The Merchant Ape

by Dori LeCroy, PhD.
Copyright, Dori LeCroy. Reproduced here with permission.

Dori LeCroy (dorilecroy@aol.com) is an independent scholar and board member of The Bastiat Society in Charleston. South Carolina.

Living creatures have adapted to their environments through millions of years of natural selection operating on both physical and behavioral characteristics. Cats climb trees and catch mice because in addition to installing the necessary physical equipment for these activities, natural selection also “designed” cats to want to do them.

Behavioral adaptation is crucial to survival, as is physical adaptation, and natural-selection pressures have influenced the behavior of all the animal species, including the human animal. An inclination to form alliances, greater generosity to relatives than to nonrelatives, mistrust of strangers, and delight in gossip are all examples of human behaviors resulting from millions of years of evolution. They are present, as the norm, in all cultures.

Evolved behaviors are natural tendencies to notice some things more than others, to have feelings about certain things, and to act in certain ways. Behaviors evolve because, more often than not, they foster survival and reproduction in the face of relatively constant environmental challenges. During our evolutionary past, avoiding predators was a constant challenge. This likely led to a human tendency to be nervous in the dark and to lie low at night. The saber-tooth got those who weren’t nervous, and only we nervous ones are left. Nervousness in the dark is an evolved characteristic. So is the human sweet tooth. Those who ate more of the sugary fruits during the ripe period stored more energy, and over the long run had a reproductive edge over those without a sweet tooth. So here we are, the descendants of sugar-craving, fruit-gorging ancestors paying outrageous prices for Godiva chocolate and dieting the rest of the time. But the most interesting human adaptations are the social ones.

We are group-living animals, and we evolved as such. The human mind evolved in the context of a subsistence hunter-gatherer existence in groups numbering upwards of 100 or more individuals. During our millions of years of evolution all the necessities of life emerged from group membership: protective alliances, cooperative hunting, sharing food, all kinds of exchanges of goods and services. And this never was a “one for all” arrangement, but rather one of “reciprocal altruism,” as evolutionary psychologists call it. Goods and services are given to another in the expectation of reciprocation, but not necessarily simultaneously, in kind, or by the same person. Each individual was part of a reciprocation network where a favor in the form of a food donation might be returned with a future gift of food or some other valued item like aid in child-care, support in a dispute, or another endeavor. Also the reciprocator might be a relative, friend, or alliance partner of the original recipient of the food donation. The expectation is that what goes around comes around in one form or another and by one route or another.

For the marginal existence of our ancestors, networking was essential for survival and reproductive success, and those who did it best are our ancestors. Or to put it the other way, we are the descendants of ancestors who were the most skilled in the reciprocal-altruism arena. This means that natural selection favored psychological traits that supported success in this arena—traits like noticing and remembering who gives what to whom, how much, and under what circumstances. When a society is organized around dozens of individuals linked by mutually beneficial exchanges, a sensitive and efficient accounting mind is highly advantageous.

Due to its gradual accumulation in our ancestors over evolutionary eons, we carry the genetic material that supports these accounting capabilities. Our brains evolved under pressures to make efficient neural circuits that serve specific kinds of keeping-track-of-things. Once set in this direction in the context of small-group living, the human bookkeeping brain had no trouble extending its calculating abilities to a broader scope. The migrations of peoples led to intergroup contacts, and although warlike conflicts were common, so were commercial contacts.
Archeologists are constantly discovering new evidence of trade between ancient peoples deeper and deeper in the past and over wider and wider areas. Materials were gathered by one set of exchanges and traded in another set, sometimes at great distances, all prior to the advent of writing or currency. The power of the human mind to keep accounts is extraordinary, and it has been at work for a long time. Our great ape cousins, the chimpanzee, the gorilla, and the bonobo (also called pigmy chimpanzee) are capable of rudimentary versions of this kind of bookkeeping and are also socially organized around reciprocal altruism, but we far outdistance them. We are most truly the merchant ape.

Role of Emotions
All this sounds terribly calculating and cold-blooded, but actually emotions are very much involved. Behavior is motivated by emotion, and natural selection has seen to it that our emotions support our mercantile relations. Gratitude encourages reciprocation, guilt discourages nonreciprocation, and anger discourages nonreciprocation by others. Anxiety is evoked by suspicion of nonreciprocation. Contentment comes through inclusion in a reciprocation network, and happiness through personal achievements (skills, reliability, and other virtues) that demonstrate worthiness and therefore value as a reciprocation partner. From an evolutionary point of view, any evolved characteristic must confer a fitness advantage. There is little doubt that human emotions along with human reason were supported by natural selection to the degree that they successfully regulated reciprocal exchanges in the hunter-gatherer context of ancestral life.

