Each of the ten essays is an estimable work, but some are likely to be of particular interest to Freeman readers. I’ll focus on four.

At the top of that list, I would place Peter Leeson’s essay, “Do Markets Need Government?” Most free-market advocates assume that “the rules of the game” must come from and be enforced by the government. Leeson, however, argues that market participants may do a better job than the State, writing, “The long-standing existence of vibrant markets under conditions of real or quasi-statelessness suggests that private ‘rules of the game’ must be possible without  government.” In commercial transactions, he points out, the participants have a lot at stake in the performance of contractual obligations.

That led them to develop commercial law completely independent of government, as well as tribunals to adjudicate disputes. Those tribunals did not have enforcement powers, but the need to maintain a good business reputation minimized flouting of their decisions. Violators were apt to face ruinous ostracism. Adam Smith’s “invisible hand” worked remarkably well.

Leeson goes on to show that the spontaneous order of the market also devised mechanisms to deal with criminal conduct. After reading his essay, it’s evident that the Hobbesian notion that society would be chaotic violence without a powerful state is untenable.

Another particularly valuable contribution is the late Norman Barry’s essay, “Economic Rights,” in which he laments that “for most of the time, in all countries, economic rights have been at the mercy of legislatures . . .with little or no protection from the courts or written constitutions.” He attributes this unfortunate state of affairs to the abandonment of the Enlightenment concept of the unity of liberty. In this concept, economic liberty is integral to an overall concept of liberty; most modern thinkers, by contrast, conclude that some aspects of liberty are important and others are not. They say they can tell wheat from chaff, with property rights and economic liberty being chaff. “There is scarcely any recognition of the connection between economic rights and other, more fashionable notions,” Barry writes.

He concludes that nations would reap huge productivity gains if they would steer away from “welfare rights” and regulatory intervention, and instead allowed people to produce and trade as they choose.

Julian Morris also merits special mention for his essay, “Private Versus Public Regulation of the Environment.” He takes issue with the presumption that the State alone is capable of solving environmental problems: “The reader may be surprised to learn that many environmental problems have in fact been caused by governments, sometimes in spite of attempts by private industry or businesses to stop them.”

I’ll mention one more essay, Cento Veljanovski’s “The Common Law and Wealth.” In it Veljanovski looks at this intriguing question: What kind of legal system is apt to contribute more toward a nation’s ability to produce wealth—common law or civil law? He notes that Gordon Tullock, among others, has observed that common law tends to be “untidy,” with duplicative costs, inefficient methods of ascertaining facts, and great latitude for wealth-destroying judicial activism. Other scholars, however, such as Richard Posner, maintain that since common law is premised on the legality of the status quo, it places a restraint on the use of law to redistribute wealth. This is an interesting debate with no resolution in sight.

Scholars who are interested in the field of law and economics will want to have this book on their shelves, and professors teaching a variety of law, economics, and political science courses will find in it a good many supplemental readings to get sharp students thinking about questions that mainline textbooks almost always overlook.

The market is a complex order. A thief needs only violence to get rich; a cattle trader needs more things, such as order and justice; in other words, an environment where transactions can be safely completed. The market does not obey “the law of the jungle”—just the opposite: The law of the jungle prevails where there are no markets. Peaceful exchange with secure property rights is more productive than widespread robbery, but many criticize the rich regardless of the path they followed to opulence, as if they all had achieved their wealth illicitly. Apparently, George Bernard Shaw’s fallacious quotation still rules the day: “I am a gentleman: I live by robbing the poor.”

The most common way to make a fortune in a free market is organizing a successful company. How can this company succeed and pay handsome salaries? In a free market there is only one answer: by making something consumers appreciate. Under such circumstances, the businessman’s wealth is linked to the social utility of his labor, a utility proved by consumers who buy because they too benefit from the deal.

Of course, one can always make money breaking the law, as thieves and swindlers do. And there is also another method that, while unjust, does not always appear that way: to become rich by avoiding competition or gaining other privileges that only the state can grant.

Monopolies and protectionism exemplify these strategies. Both became the enemies of classical liberals, who argued in favor of the free market and against the privileged groups that injured the majority of the population by imposing high prices and limiting the ability to choose.

Alongside the state’s expansion during the past century, opportunities to profit from using the state to avoid competition have proliferated. Through the apparatus of government, lobbying groups have obtained power over their markets, subsidies, and every other kind of anticompetitive protection.

Blocking market activity breaks the connection between social needs and the supply of goods and services aimed at satisfying them. But it may turn out to be profitable: Fortunes have originated in anti-competitive privileges bestowed by political power or made possible by its regulations. In such cases it is fair to distrust the wealthy.

Often, however, no distinction is made when it comes to criticizing rich people. They all appear reproachable, and few dispute the need to impose on them specific burdens and progressive tax scales aimed at dealing with the “problem” of inequality. The state must force-fit all of us into a Procrustean bed.

Internal Robin Hood Service

Many thus would have the state play Robin Hood, robbing from the rich (no matter how they got the money) and giving to the poor. I do not dispute that this legend is open to several interpretations, including a plausible libertarian one. Robin Hood can be seen as an enemy of tyranny and the abuse of law, a friend of the people, a man who robbed tax collectors and privileged aristocrats, returning the money to the victimized peasants. This is a very appealing version of the story. My objection, however, is directed exclusively at the danger of casting the modern state in the powerful image of a hero seeking redress and justice. It uses this image to legitimize its vast distribution operations and to show its supposed liberality.

The notion of the state playing Robin Hood has two weaknesses. First, there is no way to prove that if the authorities take a dollar by force from a rich person and give it to a poor person, the collective happiness increases. As Anthony de Jasay says, the only way to solve the problem of comparisons between individuals is for the state to impose its preferences on the community. The outcome of these operations, in the words of Bertrand de Jouvenel, is not a redistribution of income from rich to poor but from everyone to the state.

