparate and seemingly unrelated events, such as the “Human Be-In” in Berkeley and the founding of Oral Roberts University in 1967. These and other memorable illustrations add to the considerable enjoyment of this book.

J. Wilson Mixon is Dana Professor of Economics, Emeritus, Berry College.

It is a rare book that treats readers—even those who’ve never taken economics—to a comprehensive understanding of the forces and policies that ultimately determine prosperity and liberty for themselves and future generations. The Big Three in Economics by Mark Skousen accomplishes that, supplying essential historical perspective on the best-known names and evolutionary developments in economics.

This fascinating study focuses on the luminaries that have dominated economic conversations and debates since 1776. Adam Smith’s eighteenth-century Wealth of Nations inquires into and documents the causes of wealth and prosperity. Karl Marx’s nineteenth-century Das Kapital is a treatise on victimization by an economic system rooted in individual property rights and “natural liberty.” It calls for centralization of authority in government that would facilitate redistribution of income and wealth. J. M. Keynes’s twentieth-century General Theory outlines a framework to justify specific policy prescriptions for reestablishing systemic stability and maintaining economic security during business cycles.

Not only do Skousen’s succinct examinations of the “Big Three” clarify the principles of economics for unsophisticated readers, they also furnish insights into and resonate marvelously with 2008′s election-year polemics. The entire book crystallizes basic economic issues and delivers the intellectual tools to differentiate rhetoric from reality. For example, during 2008 alone, we’ve had the spectacle of one presidential candidate labeling the oil industry’s barely average profit margins “egregious,” while the other candidate (along with Congress and various regulatory bureaucracies) fingers so-called “oil speculators” for possible criminal investigations. Thanks to Skousen’s research and dozens of prescient quotations, the curious investigator—layman or Ph.D. economist—can separate hyperbole and scapegoating from objective analysis.

Equally enlightening, Skousen surrounds Smith, Marx, and Keynes with their contemporary and historical disciples, who served to reinforce the message. An excellent example of this “reinforcement” effect, which helped Adam Smith’s economic principles win the day, is the work of Jean-Baptiste Say.

Despite its title, the book isn’t exclusively about Smith, Marx, and Keynes. It describes the influence of David Hume and the French Physiocrats on Adam Smith; the impact of Reverend Thomas Robert Malthus, David Ricardo, and Friedrich Engels on Marx; and the works of Alfred Marshall plus the English marginalist school, which provided the broad shoulders on which Keynes stood.

Skousen is at his best when he describes the lives of the three economists. For example, we learn the personal story of Marx and his life as a writer-agitator-
theorist. At one point, Skousen quotes Marx’s mother who complained: “If only Karl had made capital instead of writing about it!” Several documents from Marx’s pen are so shocking they cannot be reproduced in this review.

By acquainting us with the dichotomy between what Marx envisioned and modeled versus how he behaved, Skousen’s manuscript becomes a true guidebook. Beware hypocrisy, the author seems to say. Scrutinize those who expound elaborate economic theories and then violate them at their earliest convenience. Marx condemned stock-market trading yet indulged fully in the buying and selling of shares. While excoriating the capitalist system, he exploited the accumulated wealth of his in-laws, father, and closest associate.

An important spin-off from this three-century tour of economic thought is the growth of and respect for economics as a science. A particular strength of the book is how Skousen traces the continuity of economic challenges and problem-solving across the centuries. Readers will see how advances in economic thinking made it possible for later economists to resolve questions that befuddled Smith, Marx, and Keynes. Moreover, readers will be surprised by how many of today’s populist political campaign slogans (such as “change” and “race to the bottom”) were common parlance more than 150 years ago.

Of the many moments of delight and edification, I especially enjoyed Skousen’s elegant construction of Milton Friedman’s refutation of Keynesian theory and its so-called “revolution.” Contributions largely from Friedman’s Chicago School disciples and other Nobel laureates conclude the final chapter on a hopeful note. With overwhelming relevance to our nation’s current economic challenges, Skousen recapitulates Adam Smith’s fundamental theme underscoring the prescription for growth and material well-being of nations: “Peace, easy taxes, and a tolerable administration of justice.”

David Littmann is senior economist with the Mackinac Center for Public Policy.

“Jobs and Trade,” July 1996

Unemployment is the great puzzle of our time. It perplexes politicians, confuses officials, and even entangles economists. It persists and continues to grow despite all the government programs that mean to reduce it and the tax dollars spent to alleviate it.

Some writers continue to echo the teaching of Karl Marx. For them, capitalism always creates an “industrial reserve army of labor” consisting of the mass of wage-earners who are exploited and then thrown out of their jobs. Most economists are at one with John Maynard Keynes, the economic guru of our time, who viewed unemployment as a symptom of insufficient spending. Politicians continue to cling to the Keynesian view because it supports their spending predilection.

Some old-guard politicians and writers explain unemployment in protectionist terms which are among the oldest and most controversial in economics. Unemployment, they blaze about, is the price we pay for our participation in a global economy with millions of unemployed and under-employed people who are willing to work for 25 cents an hour. “Free trade” is “unfair trade” for Americans who are condemned to the indignities and hardships of unemployment.

If foreign trade actually were responsible for the corporate layoffs, the phenomenal rise of imports and exports in recent years should have disemployed most Americans. According to U.S. Department of Commerce statistics, U.S. general imports in 1950 amounted to $8.954 billion. By 1960 they had nearly doubled to $15.073 billion. By 1970 they had risen to $40.356 billion. During the 1970s they soared to $244.871 billion, and during the 1980s to $495 billion. This year they may exceed $700 billion. Surely, if imports would destroy jobs, this 7,800 percent rise in imports since 1950 should have thrown most Americans out of work.

It is difficult to imagine our present working conditions and standards of living if the U.S. government had turned inward and closed its borders in 1950, as the Hoover administration managed to perpetrate in 1930. Even if the disruption of trade and immediate foreign retaliation would not have brought another depression, the crushing burden which radical liberal administrations placed on the economy during the 1960s and 70s would surely have depressed the economy and drastically lowered American levels of living. Similarly, if there had been no foreign investments, the staggering budget deficits of the 1980s and ’90s would have drained the capital market and paralyzed the economy.

Employment always is a phenomenon of productivity and cost. In a market economy, in booms and depressions, there is an unlimited demand for labor that makes productive contributions. Labor that costs more than it is expected to produce, whether it is unskilled or armed with triple degrees, is devoid of any demand. In the eyes of potential employers, it is utterly “unproductive.” This applies to actors and administrators, systems analysts, software programmers, automatic engineers, and aeronautical scientists. If young Ph.D.s in mathematics are unable to find employment, employers believe them to be rather “unproductive” considering their cost and productivity.

Much university-educated labor remains unemployed because it is not in touch with the labor market. It is government-directed and taxpayer-financed. Graduating from mammoth state universities and guided by Pell grants, Work-Study grants, Stafford loans, Perkins loans, and numerous other federal and state support programs, many graduates are ill-equipped for useful employment. In nearly all fields of economic activity employers provide most of the productivity training. But they are reluctant to offer it if the expenses of the trainee are prohibitive and the final results of the training are not expected to cover the outlays.

Businessmen continually adjust to changes in demand, supply, transportation, technology, cost of labor and capital, government levies and obstacles, domestic and international competition. Every member of the market order is under pressure to adjust in order to stay productive. Of course, a person is free to ignore the pressures; the typist may continue to pound the typewriter. But she cannot justly insist that she be subsidized by fellow workers and employers. The same is true of a university-trained aeronautical engineer who has learned to build great military planes. In times of war and preparations for war he is in great demand. In peace he will have to learn peaceful pursuits. He does not have the natural right to live off the labors of others.

International competition is as beneficial as domestic competition; it forces sellers to outdo one another by offering better and cheaper goods and services and forces buyers to outdo one another by offering higher prices. Protective tariffs and other trade restrictions effect the very opposite; they permit the protected producers to offer inferior products at higher prices. They cause production to shift from places in which the natural conditions of production are more favorable to places in which they are less favorable. They force labor to move from export industries paying high wages to the protected industries that generally pay lower wages. In short, trade restrictions hamper production and thus lower the standards of living.

The competitive position of an enterprise in domestic as well as international markets is determined by its total costs of which labor costs merely are one of many components. In capital-intensive industries, such as the pharmaceutical, chemical, aeronautical, steel, tool-and-die industries, the cost of capital tends to determine competitiveness; in labor-intensive industries the total cost of labor is decisive. There are no labor-intensive American industries that compete with foreign labor. Our service industries which render valuable labor services need not fear foreign competition; they are protected by onerous immigration restrictions.

Free trade is fair trade; those who deny it to others do not deserve it for themselves.

* * *

“You Cannot Get Even,” June 1978

Government affects individual incomes by virtually every decision it makes. Agricultural programs, veterans’ benefits, health and labor and welfare expenditures, housing and community development, federal expenditures on education, social insurance, Medicare and Medicaid programs, and last but not least, numerous regulations and controls affect the economic conditions of every citizen. In fact, modern government has become a universal transfer agency that utilizes the political process for distributing vast measures of economic income and wealth. It preys on millions of victims in order to allocate valuable goods and services to its beneficiaries. With the latter, transfer programs are so popular that few public officials and politicians dare oppose them.