But all this doesn’t imply that we are evolved to follow a golden rule. Skillful participation in networks of reciprocation also included skills for cheating and deceit. Clearly nonreciprocators were unlikely to be carried as free riders by our struggling ancestors. However, stingy reciprocation that escapes detection is another story. Successful cheating gives a reproductive advantage, so selection pressures supported it. And, of course, those best at detecting deception also had a reproductive advantage over those easily duped. As a result, through a kind of arms race, we evolved mental talents specifically “designed” both to detect deception and to deceive. At some point in this arms race a new weapon came along that had a pervasive impact on human nature: self-deception.

What better way to deceive another than to be oneself deceived? No clues in facial expression, body stance, or tone of voice are available to alert the target. We can be so convincing. The division of the mind into unconscious and conscious realms may well have evolved because it supported self-deception in the service of deception of others. Again, to reiterate our theme, those best at self-deception were our ancestors. They were the best at gaining advantages over others in the exchange of goods and services. Escalation of this talent was inevitable as self-deception dealt with ever-refining deception detectors. We are a species of self-deceivers. Freud told us this, as does great literature and our own introspection. Now evolutionary psychology weighs in.

Self-deception is adaptive because it served mercantile cleverness. It allows for storage of information outside of awareness, and authentic-appearing behavior inconsistent with unconscious knowledge. I can make a deal with you that is biased to my advantage and negotiate with you in a belief that it is a fair deal, and by my honest appearance be more effective. You may also have an interest in deceiving yourself about it.

Hierarchic Groups
Human groups are hierarchic arrangements of dominants and subordinates. An individual may be dominant in one context and subordinate in another (at work and in a church group for example), but we are all subordinate somewhere. Let’s say your boss has decided to promote a colleague rather than you. The reason he gives is that you will have time for special training that will be a greater ultimate advantage for you. In spite of evidence that he is really acting out of self-interest, you might benefit from deceiving yourself into believing his story. Self-deception in this case would support authentic-appearing good-humored deference, and you would avoid the costs that might be incurred if suspicion and resentment should reveal themselves. Perhaps, in his own self-deception, your boss also misleads himself and really believes his decision is in your interest. This allows him to behave convincingly toward you and also get the bonus of feeling beneficent.

However, all this isn’t to say that our commercial psyche is strictly designed for manipulation and exploitation, deception, and self-deception. Equally essential for successful participation in exchange networks are empathy, a sense of fairness and of right and wrong, and an inclination to form trusting bonds of mutual support. Warm feelings develop between consistently reliable coalition partners. Feelings that support mistrust are useful when dealing with a new partner, but an emotional bias supporting trust of a tried and true partner will get you past misunderstandings that might destroy a vital alliance.

In other words, reciprocal altruism, the exchange of goods and services, flows on a rich and sensitive current of human emotional life that may itself have been selected for the mercantile advantages it provided. This means that along with cheating and deceit, what we might think of as the worst of the human character, our merchant nature also gave rise to the capacity for social responsibility and for commitment and loyalty between friends and partners in endeavor and trade. One might even speculate that this capacity laid the groundwork for long-term, affectionate working partnerships between men and women.

Perhaps such partnerships were the beginning of divisions of labor. Because of differences imposed by reproductive biology, as with all species, human males and females always did different things. But at some point these differences became coordinated into mutually beneficial systems. We don’t know when or why domestic arrangements changed so many thousands of years ago. Perhaps it had to do with the ice ages when meat became more essential and the dependence of females on male provisioning increased, as would have the need for females to maintain the all-important fire while males hunted. But division of labor is also based on individual differences in talents and inclinations within the sexes as well as between them. In ancient times, for example, one guy might be better at finding promising rocks and another better at chipping the tools out of them. So the second guy makes two tools and repays the first for his trek to the mountain.

However it started, evidence for division of labor or specialization and, by inference, systems of barter date from 1.5 to 2 million years ago. Over subsequent millennia, trade increased in geographical ranges. If we fast forward until about 30,000 years ago we may see awkward barter systems eased by the use of money. The existence of representational ornaments and cave paintings suggest that the symbolic psychological processes necessary for the use of intrinsically valueless items for the representation of IOU’s for goods or services were in place. There is no evidence of these economic or psychological developments for contemporaneous Neanderthals who were then becoming extinct.