The second weakness in the state-as-Robin-Hood argument is that it only works if the treasury is small. The state in the days of Robin of Locksley was limited, but when it takes on modern proportions, no matter what Barack Obama may say, it can no longer finance itself only by taking money from the very rich, who are by definition a minority. The state might pretend to do this, but in practice its only financing option is to take money from everyone.

One of the main arguments for the growth of the modern state is the fight against inequality. Some claim that without the state’s intervention, human beings would abandon the poor to their own devices and charity would prove both insufficient and insulting.

The allegation that, without the state’s helping hand, people would ignore their fellow human beings in poverty can’t stand even a cursory analysis. From the dawn of civilization, examples to the contrary abound. Voracious tax increases have not managed to extinguish the humanitarian impulse.

Charity is a noble and deep human feeling. Why is it dismissed and devalued? Why is it deemed humiliating, while state aid is viewed as a display of compassion?

Virtue Requires Liberty

Helping our fellow man and political distribution are very different actions. Let us take as an example the noble conduct of the Good Samaritan, a beautiful portrait of humanitarianism. A basic assumption—in truth, an essential element—of the parable is liberty. The Good Samaritan’s virtue stems from the fact that he acts voluntarily; if a centurion forced him to help the poor Jew, beaten and abandoned in the road, the parable would have made no sense. Virtue, in effect, demands liberty.

In this example, we see the demoralizing effect of state expansion. Many nongovernmental organizations, particularly in Europe, do not ask citizens to freely and voluntarily hand over a fraction of their income. Instead, they ask the state to extract sums from taxpayers’ pockets. Amazingly, the sacrifice of liberty and responsibility on the altar of political power is praised, while providing free and voluntary aid to one’s fellow man is dismissed as humiliating charity.

The fact is that where markets are permitted to work, fewer people need economic assistance of any kind. The centuries since Adam Smith wrote The Wealth of Nations have provided ample evidence to support his message: Free trade and security in one’s rights are the pillars on which individuals can improve their condition. Despite this, many people criticize the market economy and allege that it encourages marginalization. It is common to read statistics showing great poverty and accusations that market-oriented countries like the United States are infernos of inequality.

Not Condemned to Poverty

The problem with such statistics is that they are based on surveys that fail to track the same people through time. Thus they cannot provide the most important piece of information: Are the poor condemned to poverty or are they able to rise out of it? The statistics, in short, rarely measure social mobility. But when they do, they show that the poor have large possibilities of escaping the lowest percentile of income distribution. It is in fact more probable that a very poor person in America will climb to the highest income rung than that he will remain in poverty. One could argue that the data indicate mobility but not improvement, given that there is always a poorest 20 percent. Incomes in an advancing society like the United States, however, are not constant but rather are increasing—despite pervasive government interference—and this, not welfare, offers everyone the opportunity and the incentive to progress.

State-Sanctioned Inequality

Socialists and interventionists of all parties have reluctantly ended up accepting the market, but they claim government intervention is necessary to tackle inequality. However, inequality is only objectionable if there is a lack of competition and freedom. The modern state’s onerous and inefficient distributive structures, ostensibly built to wipe out inequality, have had perverse effects and a demoralizing impact on society, pushing different groups to fight over public favors. It is an out-of-control process in which, as the German liberal Ludwig Erhard said, everyone puts his hand in the pocket of everyone else.

The clamor from interventionists against inequality morphs into a clamor for a larger and larger state. This path leads to the loss of liberty and a distortion of both democracy and justice. It distorts democracy because, by attempting to solve inequality, it removes limits to power and expands the field of state action. It distorts justice because the only way to solve inequality politically is for the state to have the power to treat individuals unequally. Thus the struggle to eliminate inequality ends up destroying the most important form of equality for an open society: equality before the law.

People who are newcomers or visitors to Canada sometimes have trouble understanding how our government works so I have prepared the following short primer.

Taxes are the money forcibly taken from almost every man, woman, and child in Canada by the people in government. These taxes consume about half the average taxpayer’s income. The people in government keep a large portion of these taxes for themselves.

Some of the remainder is partially given back to the taxpayer as a kind of allowance. In many ways it’s just like the allowance you used to get from your mother when you were a child. The biggest difference is that this mother pays your allowance from the money she has stolen from your piggy bank. As a matter of fact, she also takes her pin money from your piggy bank. Don’t ever let your piggy bank run short or mother government will become very angry and abusive. I hope your real mother isn’t like mother government.

Some of your tax money is given to other people. When it is given to other people the government often calls it an investment. The recipients of these investments are often mil lionaires. They become millionaires by being connected to people in government and receiving investments from the government. Sometimes your taxes are given to people who have squandered their opportunities. In Canada this is called social justice.

Canadians are happy to pay taxes because this is how we get free health care. It’s good that it’s free because sometimes sick people are forced to stay in hospital closets or to wait months for treatment. We wouldn’t tolerate this if we actually had to pay for our health care, but because it is free Canadians don’t mind, and at least it’s not American-style health care. In America no one can afford health insurance, and everyone dies on the street.

Government takes the remainder of the money and gives it to other people who are poor. The poor are people who make less money than the people who aren’t poor. However, now that government takes half of people’s incomes almost everyone is poor. We do it this way because Canadians are more compassionate than Americans are. Being equally poor helps us eliminate our social deficit.

Canadians go along with this system because bureaucrats and politicians are more responsible with the taxpayers’ money than the taxpayers are themselves. If taxpayers were allowed to keep more of their money it would only be wasted on food, shelter, and clothing. Bureaucrats and politicians can be trusted because they are altruistic whereas taxpayers are selfish.