The motive powers that drive the transfer order are as varied as human design itself. Surely, the true motives are often concealed, and a hollow pretext is pompously placed in the front for show. And yet, man is more accountable for his motives than for anything else. A good motive may exculpate a poor action, but a bad motive vitiates even the finest action. Conscience is merely our own judgment of the right and wrong of our action, and therefore can never be a safe guide unless it is enlightened by a thorough understanding of the implications and consequences of our actions. Without an enlightened conscience we may do evil thoroughly and heartily.

An important spring of action for the transfer society is the desire by most people to get even in the redistribution struggle. “I have been victimized in the past by taxation, inflation, regulation, or other devices,” so the argument goes, “therefore I am entitled to partake in this particular benefit.” Or the time sequence may be reversed: “I’ll be victimized later in life,” pleads the college student, “and therefore I want state aid and subsidy now.”

This argument is probably the most powerful pacifier of conscience. It dulls our perception and discernment of what is evil and makes us slow to shun it. After all, we are merely getting back “what is rightfully our own.” With a curious twist of specious deduction the modern welfare state, which continually seizes and redistributes private property by force, is defended by the friends of individual liberty and private property. “Man is entitled to the fruits of his labor,” they argue, “we are merely getting back that which is rightfully and morally our own.” They borrow the arguments for the private property order to sustain the political transfer order.

Surely getting back that which is rightfully and morally our own is a principle that is rooted in our inalienable right to our lives. It is a property right that springs from our human rights and from the right to life itself. It is the right to restoration of the fruits of our efforts and labors of which we are deprived by deceit, force, or any other immoral practice. It is a specific right to recovery or compensation from those who are wronging us or have injured us in the past.

This right to restoration does not beget the right to commit the very immoral act from which we seek restoration, to imitate others in acting immorally, or to seek revenge against the trespassers or innocent bystanders. But this is precisely what the “get-even” advisers urge us to do.

In an unfortunate automobile accident we are hurt or injured, or our vehicle may be damaged, because of the negligence of another driver. This gives us the right to demand restoration and compensation from the guilty party. But it does not give us the right to seize another car parked in the neighborhood, or return to the road and injure another driver. Or, our home is burglarized and we suffer deplorable losses in personal wealth and memorabilia. This does not bestow upon us the right to do likewise to others. But the “get-even” advocates are drawing this very conclusion.

He who is desirous of “getting even” in the politics of redistribution longs to join the army of beneficiaries who are presently preying on their victims. They would like to get their “money back” from whomever they can find and victimize now. Like the victim of a burglary who becomes a burglar himself, they are searching for other victims. But in contrast to the new burglar who may be aware of the immorality of his actions, the “get-even” advocate openly defends his motives while he is pursuing his political craft.

We cannot get even with those individuals who deprived us of our property in the past. They may have long departed this life or may have fallen among the victims themselves. We cannot get even with them by enlisting in the standing army of redistributors. We merely perpetuate the evil by joining their forces. So we must stand immune to the temptations of evil, regardless of what others are doing to us. The redistribution must stop with us.

The redistributive society has victimized many millions of people through confiscatory taxation, inflation, and regulation. Government, acting as the political agency for coercive transfer, seized income and wealth from the more productive members and then redistributed the spoils to its beneficiaries. Although many millions of victims and beneficiaries were involved, which often obscures the morality of the issue, the forced transfer took place between certain individuals. It is true, the beneficiaries, who used political force to obtain the benefits, cannot easily be recognized in the mass process of transfer. But even if we could identify them, and establish a personal right to restoration, our property has been consumed long ago. A vast army of beneficiaries, together with their legions of government officials and civil servants, consumed or otherwise squandered our substance. There is nothing to retrieve from the beneficiaries who probably are poorer than ever before, having grown weak and dependent on the transfer process.

When seen in this light, the get-even argument is nothing more than a declaration of intention to join the redistribution forces. It may be born from the primitive urge for revenge against government, state or society. But it is individuals who form a government, make a state and constitute a society. By taking revenge against some of them for the injuries suffered from the hands of others, I am merely reinforcing the evil.

Revenge is a common passion that enslaves man’s mind and clouds his vision. To the savage it is a noble aspiration that makes him even with his enemies. In a civilized society that is seeking peace and harmony it is a destructive force which law seeks to suppress. But when the law itself becomes an instrument of transfer, the primitive urge for revenge may burst forth as a demand for more redistribution. It becomes a primary force that gives rise to new demands or, at least, reinforces the popular demands for economic transfer. The common passion for revenge, no matter how well concealed, undoubtedly is an important motive power of social policy that leads a free society to its own destruction.

No wealth in the world and no political distribution of this wealth can purchase the peace and harmony so essential to human existence. Peace and harmony can be found only in moral elevation that reaches into every aspect of human life. A free society is the offspring of morality that guides the actions and policies of its members. To effect a rebirth of such a society is to revive the moral principles that gave it birth in the beginning. It is individual rebirth and rededication to the inexorable principles of morality that are the power and the might. The example of great individuals is useful to lead us on the way, for nothing is more contagious for greatness than the power of a great example.

To spearhead a rebirth of our free society let us rededicate ourselves to a new covenant of redemption, which is a simple restatement of public morality. In the setting of our age of economic redistribution and social conflict it may be stated as follows:

• No matter how the transfer state may victimize me, I shall seek no transfer payments, or accept any.
• I shall seek no government grants, loans or other redistributive favors, or accept any.
• I shall seek no government orders on behalf of redistribution, or accept any.
• I shall seek no employment, or accept any, in the government apparatus of redistribution.
• I shall seek no favors, or accept any, from the regulatory agencies of government.
• I shall seek no protection from tariff barriers or any other institutional restrictions of trade and commerce.
• I shall seek no services from, or lend support to collective institutions that are creatures of redistribution.
• I shall seek no support from, or give support to associations that advocate or practice coercion and restraint.

We do not know whether our great republic will survive this century. If it can be saved, great men of conviction must lead the way—men who with religious fervor and unbounded courage resist all transfer temptations. The heroes of liberty are no less remarkable for what they suffer than for what they achieve.

* * *

“Beware of Despair,” July 1994

Many lovers of freedom love to despair. They complain of regulation, regimentation, taxation, inflation, confiscation, expropriation, bureaucratization, and politicization. They cry out against legislators, regulators, tax collectors, judges, and bureaucrats who annoy and anger them every day. Some look askance at all manifestations of government.

Yet no man who is mindful of the past should take a morose or despondent view of the present. The past surely was no better than the present; the past days were not what they should have been. In our own century, man’s inhumanity to man reached unprecedented magnitudes in brutality and barbarity, in bloody wars between the great Western nations, the massacre of countless millions of innocent people in the Soviet Union, Germany, China, and many other places. No present calamity, whether political, social, or economic, can be compared with those evils.

Social and economic policies in the United States are no worse today than they were in the past. When compared with the 1930s and 1960s they may even be more circumspect. During both the 1930s and 1960s the country suffered major breakthroughs of political and economic radicalism which paved the way for an economic command system. . . .

The fears of the pessimists in our midst are natural and logical. If we project the trend of the last sixty-five years into the future, we will in time arrive at a political command system, at first at democratic socialism of the British variety and later at a Soviet brand. The road on which Presidents Hoover and Roosevelt first embarked leads straight to authoritarian socialism.

Fortunately, history never moves in a straight line. The trends of policy change as the ideas which guide man are ever changing. Ideas are the factors that shape policies and guide Presidents in a way they lead all other individuals. In most parts of the world the trend of policy has already changed fundamentally and is visible as a movement toward “privatization.” A free-market counterrevolution is rising in all corners of the world; the old order of political economy is retreating everywhere. The revolution of ideas has swept away the Communist system, discredited all forms of socialism, and is bringing hope to many poor countries. All over the world governments are being downsized, public enterprises are privatized, and taxes are lowered. The houses which Marx and Keynes built are being razed and replaced by houses designed by Adam Smith and Ludwig von Mises.

The light of economic freedom is shining brighter now than at any time in this century. Even old-guard socialists readily concede that the market order is more productive than the command order; socialistic parties all over the world are introducing market reforms. Communist China, the last stronghold of Communism, has launched a vigorous market order.

The United States may very well be the last country to reform and depoliticize the economy. A giant does not readily learn from a puny neighbor; a superpower does not cheerfully emulate a country without power; a victor does not gladly follow in the steps of the vanquished. Yet the size of a country and its military might do not annul economic law; disregard and disobedience of economic law in time stifle military might and weaken a country. . . .

It is difficult to convince a pessimist that the future belongs to people who are free. He spends all his time worrying about tomorrow’s misfortunes which may never come. He peers into the future wearing dark glasses and sees only darkness. Despondent and forlorn, he is bogged down with discontent and unhappiness, calling himself a “realist” and being proud of it. But even realists need the promise of success in order to be active and energetic. Few people readily give their time and strength to a hopeless cause even if it should be noble and desirable. Without the hope of success and ultimate victory the pessimist can muster little support for the cause he may represent. His fears are likely to become self-fulfilling.

Virtue and justice may not be enough to achieve victory for a noble cause. It takes effort and leadership which builds on reason, judgment, and hope. A habitual pessimist is incapable of leading the way.

We know where we are, but we do not know where we will be in the future. God does not suffer man to have knowledge of things to come. Yet we always look to the future; our ideal, whatever it may be, lies further on. Henry Wadsworth Longfellow, the nineteenth-century American poet, who wrote some of the most popular poems in American literature, responded to all forms of pessimism when he wrote: “Look not mournfully to the past—it comes not back again; wisely improve the present—it is thine; go forth to meet the shadowy future without fear, and with a manly heart.”

