What Markets Reveal

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Confusion, Freedom and Community

Ed Hudgins, Executive Director of The Atlas Society, was the speaker at the June monthly meeting of the Bastiat Society. He addressed the question "Why are so many people confused about the morality and social benefits of freedom?" Hudgins gave thirteen reasons people are confused:

1. Diminished data base.
Schools don't give students the facts, especially historical ones, on which judgments concerning freedom and government should be made.

2. Can't think.
Schools do an even poorer job of teaching critical thinking skills.

3. Emotions get in the way.
Individuals have a strong reaction, for example, seeing poor people, and want to "do something" immediately rather than stepping back and asking questions concerning justice, economics, public policy, etc.

4. Ideology over truth.
In a healthy culture, intellectually healthy minds can step back from an ideological paradigm, even a correct one, and ask questions in order to meet new challenges. Allegiance to the truth always comes first.

5. Acceptance of the status quo.
Most people accept the situation into which they are born and, unless a situation becomes truly intolerable, simply criticize around the edges.

6. Failure of imagination.
Even acknowledging problems and seeing something of the logic of an alternative, many people can't visualize how an alternative might work, e.g. a world without government schools.

7. Prerequisites to freedom argument.
Some argue, correctly, that freedom requires certain prerequisites. But some have too narrow a vision of what these prerequisites are. In fact they are certain moral premises that shouldn't be forced by governments. But some think that freedom requires a strong role for government. For the right it's enforcement of specific moral precepts, usually from religion. For the left it's economic equality or income guarantees.

8. Freedom as vague, fuzzy, floating, feel-good concept.
The term can mean different, disconnected, often contradictory things.

9. The many-freedoms problem.
Some see freedoms as distinct "things," e.g., free speech, freedom of religion, that can be chosen from a Chinese menu with other "things " that limit freedom, e.g. economic security, minimum wages, etc.

10. Confusion of positive and negative rights.
Negative rights are rights to be left alone, e.g. the right to free speech, assembly, worship. Positive rights are rights to things, e.g. medical care, a house, a certain income. The latter limits the former.

11. Failure to think in principles.
Many mistakes concerning freedom can be lumped under a general failure to think in terms of principles. The principles of freedom is a rule concerning individual action in a social context in which individuals are seen as morally entitled to do as they please as long as they respect the equal freedom of others, that is, not initiate force against others and deal with them based on mutual consent. Most politicians--Bush, McCain, etc--are not individuals of principle but, rather, of specific convictions and prejudices that are out of any context.

12. Concern for community.
The general concern of individuals for others often leads to the contradictory notion that we must sacrifice ourselves or others for the sake of the "community," which negates the whole point of being in community with others, that is, the pursuit of our own happiness.

13. The paternalist problem.
For decades our institutions have treated us like children which has created in many the moral habits of children, that is, a generally lack of responsibility for our own lives and happiness and the juvenile moral habits. The tools the of paternalist state and culture are envy of those who are successful because of their success and virtues and guilt instilled in such individuals for their virtues.

***What Can We Do?
1. Make arguments of freedom in terms of principles.
We need to elevate the discussion by getting to the root reasons why we deserve freedom in a social context.

2. Fight on the moral high ground.
Explicitly reject the immoral assumptions of the opponents of liberty. For example, don't only argue that economic freedom allows everyone to prosper--it does, of course--but more basically that our lives are our own and that we have a moral right to pursue our prosperity without the permission of others as long as we accord others then same freedom.

3. Appeal to the pride of autonomy and the creator.
True pride comes from our virtuous actions, e.g. taking responsibility for our own lives and creating the means of our physical survival and prosperity as well as spiritual flourishing, whether nurturing a child to maturity or a business to profitability; whether writing a poem or a business plan; whether designing a building or laying its bricks.

Appeal to that in people.

4. Appeal to a better community.
By pursuing our rational, responsible, principled self-interest, by pursuing the best within us as individuals, we create a community in which we each are entertained, enriched, educated, enlightened and inspired by our fellow. The only path to the best community, one in which individuals can flourish, is through individuals pursuing their highest self-interest.

The Business that Did Not Charge Enough

A business owner in Wisconsin is in trouble because he did not charge old people enough.

As reported in Forbes, Raj Bahandari used to give the old people who bought gas at his BP station a 2 cents a gallon discount. Then one of his competitors filed a complaint with the state agency that regulates gasoline sales. It turns out there is a state law, the Unfair Sales Act, that requires station owners to charge a minimum price for gasoline. Bahandari faced stiff fines from the Wisconsin Department of Agriculture, and the possibility of expensive lawsuits from his competitors. So he stopped offering the discounts. Gasoline sales dropped 20 percent.

Then he started fighting back. He's suing the Department of Agriculture and its secretary, Rod Nilsestuen. The Institute for Justice, an Arlington, VA based law firm representing Bahandari, says the 1930s law is unconstitutional. It vows to take the case to the state Supreme Court.

