Despite the widespread acceptance of this narrative, there are many reasons to question whether it accurately portrays the motivations and hopes of some Progressive-Era reformers. In a 2005 article in the Journal of Economic Perspectives, “Eugenics and Economics in the Progressive Era,” the economist Thomas C. Leonard offered a completely new historical account of the sources of Progressive-Era labor legislation and the intentions of its supporters. Leonard’s work, including an important 2009 article coauthored with legal scholar David E. Bernstein for Law and Contemporary Problems, “Excluding Unfit Workers: Social Control Versus Social Justice in the Age of Economic Reform,” indicates that lurking behind what many people see as humanitarian reforms was something much uglier.

Leonard and Bernstein argue that some of the most prominent of the Progressive reformers were “partisans of human inequality.” They supported interventions as ways to forward their eugenic goal of a purer (that is, whiter) human race by eliminating the opportunities for the “unfit” to get meaningful work. The “unfit” here included not just nonwhites (especially African-Americans) but also the “insane,” immigrants (especially from central and eastern Europe), and in a somewhat different way, women.

In other words, what we today think of as the unintended consequences of laws supported by today’s well-meaning but economically uninformed Progressives were actually the intended goals of some of their intellectual ancestors a century ago. Early Progressive economists understood the effects of these interventions, but they thought those effects were desirable.

The Progressive economists of the late nineteenth and early twentieth centuries saw social science not merely as a means of inquiry and understanding but as a guide to social management and control. The advent and broad acceptance of Darwinism in the late nineteenth century, combined with a more general belief in the power of science and scientific management to solve social problems, led to a fascination with eugenics and the possibility of using public policy to ensure the “survival of the fittest” and the purity and strength of the human race. In the hands of many thinkers at the turn of the twentieth century, Darwinian theory became a rationale for using the power of government to weed out the “undesirable” and “unfit” in much the way that the new understanding of evolution was changing agriculture and animal husbandry. Eugenics clubs and societies grew rapidly and many of the leading intellectuals of the early twentieth century, including a number of well-known economists (such as John Maynard Keynes and Irving Fisher, perhaps the most famous American economist of the time), were active in these groups and saw their work through the lens of eugenics.

Eugenics and Intended Consequences

We look back on the eugenics movement with proper horror. Yet the same ideas that led to forced sterilization also led to restrictions in the workplace, because labor markets were one place where eugenics-oriented economists could combine their two interests. They recognized early on that legislation which  excluded the “unfit” from labor markets would advance their eugenic goals. Most of these laws were enacted at the state level during this period, but the New Deal era saw many of the same arguments applied at the national level.

Consider minimum wage laws, for example. Today we tend to think people support them because they believe a minimum wage is a free lunch that will help the poor. Classical-liberal economists have long criticized such regulations, arguing they are a perfect example of the law of unintended consequences and of the disconnect between intentions and outcomes. In a competitive labor market any worker who can produce value is hirable at some wage up to that value. Even workers with limited skills are employable. What the minimum wage and other mandated benefit laws do is create a minimum productivity criterion for hiring, closing off the labor market to workers whose productivity is too low to justify that cost.

Leonard’s work shows that some advocates of the minimum wage, including many giants of the early days of the economics profession, such as John R. Commons and Richard T. Ely, understood exactly what minimum wage laws would do and liked it. In addition, various Progressives and socialists who were not economists, such as Eugene Debs and Beatrice and Sidney Webb, also supported minimum wage laws and other interventions into the labor market precisely because they would weed out those who were deemed too stupid or lazy to compete in a market economy—in particular, women, immigrants, and blacks.

Leonard writes, “the progressive economists . . . believed that the job loss induced by minimum wages was a social benefit, as it performed the eugenic service ridding the labor force of the ‘unemployable.’” He quotes the Webbs’ statement that “this unemployment is not a mark of social disease, but actually of social health.” Further, he quotes Henry Rogers Seager of Columbia University, who suggested that minimum wages were necessary to protect workers from the “wearing competition of the casual worker and the drifter.”

A. B. Wolfe, who would one day be a president of the American Economic Association, wrote in the American Economic Review in 1917 (quoted in part by Leonard and Bernstein): “If the inefficient entrepreneurs would be eliminated [by minimum wages,] so would the ineffective workers. I am not disposed to waste much sympathy upon either class. The elimination of the inefficient is in line with our traditional emphasis on free competition, and also with the spirit and trend of modern social economics. There is no panacea that can ‘save’ the incompetents except at the expense of the normal people. They are a burden on society and on the producers wherever they are.”

In the context of the early twentieth century this group largely included nonwhites, immigrants, and women, as well as white males with physical or mental disabilities—the very same groups the Progressive eugenicists thought were diluting the quality of the human gene pool. Unlike their modern successors, these supporters of minimum wage laws were under no illusion about the effects of their proposed policies; they understood and intended the negative consequences that economists now go to great lengths to argue will be the outcomes of the policies favored by contemporary Progressives. A great irony of the Progressive movement for a minimum wage is that while it aimed at eliminating the “unemployable,” it in fact created a group of “unemployables.”

Leonard’s research shows that even professional economists, including some for whom distinguished prizes and lectures are named today, engaged in a manner of thinking about issues like minimum wages that was profoundly—even obscenely, given their explicitly racist goals—anti-economic. According to some Progressives, wages were determined not by marginal productivity but by the living standards to which a particular worker was accustomed. Competition from women, children, and members of “low-wage races” threatened the dignity of white male heads of households, the robustness of the white genetic stock, and ultimately the social fabric. Leonard and Bernstein quote sociologist Edward A. Ross, who wrote that “the coolie, though he cannot outdo the American, can underlive him.” If society was to endure, white male breadwinners needed protection from outside competition.

Economists today sometimes argue that subsidies or expansion of negative income tax programs like the earned income tax credit are far more efficient ways to help the poor than policies like minimum wages. Leonard and Bernstein point out that according to Progressive economist Royal Meeker, wage subsidies were undesirable precisely because they would create more employment, particularly among “unfortunates.” The virtue of the minimum wage was that it increased the supposed dignity of white labor while separating “unfortunates” and “defectives” from jobs they would have otherwise had. Minimum wages were supported by explicit racists seeking explicitly racist ends.

Fast-forward a few decades and the results are still the same even if the intentions are more noble. In a recent paper, “Unequal Harm: Racial Disparities in the Employment Consequences of Minimum Wage Increases,” William Even and David Macpherson argued that in states fully exposed to the most recent minimum wage increases, the law cost young African Americans more jobs than the recession has. We should judge policies by results, not intentions. As the economist Thomas Sowell might say, whether a policy is deemed “compassionate” or not should depend on its effects rather than the stated goals of its advocates.

Other Labor Market Interventions

Eugenics provided an allegedly scientific pretext for protectionist legislation—specifically, restrictions on immigration. The eugenicists supported immigration restrictions because they believed that members of “low-wage races” would compromise not only whites’ living standards but also whites’ genetic stock through miscegenation. According to them, immigrants and other outsiders (read: African-Americans) would degrade the labor force and debauch the species. The Progressives proceeded on a model of society in which a (white male) breadwinner earned a “family wage” sufficient to support a (white) wife and (white) children. Women were to fulfill their roles as “mothers of the race,” and children were to be trained to do the same in the following generation.

In his 2005 article Leonard pointed out that restrictions on child labor were enacted specifically to prevent the lower classes from putting their children to work. Presumably this would then cause them to think twice about procreating as well as limit their incomes.

The Progressives used the same techniques to reduce the labor market opportunities of women. Women were seen both as fragile—in need of protection from the rigors of the workplace—and as having a special role in bearing children and managing the household as “mothers of the race.” This was in contrast to the perceived “overbreeding” of nonwhites and immigrants from places like eastern and southern Europe. Progressive reformers tried to keep women out of the labor force by enacting a variety of “protective” legislation at the state level, including maximum hours and minimum wage laws for women, both of which were set differently from those for men. Such laws made women less desirable and more expensive employees, which limited their labor force participation—precisely the goal of the reformers.

The perils of the 1930s provided an opening for additional burdens on the labor market designed to exclude “unfit” workers. Leonard and Bernstein report that the Davis-Bacon Act, for example, was “passed with the intent of preventing itinerant African American workers and others from competing with white labor unionists for jobs on federal construction projects.” The amplification of interest-group politics was evident in the relatively transparent attempts by New Deal Progressives to protect special interests from low-wage competition from the South—from African-Americans and other “low-wage races.”