It is odd to find the word “dialectics” conjoined with anything remotely having to do with “libertarianism.” And this is, perhaps, a result of the profound socialist influence on contemporary thought. Say the word “dialectics” and what might come to mind is the “thesis-antithesis-synthesis” waltz usually associated with Hegel (even though that triad more appropriately belongs to Fichte). Or one might think of the “historical materialism” of the Marxists, who view communism as the ultimate “synthesis.” Or one might even think of the claims made by some that dialectics is a means of “resolving” actual, logical contradictions, a means of showing that “A” and “non-A” are one and the same.

It is no coincidence that the same people who dismiss dialectics as an assault on logic are often the same people who view it as the methodology of socialism. But even some of the proponents of socialism would agree, for they have dismissed logic as a “bourgeois” prejudice, while viewing exploitation as the “logic” of capitalism.

The socialists have also criticized many of the advocates of capitalism for having embraced a dogmatic, ahistorical social ideal. Marx himself had derided bourgeois theorists as “Robinsonades”; the bourgeois, said Marx, had put forth an atomistic notion of human liberty that saw individuals as entirely separate from one another. Like “Robinson Crusoe” on a desert island, the bourgeois individual is unrelated to other individuals and unrelated to any social or historical context. And, for the most part, mainstream neoclassical economists agreed with him. Their static conceptions of “perfect” competition posited a rationalistic model of “Economic Man” in possession of “perfect” knowledge. Such a model had little to do with the dynamics of the real world.

But as F. A. Hayek and others have pointed out, the very word “capitalism” was a product of the socialist conception of history. It took a major effort by twentieth-century thinkers to provide a thorough reconceptualization of the market society and its foundations. Among these were Austrian economists, such as Ludwig von Mises and Hayek himself, who viewed the market in dynamic and institutional terms, and philosophers, such as Ayn Rand, who articulated an objective moral ethos at the base of “capitalism: the unknown ideal.”

A proper defense of the free society is one that must lay to rest the notion that classical liberalism, or libertarianism, as such, depends on static, ahistorical, or atomistic thinking. It is possible, nay, necessary, to present a form of libertarian social analysis that makes use of the very dialectical techniques that are its birthright. It is time to recapture dialectics as a tool for liberty.

That was the goal of my “Dialectics and Liberty” trilogy. On this tenth anniversary of the publication of its first two installments, I look back on the genesis and development of this project.

What is dialectics? Dialectics is the art of context-keeping. It counsels us to study the object of our inquiry from a variety of perspectives and levels of generality, so as to gain a more comprehensive picture of it. That study often requires that we grasp the object in terms of the larger system within which it is situated, as well as its development across time. Because human beings are not omniscient, because none of us can see the “whole” as if from a “synoptic” godlike perspective, it is only through selective abstraction that we are able to piece together a more integrated understanding of the phenomenon before us—an understanding of its antecedent conditions, interrelationships, and tendencies.

In social theory, the object of our inquiry is society: social relations, institutions, and processes. Society is not some ineffable organism; it is a complex nexus of interrelated institutions and processes, of volitionally conscious, purposeful, interacting individuals—and the unintended consequences they generate. A dialectical approach to social theory is one that recognizes that any given social problem will often entail an investigation of related social problems. What makes a dialectical approach into a radical approach is that the task of going to the root of a social problem, seeking to understand it and resolve it, often requires that we make transparent the relationships among social problems. Understanding the complexities at work within any given society is a prerequisite for changing it.

It is simply mistaken to believe that Marx and Marxists have had a monopoly on this type of analysis. It is also mistaken to believe that this emphasis on grasping the full context is, somehow, a vestige of Marxism.

In fact, the father of dialectics, the man whom Hegel himself called the “fountainhead” of dialectical inquiry, was Aristotle. In works such as the Topics—the very first theoretical treatise on dialectics—Aristotle presented numerous techniques by which one might gain a more complete picture of an issue by varying one’s “point of view.” The Topics serves as a grand discussion of how shifts in one’s perspective can reveal different things about the objects of our inquiry, and about the perspectives from which those objects are viewed.

I examine the broad history of dialectical thinking, from the ancients to the postmoderns, in part one of Total Freedom. Presenting that history is beyond our current scope. But it is important to recognize that these methodological techniques have long been an unheralded aspect of classical-liberal and libertarian analytical frameworks, as presented by such thinkers as Herbert Spencer, Carl Menger, Mises, Hayek, Rand, and Murray Rothbard.

Hayek’s Critique of Utopianism

For example, Hayek, who absorbs from Menger an Austrian emphasis on process and spontaneous order, enunciated a profoundly dialectical critique of utopianism. As I argue in Marx, Hayek, and Utopia, Hayek railed against both collectivist and atomist viewpoints. For Hayek, since no human being can know everything there is to know about society, people cannot simply redesign it anew. Human beings are as much the creatures of their context as they are its creators. Hayek’s rejection of utopianism is a repudiation of what he calls “constructivist” rationalism. The utopian relies on a “pretense of knowledge,” Hayek argued, in an attempt to construct a bridge from the current society to a future one. Whereas the collectivists have criticized bourgeois theorists for embracing “ahistorical” and “state of nature” arguments for capitalism, they themselves have embraced an ahistorical, exaggerated sense of human possibility in their projections of an ideal communist society.

Marx himself was critical of this “constructivism” in the works of the utopian socialists, but his own work succumbs to the same constructivist impulse. Implicit in his communist ideal is the presumption that human beings can achieve godlike control over society, as if from an Archimedean standpoint, virtually transcending unintended social consequences such that every action brings about a known effect. Hayek saw this as a “synoptic delusion,” an illusory belief that one can live in a world in which every action produces consistent and predictable outcomes.And, invariably, the quest for total knowledge becomes a quest for totalitarian control.

Whatever problems one might detect in Hayek’s various theories of social evolution—and I discuss these in Marx, Hayek, and Utopia—I believe that he contributes much to a dialectical-libertarian social theory. For example, in his classic book, The Road to Serfdom, Hayek presents us with a multidimensional view of the corrosive nature of government control. He does not focus on the one-dimensional economic effects of state regulation. In fact, one might say that his primary concern is with the insidious, multidimensional effects of statism—how its consequences redound throughout a nexus of social relations: economic, political, and even social-psychological. In other words, Hayek analyzes statism not only as a politico-economic scourge, but as a phenomenon whose effects can be measured on many different levels of generality and from many different vantage points. The more perspectives we take on statism, the greater will be our grasp of its characteristics and the means by which to undermine it.

For Hayek, “the most important change which extensive government control produces is a psychological change, an alteration in the character of the people.” There is a social-psychological corruption at work, therefore, in which causes and effects become preconditions of one another, part of a system of mutually reinforcing processes. “The important point is that the political ideals of a people and its attitude toward authority are as much the effect as the cause of the political institutions under which it lives,” he writes.¹ This is a system, then, of mutual implications, of reciprocal connections between social psychology, culture, and politics:

Freedom to order our own conduct in the sphere where material circumstances force a choice upon us, and responsibility for the arrangement of our own life according to our own conscience, is the air in which alone moral sense grows and in which moral values are daily re-created in the free decisions of the individual. Responsibility, not to a superior, but to one’s conscience, . . . the necessity to decide which of the things one values . . . and to bear the consequences of one’s own decision, are the very essence of any morals which deserve the name. That in this sphere of individual conduct the effect of collectivism has been almost entirely destructive is both inevitable and undeniable. A movement whose main promise is the relief from responsibility cannot but be antimoral in its effect, however lofty the ideals to which it owes its birth.²

Hayek understood that under advancing statism, culture tends to both promote and reflect those social practices that undermine individual self-responsibility. Likewise, a free society is one in which the culture tends to promote and reflect those social practices that require individual self-responsibility. For Hayek, political change is built on a slow and gradual change in cultural mores, traditions, and habits, which are often tacit; trying to impose such change, without the requisite cultural foundations, is doomed to fail. Moreover, Hayek argued, those cultural foundations are reflective of the historically specific circumstances of a particular time and place. For somebody who has often been derided as a conservative, Hayek embraced the essence of a radical, rather than a utopian, approach.“[W]e are bound all the time to question fundamentals,” he said;“it must be our privilege to be radical.”³

Rand and Dialectics

Despite serious differences with Hayek, Ayn Rand also appreciated the role of culture in shaping political realities. In Ayn Rand: The Russian Radical, I reconstructed Rand’s critical approach as a tri-level model of analysis: In her examination of any social problem, Rand focused on the reciprocal connections among personal factors (Level I), that is, a person’s methods of awareness, or “psycho-epistemology,” and ethics; cultural factors (Level II), that is, ideology, pedagogy, aesthetics, and language; and structural factors (Level III), that is, politics and economics. For Rand, each level of generality offers both a microcosm and a differential perspective on the growing statism of the mixed economy that was the object of her criticism. (Rand saw that system as an instance of the “New Fascism.”) She traced the mutual implications and reciprocal interconnections among disparate factors, from politics and pedagogy to sex, economics, and psychology.

In terms of the implications for a dialectical-libertarian analysis, the important point here is that Rand never emphasized one level of generality or one vantage point to the exclusion of other levels or vantage points. So, for example, even when she’d focus attention on Level III—the nightmarish labyrinth of government taxes, regulations, prohibitions, and laws constraining trade—she was quick to dismiss those who thought that an attack on the state was a social panacea. In the absence of an alteration of Level I and Level II social relations, which have a powerful effect on the character of political and economic practices and institutions, a change in Level III is not likely to be sustainable. For Rand, then, just as statism exerts its nefarious influence on all the levels of human discourse, so too must freedom be understood as a multidimensional achievement. Think Russia or Iraq—where, in the absence of a culture of individualism, all the “democratic” procedural rules in the world are not likely to bring about a free society.