Meanwhile, the state trade association representing gasoline retailers like Mr. Bahandari has come out against his lawsuit. It claims the law promotes fair trade. No word from the trade association on what the law does for old people.

Markets and Education, Continued

The following op-ed outlines a strategy for unleashing market forces in education. It appeared in the Wall Street Journal on Saturday, 16 June 2007, and was written by Howard Rich, Chairman of the Parents in Charge Foundation.

School Choice Strategy
The flattened borders of the 21st century have made networking faster, global trade freer and competition more rigorous -- meaning the premium we place on educating future generations is higher than ever before. Yet the nation's monopolistic approach to education remains a millstone around our children's necks, with America consistently lagging behind its industrialized peers in academic achievement.

The late Nobel Prize-winning economist Milton Friedman understood the central role school choice must play in revitalizing American education. "Empowering parents would generate a competitive education market, which would lead to a burst of innovation and improvement, as competition has done in so many other areas," he said in December 2005. "There's nothing that would do so much to ensure a skilled and educated work force."

By any objective measure, Friedman was right. The success of school choice as a method of empowering parents, raising student achievement and improving public education systems in those markets where it has been implemented is indisputable. The question now becomes how to achieve meaningful school choice for the benefit of all parents, not just a select few?

After this year's compelling school-choice victory in Utah, the methodology for successfully advancing parental options against the well-funded phalanxes of institutional opposition is crystallizing. Specifically, Utah's success has proven the efficacy of advocating universal choice initiatives as opposed to limited, means-tested pilot programs.

Beyond the obvious quantitative benefits universal plans provide (i.e., more choices for a larger number of parents), consider the following lessons from experience:

* Scaling back choice plans does nothing to diminish institutional opposition. Too often, supporters of school choice assume that watering down legislation in their states will result in acquiescence from teachers unions and the education-industrial complex. Nothing could be further from the truth. Whether it is choice for one child or one million children, the education establishment will fight it tooth and nail. If anything, the rhetorical salvos launched against scaled-back proposals are even more incendiary, with bureaucratic apologists
falsely accusing school choice supporters of "sneak attacks" and "end- arounds" in addition to the predictable "anti-public education"
harangues.

Moreover, the introduction of "softer" choice bills is often perceived as a political retreat, emboldening opponents and unnecessarily muddying the clear policy and philosophical merits school choice enjoys. Anti-choice forces do not make distinctions nor will they ever stop attacking that freedom once it has been achieved. Even after Utah's decisive school choice victory, supporters of the status quo are already seeking to derail the legislation by using the state's public referendum process -- all this despite the fact that Utah's public schools received more than half a billion dollars in new funding this year.

* Broader choice plans equal broader support. You don't have to take Grassroots 101 to know that successful coalitions are based on addition, not subtraction. Yet in many instances school choice supporters have been conditioned to believe that confining the parameters of parental choice will lead to a broader base of public support. The opposite is true. As employee stock options and personal savings accounts have shown, nothing motivates individuals quite like becoming personally invested in an issue.

Supporters of school choice cannot afford to leave a single ally on the sidelines -- for Christian school parents, home school parents, parents with special-needs children or parents who for whatever reason aren't satisfied with the public school they are zoned for, universal choice plans offer a much broader base of grassroots support than more narrowly-drawn proposals.

* Universal school choice plans can ultimately forge winnable political coalitions. Utah adopted the nation's first universal school choice bill this year in spite of a staggering amount of political capital devoted to defeating the legislation and demonizing those who rallied behind it. House Speaker Greg Curtis, who was targeted for defeat by teachers unions last year and came close to losing his seat, is emblematic of courage under fire. Instead of being awed by the onslaught, Mr. Curtis pushed choice aggressively, and was a central figure in the school choice victory.

Like citizens, elected officials are much more inclined to support legislation when they are given a direct stake in it. All politicians respond to pressure in their own backyards, yet absent such pressure, they will invariably bend to the inflexible will of the education establishment.

In spite of enormous resistance, Utah's victory is proof positive that a universal approach -- consistently advanced over time and leveraging every available grassroots and political coalition -- can succeed in securing the educational choices our nation needs to compete in the new millennium. The sooner we apply these lessons to other states, the sooner America can inherit its 21st century Manifest Destiny.

Markets and Education

We all enjoy the benefits of choosing from a wide variety of goods and services produced in a competitive business market. Yet many people refuse to consider the benefits of creating a competitive market for K-12 education. Such people either take markets for granted or, even worse, they view them as chaotic and destructive. They usually believe that technical specialists with political power can do a better job than entrepreneurs and consumers organizing voluntarily via a market. Of course, that is just the kind of thinking that made North Korea the commercial and educational powerhouse that it is today.

The following letter to the editor is a reply to Cindi Ross Scoppe's editorial on school choice in "The State" newspaper. In her editorial, she defends a bill that would give South Carolina parents the option of choosing among public schools, but would do nothing to aid parents who want the option of sending their children to private schools. She compares criticism of the bill to criticism of her recipe for strawberry shortcake. Her thinking reduces the kind of complex decision-making best left to individuals in a market to a one-size fits all recipe.