Bureaucrats sometimes invest the taxpayers’ money in culture to give us a sense of who we are as a country. Canadians pride ourselves on being tolerant, whereas Americans are intolerant. Sometimes we give hundreds of millions of dollars away to special-interest groups. These are called partnerships and they enrich the Canadian mosaic.

Imagine how terrible it would be to live in Canada if it weren’t for a government that suckles, guides, and watches over us for our entire lives, no matter where we go or what we do, just like a gigantic, doting, dependent, mildly abusive mother (sure, mom has her faults but who doesn’t?).

I trust this short primer will help visitors to my wonderful country understand the progressive nature of our government. Perhaps some visitors can take home valuable lessons on how to treat one another with real compassion. Hello, America, are you listening?

In the marketplace for cars, competition insures that the products mirror consumer tastes. Unfortunately, politicians have created barriers to entry that make political competition less vigorous than it might be. And voters do not bear the consequences of their choices with the same immediacy of car consumers. Still, the politicians who survive in office tell us something about ourselves.

We could, for example, expect our politicians to uphold the Constitution and maximize our ability to lead the lives we choose. After all, elected officials at the federal level swear to “support and defend the Constitution of the United States against all enemies, foreign and domestic.”

In contrast, we might expect our politicians to see their job as pleasing their constituents regardless of constitutional constraints. And because constituents are a diverse lot, the politician who wants to stay in office focuses on the most influential constituents.

Frederic Bastiat described the state as “the great fiction by which everyone seeks to live at the expense of everyone else.” Everyone may try, but only the politically powerful succeed. When the state is devoted to such efforts, what Bastiat called plunder, a peculiar sort of person succeeds in politics. No, not a thief, but a thief in saint’s clothing.

The political marketplace teems with those who sugarcoat redistribution with claims of helping the general public: “We need farm subsidies because the family farm is the backbone of this great nation.” A politician who can make that claim with a straight face has a much better chance of being elected than one who says, “I have a lot of friends who are farmers and when elected, I intend to make them rich using your money.”

Helping the District

In today’s political landscape, however, some politicians dip their hands into the treasury without invoking the legerdemain of the public good. It is not uncommon to read of a member of Congress making the case for his re-election on the grounds that he has successfully steered large amounts of so-called federal dollars into his district.

You would think he might be embarrassed to have taken money from neighboring districts and states merely to enhance, say, the roads of his constituents. But he’s actually proud of it. When he is called to task, his supporters have a quick justification: it’s his job to help his constituents.

His job? It’s his job to use the fiscal process to enrich A at B’s expense? I guess that oath of office is just for show. If the Constitution could weep, it would cry us a river.

We once lived in a different world.

We once, at least from time to time, had politicians who understood that the Constitution constrained their ability to spend the people’s money. One such man was Grover Cleveland. In his first Inaugural Address, in 1885, he said: “In the discharge of my official duty I shall endeavor to be guided by a just and unstrained construction of the Constitution, a careful observance of the distinction between the powers granted to the Federal Government and those reserved to the States or to the people, and by a cautious appreciation of those functions which by the Constitution and laws have been especially assigned to the executive branch of the Government.”

Such language sounds quaint to our ears: a president promising to restrain himself based on higher principle. When push came to shove, Cleveland refused to budge from that principle. In 1887, when a drought hit Texas, a bill arrived on his desk providing funds to buy seeds for struggling Texas farmers. Who could oppose such a worthy cause?

Cleveland vetoed the bill and wrote the House of Representatives that “I can find no warrant for such an appropriation in the Constitution, and I do not believe that the power and the duty of the general government ought to be extended to the relief of individual suffering which is in no manner properly related to the public service or benefit.” Cleveland went on to explain to Congress that when the government got into the business of relieving suffering, it discouraged private efforts to fight hardship and hurt our character.

How would the voters of today describe such a veto? Heartless? An example of grid-lock? How the world has changed! A reluctance to spend other people’s money has become a vice rather than a virtue.

Notice that Cleveland said nothing about the morality of helping the farmers of Texas. He might have felt their cause to be just. But he could not justify federal intervention constitutionally. This narrow perspective reduces the potential for plunder. And one of the purposes of the Constitution is to limit even our honorable desires to alleviate suffering with the public’s money. Otherwise, the power of government grows and that of individuals falters.

It is tempting to say that Cleveland’s integrity and respect for his oath of office were politically courageous. Perhaps they were. He made plenty of enemies. But he was also popular with the voters. He managed to win the popular vote in three consecutive elections, his two terms book-ending an electoral college defeat. The voters of the late nineteenth century respected the Constitution and honored Grover Cleveland with their support.

If we want politicians who respect the Constitution, those of us who care about it will have to do a better job encouraging our fellow citizens to feel the same way. Then the politicians who will thrive in the political marketplace of the next millennium will be less interested in spending other people’s money and more interested in letting us make our own decisions about living life to the fullest.

FDA Contest

I want to thank all the readers who responded to the contest in my September column asking for your thoughts on a world without the FDA. The contest winners are Karen Kwiatkowski and David Calderwood. Both made a number of interesting points. Karen emphasized how the FDA politicizes the flow of information about the efficacy of drugs while David pointed out how the FDA suppresses information and undermines the nature of the doctor-patient relationship. Karen and David will each receive a $25 gift certificate to use at the FEE bookstore.

To understand aright this connection between private property and moral freedom, we must begin with an observation about the nature of freedom: the ascription of freedom to a creature is only meaningful if that creature exists in a more or less fixed environment. Or, put another way, freedom requires limitation. This is because the realm of freedom is the realm of choice, and choices exist only for creatures who are confronted with a reality that does not twist itself into conformity with every human wish. As C. S. Lewis so clearly discerns in his discussion of the problem of evil, any society of free individuals requires a common field of play within which the individuals may interact. For human beings, that field of play is the material world. “But if matter is to serve as a neutral field it must have a fixed nature of its own,” Lewis writes in The Problem of Pain. The externality of other people and objects creates the sphere of choice and action that makes moral responsibility possible. The fixity of the human environment means that even in our choices, we never escape limitation. For not only is the range of options always limited, but the very act of choosing is, paradoxically, an act of self-limitation.