Much like Hayek, Rand proclaimed herself a radical “in the proper sense of the word: ‘radical’ means ‘fundamental.’”⁴ And as a “radical for capitalism,” Rand argued that “Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries.”⁵ When I teach this tri-level model to my students, I often ask them to consider any social problem of their choice. I then ask them to filter that social problem through the different levels of generality and the different vantage points offered within each level. As a prime illustration of this methodology, I point to Rand’s own analysis of the social problem of racism.

Like other great classical-liberal and libertarian theorists, Rand maintained that government intervention in the economy creates a civil war of all against all; advancing statism makes masters and slaves of every social group, with each vying for some special privilege at the expense of others. Paradoxically, even as statists try to create and rule society as a collective whole, their policies simultaneously create vast social fragmentation. The rule of force has the effect of engendering the formation of pressure groups, each with a design on the levers of power. Every group threatens every other group while acting in self-defense against the aggrandizement of its political competitors. Over time, Rand argued, the group becomes the central political unit of a statist society, and every differentiating characteristic among human beings—be it age, sex, sexual orientation, social status, religion, nationality, or race—becomes a pretext for the formation of yet another interest group.

Racism, in Rand’s view, was the most vicious form of social fragmentation perpetuated by modern statism. It was not a mere byproduct of state intervention; it was a constituent element of statism. From the perspective of Level I, Rand argued that racism was an immoral and primitive form of collectivism that negated individual uniqueness, choice, and values. Psychologically, the racist substitutes ancestral lineage for self-value and thereby undermines the earned achievement of any genuine self-esteem. Holding people responsible for the real or imagined sins of their ancestors, wielding the weapon of collective guilt, the racist adopts the associational, concrete-bound method of awareness common to all tribalists. This “anti-conceptual” tribalism is manifested in the irrational fear of foreigners (xenophobia), the group loyalty of the guild, the worship of the family, the blood ties of the criminal gang, and the chauvinism of the nationalist. Tribalism was “a reciprocally reinforcing cause and result” of the various caste systems throughout history.⁶

Such “psycho-epistemological” tribalism could only gain currency in a culture dominated by irrationalist and collectivist ideas (Level II). When the Nazis ascribed notions of good and evil to whole groups of people based on legitimating ideological doctrines of racial purity, they depended on the obliteration of individualism as a cultural ideal.

In terms of structural realities (Level III), Rand explored the various political and economic institutions and policies that both reflected and perpetuated racism—through outright slavery, genocide, or apartheid, or through the use of quotas, prohibitions, zoning laws, rent control, public housing, public education, compulsory codes of segregation and integration, and a self-perpetuating welfare bureaucracy that kept poor people poor, while inculcating a psychology of victimization among them.

What most interested Rand was the broad historical process by which racism predominates in modern societies. In Rand’s view, statism was born in “prehistorical tribal warfare.” Political elites often perpetuated racial hatred and scapegoated racial and ethnic groups in order to secure power. But “the relationship is reciprocal,” said Rand: Just as tribalism was a precondition of statism, so too was statism a reciprocally related cause of tribalism.⁷

“The political cause of tribalism’s rebirth is the mixed economy,” Rand wrote, “the transitional stage of the formerly civilized countries of the West on their way to the political level from which the rest of the world has never emerged: the level of permanent tribal warfare.”⁸ In Rand’s view, advancing statism and tribalism went hand-in-hand, leading to a condition of “global balkanization.”

What Is to Be Done?

Ten years later I continue to argue for the necessary integration of dialectical method and libertarian theory. A dialectical-libertarian approach to social inquiry exhibits one of the key hallmarks of radical thinking. If one’s aim is to resolve a specific social problem, one must look to the larger context within which that problem is manifested, and without which it would not exist. This is why context-keeping is so indispensable to a radical libertarian political project.

As the brief example of racism makes clear, deeply embedded social problems demand analysis not only in terms of their political and economic dimensions, but also their preconditions and effects in the realms of morality, social psychology, psycho-epistemology, ideology, and culture. The dialectical theorist uses all the tools of empirical investigation to ascertain the factors at work across many dimensions in the consideration of any social problem. But it takes a supreme act of integration to note the connections among social problems, viewing these not only as related to one another, but as constituent relations of a larger system in need of radical change.

This large-scale theorizing might give the impression that one must analyze everything before one can change anything. But this is as much of a “synoptic delusion” as is the notion of central planning. What is required is a more fully developed critique of the system that generates such social problems—and a corresponding vision for social change that resolves these problems at their root, in all their personal, cultural, and structural manifestations. A genuinely radical project beckons, one that integrates the explanatory power of libertarian social theory and the context-keeping orientation of dialectical method.

Notes

1. F. A. Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1994 [1944]), p. xxxix.
2. Ibid., 231-32.
3. F. A. Hayek, “The Dilemma of Specialization,” in Studies in Philosophy, Politics, and Economics (Chicago: University of Chicago Press, 1980 [1967]), p. 130.
4. Ayn Rand, “Conservatism: An Obituary,” in Capitalism: The Unknown Ideal (New York: New American Library, 1967), p. 201.
5. Ayn Rand, For the New Intellectual (New York: Signet, 1961), p. 25.
6. Ayn Rand, “The Missing Link” in Philosophy: Who Needs It (New York: New American Library, 1982), pp. 50-51.
7. Ayn Rand, “Racism,” in The Virtue of Selfishness (New York: New American Library), p. 128.
8. Ayn Rand,“Global Balkanization,” in The Voice of Reason (New York: New American Library), p. 123.

I am not going to quarrel with the comparisons of men’s and women’s actual wages, but with the contention about productivity. In a market in which competition is permitted between employers and between workers, the situation ascribed could not long exist. What would prevent it, what does prevent it, is the selfishness of employers.

Let us suppose that there was an industry in which both male and female workers were producing enough to bring the employer an ascertainable added profit of just over $10 an hour, but in which the men workers were receiving $10 an hour, and the equally productive women workers only $7 an hour.

It would soon occur to an unscrupulously selfish employer that he should henceforth employ only women workers from which he could make a net $3 more an hour than from his male workers. He would let his men workers go. Other employers would follow his example, and for the same reason. But this would mean that the female workers would start demanding higher individual wages until their pay was on an equality with that previously received by males.

In other words, selfish employers would prefer to make only $2 an hour net by employing female labor at $8 an hour rather than see competing employers make $3 net out of them. They would even choose to make only $1 an hour net by paying them $9 an hour rather than stand by and watch other employers making $2 net out of them. This would continue until prevailing female wages in that industry were very close to female labor productivity in dollar terms. (In the long run, of course, there would be no drop in the prevailing men’s pay, because their productivity would still make it profitable to employ them at that rate.)

To state this more briefly and bluntly, any employer would be a fool to hire male workers for $10 an hour when he could hire equally productive women workers for $7 an hour. There are, it is true, special conditions, temporary and localized, in which labor productivity might not be the dominant factor in determining wage levels. In a small mill town, for example, in which there was only one mill, not large enough to employ the entire working population, the wages paid by that mill might fall below the worker productivity level. But this would tend to prove only a temporary situation. Two developments would be likely to change it. The unemployed surplus workers would start to leave for other towns. And the mill owners would be tempted to reinvest their profits and expand their operations.

So far, I have been writing about the factors that tend to eliminate wage discrimination on sexual grounds where it exists. But the same considerations would also tend to eliminate wage discrimination on grounds of color, race, nationality, or other reasons. Where such wage differences persist, they tend to reflect real differences in productivity.

Let me now carry my contention a giant step further. The selfishness of individual employers is the force that, under competitive capitalism, brings the level of wages up close to the full value of the productivity of the workers.

Of course, there are never conditions of perfect competition; of full knowledge on both sides, employer and employed, of their respective opportunities. There are individual accidents, immobilities, prejudices, and other factors that prevent everybody’s wage or salary from corresponding with the approximate value of his or her contribution or output. But this correspondence is the dominant long-run tendency.

There is nothing original in this explanation. I have simply been stating, in fact, in an unusual form, what is known as the marginal-productivity theory of wages. This is the theory held by the overwhelming majority of serious economists today.

The Marginal Productivity Theory of Value

This theory was astonishingly late in its development. It did not make its appearance until the very end of the nineteenth century, in the principal works of the Austrian economists Carl Menger (1871), Friedrich von Wieser (1884), and Eugen von Böhm-Bawerk (1884), and of the American economist John Bates Clark (1899).

Why did its development take so long? It took so long partly because the field was already occupied by other theories—wrong theories. And how did they in turn get started? They got started partly through the errors of writers that were in some respects acute and even profound thinkers. The first of these was the economist David Ricardo (1772–1823), who, by abstract reasoning, developed a labor theory of value in which the contributions of capital investment, initiative, invention, and management somehow got buried.

Then, along came Karl Marx. Ostensibly taking off from Ricardo, he presented a pure “exploitation” theory of wages, and declared outright that as long as the “capitalist system” continued in existence there could be no real improvement in the condition of workers.

This assertion was made in the face of some very noticeable improvement in the economic condition of the “masses” before 1848, when the Communist Manifesto was published, and certainly in the remaining 35 years of Marx’s life.