Dear Editor:

Perhaps Cindi Ross Scoppe revealed more than she intended in her Friday column. She said any criticism of state Superintendent of Education Jim Rex’s plan for open enrollment in public schools is “like saying my recipe for strawberry shortcake is ‘fundamentally flawed’ because it doesn’t include sardines.”

Ms. Scoppe, my children are not ingredients for your political kitchen. I dare say most parents feel the same way.

Comparing something as precious, as complicated and as important as the education of a child to baking a cake reveals a social vision that leaves little room for individual preferences and innovation.

The only thing more troubling than such a vision is the hubris to impose it on everyone else.

Nonzero

Video of Robert Wright, the author of Nonzero: The Logic of Human Destiny.

Is Capitalism Inevitable?

The question is a provocative one, loaded with implications for anyone who is concerned about the present and future state of human freedom.

In Robert Wright's book Nonzero: The Logic of Human Destiny, he answers yes, more or less. In an unusual twist, he does not claim that the lofty ideas of Western philosophy explain capitalism's triumph. Rather, he argues that capitalism will succeed simply because it is consistent with human nature.

An excerpt:

"When medieval burghers carved out some breathing room for themselves, winning the right of self-governance, they were not spurred by the writings of Demosthenes, nor trying to revive their classical Western heritage. They were just indulging their instincts for self-interest and collaboration, and embracing a productive information metatechnology: freedom. Freedom to buy and sell, to make contracts, to use one's savings as one sees fit -- and the freedom of towns, more broadly, to define and fine-tune these freedoms -- all these were fruitful algorithms of governance; they were the political technology that best energized the ascendant economic technology, capitalism.

In Wright's view, capitalism is inevitable, sooner or later and somewhere in the world. It works so well that lots of people, somewhere are going to use it. If not in North Korea, then in South Korea. If not now, then later. If not us, then...who?

One Man's Sprawl is Another Man's Castle

We often hear people complaining about "sprawl." We know it's not supposed to be a good thing. But when a negative word is used to describe a positive reality, what do you believe? The word or the reality?

Robert Bruegmann, a professor at the University of Illinois at Chicago and the author of Sprawl: A Compact History, does a nice job clarifying the issue. In his article "In Defense of Sprawl" on Forbes.com, he says complaints about sprawl "are built on an extremely shaky foundation of class-based aesthetic assumptions and misinformation." In other words, ignorance and snobbery.

Bruegmann concludes:

"Sprawl in itself is not a bad thing. What is bad is the concept of 'sprawl' itself, which by lumping together all kinds of issues, some real and important and some trivial or irrelevant, has distracted us from many real and pressing urban issues. It also provides the dangerous illusion that there is a silver bullet solution to many of the discontents created by the fast and chaotic change that has always characterized city life.

Sprawl, like beauty, is in the eye of the beholder. All the more reason we should be skeptical of planning boards that claim to speak with final authority on either subject.

Indoctrinate U

If capitalism is to survive the 21st century, it must confront the anti-capitalist mentality so often encountered on today's college campuses. A new documentary, Indoctrinate U, does just that.

The film uses a combination of MTV-type-editing and ambush-interviews to humorously attack the alarming assault on free speech and freedom of thought that passes for higher education.

The producers are looking for individuals to request a screening in as many cities as possible. This is your chance to be involved in a free-market, grass-roots effort. Please seriously consider participating.

Check out the trailer below.

Moral Fortunes

There are only two ways to accumulate significant wealth. One is to steal it. The other is to earn it.

For most of human history, stealing it was the preferred method. This explains why the oldest moral codes often associate the accumulation of wealth with questionable moral conduct. Sayings such as "The love of money is the root of all evil" or "It is easier for a camel to pass through the eye of a needle than for a rich man to enter the Kingdom of God" make more sense when viewed in the context of a culture whose first-hand experience was that the quickest way to get rich was by using violence and fraud.

The effects of this historical experience are with us today. We regularly hear the idioms "filthy rich" and "stinking rich" tossed about indiscriminately, without ever asking why wealth should be filthy, or why it should stink. These idioms are vestiges of another time and place. They unnecessarily confuse the moral issue of wealth creation in the modern world.

Moral fortunes are built by earning it, not stealing it. The only way to earn a fortune is to engage in mutually beneficial trading. As the economist Murray Rothbard put it, "The greater a man's income, the greater his service to others." Sam Walton died a rich man because he earned it. Bill Gates is rich because he earned it.

This is not to say every fortune in the world is the result of honest and moral effort. Hugo Chavez, Fidel Castro, and Robert Mugabe all have personal fortunes (somewhere). But they did not earn them. They stole them, using violence and fraud on the grandest scale of all. Rather than lie and steal one person at a time, they used politics to loot whole populations. People like this may be rich, but their fortunes are not moral.