In The Myth of Democracy, Tage Lindbom argues that “We live in a subject-object antinomy, and we cannot escape the antinomies of existence. Even freedom of will, freedom of choice, comes to an end, at least from the formal standpoint. We are bound to what we have freely chosen.” This means that authentically human freedom is not freedom from commitment, but freedom to commit. And commitment entails responsibility for the consequences of one’s choices. The fixed material world is the matrix for the exercise of human freedom.

Survival, Duty, and Self-Development

The institution of private property attaches pieces of the material world to particular moral agents. Private property endows the spatio-temporal actions of individuals with moral significance. This is true in at least three senses. First, private property allows the individual to be responsible for his own survival. Man is both spirit and body, and his physical existence requires certain material conditions to sustain it. The possibility of property places the responsibility for survival squarely on the individual’s own shoulders. Put more concretely, the institution of private property allows me to build my own house if I want shelter, to grow my own crops if I want food, and to chop my own wood if I want heat.

Obviously there can be no incentive for anyone to engage in productive labor if the fruits of that labor are liable to be plundered by his less industrious neighbors. Under such circumstances, the concept of exclusive private property ceases to exist meaningfully. The more likely scenario in today’s world is that the state will claim the final say to distribute all property so as to achieve some guaranteed social minimum. Such a guarantee, possible only at the expense of private property, destroys the individual’s responsibility to meet his own needs. Moral freedom requires choices and consequences through time: I deserve present consequence Y because of my own past action X.

The welfare state creates a radical disjunction between choices and consequences. When the state provides for my material well-being, I am no longer morally free to make choices that determine my future; no matter what I do or don’t do, the state will provide for my physical needs. As Richard M. Weaver maintains in Ideas Have Consequences, “no society is healthy which tells its members to take no thought of the morrow because the state underwrites their futures. The ability to cultivate providence, which I would interpret literally as foresight, is an opportunity to develop personal worth.” The freedom of responsibility to provide for my own survival can exist only where the respect for private property allows me to do so.

A second way private property promotes moral freedom is by allowing the individual to freely discharge his moral duty to his neighbors. It is an axiom of ethical theory that morally meaningful actions must be performed freely. This condition of freedom would naturally hold for the material duties that men owe to one another: to satisfy whatever duty I may have to help those in need, I must be free to give my property to them. But the welfare state denies property owners the opportunity to exercise this form of moral agency. Robert Nozick, in Anarchy, State, and Utopia, frankly notes that “Taxation of earnings from labor is on par with forced labor.” The welfare state essentially enslaves those who attempt to work for themselves and forcibly redistributes their property along utilitarian lines. In this way, the rape of private property destroys the individual’s opportunity to exercise the virtues of charity and beneficence. The private citizen cannot be credited as morally praiseworthy for relinquishing wealth that is coercively seized from him. Freedom is the necessary condition of moral responsibility, and private property is the necessary condition of freedom.

The third way in which private property guarantees moral freedom is by providing the individual with the material media for the full development of his person. Much of the distinctively human work we do, we do with property. According to Weaver, “ownership provides a range of volition through which one can become a complete person.” Man could neither write nor sculpt nor perform nor build without the opportunity to own the tools and media that make these activities possible. Private property becomes the material manifestation of realized individual potentials.

The necessary connection between private property and freedom in the realm of Self-development may perhaps most clearly be seen by examining what happens to individual identity when private property is sacrificed to equality. John Rawls regards private property as subordinate to the desires of the least advantaged, and he concludes that both physical property and the individual traits that created the property should be regarded as the common property of the community.

It is certainly true that private property joined to disparate abilities makes inequality inevitable; some men will always be more talented and produce more of human worth than others. Individuality is easily destroyed when the material expression of that individuality through property ceases to be respected. In such a socialist, egalitarian society, the individual is denied the freedom to develop his personhood, because nothing he does can be viewed as truly and exclusively his own. Private property gives man the prerogative to define himself in the material world.

Freedom to Fail

The kinds of freedom made possible by private property obviously do not exhaust the conditions for moral agency. But our interactions with property do represent a substantial part of our responsibility, and our moral lives would be impoverished without the opportunities for choice that private property provides. At this point, I want to make explicit two implications of the relationship between property and moral freedom developed above. First, a painful but necessary part of any freedom is the freedom to fail. Applied to our use of property, moral freedom requires the freedom to be poor, the freedom to be selfish, and the freedom to be undistinguished. If private property were obliterated so that no one could be poor or selfish or undistinguished, no one could properly be said to be free. And what’s more, history and scarcity give us every reason to believe that some people not only can fail, but will fail. Failure is the cost of freedom. Second, the kinds of moral freedom I have addressed are linked to concrete, relatively small-scale properties. Massive, abstract, anonymous ownerships of stocks, options, and the like are legal fictions that, whatever their own virtues, weaken the bond between man and the material world, and hence weaken the moral freedom and responsibility that ownership engenders. In the classic Lockean understanding of property, individuals create possessions by mixing their labor with the material environment. The reality of global scarcity may give us reason to add to Locke’s condition, but the purposeful labor of an individual is still a necessary starting point in understanding how it is that a person comes to be identified, in part, with his property.

When a man turns his money over to a broker who then buys shares of a mutual fund that itself buys shares in a variety of corporations around the world, the man may legally possess the mutual fund shares; but his connection to the businesses in which he is invested is far too weak, and often unwitting, to allow for any substantial moral agency on his part. Indeed, the whole modern notion of a corporation divorces men from responsibility and reduces property to a disembodied and dangerous abstraction. Ghost properties may promote a certain kind of freedom in the broadest libertarian sense, but they are neither necessary nor beneficial to the moral freedom that real property secures.