In the 1930s U.S. Rep. John Cochran (D-Mo.) said he had “received numerous complaints in recent months about southern contractors employing low-paid colored mechanics getting work and bringing the employees from the South.” Rep. Clayton Allgood (D-Al.) joined in: “Reference has been made to a contractor from Alabama who went to New York with bootleg labor. This is a fact. That contractor has cheap colored labor that he transports, and he puts them in cabins, and it is labor of that sort that is in competition with white labor throughout the country.”

The disemployment effects, for example, of the National Industrial Recovery Act (NIRA) were stark. Leonard and Bernstein cite one estimate that the NIRA’s “wage provisions directly or indirectly led to the dismissal of 500,000 African American workers.” They also write that “the American Federation of Labor took credit for the failure of the FLSA [Fair Labor Standards Act] to provide for a lower minimum wage in the South,” preventing southward capital flows.

The Progressives, the Modern Left, and the Dismal Science

This history can be read as the American version of what happened earlier in England. David Levy has shown that economics became known as the “dismal science” because classical-liberal economists (such as J. S. Mill) favored racial equality in a free labor market. Reactionary, elitist British Romantics such as Thomas Carlyle and John Ruskin argued that the free market, with its underlying assumption of equality, would eliminate racial hierarchies and bring a “dismal” future of racial mixing. It was the classical-liberal economists who were providing the intellectual support for that future.

The moral of the story is that, despite the modern left’s continued claim that the pro-market philosophy is racist, sexist, and xenophobic, history demonstrates that classical liberals/libertarians were proponents of equality and opponents of racism, and that those who viewed the races as unequal were likely to seek backing from the State, particularly in labor markets. The historical record of the left on these counts is much more mixed than it is willing to acknowledge.

Despite their odious views on race and the use of the State to enforce their eugenically informed vision of the future, Progressive-Era reformers were ahead of their modern liberal counterparts in one important way. They understood that free markets, especially free labor markets, are the enemy of racism.

The American economy after the Civil War became increasingly dominated by large organizations. I’ve written in The Freeman before about the role of the government in the growth of the centralized corporate economy: the railroad land grants and subsidies, which tipped the balance toward large manufacturing firms serving a national market (“The Distorting Effects of Transportation Subsidies,” November 2010), and the patent system, which was a primary tool of consolidation and cartelization in a number of industries (“How ‘Intellectual Property’ Impedes Competition,” October 2009, tinyurl.com/lqzehv)

These giant corporations were followed by large government agencies whose mission was to support and stabilize the corporate economy, and then by large bureaucratic universities, centralized school systems, and assorted “helping professionals” to process the “human resources” the corporations and State fed on. These interlocking bureaucracies required a large managerial class to administer them.

According to Rakesh Khurana of the Harvard Business School (in From Higher Aims to Hired Hands), the first corporation managers came from an industrial engineering background and saw their job as doing for the entire organization what they’d previously done for production on the shop floor. The managerial revolution in the large corporation, Khurana writes, was in essence an attempt to apply the engineer’s approach (standardizing and rationalizing tools, processes, and systems) to the organization as a system.

And according to Yehouda Shenhav (Manufacturing Rationality: The Engineering Foundations of the Managerial Revolution), Progressivism was the ideology of the managers and engineers who administered the large organizations; political action was a matter of applying the same principles they used to rationalize their organizations to society as a whole. Shenhav writes (quoting Robert Wiebe):

Since the difference between the physical, social, and human realms was blurred by acts of translation, society itself was conceptualized and treated as a technical system. As such, society and organizations could, and should, be engineered as machines that are constantly being perfected. Hence, the management of organizations (and society at large) was seen to fall within the province of engineers. Social, cultural, and political issues . . . could be framed and analyzed as “systems” and “subsystems” to be solved by technical means. . .

During this period, “only the professional administrator, the doctor, the social worker, the architect, the economist, could show the way.” In turn, professional control became more elaborate. It involved measurement and prediction and the development of professional techniques for guiding events to predictable outcomes. The experts “devised rudimentary government budgets; introduced central, audited purchasing; and rationalized the structure of offices.” This type of control was not only characteristic of professionals in large corporate systems. It characterized social movements,the management of schools, roads, towns, and political systems.

The managerialist ethos reflected in Progressivism emphasized transcending class and ideological divisions through the application of disinterested expertise. Christopher Lasch (The New Radicalism in America) wrote:

For the new radicals, conflict itself, rather than injustice or inequality, was the evil to be eradicated. Accordingly, they proposed to reform society . . . by means of social engineering on the part of disinterested experts who could see the problem whole and who could see it essentially as a problem of resources . . . the proper application and conservation of which were the work of enlightened administration.

In Shenhav’s account this apolitical ethos grew out of engineers’ self-perception: “American management theory was presented as a scientific technique administered for the good of society as a whole without relation to politics.” Frederick Taylor, whose managerial approach was a microcosm of Progressivism, saw bureaucracy as “a solution to ideological cleavages, as an engineering remedy to the war between the classes.” Both Progressives and industrial engineers “were horrified at the possibility of ‘class warfare’” and saw “efficiency” as a means to “social harmony, making each workman’s interest the same as that of his employers.”

The implications, as James Scott put it in Seeing Like a State (about which much more below), were quite authoritarian. Only a select class of technocrats with “the scientific knowledge to discern and create this superior social order” were qualified to make decisions. In all aspects of life, policy was to be a matter of expertise, with the goal of removing as many questions as possible from the realm of public political debate to that of administration by properly qualified authorities. Politics, Scott writes, “can only frustrate the social solutions devised with scientific tools adequate to their analysis.” As a New Republic editorial put it, “the business of politics has become too complex to be left to the pretentious misunderstandings of the benevolent amateur.”

It’s true that Progressivism shaded into the anti-capitalist left and included some genuinely anti-business rhetoric on its left-wing fringe. But the mainstream of Progressivism saw the triumph of the great trusts over competitive enterprise as a victory for economic rationalization and efficiency—and the guarantee of stable, reasonable profits to the trusts through the use of political power as a good thing.

In the end the more utopian or socialistic Progressives found they’d become “useful idiots.” Their desire to regiment and manage was given free rein mainly when it coincided with the needs of the corporatist economy created by Rockefeller and Morgan. These needs were for what Gabriel Kolko (The Triumph of Conservatism) called “political capitalism,” the guiding theme of Progressive-era legislation. Political capitalism aimed to give corporate leadership “the ability, on the basis of politically stabilized and secured means, to plan future economic action on the basis of fairly calculable expectations” and to obtain “the organization of the economy and the larger political and social spheres in a manner that will allow corporations to function in a predictable and secure environment permitting reasonable profits over the long run.”

Mainstream Progressivism, far from embracing a left-wing vision of class struggle, saw class conflict as a form of irrationality that could be transcended by expertise. To quote Shenhav again:

Labor unrest and other political disagreements of the period were treated by mechanical engineers as simply a particular case of machine uncertainty to be dealt with in much the same manner as they had so successfully dealt with technical uncertainty. Whatever disrupted the smooth running of the organizational machine was viewed and constructed as a problem of uncertainty.

As Hilaire Belloc said (The Servile State) of its Fabian counterparts in Britain, the mainline of the Progressive movement quickly accommodated itself to the impossibility of expropriating big business or the plutocratic fortunes and found that it could be quite comfortable as a junior partner to the plutocracy, directing its lust for regimentation against the working class:

Let laws exist which make the proper housing, feeding, clothing, and recreation of the proletarian mass be incumbent upon the possessing class, and the observance of such rules be imposed, by inspection and punishment, upon those whom he [the Fabian] pretends to benefit, and all that he really cares for will be achieved.

As Scott put it, the managerial classes’ virtually unbounded planning instincts were directed mostly downward:

Every nook and cranny of the social order might be improved upon: personal hygiene, diet, child rearing, housing, posture, recreation, family structure, and, most infamously, the genetic inheritance of the population. The working poor were often the first subjects of scientific social planning. . . . Subpopulations found wanting in ways that were potentially threatening—such as indigents, vagabonds, the mentally ill, and criminals—might be made the objects of the most intensive social engineering.