Bill Gates is rich. Hugo Chavez is stinking rich.

End Poverty, Spread Capitalism Now!

The following excerpt is from an editorial entitled "Bill Gate's Charitable Vistas" by Robert Barro, an economics professor at Harvard. It appeared in the Wall Street Journal on 19 June 2007.

It is thrilling to find an academic who understands the way business makes the world better, and can communicate that understanding with authority and clarity.

"To find policies that are likely to alleviate poverty, it is best to look at actual successes and failures. In recent decades, the biggest single accomplishment is the post-1979 (post-Mao) economic growth in China. Xavier Sala-i-Martin ("The World Distribution of Income," Quarterly Journal of Economics, May 2006) finds that the number of persons below a standard poverty line fell in China by about 250 million from 1970 to 2000. This massive poverty reduction occurred despite an increase in the Chinese population of more than 400 million and rising income inequality within China. The second-best story is the economic growth in India, where the poverty count fell by around 140 million people from 1970 to 2000.

Also illuminating is the greatest tragedy for world poverty -- the low economic growth in sub-Saharan Africa. In this case, the number of people in poverty rose by around 200 million from 1970 to 2000.

These examples suggest that the key question for poverty alleviation is how to get Africa to grow like China and India. An important clue is that the triumphs in China and India derive mainly from improvements in governance, notably in the opening up to markets and capitalism. Similarly, the African tragedy derives primarily from government failure. Another clue is that foreign aid had nothing to do with the successes and did not prevent the African tragedy."

Imperfect People or Imperfect Masters?

A frequently heard criticism of people who have confidence in the social benefits of the free market system is that we believe it will "magically" produce results. Of course, this is a gross simplification. The fact that we hear this criticism so often tells us we have work to do.

We do not support the free market system because we believe in magic. We support it because we know that it is the best way to organize imperfect people with widely dispersed knowledge and a strong preference for their own self interest. The results of the market are innovative, enjoyable, occasionally perplexing, and sometimes disturbing. But the system gets results, and it does so peacefully.

Ah, says the critic. Why leave social organization to vague market forces with unpredictable results? Why trust the chaos of undirected and self-interested human behavior? Why not organize with the best available knowledge, using our collective and most powerful efforts towards a common and mutually beneficial goal? Why not use the might of the political system?

The answer is simply this. Imperfect people do not become perfect when they don the mantle of the political actor. They are still imperfect people, but now with more power over other people's lives, properties and incomes. They become imperfect masters. The fact that they are elected and can be unelected does nothing to lessen this fact.

Inevitably, these people make mistakes. Inevitably, they act according to their own self interest. Inevitably, they cannot gather all the dispersed and fragile knowledge they need to run the system, compounding their own errors with errors in the information system itself. And they do all this at other people's expense. While such systems can produce spotty successes, e.g., the Bolshoi Ballet or Romanian gymnasts, the results are more widely tragic.

The historical record is clear. Imperfect people in a free market system will do a better job, with smaller and less costly mistakes. That is why we have confidence in the system. It's not magic, and it's better than tragic.

Planning, Financial and Otherwise

No one ever walks into a financial planner's office and asks for an expensive, complicated, and difficult to maintain financial plan. What he wants is something simple, effective, and as inexpensive as possible.

The same is true for every other kind of plan. Business plans, military plans, and education plans are all ideally simple, effective, and inexpensive. Another way of saying this is to describe the plan as "economical," in the sense it uses a minimum of the resources required. These resources might be time, knowledge, or money, among other things.

Remarkably, more than just human plans seem to be organized with the goal of economy. Consider the human mind. It works with a surprisingly small amount of information. Our senses do not completely perceive reality as it is. Rather, our senses detect only those facets of reality that aid our survival. You could say our senses operate economically.

Trade extends the idea of economy to the relationship between individuals. In a trading economy, individuals can achieve a great deal of success with a surprisingly limited amount of knowledge. All that is necessary is the entrepreneurial sense to detect a trading opportunity, the freedom to trade, and a price system that reflects unbiased information.

To return to our initial argument, we should never ask for an economic system that is expensive, complicated and difficult to maintain. The more we allow market forces to work, the closer we come to the ideal of an adaptable system that operates effectively with widely dispersed and individually limited knowledge.

Freedom, Not Climate, Is at Risk

More and more businesses are jumping on the global warming band-wagon. Why? Do they think it's good for business? Do they see an opportunity to make a profit for their owners and shareholders? Do they think it's good PR? Or do they feel compelled by conscience to do what they think is right?

I suspect it is a mixture of all of the above. A business is nothing more than a temporary overlap of a wide variety of self interests. People work and do things for their own peculiar motives, not necessarily yours or mine. The amazing thing is that we work together so well and so often.