Lessons from Dostoyevsky

Few spokesmen represent the relationship between property and moral freedom more clearly than the Grand Inquisitor in Dostoyevsky’s The Brothers Karamazov. The Inquisitor, centerpiece of Ivan Karamazov’s poetic brief for atheism, condemns a returned Christ for his failure to feed the weak masses of humanity with the earthly bread they crave. Instead, Christ resisted the devil’s temptation to temporal power and left men free to choose-to accept or reject, to obey or flout, to work or starve. So the Inquisitor and his church have stepped in to satisfy the mob’s longing for security. Men groan under the agony of freedom and responsibility, and they gladly surrender their freedom and their property to the church in exchange for the most basic material guarantees: “No science will give them bread as long as they remain free, but in the end they will lay their freedom at our feet and say to us: `Better that you enslave us, but feed us.’”

In the character of the Inquisitor, Dostoyevsky brilliantly prefigures the horrifying connection between humanitarianism and totalitarianism in the twentieth century. When the alleviation of physical suffering is pursued as the highest end of man, his freedom, his property, and often his life are brutally sacrificed on the altar of compassion. The same deontological respect for persons underlies both moral freedom and private property. But as we have seen above, any meaningful respect for persons must allow them to freely and responsibly fail. It is this possibility that Christ allows, and for which he is attacked by the Grand Inquisitor: “Respecting him so much, you behaved as if you had ceased to be compassionate, because you demanded too much from him.”

An Abdication of Responsibility

The history of America in recent decades is in large measure the history of a people who, unwilling to bear the responsibility that freedom and choice require, have ceded larger and larger portions of their liberty and property to a national government that promises to provide materially. The recent round of cries for socialized medicine in this country signifies an abdication by many Americans of responsibility for their own lives and welfare. The figure of the Grand Inquisitor shows us the manipulative and dehumanizing face lurking behind the mask of statist humanitarian compassion.

The institution of private property cultivates and protects the moral freedom of the individual person by recognizing his essential dependence on the material world. The limits imposed by this material environment comprise to a large extent the conditions under which human beings make choices, and, thus, the conditions under which human beings exercise moral agency. The sphere of sovereignty that property provides is a sphere necessary to the moral autonomy of the person. Property forms a cushion of independence for each person from the moral intrusiveness of other individuals and the state. It is the fulcrum by which the lone individual makes his moral significance known to the forces that would strip him of his freedom.

The issue, though, is not why reform never happens, but why people voluntarily give vast amounts of money to politicians in the first place. Clearly, those people who give think they are buying something. What is for sale? What is it that they demand and politicians supply? Identifying the product in this political marketplace will at least allow the debate to focus on the real issue.

The product, of course, is wealth. Wealth is desired because it makes people better off, and all human activity is a search by people to make themselves better off.

Two Ways to Get Wealth

Cooperating with others is one way to make yourself better off. You engage in some kind of quid pro quo, a voluntary exchange: I’ll do something for you if you do something for me. I’ll give you a hundred dollars, if you fix my car. If you give me five dollars, I’ll cut your hair. Both parties come out ahead. Voluntary exchange is the basis for all economic activity. It is productive.

But there is also another method to get others to make you better off: stealing. Theft is a redistributive activity, as opposed to a productive activity. There are two basic ways to steal: the crudest way is to use force or the threat of force. This is an involuntary exchange, and it is condemned by all systems of law and ethics.

The other way to steal is to prevent people from engaging in voluntary exchanges and forcing them to exchange with you to your benefit. Forced exchange lowers the benefits the forced party would have obtained otherwise. For example, a giant food-processing firm lobbies hard to keep quotas on foreign sugar. That makes the domestic price of sugar artificially high and the price of the firm’s corn syrup more attractive. The company is better off, but consumers are worse off.

This is always the case. Voluntary associations are productive; all participants are better off. Involuntary associations, no matter of what kind, are redistributive. Some are made better off, and others are made worse off. Further, redistributive activity makes the economic pie smaller by reducing people’s incentives to produce and exchange. Why produce if someone is going to take some (or all) of it? Why produce to get something in exchange if you can get it for nothing?

Government’s Role

Government, of course, can play a role in both kinds of exchanges. Government can, and should, foster voluntary exchange. It does so by defining and protecting property rights—voluntary exchanges are simply exchanges of property rights—and by enforcing contracts, which are merely promises to exchange titles to property. This is what a good legal system is supposed to do.

But government also can, and unfortunately does, foster involuntary, redistributive exchanges of both kinds discussed above. Some taxes, of course, are needed to support the legal system that fosters voluntary exchanges by protecting property rights and enforcing contracts. But those taxes are a tiny part of the total that government collects. Most taxes are purely redistributive. The money is taken from some and given to others, depending on their relative influence in the political process. Thus, manipulating the taxing-and-spending system is a major reason why people lobby politicians and make campaign contributions.

Redistributing wealth by preventing voluntary association is perhaps even more pervasive than redistribution carried out directly through the tax system. Every regulation benefits someone and hurts someone else, thus giving each an incentive to pay off politicians and regulators to tip the scales in their direction. Further, when the potential for regulation is present, affected people have an incentive to play the redistributive game, either offensively or defensively, even if nothing ever happens. As economist Ben Zycher wrote, “Politics is the art of wealth redistribution, and economic regulation is the continuation of politics by other means. Whatever rationale for regulation one chooses—natural monopoly, external effects of individual behavior, health and safety, requirements of national defense, ad infinitum—the universal characteristic of regulation, regardless of industry, time, or place, is a redistribution of wealth from political losers to those favored by regulators and politicians.” (“Market Deregulation of the Electric Utility Sector,” Regulation, Winter 1992, p. 13.)