Progressivism was a branch of what Scott called the “high modernist” ideology, which “envisioned a sweeping, rational engineering of all aspects of social life in order to improve the human condition.” High modernism carries with it an aesthetic sensibility in which the rationally organized community, farm, or factory was one that “looked regimented and orderly in a geometrical sense,” along with an affinity for gigantism and centralization reflected in “huge dams, centralized communication and transportation hubs, large factories and farms, and grid cities. . . .” If you’ve read H. G. Wells’s “Utopias” or looked at Albert Speer’s architecture, you get the idea.

High modernism was scientistic, not scientific, based on, writes Scott, a “muscle-bound . . . version of the beliefs in scientific and technological progress” of the Enlightenment, centering on “a supreme self-confidence about continued linear progress . . . , the expansion of knowledge, the expansion of production, the rational design of social order, the growing satisfaction of human needs, and, not least, an increasing control over nature (including human nature) commensurate with scientific understanding of natural laws.” The high priesthood of this ideology was precisely the same as Progressivism’s social base: “planners, engineers, architects, scientists, and technicians [high modernism] celebrated as the designers of the new order.”

One aspect of Scott’s analysis of high modernism, his use of the concept of metis, is especially relevant to us here. Scott’s book, more than any other I can think of, should be read as a companion to Hayek’s discussion of what’s variously called distributed, tacit, or idiosyncratic knowledge in “The Use of Knowledge in Society.” (As Hayek put it, this is the knowledge of circumstances necessary to make a decision that exists “solely as the dispersed bits of incomplete . . . knowledge which all the separate individuals possess.”)

Scott distinguished metis from techne, which is a body of universal knowledge deducible from first principles. Metis, in contrast, is (largely irreducible) knowledge acquired from practical experience, concerning the particular, the variable, and the local, and involving a “feel” for the unique aspects of situations obtained over a prolonged period.

High modernism tended to see metis as an enemy and sought to supplant it by central schemes of planning and control, whether at the level of society as a whole through State social engineering or at the level of the firm by Taylorist managers.

High modernism, Scott writes, placed remarkably “little confidence . . . in the skills, intelligence, and experience of ordinary people.” The dispersed, local knowledge of the general population was, at best, to be patronized as prescientific and purified of its partial or local character by codifying it into a set of universal rules that could in turn be reduced to a verbal formula and transmitted as knowledge by the priesthood.

What we know as Taylorism is one facet of the larger high modernist project in this regard. One feature of high modernism, Scott notes, was “a narrow and materialist ‘productivism’ [which] treated human labor as a mechanical system which could be decomposed into energy transfers, motion, and the physics of work,” so that work could be simplified into “isolated problems of mechanical efficiencies” and brought under scientific control. Taylorism, in particular, attempted a “minute decomposition of factory labor into isolable, precise, repetitive motions.” Taylor’s goal, in his own words, was for management to “assume . . . the burden of gathering together all of the traditional knowledge which in the past has been possessed by the workmen and then of classifying, tabulating, and reducing this knowledge to rules, laws, formulae. . . . Thus all of the planning which under the old system was done by the workmen, must . . . be done by management in accordance with the law of science.”

The idea was that understanding and decision-making should be divorced from the performance of tasks. The managerial caste determines “best practices” and breaks tasks down into the most efficient possible set of simple sub-processes, and workers perform the tasks as instructed without the intervention of critical thought.

But by its nature, Scott says, high modernism is reductionist or “schematic” and “always ignores essential features of any real, functioning social order.” Progressivism, as a high modernist ideology, makes no allowances for hidden knowledge.

In the case of Taylorism, this means that the suppression of metis sacrifices the distributed, job-related knowledge possessed by workers whose consideration is indispensable to any adequate governance of the production process. Taylorist management can no more render the production process amenable to central control without the dispersed knowledge of its workers than a central planning office can render a national economy transparent to its understanding and control.

According to David Noble (Forces of Production), large-scale computer numeric-controlled (CNC) machine tools were introduced in mass-production industry (first and most heavily in the military-industrial complex, mind you) as a way of supplanting metis with centralized control by managers and engineers, and of overcoming the knowledge rents inherent in distributed knowledge. The CNC tools were intended to shift the balance of power upward by putting production under the control of engineers and deskilling master machinists on the shop floor.

Unfortunately for this design, CNC machinery did not eliminate the need for metis. As Noble pointed out, management quickly found out that the only thing the machines could produce “automatically,” without ongoing worker intervention and concrete judgment, was scrap. When workers withheld their metis on a “work-to-rule” strategy, scrap rates went through the roof.

(Ironically, today we’re in the early stages of the shift of a great deal of manufacturing capability from mass-production industry to small job-shops—with small-scale CNC tools, in the latter, operated by skilled craftsmen.)

So it seems metis or distributed knowledge, in the end, is one of those stubborn traits of human action that outlasts all attempts to supersede it.

In Last Call: The Rise and Fall of Prohibition, a brilliant and exhaustively researched book, David Okrent examines the forces behind the enactment and repeal of Prohibition as well as its consequences, both intended and unintended. From 1920 until 1933 most Americans were forced to choose between abstinence and illegal consumption. But Americans loved to drink: Per capita alcohol consumption in the nineteenth century was three times today’s rate. It’s no surprise that so many chose to continue their consumption illegally.

If the goal of Prohibition was to eliminate, or even reduce, many of the problems associated with alcohol consumption—such as criminal activity, binge drinking, drunk driving, and deaths and injuries via alcohol poisoning—it was an unambiguous failure. As Okrent illustrates, after 13 years of speakeasies, corrupt enforcement, and criminal empires, the repeal movement had little difficulty in convincing a beleaguered public that Prohibition was a mistake.

However, this is not to say that Prohibition was entirely ineffective. If the goal was to reduce overall consumption of alcohol by increasing its price, Prohibition worked largely as intended. Initial consumption declined to 30 percent of its pre-Prohibition level, though this number rose to 70 percent within three years and stayed roughly at that level by the time of repeal. However, even for its advocates this is an odd measure of success for prohibition. Also worth noting is that repeal did not bring about a significant increase in drinking. Per capita consumption rates did not reach their pre-Prohibition levels until 1973.

Enforcer Colonel Ira L. Reeves bitterly stated at the end of his term that the only thing he had accomplished was that he “had raised the price of alcoholic beverages and reduced the quality.” This was a declaration of frustration and defeat, an admission he had been unable to remove alcohol from the American way of life. In line with this assessment, one of the main lessons Okrent derives from Prohibition is that government cannot effectively legislate against people’s tastes.

Okrent primarily focuses on the battle between the “wet” and “dry” political movements dating from the mid-nineteenth century until the 21st Amendment and the repeal of Prohibition in 1933. Both sides had their share of notable and influential characters, perhaps none more so than the dry Wayne Wheeler, leader of the Anti-Saloon League (ASL). In the history of American politics, no interest group has been as influential as the ASL and few individuals have had as much direct impact on public policy as Wheeler. H. L Mencken, a dedicated wet, wrote of Wheeler: “In fifty years, the United States has seen no more adept political manipulator.”

Wheeler and the ASL, supported primarily by rural Protestant voters, had a stranglehold over Congress and most state legislatures during most of Prohibition. Okrent writes that the Wheeler-led ASL “effectively seized control of both the House and the Senate in the 1916 elections” and did not loosen its grip until the early 1930s.

Perhaps the most enlightening, and disturbing, revelation in the book is how the ASL became the most powerful pressure group the nation had ever known and how the dry movement was able to enforce its will on a population that loved to drink. Most people are familiar with Prohibition-era stories involving corrupt police and politicians taking bribes from bootleggers like Al Capone. What most people are unaware of, however, is just how openly most members of Congress manipulated the political process to push Prohibition on a largely unwilling public.

A primary reason Prohibition happened was that the dry rural voters in favor of it were vastly overrepresented in state legislatures and in Congress. To get an idea of just how overwhelming this discrepancy was, consider that by 1929 a staunchly wet congressional district in Detroit had a population of 1.3 million, while ten separate dry districts in the Missouri had fewer than 180,000 people total. This disparity was the work of dry legislators, who blocked reapportionment and thus denied accurate representation to wet districts that were experiencing unprecedented immigration. Okrent summarizes the significance of the situation aptly: “Never in American history, not even during the tumult of Civil War, had Congress disregarded the constitutional mandate, enunciated in Article 1, Section 2, to reapportion itself following completion of the decennial census. . . . Between 1921 and 1928, forty-two separate reapportionment bills were introduced in the House. Not one became law.”