But whatever the motive, before business accepts the responsibility to do what it can to avoid a man-made climate catastrophe, it should consider the words of Vaclav Klaus. Although he is an elected politician, President of the Czech Republic, he bravely speaks about the danger behind global warm-and-fuzzy feelings. An excerpt:

"As someone who lived under communism for most of his life, I feel obliged to say that I see the biggest threat to freedom, democracy, the market economy and prosperity now in ambitious environmentalism, not in communism. This ideology wants to replace the free and spontaneous evolution of mankind by a sort of central (now global) planning."

And another:

"I agree with Professor Richard Lindzen from the Massachusetts Institute of Technology, who said: “future generations will wonder in bemused amazement that the early 21st century’s developed world went into hysterical panic over a globally averaged temperature increase of a few tenths of a degree, and, on the basis of gross exaggerations of highly uncertain computer projections combined into implausible chains of inference, proceeded to contemplate a roll-back of the industrial age”."

Business should approach the issue of global warming with great skepticism. It is an issue where science, politics, and propaganda have mixed to a dangerous degree.

One Radical to Another

The following is my response to an editorial by Brad Warthen, Editorial Page Editor of "The State" newspaper in Columbia, SC. Brad is a friend with whom I have friendly disagreements. One of the things I disagree with is his fondness for the phrases "strident libertarian" and "radical libertarian."

Brad,

Frankly I'm puzzled at the way you casually dismiss anyone who disagrees with you as a "strident libertarian," while strenuously resisting any attempt to identify yourself a "strident communitarian." Don't you think it's a little hypocritical?

As for those you label "libertarian," you should be aware that it includes a rather diverse community. Reagan Republicans, moderate libertarians, anarcho-capitalists, evangelical Christians, and even some conservative Democrats share many of the views you dismiss under one label.

I do not doubt your sincerity in wishing for a better world. We share that wish. However, what I do worry about is your enthusiasm for using political power to mold a particular vision of the social order. As F.A. Hayek pointed out sixty years ago in "The Road to Serfdom," people with good intentions believe political power can improve the world, and end up discovering that political power is quickly usurped by those who use it for their own ruthless ends. This explains much of the pointless suffering of the 20th century.

And before you dismiss Hayek as a "strident libertarian," you should know he resisted the label. He repudiated conservatism and was sympathetic to socialism (a careful reading of "The Road to Serfdom" reveals a social policy not too different from the Democrat Party Platform of 1992). Hayek preferred to call himself "an Old Whig," a term I think we should revive for its quirkiness, if for no other reason.

Ben Rast
President, The Bastiat Society
Treasurer, The SC Club for Growth
www.bastiatblog.blogspot.com
www.scclubforgrowth.com

"Cute Depreciates Rapidly"

Stephen Colbert, the funniest guy on television, gives advice on the weak dollar, your next vacation, the ivory trade, and where to invest. It's a virtuoso performance.

Warning: this material is not intended for use.

The Bastiat Society Honors Atkins and Gornik

The Bastiat Society is pleased to announce that Paul Atkins, Commissioner of the Securities and Exchange Commission in Washington, DC, and Kathy Gornik, President of Thiel Audio in Lexington, Kentucky, are recipients of Bastiat Awards. Mr. Atkins will receive the Bastiat in Public Policy Award, and Ms. Gornik will receive the Bastiat in Business Award. The awards will be presented at a gala dinner in Charleston, South Carolina on Saturday, April 5th, 2008.

The Bastiat Awards are given in four areas: Public Policy, Culture, Academics, and Business. The awards honor individuals who, in the course of their professional lives, have distinguished themselves in promoting free market ideas and a greater appreciation of the socially beneficial and inherently moral nature of peaceful commercial activity.

The Society and the awards are named after the French economist Frédéric Bastiat (1801 – 1850), one of the all-time great spokesmen for classical liberalism, who was famous for his ability to translate complex economic ideas into language anyone could understand.

For more information, please contact Stephanie Whitener.

Image property of Walter O. LeCroy

The Power of Choice

Bob Chitester will be the speaker at the July Bastiat Society monthly meeting.

Mr. Chitester is President and CEO of the Palmer R. Chitester Fund, Chitester Creative Associates, Inc. and The Idea Channel®; and is managing partner of Free to Choose Enterprise. These companies produce television programs and program elements, create and operate web sites, create print and CD-ROM materials, and distribute curriculum materials to high schools and colleges.

Date: Wednesday, 11 July 2007
Hors d'oeuvres : 5:00 pm
Speaker: 6:00 pm
Location: Imaging Arts Gallery 175 King Street, Charleston, SC
RSVP to Stephanie Whitener

In 1977, Mr. Chitester convinced Milton Friedman to undertake a project which became, Free to Choose, an award winning PBS TV series and an international best selling book based on the series. Over 25 years later the series and book are still in wide use and have been notably influential. Mart Laar, first Prime Minister of a free Estonia and recent winner of the Friedman Prize, used Free to Choose as a guide in setting policies that gave Estonia a thriving economy.