We are certainly the symbolic species. But what selection pressures, besides social selection for the exchange arts, could have driven the evolution of human psyche to this level of sophistication? We have been called the bipedal ape, the tool-using ape, the language and symbol-using ape, and we are all of these, but, I suspect, we are most fundamentally the merchant ape.

Economic Harmonies, March 208

This is the first issue of the Bastiat Society's newsletter, Economic Harmonies. It is named after one of Bastiat's last books, published in 1850, the year he died.

Economic Harmonies is a monthly publication, distributed via email. If you would like to subscribe, please contact me here.

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A "Helping" Industry

In a visit to Zanesville, Ohio, Michelle Obama urged a group of women to go into the "helping" industry, rather than to pursue better paying careers in business. Laudably, she warned against amassing loads of student debt.

She could have added -- but did not -- that student loans are no different from any other type of debt. A borrower must carefully assess the advantages and disadvantages of borrowing the money, including the strategic value of the skills acquired, and the probable time and ability to repay the loan.

After a promising start, Mrs. Obama revealed how she really thinks the economy works: it is pure luck that determines the difference between success or failure. Either that, or magic. She said,

"The salaries don’t keep up with the cost of paying off the debt, so you’re in your 40s, still paying off your debt at a time when you have to save for your kids.

Barack and I were in that position. The only reason we’re not in that position is that Barack wrote two best-selling books… It was like Jack and his magic beans. But up until a few years ago, we were struggling to figure out how we would save for our kids.

Don’t go into corporate America. You know, become teachers. Work for the community. Be social workers. Be a nurse. Those are the careers that we need, and we’re encouraging our young people to do that."

What a shame someone did not have a copy of Benjamin A. Rogge's 1979 book, Can Capitalism Survive? handy. There, she could have read Professor Rogge's advice to the students of Wabash College. He wrote,

"I take as granted then your desire to do something useful to serve society. Can you do it as a businessman? That many still answer “no” to this question is a tribute to the enduring quality of an old myth—the myth that in an exchange, what one party gains, the other must lose. In a voluntary exchange, both parties must expect to gain or no exchange will take place. A businessman is a specialist in voluntary exchange, and his success is largely determined by how well he succeeds in serving others.

Don’t I really mean, by how well he succeeds in deceiving others into thinking he is serving them? Isn’t a kind of sophisticated dishonesty a requirement for success in business? I make no claims for the superior moral fiber of the businessman, but I will say this: A basically dishonest man can survive longer in the church or the classroom than he can in the grain exchange or the furniture business. The penalty system in the business world operates with some real precision and certainty, largely unencumbered by a mystique of occupational sanctification.

There are dishonest men in the business world, of course, but if you go into the business world, you will be under no greater pressure to stretch the truth than if you get a job as an editor of a college catalogue or as a speechwriter for candidates for political office or a member of Nader’s Raiders."

Weather Channel Founder Denounces Global Warming Fraud

John Coleman, who founded the Weather Channel in 1982, denounces his creation for being a cheerleader for global warming hysteria (from the Business and Media Institute).

An excerpt...

Coleman also told the audience his strategy for exposing what he called “the fraud of global warming.” He advocated suing those who sell carbon credits, which would force global warming alarmists to give a more honest account of the policies they propose.

“[I] have a feeling this is the opening,” Coleman said. “If the lawyers will take the case – sue the people who sell carbon credits. That includes Al Gore. That lawsuit would get so much publicity, so much media attention. And as the experts went to the media stand to testify, I feel like that could become the vehicle to finally put some light on the fraud of global warming.”

Reason Weekend in Charleston

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.

You have your choice. You can register for the entire Reason Weekend -- highly recommended -- or register for just the dinner.

The schedule follows. You can open a full-screen version of the schedule by clicking on the far right button of the Scribd toolbar.

Read this doc on Scribd: rw2008schedule

Reason Weekend 2008
April 3-6, 2008
Charleston Place Hotel
Charleston, SC
Register for the weekend now!

Reason Weekend is an outstanding opportunity to connect with friends who share a passion for liberty. Join Reason President David Nott and Reason Founder Bob Poole in Charleston, South Carolina for three days of outstanding speakers, excellent food, and stimulating conversation.