Government as Broker

In essence, the cause of large political contributions and spending is the government’s possession of the power to redistribute wealth. Originally, the U.S. Constitution properly and powerfully limited that power. Governments could not take private property without compensation, and then only for “public use”; governments could not interfere in private contracts; state governments could not interfere in interstate trade. On the civil side, governments could not interfere with freedom of speech, religion, and association. But over the last century, the constitutional prohibitions against the major means of redistributing wealth have been greatly eroded, opening the door to the offensive and defensive purchase of this power through political contributions.

The superficial response is to simply outlaw those contributions. But this does not get at the cause of the problem. As long as the supply and demand exist, such prohibitions will be largely ineffective. For years government has sought to deal with the drug problem by making drugs illegal and devoting billions every year to enforcement. Yet the market thrives. Sixty percent of all federal prisoners are drug offenders, and the drug problem persists. If there is supply and demand, there will be exchange, regardless of what the law says.

It is the same with campaign finance. The only real solution is to deal with the root cause: the supply and demand for the redistribution of wealth. And the way to do that is to return to the constitutional prohibitions against it. Then there would be nothing to buy.

The market economy—capitalism—is based on private ownership of the material means of production and private entrepreneurship. The consumers, by their buying or abstention from buying, ultimately determine what should be produced and in what quantity and quality. They render profitable the affairs of those businessmen who best comply with their wishes and unprofitable the affairs of those who do not produce what they are asking for most urgently. Profits convey control of the factors of production into the hands of those who are employing them for the best possible satisfaction of the most urgent needs of the consumers, and losses withdraw them from the control of the inefficient businessmen. In a market economy not sabotaged by the government the owners of property are mandataries of the consumers as it were. On the market a daily repeated plebiscite determines who should own what and how much. It is the consumers who make some people rich and other people penniless.

Inequality of wealth and incomes is an essential feature of the market economy. It is the implement that makes the consumers supreme in giving them the power to force all those engaged in production to comply with their orders. It forces all those engaged in production to the utmost exertion in the service of the consumers. It makes competition work. He who best serves the consumers profits most and accumulates riches.

In a society of the type that Adam Ferguson, Saint-Simon, and Herbert Spencer called militaristic and present-day Americans call feudal, private property of land was the fruit of violent usurpation or of donations on the part of the conquering warlord. Some people owned more, some less and some nothing because the chieftain had determined it that way. In such a society it was correct to assert that the abundance of the great landowners was the corollary of the indigence of the landless.

But it is different in a market economy. Bigness in business does not impair, but improves the conditions of the rest of the people. The millionaires are acquiring their fortunes in supplying the many with articles that were previously beyond their reach. If laws had prevented them from getting rich, the average American household would have to forgo many of the gadgets and facilities that are today its normal equipment. This country enjoys the highest standard of living ever known in history because for several generations no attempts were made toward “equalization” and “redistribution.” Inequality of wealth and incomes is the cause of the masses’ well-being, not the cause of anybody’s distress. Where there is a “lower degree of inequality,” there is necessarily a lower standard of living of the masses.

Demand for “Distribution”

In the opinion of the demagogues inequality in what they call the “distribution” of wealth and incomes is in itself the worst of all evils. Justice would require an equal distribution. It is therefore both fair and expedient to confiscate the surplus of the rich or at least a considerable part of it and to give it to those who own less. This philosophy tacitly presupposes that such a policy will not impair the total quantity produced. But even if this were true, the amount added to the average man’s buying power would be much smaller than extravagant popular illusions assume. In fact the luxury of the rich absorbs only a slight fraction of the nation’s total consumption.

The much greater part of the rich men’s incomes is not spent for consumption, but saved and invested. It is precisely this that accounts for the accumulation of their great fortunes. If the funds which the successful businessmen would have ploughed back into productive employments are used by the state for current expenditure or given to people who consume them, the further accumulation of capital is slowed down or entirely stopped. Then there is no longer any question of economic improvement, technological progress, and a trend toward higher average standards of living.

When Marx and Engels in the Communist Manifesto recommended “a heavy progressive or graduated income tax” and “abolition of all right of inheritance” as measures “to wrest, by degrees, all capital from the bourgeoisie,” they were consistent from the point of view of the ultimate end they were aiming at, viz., the substitution of socialism for the market economy. They were fully aware of the inevitable consequences of these policies. They openly declared that these measures are “economically untenable” and that they advocated them only because “they necessitate further inroads” upon the capitalist social order and are “unavoidable as a means of entirely revolutionizing the mode of production,” i.e., as a means of bringing about socialism.

But it is quite a different thing when these measures which Marx and Engels characterized as “economically untenable” are recommended by people who pretend that they want to preserve the market economy and economic freedom. These self-styled middle-of-the-road politicians are either hypocrites who want to bring about socialism by deceiving the people about their real intentions, or they are ignoramuses who do not know what they are talking about. For progressive taxes upon incomes and upon estates are incompatible with the preservation of the market economy.

The middle-of-the-road man argues this way: “There is no reason why a businessman should slacken in the best conduct of his affairs only because he knows that his profits will not enrich him but will benefit all people. Even if he is not an altruist who does not care for lucre and who unselfishly toils for the common weal, he will have no motive to prefer a less efficient performance of his activities to a more efficient. It is not true that the only incentive that impels the great captains of industry is acquisitiveness. They are no less driven by the ambition to bring their products to perfection.”