Although political manipulation was vital to the dry movement, Prohibition would not have passed if not for the support of one of the broadest coalitions in American history. The diverse movement behind the Eighteenth Amendment and the Volstead Act included such groups as the Ku Klux Klan, the American Medical Association, the women’s suffrage movement, and the Industrial Workers of the World, to name a few. Although these groups were diametrically opposed on most issues, each saw potential advantages from Prohibition.

Baptists and Bootleggers and Doctors and Coke

Prohibition provides a clear illustration of one of the basic lessons of Public Choice economics: Interest groups use the political process to concentrate benefits on themselves while dispersing costs on others. The AMA, for example, foresaw the potential for a lucrative business providing prescriptions for alcohol under the Volstead Act for roughly $3 (or about $33 in 2010 dollars). Although in 1917 the AMA ruled that the use of alcohol in therapeutics “has no scientific value,” after two years of Prohibition the organization declared alcoholic beverages to be useful in the treatment of 27 separate conditions including diabetes, asthma, and old age. The AMA’s sudden change in medical advocacy was in line with its self-interest.

The AMA was not alone in this regard. Asa Chandler, the founder of the Coca-Cola Company, was an ardent supporter of Prohibition because he saw the potential to eliminate the competition provided by brewers and distillers. Chandler was rewarded for his vision: Coca-Cola saw sales triple. Charles Walgreen expanded his drug store chain from 20 to 525 stores during the 1920s. Although family historians have credited this expansion to the invention of the milkshake, the profitable trade in medicinal alcohol provides a more likely explanation.

Making Matters Worse

As important as it is to understand how Prohibition passed, it is even more important to understand why it made many alcohol-related problems worse. Prohibition failed in this sense because the policymakers behind it failed to predict how consumers, suppliers, and regulators would respond. Many people continued to drink, and a multitude of bootleggers, violent mobsters, and corrupt politicians were willing to provide a continuous supply.

As with most cases of failed social engineering, the people who advocated Prohibition suffered from a conceit that it would work exactly as intended. The economist Irving Fisher, known for his groundbreaking work on interest rates, claimed in 1919 that Prohibition would increase national output 10–20 percent every year. Although alcohol consumption remained high, Fisher continued to attribute the growth of the 1920s to Prohibition.

Per capita alcohol consumption returned to around 70 percent of its pre-Prohibition levels by 1923 because a multitude of entrepreneurs were willing to operate outside of the law to quench the public’s thirst. The infamous Purple Gang controlled the vast alcohol traffic flowing from Canada through Detroit, while New York mobsters like Charles “Lucky” Luciano launched their long criminal careers in the illicit alcohol trade. The notorious Chicago bootlegger and gangster Alphonse Capone said of his profession, “I give the public what the public wants. I never had to send out high pressure salesmen. Why, I could never meet the demand.”

This is not to say that Capone or his contemporaries were unfamiliar with the use of force. Since Prohibition drove the market for alcohol into the illegal sector, men like Capone had to rely on extralegal measures to enforce contracts and resolve disputes. Sometimes these measures included violence. To get an idea of just how much, consider the homicide rate. In the United States it went from less than 12 per hundred thousand people in 1920 to 16 by the end of Prohibition, then subsided to less than 10 by 1940.

Nonviolent Means

Not all bootleggers were violent, however. Men like Samuel Bronfman and William “Bill” McCoy specialized in the importation of alcohol through ports and border towns all over the country. Once these specialists had evaded or bribed Prohibition agents and local politicians to bring their products into the country, they would sell them to gangsters like Luciano who handled the massive distribution to local speakeasies. New York, for example, had roughly 32,000 speakeasies during the height of Prohibition.

Although some Prohibition agents could not be bought, the prevalence of corruption throughout the era was staggering. Okrent illustrates countless examples of rampant opportunism by Prohibition enforcers. Chicago Mayor Bill Thompson, for example, received more than a quarter of a million dollars directly from Capone’s organization for his 1927 campaign. Ranking police captains amassed bank accounts approaching hundreds of thousands of dollars on salaries ranging from $2,500 to $4,000 a year.

The bootleggers controlling the black market in alcohol were actually more likely to support dry politicians in favor of Prohibition than wet politicians favoring repeal. The logic behind this strategy is simple: Bootleggers and gangsters needed Prohibition to stay in business. If alcohol were legal they would quickly be replaced by legitimate companies. The ideal combination from the criminal perspective was dry policy and corrupt enforcement, and they spent whatever was necessary to make this happen.

To understand why criminals were willing to spend so much to ensure political cooperation and endure work-related hazards like gang warfare, it is necessary to know just how much was at stake. Annual sales of bootleg liquor were estimated at $3.6 billion in 1926, which is roughly $43.4 billion in 2010 dollars. This astounding sum was about the same as the federal budget that year.

Why Not More Violence?

Given the stakes, the real puzzle is why more violence did not occur. Events such as the St. Valentine’s Day Massacre, where Capone’s South Side Gang killed seven rival gangsters, garnered a lot of attention in the national press. The extended periods of peace, stability, and even cooperation that occurred both between and within different criminal enterprises, however, have generally gone unnoticed.

Seattle bootleggers convened in 1922 to set prices and, more important, to establish rules to minimize conflict. Similar meetings occurred in Philadelphia, New York, and other major cities throughout the 1920s. Despite the enormous amount of money at stake, most areas of the country where alcohol remained avoided outright gang warfare.

The fact that economic activity of the same magnitude as the U.S. government could be organized outside of the law is surprising for a number of reasons. Those who choose a life of crime tend to be violent, impatient, and untrustworthy by nature. Despite these obstacles, criminals often discover ways to cooperate on a large scale to capture illicit profits.

Besides the use of violence, how did a bunch of violent, impatient criminals manage such organizational stability? They employed reputation, costly signaling, and constitutions as means to enforce agreements and resolve disputes. Criminals worked hard to avoid conflict where possible because conflict is costly. Gangsters like Capone and Luciano were driven to cooperate with other criminals by the same economic forces underlying cooperation between their law-abiding counterparts.

It is important to understand the robustness of criminal organization for a number of reasons. For one, it explains to a large extent why Prohibition was doomed to failure. If there is a strong enough demand, legal prohibitions on certain goods and services will simply shift markets into the waiting arms of the illegal sector of the economy.

That criminals could engage in complex economic interactions outside of the law also illustrates some important lessons for the robustness of self-enforcing exchange in general. If criminals are capable of overcoming major obstacles to organization and exchange, then conventional arguments that the State is necessary for cooperation and exchange to occur must be reconsidered. Even in an environment of mistrust and violence, firms were formed, contracts were honored, and disputes were mostly settled peacefully. A better understanding of these processes can shed considerable light on the ability of individuals to cooperate and trade in the absence of a formal legal framework.

This is not to say that criminal organization is the pinnacle of achievement in a market economy. On the contrary, the experience of black markets brought about by Prohibition illustrates how inefficient they are relative to markets with well-defined and legally enforceable property rights. Overall quality diminished, while fraud, theft, and violence increased. Criminal cooperation also periodically broke down into outright gang warfare, though as noted, this was generally the exception to the rule. The important lesson, however, is that under Prohibition, criminal suppliers found a way to meet the public’s demand despite all the obstacles they faced.

Although Okrent avoids making any explicit comparison between the prohibition of alcohol and the ongoing prohibition of certain recreational drugs, there are a number of obvious similarities. Criminal organizations continue to provide a seemingly limitless supply of illegal drugs; quality is low, potency is high, and corruption and violence are endemic.

Some 28,000 people have died in the border war between drug cartels and United States and Mexican government agents since 2006. Street gangs continue to battle over territorial distribution rights. As Nobel Prize-winning economist Milton Friedman aptly said, “Al Capone epitomizes our earlier attempts at Prohibition; the Crips and Bloods epitomize this one.”

Examples of Legalization

As was the case with the prohibition of alcohol, advocates of the “war on drugs” often claim that decriminalization would result in a massive spike in drug use. Although it is impossible to know in advance exactly how much consumption would increase, the experience of Portugal could provide some clues.