Doubtless there was some excuse for Marx’s failure to notice this improvement. In the early years of his life some relics of the medieval system were still around. Great tracts of land were still held by princes, dukes, and barons, and the men who tilled the soil were often forced to pay excessive rents. Production was by our present standards incredibly low. Capital goods — tools, implements, machinery, vehicles, and other equipment — were still rare, crude, and primitive. There was a scarcity of donkeys, horses, and other farm animals. On the farms, human beings were forced to carry great burdens on their own backs, as they still do in China today. Only very slowly were more capital goods produced. The great bulk of labor went into producing tomorrow’s food and other necessities.

But let us now turn to the actual text of the Communist Manifesto. That document, of approximately 40 pages, was written by Karl Marx and Friedrich Engels partly as a call for civil war — “Working men of all countries, unite!” — partly as propaganda, and partly to explain the economic theories of Communism to the workers. But the reader will look in vain to find those theories spelled out in any reasoned form.

We are told that there are two main classes in society — the “proletariat,” which consists of the “workers,” employed and unemployed, and forms allegedly about nine – tenths of the population, and the “bourgeoisie,” which consists of the employers and a few other groups who are comfortably well off. The bourgeoisie rule. They hire the proletariat; and because they do, they necessarily “exploit” them. The only way this dreadful situation can be changed is by revolution, in which the proletariat must seize all the property of the bourgeoisie, and, if they object, kill them.

The Marxist Exploitation Dogma

No explanation is offered in the Manifesto of how this “exploitation” is possible, or what is its exact extent. The word implies that the employers pay their workers only a fraction of what they are worth — of what they add to production or profits. The fraction is not mentioned. Let us say it is only 50 percent. As individual employers would be making such a big profit at that rate, and would obviously want to hire workers away from other employers, what stops them? The exploitation theory implies that the employers must all be in some secret agreement to keep wages down to this existing nearstarvation level, and maintain it through the most drastic penalties against humane employers, if any, who attempt to offer more. “The average price of wage-labor is the minimum wage, i.e., that quantum of the means of subsistence which is absolutely requisite to keep the laborer in bare existence as a laborer.”

All this is pure fiction. The exploitation theory implies that the wage level cannot rise. In trying to maintain this, the Manifesto quickly falls into inconsistencies and self contradictions. We are told that: “The bourgeoisie, by the rapid improvement of all instruments of production . . . draws even the most barbarian nations into civilization. The cheap prices of its commodities are the heavy artillery with which it batters down all Chinese walls. . . . The bourgeoisie, during its rule of scarce one-hundred years, has created more massive and more colossal productive forces than have all preceding generations together,” with “whole populations conjured out of the ground.”

But this enormously increased production could not have been possible without equally increased consumption. The increased population that the increased production made possible must have consisted mainly of the proletarians, and the increased production itself could only have taken place in response to an increased demand. This demand must have been made possible by increased purchasing power, and that in turn either by increased wages or lower prices. But nowhere in the Manifesto is this necessary chain of causation acknowledged. The exploitation dogma blinded Marx to the obvious.

The Manifesto keeps compounding its economic errors. Obviously capital — which is most usefully thought of as capital goods — is used because it increases production. And because it increases production, it must increase the income of the owner or user. The carpenter would get nowhere without the use of hammers, saws, chisels, and even more elaborate machinery. And so for all other artisans. These tools and machines must at least promise to “pay for themselves” before they are acquired.

Yet we find the authors of the Manifesto writing: “In proportion as the use of machinery and division of labor increases, in the same proportion the burden of toil increases, whether by prolongation of the working hours, by increase in the work exacted in a given time, or by increased speed of the machinery, etc.” (My italics.) Even if the reduction in weekly working hours recorded through the years did not show this Manifesto statement to be false, it was nonsense on its face. Yet Marx and Engels go on: “Machinery obliterates all distinctions of labor, and reduces wages to the same level!” (My italics.)

The Historical Record

From the 1830s on, however, the historic record shows a reduction of hours and an increase of wages from the introduction of machinery. Prof. W. H. Hutt, in his essay on The Factory System of the Early Nineteenth Century, writes: “That the apparent benefits wrought by the early Factory Acts are largely illusory is suggested by the steady improvement which was undoubtedly taking place before 1833, partly as a result of the development of the factory system itself” (Capitalism and the Historians, edited by F. A. Hayek, p. 181).

Tooke and Newmarch, in their book A History of Prices From 1792 to 1856, publish extracts from a report issued by the City Chamberlain of Glasgow in 1856. This records that in 1856 wages of skilled labor in the building trades (masons, carpenters, and joiners) increased 20 percent from the level of 1850–1, and wages of unskilled labor 48 percent in the same period. He attributes this principally to “increased production in consequence of improvements in machinery.”

“It must also be borne in mind,” he adds, “that weavers and spinners worked 69 hours per week in 1841 and only 60 hours in 1851–6, and hence received in 1851–6 more money for less labor.” He also notes at another point that in 1850: “The number of hours per week worked by masons, carpenters and other artisans employed in the building trades was 60 hours, or six days of 10 hours each, with a deduction of 11⁄2 hours for meals. Since 1853, the weekly time has been reduced to 57 hours.”

For the United States (which seems to have lagged greatly behind England), the official publication, Historical Statistics of the U.S.: Colonial Times to 1957, reports (p. 90) that in 1860, the weighted average of working hours in all industries was 11 hours a day (Monday through Saturday inclusive), and that by 1891 this had fallen to 10 hours. In 1890, the working week was 60 hours (6 times 10 daily) and by 1926 had fallen to 50.3.

Recent issues of government publications, the annual Statistical Abstract and the current monthly Economic Indicators, show that the average of manufacturing hours fell from 51 a week in 1909 to 39.8 in 1957 and to 35 in 1985. Thus average working hours per week under capitalism, in other words, show a steady fall for nearly a century and a half.

In the Manifesto, our two authors mention frequently how “the competition between the workers” undermines solidarity and reduces wages. But they never once acknowledge the existence of competition among employers for workers. It is precisely this that brings wages up to the value of the workers’ specific contribution to output. And this is not because the employers have or need to have any altruistic motives, but simply the motive of maximizing their own individual profits.

The Ominous Appeal of Hatred

Karl Marx must himself later have felt a great deal of misgiving about the lack of any real explanation of the maleficent workings of the existing economic system that he had portrayed in the Manifesto. For in 1867 he published (in Germany) a volume entitled Das Kapital. This was apparently intended to be the first of further volumes, but though Marx lived to 1883, nothing more appeared. Some commentators have surmised that Marx had reached an impasse, and could not decide how to continue. After Marx died, Engels undertook to “complete” the work in three volumes by supplementing his friend’s unfinished manuscripts. The Austrian economist Eugen von Böhm-Bawerk thoroughly demolished the argument of the finished work in his Karl Marx and the Close of His System (1896), a masterful refutation that does not have to be done again.

Let me remind the reader once more that the thesis with which I began this piece — that the assumption of pure selfish competition on the part of the employers would be enough to explain how workers on the average receive practically the full value of their productive contribution — is only a novel way of presenting the marginal-productivity theory of wages, now accepted by the overwhelming majority of present-day economists. The factual substantiation of that theory is particularly impressive in the United States. The annual reports of nonfinancial corporation earnings, going back for more than thirty years, show that the employees today receive an average of about 90 percent of corporate gross earnings in their wages and the stockholders only about 10 percent in their profits. In fact, a man’s personal income often seems to have little to do with whether he is technically an employee or an employer. A baseball, football, basketball, or prize-fighting star may receive an income in the million-dollar range, far above that of the promoter who technically employs him. It is a result of the star’s “productivity” — his box-office appeal. It is the competition among promoters, employers, that brings this about.

Selfish Capitalists vs. the Communist Manifesto

From the standpoint of common sense, the appeal of the Manifesto to violence and class war seems entirely needless. If the proletariat (supposedly some nine-tenths of the population) would be better off under a Communist economy, all that was necessary was to make this clear to them, and they could be trusted to vote themselves into power and such an economy into being. (Democracy was emerging in Britain in 1848, and, forwhites, already functioning in America.)

But such an appeal gave little promise of starting a “movement” or leading to early political action. Marx and Engels were agitators, activists — and shrewd psychologists. They knew that most people who find themselves at the bottom of the economic ladder are tempted to put the blame, not on themselves, but mainly on somebody else. The exploitation theory, however weak as an economic doctrine, was tremendously persuasive psychologically and as a call for action. It was an essential part of their propaganda.

So, though the Communist Manifesto, even in its own time, failed completely as an economic guidebook, it did succeed thoroughly in instilling class hatred. This hatred, unfortunately, has been its most permanent contribution. It was originally directed ostensibly against a special class, the bourgeoisie — the employers, and all those comparatively well off — in revenge for “exploiting” the workers.

But, with the passing years, the target of this hatred has been quietly changed. As the employing class in Russia was liquidated by various means, a still existing group had to be substituted. To stay in command, a dictatorship must continue to point to a powerful enemy to be feared and destroyed. Fortunately, such an enemy can still be pointed to. It is the “capitalist” nations as a whole, especially the United States. Sixty-eight years after the Bolshevik Revolution, most of the American population is notably better off than the population in the Soviet Union. Though Russian school children are taught that we are an “imperialist” nation, the American “proletariat” are now tacitly included, as the Russian “bourgeoisie” once explicitly were, among the people to be envied and somehow blamed for the plight of the Communist-ruled countries.