The Palmer R. Chitester Fund is a 501-c-3 public foundation doing business as izzit.org (formerly In the Classroom Media) and Free to Choose Media. Its mission is: To use easily understood and entertaining popular media to reach inquisitive minds regarding the value and interrelationship of personal, economic and political freedom sustained by the rule of law.

izzit.org created the Stossel in the Classroom teaching units and services a nationwide network of teachers in over 68% of all secondary schools in the United States. Currently over 84,000 teachers use these and new video materials developed by izzit.org to supplement classroom curriculum for over 13 million students.

Free to Choose Media recently completed production of The Power of Choice a television biography of Milton Friedman to be telecast on PBS. In the works are several other programs, including a biography of Secretary of State George Shultz and commentaries by and about Hernando de Soto and Bjorn Lomborg.

In the mid nineties, working with TCI in Denver, Chitester Creative Associates, Inc. created Damn Right, a week-nightly, half-hour program, whose alumni, include David Asman, Eric Burns and Douglas Kennedy, currently regulars on the Fox Cable News Channel, Jonathan Karl of ABC news, and Richard Loury, editor of National Review. Another production, “National School Assembly,” with David Robinson, MVP Center with the San Antonio Spurs, is currently being offered to teachers via izzit.org.

The Idea Channel is a library of over 200 video recordings of intellectual discussions between the world's leading scholars, the collection currently includes more than 50 Nobel Prize recipients, including Friedrich von Hayek, Jim Buchanan, Christian de Duve, Norman Borlaug and Charles Townes.

Along with Milton and Rose Friedman, Mr. Chitester is the managing partner of Free To Choose Enterprise. Free To Choose Enterprise manages licensing and sales of “Free to Choose,” hosted by Professor Friedman, 1976 Nobel prize winning economist.

Mr. Chitester has more than forty five years of experience in television management and program development. He started educational television facilities at Buena Vista High School in Saginaw, Michigan and Edinboro State University in Pennsylvania. In 1966, he became the founding General Manager of the Erie, Pennsylvania PBS and NPR stations (WQLN and WQLN-FM), which he headed until 1982.

Mr. Chitester earned his B.A. and M.A. degrees from the University of Michigan, and received an honorary Doctor of Literature degree from Allegheny College. He and his wife, Carol Lovell, have four children and eight grandchildren.

Image © 2006 Free to Choose Media. All Rights Reserved.

The Cost of Regulation

In ancient Athens, a lawmaker was held personally responsible for the results of any legislation he proposed. If his ideas turned our badly, he could be fined, imprisoned, or even executed.

Now that's accountability. It's what they meant in ancient Athens when they talked about "an inconvenient truth."

In modern Washington, there is a somewhat less enthusiastic effort to make lawmakers and government agencies accountable for the costs of implementing their proposed regulations. Businesses have run cost/benefit analyses for years, but in Washington, the idea of being held responsible is about as popular as uncensored speech on a college campus. No wonder. It's much easier to make up laws and regulations if you never have to worry about costs or benefits.

Check out what the Washington Post says.

Ce qu'on voit et ce qu'on ne vois pas

One of Frédéric Bastiat's famous essays is "Ce qu'on voit et ce qu'on ne vois pas," in English, "That Which is Seen and That Which is Not Seen." In it, he argued that we often make the mistake of focusing only on the immediate and visible result of our actions without ever thinking about what we do not see. Bastiat wrote:

"Between a good and a bad economist this constitutes the whole difference - the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favourable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, - at the risk of a small present evil."

Even today, over 150 years after Bastiat's death, we still find intelligent people making the mistake of only thinking about the benefits they can see. Teenagers, politicians, broadcasters and real estate agents are notorious for doing this.

For example, in 2006, NPR reported on the improvements in Charleston, SC brought about by the devastation of Hurricane Hugo. Some people call the hurricane -- which caused billions of dollars of damage -- "the best thing that ever happened to Charleston" because it brought an insurance-fueled rebuilding boom.

They could see the boom. But they could not foresee its consequences. Now, homeowners and politicians along the South Carolina coast are up in arms because insurance companies are hiking their rates to cover the risk of another hurricane. Multi-million dollar homes now stand on some of the most geologically unstable and storm-exposed real estate in the world. The next hurricane to hit the coast won't hit throw-away, week-enders. It will pound prime real estate, and will cause damage many times the cost of Hugo. The insurance companies know this, and are adjusting their rates accordingly.

It was their money that rebuilt Charleston last time. It's their money that is at stake today.

To the Benefit of the Ordinary Person

"The rich in Ancient Greece would have benefited little from modern plumbing: running servants replaced running water. Television and radio -- the patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading artists as domestic retainers. Ready-to-wear clothing, supermarkets -- all these and many other modern developments would have added little to their life. They would have welcomed the improvements in transportation and in medicine, but for the rest, the great achievements of Western capitalism have redounded primarily to the benefit of the ordinary person."

Milton Friedman in Free to Choose
Quoted in A Conflict of Visions by Thomas Sowell

Image © 2007 The J. Paul Getty Trust. All rights reserved.