Since the decriminalization of all drugs there in 2001, user rates have not increased and remain near the lowest in Europe. Sexually transmitted diseases and deaths due to drug usage have decreased significantly (see Glenn Greenwald, “Drug Decriminalization in Portugal: Lessons for Creating Fair and Successful Drug Policies,” Cato Institute, April 2, 2009).

Just as Coca-Cola and the AMA lobbied for alcohol prohibition because it was in their economic interest to do so, a number of groups have a vested interest in the war on drugs. One illustrative example is the California Beer and Beverage Distributors, which donated money to oppose last year’s unsuccessful ballot proposition to legalize marijuana in California. History rhymes in interesting but predictable ways. This behavior is consistent with the lessons of Public Choice. The distributors, like Asa Chandler of Coca-Cola 90 years earlier, see prohibition as a means to eliminate competition.

The unfortunate reality is that despite the diagnosis of failure for prohibitions past and present, policy-makers often prescribe a further dose of the same failed policies. In 1926 Wayne Wheeler said the “very fact that the law is difficult to enforce is the clearest proof of the need of its existence.”

When the masterful and detailed study of twentieth-century communist regimes, The Black Book of Communism, was first published in France in the 1990s, for instance, one French leftist tried to rationalize the human cost of socialist tyranny by arguing: “Agreed, both Nazis and communists killed. But while the Nazis killed from hatred of humanity, the communists killed from love.”

Nazis, it seems, had bad intentions and used bad methods. Communists, on the other hand, had good intentions–they loved their fellow man and wanted to create a utopia for him–they just made an unfortunate error in selecting less-than-desirable means. Oh, well, back to the drawing board!

Richard Overy’s recent work, The Dictators: Hitler’s Germany, Stalin’s Russia, is the most detailed and methodical study, so far, of what the two totalitarian regimes shared in common and in what ways they differed. Indeed, there are few aspects of political, economic, social, and cultural life in Nazi Germany and the Soviet Union that do not receive meticulous analysis from the author.

It is in the concluding chapter of the book that one discovers what Overy considers the most fundamental premises of the two regimes. Both the Nazis and the communists, he argues, were guided by the spirit of scientism: the misplaced application of the methods of the natural sciences to the arena of human life. Marxian socialists were convinced that they could deduce the “laws” of historical development that necessitated the inevitable triumph of “the workers” over their capitalist exploiters. In addition, they believed that once the revolution had been orchestrated, the “dictatorship of the proletariat” had the ability to remake man and transform society into a collectivist paradise.

The Nazis also believed in the power of science, but in their case it was a “racial science” that defined different human groups and their hierarchical relationships to each other. Through application of eugenics, a purified “master race” could be socially engineered, with “the Germans” being the superior breed meant to rule the world.

Communism and Nazism, therefore, were variations on the same collectivist theme, in which the individual and his identity as a person were determined by either his “class” or “race.” Both were paranoid in their outlook on life. Nazis saw racial threats everywhere, in the form of inferior groups that could defile Germany’s blood purity. Communists saw class enemies surrounding and threatening the existence of the Soviet workers’ state. Vigilance at the borders and secret-police terror internally were essential for the regimes to preserve either the master race or the proletarian paradise.

Hitler and Stalin were convinced of their unique and irreplaceable roles in making history. Hitler believed that just as there is a master race among humanity, so there is a master leader within the master race, who through intuition, insight, and will power knows what is needed to assure the rightful place and destiny of the German people. Fate had called him to that task. Following in Lenin’s footsteps, Stalin believed that socialist victory was impossible without professional revolutionaries who served as the vanguard of the proletariat. Among the vanguard there was the necessity for one determined leader to head the movement, with “history” having assigned Stalin this momentous duty.

For Hitler and Stalin, their ruthlessness and disregard of human life were essential to fulfill their role as leaders of the Nazi and communist causes. What was, perhaps, most dangerous in both men was that they believed in what they were doing to bring their versions of utopia into existence. Hitler and Stalin were “true believers.”

The power of “scientific” social engineering was present in everything that they commanded for the reconstruction of German and Soviet society. Stalin introduced five-year central plans in 1929; Hitler imposed four-year central plans in 1936. Nothing was outside the orbit of control and command, from the most mundane consumer goods to the redesigning of whole cities and the wider countryside. Art, literature, music, sports, and leisure were all used to mold the tens of millions of subjects under their power into the desired shape for a beautiful tomorrow.

As Overy carefully recounts, there was little that was random in the Nazi and Soviet use of terror and imprisonment. Those, too, were planned with a purpose in mind. They targeted the designated “enemies of the people” to isolate and destroy all who opposed “the brave new world” in the making. But those arrested and sent off to concentration camps in Nazi Germany and the Soviet Union were also viewed as forced labor for building the Nazi and Soviet societies. The victims were all part of the same central plan, whether for work or extermination.

Overy also highlights the degree of popularity that both the Nazis and communists achieved in German and Soviet society. The secret police were tiny fractions of those populations. With little prodding people willingly spied and informed on their friends, relatives, and neighbors. Both regimes promised and seemed to deliver a new ideal of “equality” in which devotion and hard work in the service of “the cause” assured that even the lowly could find status, position, and reward, now that the old class distinctions were swept away. The state monopoly over news and information succeeded in persuading millions of the truth and justice of the regimes under which they lived. The “masses” in both countries passively or actively worked for the system, with little resistance or opposition.

The Nazi and Soviet regimes have passed away, their cruelties fading in memory. Yet one wonders–if such ideologies could once before mesmerize so many, could they not do so again? Under the right circumstance, could not the appeal of utopia drag humanity once more into a vortex of destruction?

I’m fond of metaphors that tease an audience into an unexpected way of looking at a subject, but Schuck’s image of the mitotic blastula fails the test. A good sign is that he introduces a second metaphor, reshuffling old decks of cards, to explain the first. Then he blots out both metaphors with a third by asserting that this gin rummy-playing embryo is also an originator of “unprecedented” forms of social life.

It is, of course, not too hard to extract the basic idea: America is getting more diverse. The colliding and contradicting metaphors, however, do nothing to advance the idea and even less to entice the reader. This is not a small fault in a book that aims to win over people to a series of contrarian positions on public policy. Nor is the mutant blastula an isolated instance. Much of Schuck’s writing is awkward, and some of it is downright painful.

Schuck does have some important things to say. His chapters on immigration (4) and judicial attempts to desegregate neighborhoods (6) are excellent tours through rough terrain. His chapters on affirmative action (5) and religion (7) are less illuminating but still worth the hard slog of Schuckian prose. That slog has been kindly overlooked in a series of generous reviews that have celebrated Schuck’s middle-of the-road sensibility. He generally endorses “diversity” as a social ideal while castigating some of the ways in which courts and the government have sought to promote it. But I wonder what it means when a supposedly major statement on a key public-policy matter issued by a prestigious university press is written in a fashion bound to be impenetrable to anyone outside the policy elite.

Through most of his book, Schuck, who is the Simeon E. Baldwin Professor of Law at Yale, looks over his shoulder at what his colleagues on the academic left will make of his points. This I think explains the convolutions of his argument as well as his coagulating imagery and overqualifled sentences. In this sense, Diversity in America pays a high price for entree into the salons of Cambridge and New Haven. By striving so hard to achieve respectability in those quarters, Schuck has written a book that is unlikely to enlighten most others.

That’s too bad because some of Schuck’s points are surely right. He argues, for example, that the value Americans place on diversity depends in large part on its “provenance.” Diversity that ensues from individuals making their own decisions is often felt to be enriching. But diversity that results from stage managers attempting to arrange society according to their own lights of the right proportions of ethnic groups, classes, and sexes is experienced as an unwelcome imposition. And Schuck accurately registers that the “ideal” of diversity is new and not, as some of its proponents pretend, an abiding principle of American life.

Sadly, Schuck never really comes to grips with the rise of diversity as an ideology. He acknowledges and even insists that the facts of social diversity are one thing and the belief system something else. But this distinction frequently disappears when he comes to specific cases. The two meanings bleed together and the attentive reader is hard put to decipher the argument. Do the courts in the Mount Laurel, Chicago Housing Authority, and Yonkers housing cases care about demographic realities or conformity to the crudely drawn categories entailed in the doctrine of diversity?