This newly directed fear and hatred are ominous. They have led to an enormous armament buildup in Russia, and to the development and storage of multiple nuclear weapons which are forcing the West to try to keep uneasy pace. None of us can foresee the ultimate outcome.

Visit Prague in the Czech Republic these days and there’s a spot you won’t want to miss. It’s the Museum of Communism, amidst the city’s main shopping district and just a five-minute walk from the foot of beautiful Wenceslaus Square. Advertisements around town tell the tourist where to find it and reveal a little irony too: “We’re Above McDonald’s, Across from Benetton, Viva La Imperialism!” A lively casino occupies the adjacent building.

While in Prague last August I stumbled into the museum with no expectations of its perspective. Was it sponsored by allies of the ancien régime, nostalgic for the “good old days” and eager to whitewash the past? Or would it be honest about the country’s painful, 40-year experience with a failed ideology? Fortunately, this place tells the truth.

The man behind the museum is not himself a native Czech. He is Glenn Spicker, a 38-year-old American entrepreneur who was attracted to Prague’s new business opportunities after the 1989 “Velvet Revolution” expelled the communists from power. He introduced bagels to Prague and opened a jazz club and several successful restaurants. It soon struck him that what was missing in the city was any vivid public reminder of what life was like before 1989. So he spent several months and $28,000 searching flea markets and junk shops for almost a thousand bits and pieces of Red memorabilia—including busts of Marx and Lenin, textbooks, posters, and samples of the shoddy merchandise that once adorned dingy state-owned storefronts all across the country. The museum opened its doors in December 2001.

Exhibits that explain the communist “dream” greet the visitor first upon entering. Slogans, propaganda, and all the paraphernalia of promises made to be broken remind one of the wildly utopian vision once offered by Marx and his followers. Communist theoreticians boasted that they would produce an egalitarian “workers’ paradise” of happiness and abundance, but nothing of the sort came to pass in eastern Europe or anywhere else the system was tried. The largest portion of Spicker’s museum is dedicated to portraying the reality of the communist “nightmare”—an Orwellian trap where private hardship was the rule behind all the public smiles.

Prague is often called the Paris of Eastern Europe for its open and lively city life, stately architecture, rich musical heritage, and cultural diversity. Tourists marvel at the art and entrepreneurship evident on every block. Czechs smile and make friends quickly. Just 15 years since liberation, it’s easy to forget how tyranny once kept these same people in thralldom.

In Spicker’s museum the reconstruction of an interrogation room used by the secret police provides a chilling refresher in state terror. Records show that under communist rule Czech political dissidents were executed by the dozens; more than a quarter million were imprisoned. The secret police employed no fewer than 200,000 spies paid to keep watch over their fellow citizens.

In another corner of the museum sits a replica of a grocery storefront, shabby and unattractive because that’s the way storefronts looked under communism. Shelves were often bare or stocked with goods few people wanted. Shoppers had to endure long lines to secure the most basic of commodities. An inscription tells the visitor that price controls led to a thriving black market in which “poorly paid employees of the shops hid rare merchandise for selected customers, who were able to pay some extra money or provide a certain counter-service.” Much of Czech society resorted to simple barter: “the butcher exchanged his steaks for bananas from the grocer,” for example.

Ecological Disaster

Did communist central planners nurture the natural environment? Hardly. Everywhere communists were in charge—from the Soviet Union and its satellites to mainland China—ecological disaster ensued. The Prague museum explains: “Surface mining in Northern Bohemia changed extensive areas of land into wasteland and the use of solid fuel in power stations polluted the air and killed border forests. Attempts to increase the yield in collectivized agriculture with the application of industrial fertilizers and heavy mechanization led to extensive damage of soil and underground water. This led to the elimination and extermination of a large number of small wildlife species. The statistics show that the average age of inhabitants of communist countries was considerably lower than the average age in the democratic countries. After the fall of communism in the Czech Republic the average age of citizens rapidly increased by about five years.”

Though the story the museum is designed to tell is grim, Spicker does have a sense of humor. To help raise money to pay the bills, the museum gift shop offers postcards and poster-size reproductions of communist-era propaganda photos but each with an added caption. One depicts a peasant woman holding aloft in the breeze a piece of cloth. The caption reads, “You couldn’t get laundry detergent, but you could get your brain washed.” Another shows a parade of smiling teens waving red flags below these words: “It was a time of happy, shiny people. The shiniest were in the uranium mines.”

Near the museum exit stands a portion of the Berlin Wall, still adorned with the graffiti that Westerners scrawled on the free side of that despicable barrier. Among the scribblings are these poignant words large enough that no visitor can miss: “Let me live my life, enjoy freedom, touch the limits, reach the stars, understand the world. That’s what I want.”

Communism was one of history’s most infamous lies. What it wrought stands as a horrible testament to the “planned chaos” of the omnipotent state. The truth demands that its record be documented and displayed. Glenn Spicker’s museum does precisely that, for which men and women everywhere should be grateful.

For more than two centuries classical liberalism has irked thinkers both right and left. Hegel, Rousseau, Comte, and of course Karl Marx did a great deal of pen-wielding to combat it, and one of their most potent weapons was to link the ideals of a fully free society to the flaws of scientism and one of its products, subjective or narrow individualism.

Scientism is the view that everything, including human community life, can be understood by treating it as classical physics recommends, namely, by analysis, or breaking it into constituents. This amounts to reducing everything to its smallest components, and once the laws governing those components are identified, the rest easily follows. This has indeed been the method of the natural sciences, but scientism extended the approach to the social sciences too.

The reductive-analytical method for understanding social and political matters was most popular with Thomas Hobbes, the sixteenth-century English philosopher who has been history’s foremost materialist. By Hobbes’s lights people are merely a collection of matter-in-motion, bits of the stuff of which everything else is made, and by understanding the laws of matter, their lives could also be fully understood.

Hobbes’s approach made him something of an individualist, especially when it came to metaphysics. He thought there were no classes or natures of things, including human nature. All that exists, Hobbes said, are bits and pieces of matter that we human beings classify according to our needs and wants. So human nature is merely the classification we have created to serve our interests. Sure, we believe that a human being is a rational animal, but we could classify things by height or weight or color or anything else we chose. It’s all a matter of convention. (Just why only human beings are able to classify things at all, Hobbes doesn’t say. But let’s leave that be for now.)

From this methodological approach one kind of individualism did indeed develop, according to which everything is merely the atoms that comprise it and nothing more. So for Hobbes and his followers, many of them classical economists who favored free markets, a community was a collection of self-sufficient individuals. (The reason this Hobbesian view recommended free markets is that in classical physics when something moves forward, the only thing that will slow it down is some force impeding its progress; so economic advances are arrested when governments interfere with people’s efforts to live, including production and consumption. Ergo: laissez faire.)

A serious problem with Hobbesian individualism is that it eliminates morality from human life. If we are merely propelled by the impersonal forces of nature, then how we act is not really up to us and we are not responsible for anything we do. There are no standards of right and wrong within this framework, except those we happen to lay down because the forces of nature impel us to do so. Although there were certain individualist elements to this view, Hobbes believed that it recommended an absolute monarchy with full authority to run society (except when it turned against the lives of the citizenry).

That Hobbes’s ideas encouraged classical economists and early free-market advocates has been a liability for all who love liberty—and a boon to all who wish to denigrate it. Marx made the most of this and declared liberalism a sort of infantile stage of human social development. He concluded that the fully mature human society would be an anti-individualist collectivist community.

Marx’s ideas had their college try, of course, but they got bogged down, ultimately, because it turns out that human individuality is essential to understanding what a just society must be. When you ignore human individuality you get a top-down authoritarian or totalitarian state that is incapable of figuring out what is good for a human society; this is to be expected when a polity misunderstands human nature and treats us all as if we were members of an ant colony.

Marx’s Mistake

Marx’s extremely costly and inhuman mistake finally came a cropper and confronted us with the question of whether there is alternative to the flawed Hobbesian individualism. Dozens of defenders of the free society have responded in the affirmative. Sadly, their position hasn’t gotten much attention. Instead, we are subjected to endless efforts to salvage collectivism: communitarianism, market socialism, the third way, economic democracy, and so on.

Individualism does require some upgrading by being framed in terms of an objective human nature. Communities are composed of individuals with a definite human nature. A central feature of human nature is individuality—each of us is unique. This kind of being needs a free society to flourish.

This revamped individualism has been a thorn in the sides of those who do not want human beings to be free. In response, they insist that every form of individualism is atomistic and Hobbesian. One writer who has been most energetic in pushing this smear campaign is Amitai Etzioni, most recently in his book The Monochrome Society (Princeton, 2003). Nearly the same theme is found in such works as Roberto Mangabeira Unger’s Knowledge and Politics (Free Press, 1985), Thomas A. Spragens’s The Irony of Liberal Reason (Chicago, 1981), Charles Taylor’s “Atomism” in his Philosophy and the Human Sciences (Cambridge University Press, 1985), and Robert Bellah et al.’s Habits of the Heart: Individualism and Commitment in American Life (Harper & Row, 1985) and The Good Society (Harper & Row, 1991).