Supremacy of the Consumers

This argumentation entirely misses the point. What matters is not the behavior of the entrepreneurs but the supremacy of the consumers. We may take it for granted that the businessmen will be eager to serve the consumers to the best of their abilities even if they themselves do not derive any advantage from their zeal and application. They will accomplish what according to their opinion best serves the consumers. But then it will no longer be the consumers that determine what they get. They will have to take what the businessmen believe is best for them. The entrepreneurs, not the consumers, will then be supreme. The consumers will no longer have the power to entrust control of production to those businessmen whose products they like most and to relegate those whose products they appreciate less to a more modest position in the system.

If the present American laws concerning the taxation of the profits of corporations, the incomes of individuals and inheritances had been introduced about sixty years ago, all those new products whose consumption has raised the standard of living of the “common man” would either not be produced at all or only in small quantities for the benefit of a minority. The Ford enterprises would not exist if Henry Ford’s profits had been taxed away as soon as they came into being. The business structure of 1895 would have been preserved. The accumulation of new capital would have ceased or at least slowed down considerably. The expansion of production would lag behind the increase of population. There is no need to expatiate about the effects of such a state of affairs.

Profit and loss tell the entrepreneur what the consumers are asking for most urgently. And only the profits the entrepreneur pockets enable him to adjust his activities to the demand of the consumers. If the profits are expropriated, he is prevented from complying with the directives given by the consumers. Then the market economy is deprived of its steering wheel. It becomes a senseless jumble.

People can consume only what has been produced. The great problem of our age is precisely this: Who should determine what is to be produced and consumed, the people or the State, the consumers themselves or a paternal government? If one decides in favor of the consumers, one chooses the market economy. If one decides in favor of the government, one chooses socialism. There is no third solution. The determination of the purpose for which each unit of the various factors of production is to be employed cannot be divided.

Demand for Equalization

The supremacy of the consumers consists in their power to hand over control of the material factors of production and thereby the conduct of production activities to those who serve them in the most efficient way. This implies inequality of wealth and incomes. If one wants to do away with inequality of wealth and incomes, one must abandon capitalism and adopt socialism. (The question whether any socialist system would really give income equality must be left to an analysis of socialism.)

But, say the middle-of-the-road enthusiasts, we do not want to abolish inequality altogether. We want merely to substitute a lower degree of inequality for a higher degree.

These people look upon inequality as upon an evil. They do not assert that a definite degree of inequality which can be exactly determined by a judgment free of any arbitrariness and personal evaluation is good and has to be preserved unconditionally. They, on the contrary, declare inequality in itself as bad and merely contend that a lower degree of it is a lesser evil than a higher degree in the same sense in which a smaller quantity of poison in a man’s body is a lesser evil than a larger dose. But if this is so, then there is logically in their doctrine no point at which the endeavors toward equalization would have to stop.

Whether one has already reached a degree of inequality which is to be considered low enough and beyond which it is not necessary to embark upon further measures toward equalization, is just a matter of personal judgments of value, quite arbitrary, different with different people and changing in the passing of time. As these champions of equalization appraise confiscation and “redistribution” as a policy harming only a minority, viz., those whom they consider to be “too” rich, and benefiting the rest—the majority—of the people, they cannot oppose any tenable argument to those who are asking for more of this allegedly beneficial policy. As long as any degree of inequality is left, there will always be people whom envy impels to press for a continuation of the equalization policy. Nothing can be advanced against their inference: If inequality of wealth and incomes is an evil, there is no reason to acquiesce in any degree of it, however low; equalization must not stop before it has completely leveled all individuals’ wealth and incomes.

The history of the taxation of profits, incomes and estates in all countries clearly shows that once the principle of equalization is adopted, there is no point at which the further progress of the policy of equalization can be checked. If, at the time the Sixteenth Amendment was adopted, somebody had predicted that some years later the income tax progression would reach the height it has really attained in our day, the advocates of the Amendment would have called him a lunatic. It is certain that only a small minority in Congress will seriously oppose further sharpening of the progressive element in the tax rate scales if such a sharpening should be suggested by the Administration or by a congressman anxious to enhance his chances for re-election. For, under the sway of the doctrines taught by contemporary pseudo-economists, all but a few reasonable men believe that they are injured by the mere fact that their own income is smaller than that of other people and that it is not a bad policy to confiscate this difference.

There is no use in fooling ourselves. Our present taxation policy is headed toward a complete equalization of wealth and incomes and thereby toward socialism. This trend can be reversed only by the cognition of the role that profit and loss and the resulting inequality of wealth and incomes play in the operation of the market economy. People must learn that the accumulation of wealth by the successful conduct of business is the corollary of the improvement of their own standard of living and vice versa. They must realize that bigness in business is not an evil, but both the cause and effect of the fact that they themselves enjoy all those amenities whose enjoyment is called the “American way of life.”

He’s the one from whom the money is taken to subsidize the others

A nation begins to decline when it neglects its own classics. But no trend is necessarily permanent, and classics can come back. Take the case of William Graham Sumner’s What Social Classes Owe to Each Other, for example. Published originally in 1883, this little classic of individualism was long unavailable to the general reader. But in the last few years, it has been made available by several different organizations.

What Social Classes Owe to Each Other has had the strangest of histories. It was written at a time when the fallacies of Welfare State thinking were just beginning to take hold in America. A professor of economics at Yale in the early Eighties, Sumner sensed the oncoming socialistic deluge when it was the merest trickle. He could hardly know in 1883 that Edward Bellamy was already meditating in Boston on the notions of the Utopian socialists, and getting ready to write his Looking Backward: 2000-1887, a book which does its best to suffuse the idea of the regi mented slave state with a romantic glow. He could hardly have been aware that out in Chicago young Henry Demarest Lloyd was predicting (in the Chicago Tribune, of all places) that “the unnatural principles of the competitive economy of John Stuart Mill will be as obsolete as the rules of war by which Caesar slaughtered the fair-haired men, women and children of Germania.” Nor could he have known that in Indiana, Socialist Eugene V. Debs was taking his first flier in politics, as city clerk of Terre Haute. Yet Sumner felt in his bones that the world of his youth was about to shift on its axis. Faith in individualism was weakening; Sumner knew it from reading the accounts of speeches in the papers. The willingness of the Gilded Age plutocracy to accept government favors in the form of tariffs also impressed him as a sign of decadence; no free society, as he well knew, could be built on hypocrisy.