Schuck makes a fateful mistake near the beginning of the book, where he insists that diversity is a unified subject: “I define [diversity] as those differences in values, attributes, or activities among individuals or groups that a particular society deems salient to the social status or behavior of those individuals or groups.”

But just as all the people in Cincinnati named “Charles” are not the same person, “diversity” is not one thing. It is a sprawling collection of sentiments and slogans often aimed in contradictory directions. Diversity in America suffers from treating this junkyard as though it were a college seminar.

Like a blastula undergoing mitosis—this book might have been better left to gestate until it was really ready for the outside world.

In The Wealth of Nations, Smith lamented what he called the other two forces hindering the preservation of economic freedom: “the prejudices of the public” and “the power of the interests.” By the prejudices of the public, Smith meant the difficulty that many people have in following the logical arguments of the advocates of freedom, and the ease with which they fall victim to the demagogic appeals of those who promise short-run political favors and privileges at the expense of longer-run liberty and prosperity.

And by the power of the interests, Smith was referring to the influence of special groups who receive political benefits from the government in the form of regulations and subsidies at the expense of the rest of the society. Smith warned that they will use all the means at their deposal to destroy those who threaten the continuance of their privileges. Indeed, nothing can save the opponent of government privileges from “the most infamous abuse and detraction, from personal insults, nor sometimes from real danger, arising from the insolent outrage of furious and disappointed monopolists.”

John Stossel of ABC News has experienced the wrath of all three of these antimarket forces. In this recent book, Give Me a Break, he recounts his odyssey as a television news journalist who has traveled from being a typical anti-capitalist “liberal” to a staunchly pro-market libertarian.

He first made his fame as an “in-your-face” investigative reporter on New York television who went after con artists, crooks, and corrupt businessmen. Stossel tracked them down and exposed their rip-offs of innocent and often naïve consumers. What struck him was their total amoralism, as reflected in their wanton ability to lie right into the camera with no remorse or apparent sense of guilt.

He assumed that what was needed was ever-stronger government regulation and policing of the marketplace to curb the unbridled criminality of the “greedy” and anti-social conduct of too many businessmen. But then he began to look into the conduct and motivations of the regulators and bureaucrats from whom he expected a solution to these “market failures.” Stossel soon discovered that they either had their own agendas for power and control, or served the anticompetitive actions of selected specialinterest business groups. So he decided to investigate and report on the nature of government in practice, as well as the ideas and ideologies behind political intrusiveness in society.

Rather quickly, Stossel came face to face with Adam Smith’s “man of system,” the ideological social engineer. He unearthed the twisting of facts justifying the regulation and control over such things as consumer choice, market-driven production decisions, and the environment. His exposés resulted in an avalanche of accusations that he was in the pay of business interests and that he was against the poor and the public good. In other words, he was a dangerous “enemy of the people.”

Then he faced the “prejudices of the public.” He received hate mail from viewers of his television specials demanding that he be fired, killed, or, at the very least, exiled from the human race. How could he question the good intentions of the government or the desirable results of the regulatory state unless he was, at the minimum, unbelievably stupid or, more likely, the incarnation of evil in the world?

Finally, he faced the “power of the interests.” Unions, business interests, and professional associations that eat at the government trough attacked him as a vile and dangerous threat to the “working man” and the betterment of America. In addition, the politicians and bureaucrats, whose anticompetitive policies he put into the public eye, tried to squelch his television specials.

But in spite of the most determined attempts to gag him, or to get him removed from his high-profile television position, he has survived. His television specials unmasking leftist ideologies and lies, and the abuse of political power, have had consistently high ratings.

Page after page recounts the details of his encounters with politically corrupt businessmen and power-lusting bureaucrats. He exposes the fraudulent methods used to spread myths and create fears about the extent of poverty and the quality of life in America, and the safety of products available to the average citizen in the marketplace. And he highlights the absolute contempt for the rights of others shown by those who use the state for their own purposes. Stossel ends his book with a series of clear, crisp chapters defending the logic and benefits of the free market, the importance of personal and civil liberties, and the underlying value of freedom in general. John Stossel’s journey in the world of television journalism is proof that truth can win out.

This misapprehension is helped along by a good part of the economics profession, many of whose members see themselves as the aspiring mechanics.

To state the obvious: an economy isn’t a machine. The term is an abstraction, even a metaphor, and we always get ourselves into trouble by taking metaphors literally. As F. A. Hayek was fond of pointing out, the word “economy” has its roots in the Greek word for household. (Remember those home-economics courses?) Even though a household is composed of individuals, it can usefully be thought of as a unit in the sense that its financial affairs are largely arranged around a single set of ends. (There’s a limit,of course, to how far that can be taken.) We go astray the moment we apply this description to larger collections of people. As soon as we begin talking about the city’s, state’s, or nation’s economy we have severed our moorings from reality because those groupings do not have a single set of ends.

That is why Hayek preferred the word “catallaxy” to “economy”; it comes from the Greek word for “exchange.” A catallaxy is “not a single economy but a network of many interlaced economies” (Law, Legislation, and Liberty, volume 2).

Another economist and Nobel laureate who is sensitive to this matter is James Buchanan, one of the pillars of the Public Choice school of political economy. His concerns are collected in the Liberty Fund volume What Should Economists Do? In the title essay (originally an address given in 1963) Buchanan identifies what can only be described as the central collectivist premise of most economics, namely: some entity larger than the individual—usually the nation—must allocate scarce resources.

Many heavyweights in twentieth-century economics—not just socialists—regrettably let that premise stand, Buchanan points out: Lionel Robbins never identified the allocator; Frank Knight attributed economic activity to the “social organization”; and even Milton Friedman held that (Buchanan quoting) “economics is the study of how a particular society solves its economic problem.” Not that those men did not realize that groups consist of individuals. But as economists, Buchanan fears, they too readily left the impression that economics deals with a collective’s solution to an allocation problem. It’s a short step from a collective to a machine.

That’s not how Buchanan sees economics. In contrast to the view that the economy is a “means of accomplishing the basic economic functions that must be carried out in any society,” he believes “The market or market organization is not a means toward the accomplishment of anything. It is, instead, the institutional embodiment of the voluntary exchange processes that are entered into by individuals in their several capacities.” He adds: “This is all that there is to it.”

Contemplate how different this conception of economy is from the general impression. As Buchanan writes, “Individuals are observed to cooperate with one another, to reach agreements, to trade. The network of relationships that emerges or evolves out of this trading process, the institutional framework, is called ‘the market.’ It is a setting, an arena, in which we, as economists, as theorists (as onlookers), observe men attempting to accomplish their own purposes, whatever these may be.”

In such a conception of economy, where is there room for words like “overheated,” “cooled down,” and “stimulus”?

Economic Subjectivism

In another essay in his book, “General Implications of Subjectivism in Economics,” Buchanan flaunts his affinity with the Austrian school of Hayek and Ludwig von Mises. Here he writes, “The principle that exposure to economics should convey is that of the spontaneous coordination [of individuals] which the market achieves. The central principle of economics is not the economizing process.” And he warns that economics will “become applied mathematics or engineering” if its practitioners think it is.

Subjectivism in economics is the recognition that economic phenomena emerge from what human beings believe, think, and do, and not from data they may know nothing about or rarefied statistical aggregates and averages. Subjectivism is good insurance against seeing the economy as a machine and the government as its vital attendant. Or as Buchanan puts it, “to the extent that subjectivism tends to concentrate attention on the interaction among persons and away from the ‘economic problem,’ an understanding of the principle of order is facilitated rather than retarded.”

Subjectivism can be seen most starkly in the notion of costs. Much economic theorizing (and bureaucratic meddling) regard costs as objective. That perspective encourages social engineering. After all, if those who would move us about the national chessboard had to confess that they cannot know the costs of their maneuverings, they would have a harder time justifying their power.

But they cannot know those costs. “The costs that influence ‘choice’ are purely subjective and these exist only within the mind of the decision-maker,” Buchanan writes. When one confronts two alternatives, one is really confronting two mental projections of what the world might be like in the future. Either or both projections could be wrong. At best they are educated guesses. And since one of those imagined worlds will never be realized, the chooser will never know if he was wrong about that one. But that world forgone is the true cost of the alternative chosen because that’s what the chooser gives up to achieve it. We often think of costs as money paid. But while money is indispensable for making calculations, it does not express the true opportunity cost of a choice. No one wants money for its own sake, but only for what it can buy now or later.