Horror Shows, Real and Imagined

Believe it or not, there are intellectuals out there who claim zombie movies are perfect parables for what happens in market economies. Think Consumer-Without-a-Soul + Profit-Seeking-Business = Flesh Eating Zombie and you've got the basic argument.

If you doubt me -- and I didn't believe it myself until I checked the facts -- check out Reason magazine's piece on the politics of zombie flicks. Tim Cavanaugh writes:

"In his 1979 study The American Nightmare: Essays on the Horror Film, the esteemed cineaste Robin Wood declared that the zombie’s cannibalism “represents the ultimate in possessiveness, hence the logical end of human relations under capitalism.” "

Just goes to show you that there is nothing so ridiculous that it cannot be found in movie reviews.

While Robin Wood et. al. were sitting in dark theaters, munching on buttered popcorn and looking for capitalist bogeymen, there was a real world horror show playing in places like Albania. For nearly fifty years, Albania was a Stalinist worker's paradise, where murder, cruelty and paranoia were the only things ever produced. Robin Wood imagined horror. Albania lived it.

Albania has emerged from its real-live horror show and is trying to build a new social order. It may be the only country where they don't just like Americans, they're crazy about them. After nearly half a century of lies and secret police in leather coats, the Albanians aren't too worried about "the logical end of human relations under capitalism."

They've seen another ending. They don't want it anymore.

The Age of Abundance

In Brink Lindsey's new book, The Age of Abundance: How Prosperity Transformed America's Politics and Culture, he argues that the unrivaled economic prosperity of the last century fused the old left/right political split into a generally libertarian consensus.

One interesting result: complacency became a consumer good. Check out his interview with Jon Stewart on The Daily Show.

The Trouble with Socialism

"The trouble with socialism is socialism. The trouble with capitalism is capitalists."

Austrian analyst Willi Schlamm, quoted "every ten years" by William F. Buckley

A Long Term Investment

Business is often criticized for dwelling on short-term results. When the criticism comes from an important intellectual defender of free markets like Milton Friedman, business should pay attention.

"I have been impressed time and again by the schizophrenic character of many businessmen. They are capable of being extremely far-sighted and clear-headed in matters that are internal to their businesses. They are incredibly short-sighted and muddle-headed in matters that are outside their businesses but affect the possible survival of business in general."

Milton Friedman
"The Social Responsibility of Business is to Increase its Profits"
The New York Times Magazine
September 13, 1970

If business people do not invest in the long-term ideas that make business success possible, who will?

Image courtesy of www.freetochoosemedia.org

The Nature of Business

Business is told that it must be many things to many people. It must be a good corporate citizen and support the arts and the non-profit community. It must support environmental causes like global warming and recycling. It must increase diversity by its hiring and promotion policies. It must be a partner of governments -- local, state, and federal -- for all manner of projects, from job creation to smart growth. It must not make mistakes. It must be a strategic partner of public education.

Somewhere in this list, the most important thing business must do has been lost: business must maximize owner value over the long term by selling goods or services. That is what makes an organization a business and not something else.

This definition comes from Elaine Sternberg, formerly Research Fellow in Philosophy at the Centre for Business and Professional Ethics, University of Leeds.

If an organization tries to be all things to all people, it cannot be much of anything at all, and least of all a business. Strictly defining a business makes the organizational task more manageable and therefore more likely to succeed.

But business success attracts attention -- and envy. In a world with many needs and a limited ability to pay for them, it is very tempting to tack on additional obligations to the organizations that are most effective at creating wealth.

The great danger we face is that by overloading business with new and often contradictory obligations, even with the best intentions, we risk destroying both wealth and the social arrangement that creates it.

Principles of Economics, Translated

If you've ever felt like you needed a translator to understand an economist, you'll enjoy this video featuring the world's first and only Stand Up Economist. He uses a combination of logic, humor, and irreverence to translate the principles of economics into language we all understand.

Business for the Benefit of Mankind

In 1733, Voltaire, the French writer and general troublemaker for French royalty, published his Letters Concerning the English Nation. His description of business as a social institution of tolerance and mutual benefit has rarely been surpassed.

"Take a view of the Royal Exchange in London, a place more venerable than many courts of justice, where the representatives of all nations meet for the benefit of mankind. There the Jew, the Mahometan, and the Christian transact together, as though they all professed the same religion, and give the name of infidel to none but bankrupts. There thee Presbyterian confides in the Anabaptist, and the Churchman depends on the Quaker's word. At the breaking up of this pacific and free assembly, some withdraw to the synagogue, and others to take a glass. This man goes and is baptized in a great tub, in the name of the Father, Son, and Holy Ghost: that man has his son's foreskin cut off, whilst a set of Hebrew words (quite unintelligible to him) are mumbled over his child. Others retire to their churches, and there wait for the inspiration of heaven with their hats on, and all are satisfied.