A profound student of veering social currents, Sumner set his face uncompromisingly against the rising Welfare State principles of the New Day. The record of history told him that the Welfare State inevitably becomes the Ill-fare State. In What Social Classes Owe to Each Other Sumner tried to underscore the lesson of history by bringing simple arithmetic to bear on the Welfarists’ proposition. The state, as Sumner said, is All-of-Us organized to protect the rights of Each-of-Us. But when Some-of-Us try by political manipulation to live off Others-of-Us, rights necessarily go out the window. In Sumner’s estimation the type and formula of most Welfare—or Illfare—State schemes come down to this: A and B put their heads together to decide what C shall be made to do for D. The vice of such scheming is that C is never consulted in the matter; he is simply clubbed by the police power of the state into diverting a part of his earnings to someone he has never seen. C is very likely a most responsible citizen; he is generally the type of person who supports himself uncomplainingly, sees to it that his children are educated, and contributes to the voluntary charities of his neighborhood. If C has any surplus over what it takes to live and provide for his children and his locality, he generally saves it and invests it, thereby adding to the capital equipment by which the nation’s standard of living is maintained and raised.

Sumner called C the Forgotten Man. The phrase was doubly prophetic; for by a most ironical sequel Franklin D. Roosevelt picked it up in the Nineteen-thirties and applied it, not to Sumner’s C, but to Sumner’s D. This simple act of misappropriation, which made C more forgotten than ever, did much to get the Welfare State notions of the New Deal accepted by a troubled nation. Misapplied or not, there’s nothing like a good phrase backed by a golden voice to win votes.

The attempted rehabilitation of D at the expense of C never even really served its alleged purpose of helping D. It is written in the arithmetic books of the seventh grade that D is hurt, not helped, when A and B scheme to mulct C of the fruits of his toil. Now it cannot be that Americans have actually forgotten their seventh-grade arithmetic; they have merely ceased to apply it to their thinking on social matters. Any child ought to be able to see that if C has, let us say, $3000, it will buy just $3000 worth of goods and no more. Let us say that A and B take $1000 of C’s money to spend on D. Some of the $1000 must be used to support the sterile machinery of state collection, bookkeeping, and redistribution. But after the politicians and their office-holding dependents have taken their cut of the $1000, D gets some of the money. In the natural course of events he uses it—to consume. What is left to C of the original $3000 also goes largely into consumption; there simply isn’t enough left of the total to enable C to save anything out for investment. So under Welfare politics there is no addition out of the $3000 to the capital stock of the nation. Thus, because of the schemings of A and B allegedly in behalf of D, the industrial system does not expand. The upshot of this is that D is prevented from getting a job. He remains at the mercy of A and B, who continue to take it out on C.

Since A and B are of the predatory type of do-gooder who insists on being unselfish with other people’s money, they are not likely to get around to taking a refresher course in seventh-grade arithmetic. But if D has any pride at all, he must someday begin to apply what he learned in the seventh grade to his own social plight. Does he want forever to remain a ward of A and B, getting a continually decreasing portion of consumer goods as the population grows and presses against the limits of a static industrial system? Wouldn’t it be far better for him to throw in his lot with C in an effort to expand the capital plant and so create a productive niche for himself in society?

The reason why D has not been able to see that his welfare depends on making a common front with C is that A and B have learned to delude him with inflationary tricks. A and B are always pointing out that the “gross national product” is up by so many billions of dollars over the product of ten years ago. What they do not bother to tell D is that the value of the dollar has been debauched, and that it is no longer a good measuring stick for anything. It is true enough that the gross national product of the United States has continued to increase. Despite the scheming of A and B, the Forgotten Man has been able to squeeze out some money for investment even after he has paid most of his savings out to support D. But by all the logic of arithmetic the United States would be far richer today in capital equipment if Franklin Roosevelt had made the correct identification of William Graham Sumner’s Forgotten Man. If C had been left un-mulcted, there would be more for everybody.

Sumner is usually thought of as a heartless logician, a basically uncharitable man. What Social Classes Owe to Each Other is, however, almost Biblical in its understanding of the “law of sympathy.” At the very best, says Sumner, one of us fails in one way and another in another, “if we do not fail altogether.” It will not do to condone failure abstractly; but if a man happens to be pinned to earth by a fallen tree, it is scarcely appropriate to his immediate predicament to deliver him a lecture on carelessness. True, the man may have been careless; but a lecture won’t get the tree off his leg. Amid the chances and perils of life, says Sumner, men owe to other men their aid and sympathy. But aid and sympathy must operate in the field of private and personal relationships under the regulation of reason and conscience. If men trust to the state to supply “reason and conscience,” they so deaden them-selves that the “law of sympathy” ceases to operate anywhere. Men who shrug off their personal obligations become hard and unfeeling, and it is small wonder then that they are entirely willing to go along with hard and unfeeling politics. It is when he decides to “let the state do it” that the humanitarian ends up by condoning the use of the guillotine for the “betterment” of man.

So far as I am aware, What Social Classes Owe to Each Other is not used as a text in any college in the country. If it is reprinted often enough, however, the time will come when it will make its way back to the campus. Students are curious even when they are deluded and misled; and when books are available, students will find their way to them. []

“William Graham Sumner’s What Social Classes Owe to Each Other, 146 pages, paper-bound, may be secured from FEE, Irvington-on-Hudson, N. Y., $1.25 each.

Robert Frost, from “The Listener,” August 26, 1954

William Graham Sumner