An economy is people cooperating to better their situations. Thus a “stimulus package” is fundamentally objectionable not because of anything that may be in the bill. (Tax cuts are always welcome.) It is objectionable because of its rationale. Government should endeavor to stay out of the way of productive activity at all times, not just when various numbers are deemed too high or low.

Friedman’s starting point is the idea that when people experience rising incomes and economic improvement, they tend to be both more generous and more benevolent toward their fellow men. On the other hand, when they view their present and future economic prospects as either stagnant or regressive, they tend to be stingier and less sensitive to others.

Friedman then translates this into a policy prescription for government to foster increasing economic growth, without which, he contends, many in society will be less open to “tolerance,” “fairness,” and “democracy.” To demonstrate this, he takes the reader through a lengthy, and often disjointed and meandering, account of American and European history during the last 300 years.

Long periods of sustained economic growth, Friedman argues, provide people with a psychology of economic security and confidence that makes them less fearful that continuing social change may undermine their material status. In other words, high economic growth makes people view change as a “positive-sum” game in which everyone can be better off at the same time. Low or no economic growth makes people feel that change is a “zero-sum” game in which others must be getting ahead at their or somebody else’s expense. Low growth, therefore, creates a culture and politics of mean-spiritedness.

He tries to show that it has been during periods of sustained economic growth that people have been less racist and sexist, more willing to pay taxes for the social “safety-nets” of the welfare state, and supportive of “activist” government steering society toward desirable “social ends.” During periods of prolonged slow growth, people become “anti-government,” wanting to hold on to what they have and not “share” with those who are less well off.

To prove this Friedman must perform a variety of interesting intellectual contortions. For instance, the expansion of government during FDR’s New Deal in the “bad times” of the 1930s becomes, supposedly, the “exception” that proves the rule. He also contends that people turned against Keynesian economics in the 1970s because they felt worse off during the decade’s inflation. The unstated presumption, therefore, is that Milton Friedman must not have received sufficient raises from the University of Chicago in the 1960s and 1970s. Why else would he have been so “negative” about society that he devised the monetarist case against discretionary macroeconomic policy?

And we have an internationally known Harvard economist bemoan the fact that during the “uncaring” and clearly “cruel” years of the Reagan administration, the national minimum wage was not increased. One can only conclude that the laws of supply and demand, and the harm from pricing people out of the market by mandating a wage above where the market would have set it, are fundamental truths that have been forgotten by at least some of the members of the Harvard economics department.

Benjamin Friedman rationalizes government intervention to foster continuing economic growth by arguing that such growth is a “public good” that would be “undersupplied” if left to private decision-making. Since growth generates the morally desirable side effects of “tolerance,”“fairness,” and “democracy,” for which there are no market prices, private individuals may choose to save, invest, and educate at levels below some rate of “optimal” economic growth. (The mantra of “tolerance,” “fairness” and “democracy,” which is repeated throughout the book, is merely Friedman’s Orwellian “newspeak” for all the welfare-state policies he likes.)

Friedman admits that government deficits are “bad” because they divert some of society’s resources away from future-oriented private-sector investment. But rather than cut spending so the government would borrow less, he wants those recent tax cuts for “the rich” reversed to pay for increased federal largess. The supply-side economists’ arguments over the last 30 years that raising marginal tax rates reduces the incentives for work, saving, and investment seem not to have penetrated the walls of Friedman’s office at Harvard.

And what exactly does he want government to do? He wants it to foster more college education through student loans and tuition subsidies; and private employers should be induced through tax-breaks to offer more on-the-job training. He does concede that the quality of public education is less than desirable and could be improved through competition. But he wants any “school choice” to be limited to government-run schools. Better-educated and -trained young people, you see, will generate the economic growth in coming years that will provide the wealth to support the continuation of Social Security and government health care.

Through all the hundreds of pages in Friedman’s book, there is one word that rarely appears: liberty. The only freedom that matters to him is that old New Deal notion of “freedom from want.”

That individuals should be free to retain the income they have honestly earned in the marketplace and to make their own choices concerning work, saving, and investment never even enters the discussion as a serious option. That individuals should have the freedom to decide for themselves the degree of benevolence and charity they wish to undertake is treated as something supplemental to government’s responsibility. Nor does Friedman even conceive of the possibility that education can and should be left to the market.

Friedman’s mindset is typical of the social engineer who views the members of society as puppets to be manipulated through government “pro-growth” policies in order to generate the wealth needed to fund the welfare state and to induce the right psychology so they will be willing and happy to be taxed to pay for it.

At a deeper level, therefore, Friedman operates on the basis of an almost crude “materialist” philosophy of history. How individuals think about freedom, society, and the nature and role of government is assumed to depend almost completely on their perception of whether their standard of living is rising, falling, or stagnant. Change the rate of economic growth, and you modify people’s beliefs and attitudes about the size and function of government. Get the economy moving along a faster growth path, and “the people” will want and support big government, like some version of Pavlov’s dog under the right stimulus.

Maybe if we could get Harvard University to cut back on Benjamin Friedman’s pay raises he would become disgruntled enough to write a new book, this time in defense of less government and more individual liberty!

Paul Krugman and Chris Matthews, among other Progressives, are apoplectic because two senators of the minority party held up votes on Obama appointments in order to win pork-barrel projects for their states. This reminds me of Captain Renault’s reaction on learning that people gamble in Rick’s gin joint.

Krugman acknowledges that this sort of thing is old hat, but he is upset that it’s become more common. Perhaps, but it was only a matter of time before the device known as the “hold” would be more widely used. The stakes have gotten higher over the years.

Nasty Fights over the Honey Pot

How in the world could the central government commandeer $3.8 trillion–about a third of it borrowed–without reelection-hungry politicians being willing to walk over their mothers to get at that honey pot? Government is a transfer machine. Do you expect everyone to pretend that it isn’t?

When someone insists he can square the circle, you know you’re looking at a demagogue or a zealot. Same goes for someone who insists you can have a government that exercises plenary power over our lives without generating politics in the most unsavory sense of the word. Today we have two broad political divisions that hold that power and agree on fundamentals. Sure, they have public disagreements over how power (and wealth) should be distributed at the margin between the bureaucrats and the significant interests in the “private sector.” There is no way we can have that sort of system without those disagreements at least occasionally turning bitter.

I suspect that people like Krugman and Matthews know you can’t have big government without nasty politics, but they want to have it otherwise so badly that they feign shock when a senator holds up a vote until he gets a government contract and some superfluous building for his state. Of course, they might genuinely get angry when the faction they dislike behaves this way. However, when their side indulges in such strategies, it’s good Progressive politics. Objectivity is not their strong suit.

People of this ilk showed the same shock when the Supreme Court ruled recently that corporations (for- and nonprofit) and unions cannot be barred from spending political money during election campaigns. (McCain-Feingold outlawed so-called independent expenditures by all incorporated entities, except media companies, 30 days before a primary and 60 days before a general election. The Court said that is unconstitutional.) Progressives are appalled that such entities would try to influence the selection of officeholders in a government that holds life-and-death power over so many aspects of life. Did they think people with interests at stake would just stand by passively? Apparently so, and when the affected organizations refused to do so, the “good-government” crowd opted for gagging them, showing unmistakably how devoted that crowd is to free speech when the chips are down. Now they (and Barack Obama) blast the five Supreme Court justices for saying the gag is unconstitutional.

One need not love big corporations or big unions–both of which derive significant power from the State–to be offended by this restriction on freedom of speech. Remember the slippery slope! Whose speech might next be deemed too influential and in need of restricting? Besides, it’s not as though corporations and unions have no other ways to influence politicians and policies. I suspect that spending during campaigns is the weakest method of influencing the government. Voters still have to go into the booth and mark the “right” ballots, and politicians can’t risk alienating the median voter. As Tyler Cowen pointed out in the New York Times:

For all the anecdotal evidence, it’s hard to show statistically that money has a large and systematic influence on political outcomes. That is partly because politicians cannot stray too far from public opinion. (In part, it is also because interest groups get their way on many issues by supplying an understaffed Congress with ideas and intellectual resources, not by running ads or making donations.) It is quite possible that the court’s decision won’t affect election results very much.