If one religion only were allowed in England, the Government would very possibly become arbitrary; if there were but two, the people would cut one another's throats; but as there are such a multitude, they all live happy and in peace."

What Does the Bastiat Society Aim to Accomplish?

The Bastiat Society’s mission is to accomplish five socially important goals:

1. Defend business people as the most important agents of human material progress. They are the real anti-poverty heroes.

2. Explain the virtuous and moral role that business people serve in market economies. They are ethical leaders.

3. Improve the business community’s appreciation and understanding of the necessity for a large, international, and influential class of intellectuals sympathetic to capitalism. Ideas are capitalism’s main defense.

4. Redirect the philanthropic flow of business-created wealth to institutions that will defend and promote capitalism – rather than work to destroy it.

5. Promote our members’ businesses, by building an international network of the highest quality, integrity and mutual respect. The Society is a place to do first-class business.

The Society accomplishes its mission through monthly meetings, its web site and blog, conferences, and the Bastiat Society Awards in Public Policy, Culture, Business and Academics.

Business and High Profile Philanthropy

If the first rule of business is “It takes money to make money,” the second rule is fast becoming “Then give it all away.” Ted Turner started the current round of high-profile philanthropy in 1997 with a $1 billion gift to support the work of the UN. The Gates Foundation, philanthropic child of Bill and Melinda Gates, has $30 billion in assets. And Warren Buffet has pledged 85% of his $44 billion fortune to philanthropy.

Noble actions, yes. Philanthropy is a conspicuous good deed. But business improves the world in ways immeasurably more important than what it gives away.

Every day, we take thousands of business goods and services for granted, from wi-fi, to coffee, to restaurants, just to name a few. Every day, we wake up in a world where strangers work hard to offer us many of the things we want, even if we have not yet decided that we want them. We don’t know where we will eat lunch, but we are confident that someone will work with no guarantee of success to give us that choice. Business does this not because it is philanthropic, but because business serves its own interest by serving ours. Great fortunes are built by satisfying the needs of a great many people, one at a time.

In isolation, such small measures of satisfaction are easily overlooked. But added together from all the individuals involved, they reveal a world that is more satisfied, more cooperative, less violent, and wealthier. The sum of business activity is a better world.

To the extent that business philanthropy is described as “giving back,” it obscures the fundamentally beneficial nature of commercial activity. To the extent that philanthropy is described as business’s most important role in improving the world, it flatly contradicts the facts. To the extent that philanthropy funds individuals and organizations that oppose business, it funds the most dangerous opponents of human progress.

Anyone who wants to really improve the world should stick to what works. First, build an honest and profitable business that takes good care of its most reliable employees, suppliers and customers. Second, when the urge to give it all away strikes, consider whether the gift will promote or destroy the kind of world that made success possible in the first place.

Image property of Walter O. LeCroy

The Corporate Welfare State

Last year, the US government handed out over $92 billion to politically favored corporations, according to Stephen Slivinski at the Cato Institute. This money didn't buy anything. It was a handout disguised by the use of the word "investment." It's more accurately called corporate welfare.

Frankly, this is the kind of thing that gives capitalism a bad name. The image of businessmen lining up in Washington with their hands out does not inspire great confidence in either business or the men themselves.

The usual arguments in favor of corporate welfare are:
1. Some businesses need help because of market failures.
2. Government can pick winners.

The track record of government success in "correcting market failure" is pretty poor. Sometimes, a business fails because it is simply the wrong business with the wrong management at the wrong time. To call that kind of failure a market failure is a cop-out. To hand that kind of business a big check from the taxpayer is nuts.

The track record of government picking winners is even worse. If government was really just as good as venture capital at picking winners, we wouldn't be using Google today, we'd be using Googleski -- invented in the USSR, a country that tried harder to pick winners than any other.

Check out Stephen Slivinski in this podcast.

Image property of Walter O. LeCroy

The Impact of the Highly Improbable

In 1962, an unknown guy in an unknown town started a little business that was...well, unknown.

Today, everyone knows his name: Sam Walton. The business is Wal-Mart.

Who predicted his success? I doubt even Sam Walton himself knew what lay ahead. In 1962, the giants of the retail market in the US were Montgomery Ward (it went bankrupt) and Sears (it got beat by K-Mart, which went bankrupt). No wonder Sam Walton was famous for down-to-earth humility. He surely realized how improbable his success really was.

Any rational human surveying the retail business in 1962 would have said Wal-Mart had no chance. And he would have been wrong. Rational, but wrong.

Many times in business, we are faced with the impact of highly improbable events, what you might call the defeat of reason. This is the subject of two intriguing books, Fooled by Randomness and The Black Swan, by Nassim Nicholas Taleb.

All too often, we see more certainty in numbers than is really there. This is especially true in accounting and stock prices. Math makes things manageable, but it does not make them predictable. At least not as predictable as events in physics or chemistry.

For more on Taleb, check out a discussion of his work in The Economist and an interview on NPR.

Article in The Economist

NPR interview