These authors continue to insist that liberalism and its conception of community life must be irretrievably wedded to Hobbesian individualism. They refuse to consider that other, formidable versions of individualism and the liberal polity have been developed by such authors as David L. Norton in Personal Destinies: A Philosophy of Ethical Individualism (Princeton, 1976), Ayn Rand in The Virtue of Selfishness: A New Concept of Egoism (New American Library, 1961), Fred D. Miller Jr., Neera K. Badhwar, Eric Mack, Douglas B. Rasmussen, Douglas J. Den Uyl, and many others.

In his new book Etzioni conceives of the classical-liberal idea, in the words of one fan, as the “atomization of modern society.” Nothing new here at all—Herbert Marcuse made his name by condemning modern capitalist society for producing the one-dimensional man, which is pretty much the same idea. And Taylor’s famous piece, “Atomism,” emphatically makes the same point.

Of course, there is nothing wrong with pointing out that one defense of the liberal social order has its limitations, although doing so over and over indicates a certain insecurity. I suggest that these thinkers know that their only chance of selling communitarianism, or some other version of post-Marxist collectivism, is to link liberalism—or libertarianism—to a narrow individualism (which itself is linked to scientism). A more robust version of individualism would not easily yield this result, so such views must be ignored.

Initiators of Action

Individualism in its normative, non-Hobbesian rendition does not insist, incredibly, that human beings are self-sufficient from birth and have no need for communities. Rather, it embodies the notion that individuals are at some basic level initiators of their actions, for good or for ill, and that a just community recognizes this. That’s the reason their rights to life, liberty, and property are protected. This secures for them a sphere of personal jurisdiction, authority, sovereignty—or as Robert Nozick put it, “moral space.”

No community, whether the family, tribe, ethnic group, club, religious order, nation, or humanity at large, has priority over the adult individual’s personal responsibility to decide what to do in his life. Those communities are in fact derivative of the decisions and choices made by innumerable individuals. This is so even while individuals interact with others in the communities of which they are members. (Taylor, following Rousseau and others, would use the phrase “belong to their communities,” assuming that the community is a kind of body of which the individual is but an organ, limb, or cell.)

This approach is contrary to the message of a long line of communitarian, collectivist thinkers who believe, with Jean Starobinski, that “The aptitude for moral life is a gift that the individual receives from the society in which he grows up; hence he is in debt to that society” (New York Review of Books, May 15, 2003). Starobinski reports that “Rousseau treats the life of the citizen as a ‘conditional gift of the state.’” (Exactly how a gift places one in debt to someone is a mystery—genuine gifts aren’t supposed to be given conditionally.)

Two things are repeatedly missed in these musings. First, it is individuals who utter these positions and so betray their own messages of collective identity. Second, because societies are only collections of individuals, any payment of such alleged debts is merely a transfer to other individuals (what about their debts?) rather than to some exalted collectivity.

Auguste Comte went all the way with this line of thought in Cathechisme positiviste: “[The] social point of view. . . cannot tolerate the notion of rights, for such notion rests on individualism. We are born under a load of obligations of every kind, to our predecessors, to our successors, to our contemporaries. After our birth these obligations increase or accumulate, for it is some time before we can return any service. . . This [to live for others], the definitive formula of human morality, gives a direct sanction exclusively to our instincts of benevolence, the common source of happiness and duty. [Man must serve] Humanity, whose we are entirely.”

Had Comte been more forthright, he would have added, “And I’ll be pleased as punch to extract from you the debt you owe to those predecessors, successors, and contemporaries.”

No doubt, with the academic community in the hands of thousands of scholars feeding off the collectivist political order—most universities are state-run and -supported or dependent on taxpayer money—it isn’t likely that the individualist libertarian theme will soon replace the currently popular semi-socialist communitarian alternatives. Still, it is useful, as one encounters repeated efforts to shore up what is ultimately a hopeless, indeed, self-contradictory idea, to stress that “there is no there there.”

Human beings are both individual and social beings. They do not belong to anything or anyone. Their lives are their own, something that obviously rankles those who would gladly seize the chance to run them.

But that is wrong. Whenever the government involves itself in the financing and distribution of goods and services, the production of those things will also be affected. Only certain social institutions have proven capable of delivering sustained economic growth. Private ownership of the means of production and free markets provide the necessary environment for entrepreneurial risk-taking and innovation. It is never enough for some government laboratory to develop a new technology. New technologies must prove to be cost-effective in a market context in order to successfully serve the needs of customers over time.

In free markets technological advances tend both to improve the quality and to reduce the costs of goods and services sold to consumers. The histories of the automobile and pocket calculator are typical. First, producers introduce a new product as an expensive luxury item, affordable only to the rich and sought chiefly as a curiosity. Second, competition among businessmen for profits leads them to seek larger markets for the products. Consequently, the producers direct considerable attention to developing cost-reducing innovations (for example, introduction of assembly-line production techniques by Henry Ford and the use of microchips in calculators). Third, entrepreneurs vigorously compete and pass on these cost reductions to consumers through lower prices. Fortunes are made and lost, but the new technologies raise the living standards for everyone.

Advances in medical technology, however, have failed to reduce the cost of health care. The introduction of more and more new medical techniques and equipment only seems to push costs ever upward. Overall health expenditures increased from 5.9 percent to about 14 percent of gross domestic product from 1965 to 2001 and are expected to grow to 16.2 percent of GDP by 2008.¹ Some experts have even blamed the new technologies for the cost explosion. Henry Aaron, senior fellow at the Brookings Institution, recently asserted that medical spending continues to rise faster than the GDP because the population is growing and new medical technologies and therapies are constantly being developed to enable more people to receive treatment than previously possible.²

Professor Mark Pauly of the Wharton School of Business stated, “Basically, most of the data I know about indicates that the lion’s share—whatever that is—of the growth in medical spending per capita, even after you adjust for the aging population, is accounted for by what we call technology.”³ For example, before the development of hip-replacement surgery, an arthritic hip was treated with aspirin and a walker. Now a single hip replacement can cost from $20,000 up to $50,000 depending on age and the length of hospital stay.⁴ Advances in medical equipment also seem to drive medical expenses ever upward. MRI (magnetic resonance imagery) machines involve both heavy capital outlays and additional personnel. The average x-ray costs $80 while a similar MRI machine costs over $1,200 per examination. Unlike x-rays, MRIs can detect brain and muscular disorders.⁵

Different Method of Payment

The method of payment sets health care apart from most consumer goods. Most goods are purchased directly by the consumers who enjoy them. In contrast, about 85 percent of all health-care expenditures are financed through third parties. The federal and state governments under Medicare and Medicaid pay 44 percent; private insurance companies and other third-party payers pick up 39 percent.⁶ Medicare subsidizes the health care of those over 65 years old and Medicaid provides free benefits to the poor. Both programs were enacted in 1965. Private insurance is also encouraged under federal law, which exempts employee medical benefits from income taxes. Since the government now spends huge sums on health care, it decides which technologies and procedures will be covered under its programs. Once a procedure makes the list of acceptable (nonexperimental) practices under Medicare, the standard is set for most private insurance plans to follow. The quality of medical cares improves, but the costs increase.

Under government-financed third-party payments, every new technological novelty becomes available to the vast majority of the American public—before the cost-reduction stage can occur. Medical technology entrepreneurs need not reduce costs to broaden their markets! Consequently, entrepreneurs of medical technology focus on newer, even more expensive technological improvements, rather than on applying costs-reduction methods to existing technologies. For example, some new antibiotics may be only 2 percent more efficacious and yet cost 100 percent more. But drugs do not have to be marketed to a cost-conscious public. As long as the new drugs obtain approval under Medicare rules, doctors and patients will avail themselves of the best possible quality—at taxpayer expense.

Normally, technological advances are a benefit to producers and consumers alike. Government financing, however, introduces a third party—the taxpayer—who is bled dry. State governments have attempted to restrict health-care technology by requiring providers to obtain licenses called “Certificates of Need” (CON) from state officials in order to purchase new equipment. CONs supposedly reduce government expenditures by making medical technology less available, just as socialized medicine does in Canada. This approach to cutting medical costs frequently leads to political scandals and long waits. Most important, it does nothing to redirect entrepreneurs toward reducing costs.

Countries with nationalized health care, such as Canada, Germany, and the United Kingdom, spend much less on medical care than the United States (only 7–10 percent of GDP compared to 14 percent in the United States).⁷ This is not because the government is more cost-effective than health-care markets, but because there is little innovation under a nationalized system. By restricting technological advances and cutting the quality of medical care to the bone, socialized medicine can offer lunchbox medical care to everyone, but even then routine office visits and surgeries often require waiting in long lines. During the ’80s middle-class Canadians began to flock to the United States for treatments.⁸ Since then, the long lines for Canadian specialists have dramatically increased. The required median waiting time for Canadian patients between referral by a general physician and actual treatment by a specialist increased from 9.3 to 16.2 weeks from 1993 to 2001; and for certain specialists, such as orthopedists and neurosurgeons, the wait has stretched to about six months.⁹

Under these circumstances, med-tech entrepreneurs need not serve individual patients and doctors. Cost reductions will not be forthcoming under government-financed egalitarian health care. It is no accident that the United States, where health-care financing is only partially socialized, health-care attracts more new investments in medical technology than Canada or Europe, where government-funded health care is complete. In 1990 the state of Washington had more MRI machines than all of Canada, even though Canada’s population of 26 million is more than five-and-a-half times larger than Washington’s population.¹⁰

It is also no accident that the proponents of nationalized health care in the United States frequently blame the very creators of new medical technologies (especially the pharmaceutical companies) for the cost overruns inherent under government funding. The all-too-eager national health-care chefs impatiently wait for the proverbial golden goose to be added to their stewpot.