So memo to Krugman, Matthews, et al.: You can’t have the kind of government you want without people inside and outside the halls going to great lengths to get their hands on that power. You know it, and so does anyone who spends five minutes thinking it through. Enough whining already.

Of course, what I just said suggests a way to end the power brokering, logrolling, and influence peddling:

Don’t let government commandeer our resources and manage our lives!

If there were no privileges to sell, there would be no privileges to buy. If I may adapt something musical satirist Tom Lehrer sang about the New Math years ago, “It’s so simple, so very simple, that only a child can understand it.”

I’m sure the Progressives are saying right about now, “Gosh, why didn’t we think of that?”

Progressive Coercion

Well, no, not really. They apparently would rather sacrifice anything to preserve the machinery of social engineering, which they need to realize their grand designs. They rhapsodize about democracy, but their words betray their true preferences. Why else would they insist that Obamacare be passed despite the opposition of a majority of the public? Why do they smugly insist that the only reason the people are against it is that Obama did not explain the 2,700-page plan clearly enough in dozens of speeches?

When will the Progressives realize that although they claim to despise corporate influence in government (check out who supports Obamacare), it is their Progressive ancestors who helped forge the implements of power to which the corporate world has ready access.

This government doesn’t merely breed corruption. It is corruption.

The U.S. government recognizes that power. It is currently engaged in an unprecedented push to count the people, citizen and noncitizen alike, living in the country. In preparation for the 2010 census, state employees even took GPS readings for every front door in America so that individuals can be located with computer accuracy.

On January 25 Census Bureau Director Robert Groves officially launched the 2010 Census when he arrived in the Alaskan fishing village of Noorvik, population 650. A symbolic dogsled run over the frozen tundra emphasized that no community was too remote or too small to escape the government’s head count. By mid-March 450 million census forms began arriving by mail in less exotic zip codes; census assistance centers were established to help people complete the ten-question form. April 1, also known as April Fool’s Day, was officially recognized as “Census Day.” In late April another mailing either thanked people for responding or reminded them to do so. Then census workers knocked on the GPSed doors of nonrespondents; they were to do so repeatedly, if necessary.

In January the San Jose Mercury reported, “The U.S. Census Bureau has created a hiring boom. Expecting to hire up to 1.5 million Americans this year. . . . The federal government expects to spend $14.7 billion to count every man, woman and child living in the country.” The jobs range from office clerks to supervisors and door-knockers.

Compliance is required by law; Section 221 of Title 13 of the U.S. Code, Chapter 7, Subchapter II spells out several types of illegal responses to the census:

• Refusal or neglect to answer questions; false answers
• Giving suggestions or information with intent to cause inaccurate enumeration of population
• Refusal, by owners, proprietors, etc., to assist census employees
• Failure to answer questions affecting companies, businesses, religious bodies, and other organizations.

Fines can range from $100 to $5,000. Nevertheless, the law is rarely enforced, and the Census Bureau relies heavily on public cooperation. To gain widespread voluntary compliance, authorities must overcome two major obstacles: apathy and a suspicion of how government will use the data. This article addresses the latter.

Opposition to the 2010 census has been less active than in 2000. (The Constitution mandates a census every ten years.) In 2000 approximately 16 percent of households received a “long form,” which contained more than 100 questions, many of which were highly personal. By some reports, in the first week after the 2000 mailing, the Census Bureau received over half a million calls, most of which complained about the length and intrusiveness of the questionnaire.

This year the long form has been eliminated. There are only ten questions. The comparative brevity does not reflect a new government respect for privacy, but merely a shift in strategy. The decennial census data are now supplemented by the American Community Survey (ACS), which is distributed yearly to select households.

Nevertheless, many people consider the 2010 form to be a violation of privacy. For example, one question asks, “Is this house, apartment or mobile home owned by you or someone in the house with a mortgage? Owned free and clear? Rented? Occupied without payment of rent?”

After that the form asks the sex, age, relationship, and race of each person living at the home and whether he or she is of Hispanic origin. For each person it must be specified whether he or she “sometimes live[s] or stay[s] somewhere else.”

Why the does the government need to know that? It also wants your phone number in case your answers are unclear.

Other than privacy, what other objections commonly arise?

One objection is constitutional. The Census Bureau draws on constitutional authority but the questions have little connection with the original intention, which was to apportion representatives and direct taxes. Critics ask why the government needs to know if they rent or own. They claim the census is not an expression of the Constitution but the creation of a bloated government abusing a limited mandate.

Certainly the history of the census is one of “mission drift.” The first census (1790) consisted of six questions: the name of the head of the family and the number of people in the household broken down into free white males 16 or older, free white males under 16, free white females, and slaves.

How did the census evolve into a vehicle for social engineering?

Expanded Data Collection

Starting in the nineteenth century statisticians urged the federal government to expand the type of data collected. Since then the census has been used more and more to facilitate government goals that far exceed apportionment. For example, both sides of the Civil War used the 1860 census to plan military strategy. When Union General William Tecumseh Sherman made his notorious “scorched earth” march through Georgia, he used census data to locate the farms he looted for provisions. During World War I the Justice Department used census data to locate males within a certain age range who had not registered for the draft; during World War II the data were used to locate Japanese-Americans and target them for internment. More recently, the IRS has compared census data to privately purchased lists to detect tax evaders.

Local governments also scrutinize census data for their own purposes. In a Wall Street Journal column in 1989, “Honesty May Not Be Your Best Census Policy,” James Bovard explained that those responsible for building-code enforcement often used the data “to check compliance with zoning regulations” and to find violations such as “illegal two-family dwellings.”

The government responds to privacy concerns by assuring the public that the data are confidential. “Wrongful disclosure” by employees carries a fine of up to $5,000 and/or a prison term of up to five years. Other federal laws reinforce confidentiality protections, including the Confidential Statistical Efficiency Act and the Privacy Act. Confidentiality is “guaranteed” for 72 years.

Unfortunately, the government has a history of sharing specific data with enforcement agencies, especially during crises. Government assurances can have a short shelf life. The original Social Security cards explicitly stated that they were not for identification purposes. Yet today the number is virtually a national ID without which you cannot so much as open a bank account. The government is constructing a huge national database with the goal of including detailed racial, age, financial, medical, educational, and relationship information on every American. It is naive to assume that bureaucrats can resist the temptation of dipping into the rich information on census forms.

Dividing up the Booty

The government predominantly uses one argument to elicit compliance, which the Census Bureau website states clearly: “Each question helps to determine how more than $400 billion will be allocated to communities across the country.” The money will be used to fund hospitals, job training centers, schools, senior centers, emergency services, and public-works projects.

In other words, tax money will be doled back out to communities based on how many residents return the form. An October Newsweek article, “Census Maps Out Strategy to Snare Elusive,” quoted a census official on the effect of promised entitlements and peer pressure on potential noncompliers: “What helps persuade the cynical to participate is stressing the count’s benefits for their children, such as planning for schools and hospitals.” And, if the “cynic” has no children or is willing to waive personal benefits to maintain privacy, he is reminded that noncompliance “steals” from his neighbors and their children. Thus exercising his right to privacy is said to deprive his community of benefits and the neighborhood kids of a good education. Compliance has been converted into a civic duty. But since the census determines how $400 billion is to be divided among communities, doesn’t compliance constitute stealing from others, depriving them of benefits and their children of a good education?

Several years ago I discussed the Canadian census with a neighbor after she had signed up to be a census taker. Like many rural women, she is proudly independent and openly suspicious of authority, especially of government “suits” and bean counters. I asked what she would do if a neighbor refused to answer her questions. “I’d report them to my boss,” she replied without hesitation. When I frowned in disapproval, she indignantly protested against people who refused to pull their weight in the community by answering “some simple questions.”

Note the political sleight of hand. My neighbor would never trespass on my property or steal vegetables from my garden. But she would turn me in to the authorities for not answering questions. Instead of the “natural harmony of interests” that comes from all people minding their own business, the census establishes a situation in which everyone is encouraged to police everyone else at the behest of the State; indeed, many are paid to do so.

The census in a welfare state, then, creates a dynamic in which the exercise of one person’s rights ostensibly damages the interests of others. It thus has become a powerful symbol of social control over civil society.