Moral Vision

Beneath every public policy lies both an economic theory and a moral vision. The economic theory on which Medicare and Medicaid are based asserts that third-party payments will not significantly alter the behavior of patients, doctors, and other health-care providers—including med-tech entrepreneurs. In 1965 when Medicare and Medicaid were enacted the federal government paid most medical expenses without questioning the decisions made by doctors and patients. But one cannot be personally responsible without being fiscally responsible: people flocked to receive taxpayer-paid medical care and they tended to opt for the most expensive treatments available.

Medicaid costs quickly got out of hand. Outlays increased by an average 36.6 percent per year from 1967 to 1972, and about two-thirds of this increase came from the sheer numbers of eligible welfare recipients.¹¹

Medicare expenses grew slowly at first because eligibility depends on reaching 65. From 1970 to 1981, the number of Medicare enrollees increased by only 3.1 percent,¹² but the cost increases began to soar out of control by the mid-1970s. During the period 1974–1981 the cost increased annually by 19.7 percent, 30.3 percent, 20.3 percent, 21.2 percent, 17.0 percent, 15.6 percent, 20.2 percent, and 21.3 percent.¹³ A significant portion of these Medicare cost increases came from improvements in the quality of health care due to the introduction of new medical techniques and technologies. Periodically, Medicare has been projected to go bankrupt and politicians have responded by raising taxes and restricting services. By the year 2000, spending on Medicare physician services was growing 5 percent faster than GDP, and the Medicare Board of Trustees expected the program to exhaust its funds by 2023.¹⁴

Government-financed health care is not a miracle cure for those who cannot afford treatment: the inevitable consequence of divorcing the consumption of health services from cost considerations leads to bankruptcy and/or Draconian government restrictions and rationing. Under socialized medicine in Britain, Canada, and elsewhere patients die as they wait for treatment. Others cope by receiving antiquated treatment. Expensive kidney dialyses or the latest cancer therapies may be routinely denied to old people. Inevitably, the government must control costs somehow, so it begins to deny modern treatment to the sick and allowing the severely ill and old to die.¹⁵

The moral vision that underlies Medicare, Medicaid, and the push toward “universal coverage” over the recent decade is found in the discredited Marxist credo that goods should be “distributed” according to need, rather than exchanged according to “ability to pay.” Government intervention in health care is a poisoned pill marketed under many different brand names: “single payer,” “mandatory co-ops” with “universal coverage,” private insurance under “community rated” pools financed under “employer mandates” (the Clinton plan), Medicare, and Medicaid. Each of these pills contains the same deadly ingredient with only slight differences in the sugar coating. Each relieves patients and doctors of cost consciousness—by design. Each turns technology from everyone’s friend to a dangerous budget buster, which the government must throttle and ration.

The “feel good” credo “from each according to his ability to each according to his need” does not only lead to economic bankruptcy; it generates moral bankruptcy as well. By removing doctors and patients from the cost-awareness loop, people are deprived of personal responsibility. Individuals no longer must choose between alternative methods of treatment based on cost differences. Nor must they face tough decisions such as choosing between selling the house and sacrificing Junior’s college education in order to prolong Granny’s life a few more weeks by using the latest life-support equipment.

Approximately 1 percent of GDP is spent on the dying in their last year of life,¹⁶ and about 40 percent of these costs are incurred treating patients during their final 30 days of life.¹⁷ However, averages can be deceiving. Only about 3 percent of Medicare patients who die actually incur the exorbitant costs due to aggressive care.¹⁸ A comparatively small number of patients are responsible for a lion’s share of the costs of dying.

Terminal medical costs paid by conscious recipients or their loved ones may be well worth the price. But dying patients are sometimes unable to make choices for themselves and are forced to undergo invasive high-tech procedures that merely extend the dying process for a short time. Third-party insurers, including Medicare and Medicaid, expend enormous taxpayer funds to relieve patients and their loved ones from making informed cost-conscious decisions. Already one state, Oregon, has followed the lead of the socialized medical-care nations and adopted health care rationing by denying certain treatments to the old or very sick.¹⁹ Do we want to follow this lead?

Choices between one’s wealth and the health of a loved one are often difficult, but a morally responsible life often involves difficult choices. Are we really better people for abdicating them to politicians and bureaucrats? One of the most appealing aspects of socialism to some people is that the government relieves them of the need to make difficult choices. The Soviet system once promised the people that the basic necessities would be provided to all who obeyed. Under government health care the state either provides the most expensive options or else it rations care in a manner that removes all the cost considerations from the relevant parties.

National health insurance damages people because it treats them like children. Government planners decide how much medical technology we should have and who shall receive its benefits. Individuals are discouraged or deprived of the ability to save for their medical emergencies and old-age care. Individuals are denied the opportunity to reduce health-insurance premiums by lifestyle changes. Individuals are even prevented from allocating their own health-care dollars by shopping for an insurance package tailored to their personal needs.

Government-financed medical care may make some people feel better, but is this “feel good” credo a moral principle worth upholding? Esau sold his precious inheritance to Jacob for a bowl of soup. Is a bowl of public health worth giving away the prospects of continued medical improvements for generations to come?

The recent proposals stemming from the 2000 election to expand Medicare to cover prescription drugs only continue the trend toward nationalized health care. We must reverse that trend and begin adopting approaches that restore cost-consciousness to patients and doctors, such as medical savings accounts. Insurance companies should be free to set premiums according to medical risk instead of according to a “community rating,” which ignores differences among the insured.

Only when we become responsible for our own health care will med-tech entrepreneurs compete to reduce medical costs. These cost reductions are needed to make room for wave after wave of still newer medical technologies that will enable us to live longer, healthier lives.

Gary Pecquet is an economist and C.P.A. in the greater New Orleans area.

Notes

1. Steve Eisenberg, medical director of Blue Cross Blue Shield of Minnesota, September 19, 2001, at www.ssc.k12.mn.us/insuradvminutes.htm.
2. Geri Aston, AMNews staff, “Medicare sound for now, but long-term outlook is gloomy,” April 17, 2000, Amednews.com: The Newspaper for America’s Physicians, at www.ama-assn.org/sci-pubs/amnews/pick_00/gvl10417.htm.
3. “Health Policy Discussion” from “Productivity in Health Care: The Value of Medical Technology,” AEI Conference, February 28, 2001, at www.newt.org/forum_aei_health.htm.
4. Leigh Hopper, “Hip replacement firm issues recall,” Houston Chronicle, January 23, 2001, at www.chron.com/cs/CDA/story.hts/topstory2/788942.
5. Mark H. Gurda, “Rising costs, September 18, 2000,” at www.healthinsure.com/rising_costs.html.
6. Calculated from a report by the Health Care Financing Administration, “Table 3 National Health Expenditures Aggregate and Per Capita Amounts, Percent Distribution and Average Annual Percent Change by Source of Funds: Selected Years 1982–2010.” (Calculations based on the 2000 projection.) See www.hcfa.gov/stats/NHE-proj/proj2000/tables/t3.htm.
7. In 1997 the percentage of GDP spent by these nations on health care was: United States, 13.6 percent; Canada, 9.3 percent; Germany, 10.4 percent; and the United Kingdom, 6.7 percent. (International Health Policy, “Multinational Comparisons of Health Care,” www.cmwf.org/programs/international/ihp_1998_multicompsurvey_299.asp#expenditures.)
8. Jarret B. Wollstein “National Health Insurance: A Medical Disaster,” The Freeman: Ideas on Liberty, October 1992. The article is available online at www.fee.org.
9. Michael Walker and Greg Wilson “Waiting your Turn: Hospital Waiting Lists in Canada,” 11th edition, Fraser Institute, graph at www.fraserinstitute.ca/publications/critical_issues/2001/wyt/section_05-1.html.
10. John C. Goodman and Gerald L. Musgrave, “Twenty Myths about National Health Insurance,” National Center for Policy Analysis, 1991, cited in Wollstein.
11. John Holahan, Financing Health Care to the Poor (Lexington, Mass.: Lexington Books, 1975), pp. 28–29; cited in Paul B. Ginsburg, “Public Insurance Programs: Medicare and Medicaid,” in H.E. Frech, ed., Health Care in America: The Political Economy of Hospitals and Health Insurance (San Francisco: Pacific Research Institute for Public Policy, 1988), p. 190.
12. Ginsburg, p. 188.
13. Ibid., Table 5–1.
14. Geri Aston, “Medicare sound for now, but long-term outlook is gloomy,” April 17, 2000, Amednews.com: The Newspaper for America’s Physicians, www.ama-assn.org/sci-pubs/amnews/pick_00/gvl10417.htm.
15. Goodman and Musgrave, pp. 29–31, cited in Wollstein.
16. Author’s computation. About 30 percent of all Medicare money is spent on those who die in the same year the money is spent. J.D. Lubitz and R. Prioda, “The Use and Costs of Medical Services in the Last Two Years of Life,” Health Care Financing Review 5 (1984), pp. 117–31.
17. J.D. Lubitz and G.F. Riley, “Trends in Medicare Payments in the Last Year of Life,” New England Journal of Medicine 328 (1993), pp. 1092–96.
18. See Lubitz and Prioda, and Lubitz and Riley.
19. “The Grand Unification Theory of Health Care,” Section 7, “Rationing and Death–Covert Rationing and End-of-Life Care,” www.yourdctorinthefamily.com/grandtheory/section7_1.htm.