Located across from the Old City Market in the heart of downtown Charleston , Charleston Place combines Southern charm with the luxuries you expect from a five-star hotel. Golf, tennis, and a private walking tour of the city have also been arranged for our guests.

Register for the weekend now!

So Far, So Good

"A market economy is like an internal combustion engine. It can get a lot done at 45% efficiency. It's a waste of time to try for 100% efficiency. The question is, can we get to 50% or 55%?"

University of Chicago professor Richard Epstein.

The amazing thing about free enterprise is not how much goes wrong. The amazing thing is how much goes right. Free enterprise begins with the unpromising prospect of error-prone humans working with dispersed and limited knowledge. Yet it produces a complex, adaptive economic system that gives the average person the opportunity to daily enjoy the kinds of things once reserved for kings.

A key feature of the free enterprise system is how it deals with errors. In this, it differs dramatically from political systems. Free enterprise regularly purges itself of errors. We call it bankruptcy. On the other hand, political systems retain -- and continue to fund -- their errors for years, decades, even centuries.

For example, if a private pension scheme tried to operate the same way Social Security operates, it would be declared deceptive and illegal, and its organizers would be doing time in a federal prison. As it is, Social Security is hailed as a great success in perpetual need of just one more fix, and its organizers are living it up at the Willard Intercontinental Hotel in Washington, DC.

College tuition grants and loans? These programs are working so well that college tuition is rising at twice the annual rate of inflation. It seems no one explained to the legislators who dreamed up these programs that if you give people more money to spend on something, they will spend it, in turn driving up the price of whatever you wanted to help them buy in the first place. This is just another version of a monetary phenomenon called inflation. Print more money, all prices go up. Print money just for college and...college prices go up faster than other prices.

Home loans and home buying programs? For decades, the federal government has been active in the market for homes, all in the name of trying to make homes more affordable and lending less restrictive. Well, if you give people money to buy homes, they will buy them, and thereby drive up the prices of homes, leading to an unprecedented bubble in home prices, which of course results in more calls for more government programs to make homes affordable, until somebody borrows too much money to buy a home he cannot resell or refinance. Credit crisis.

Anyone else smell another government "solution" coming soon?

The track record of human errors making a mess of things is so large we have a special name for it: history. The difference between human errors in free enterprise and human errors in government is the difference between a mid-course flight correction and a plane headed straight down while the pilot tells everyone on board "So far, so good."

Free Audio

Free Audio has a high quality and growing list of free audio books and essays on liberty. Titles include Bastiat's The Law and "The Candlemaker's Petition."

Free Audio is a project of Art Pollard. In a recent email exchange, he describes how it came to be:

"I decided that too many people are worried about winning the latest election. The problem is though, you can have a government that promotes freedom but, if the public wants something else, the "reforms" will not last. Thus came the idea of FreeAudio.org which tries to educate the public so that the average voter will understand why free handouts are not a good thing. I believe that it is through education -- not elections -- that the fight for liberty will be won. With education, the elections will come on their own volition."

The Businessman and the Defense of Capitalism

Benjamin Rogge's collection of essays, Can Capitalism Survive?, is a great choice for any business person interested in a clear and subtly humorous presentation of the source and future of the world's greatest economic system.

How many books by economics professors begin with a paper presented at the Playboy Club in Lake Geneva, Wisconsin?

You can order your own copy from the Liberty Fund by clicking on the book's image.

Below, I offer the entire chapter entitled, "The Businessman and the Defense of Capitalism,," from the online version of the entire text, available thanks to Liberty Fund at the Online Library of Liberty.

"The Businessman and the Defense of Capitalism"

The question before this house is not whether the survival of capitalism is in doubt (this is admitted). The question for us, as it was for Lenin at an earlier time, is, What to do? His concern was how best to hasten the collapse of capitalism; our concern is how to postpone or ward off that collapse.

Frankly, I feel more at ease as the diagnostician than as the therapist. Cancer is still easier to identify than to cure and so is overexpanded government. Admittedly, diagnosis must usually precede therapy. After a lengthy diagnostic examination, the doctor looks up at the patient in some puzzlement and asks, “Have you had this before?” To this the patient replies, “Yes,” and the doctor says, “Well, you’ve got it again.” Quite obviously something more than this is needed. Proper therapy usually rests upon diagnosis of the specific problem, including some notion of how the patient got into his fix, whatever it might be.

I begin then with the question, “What is our problem?” In an earlier sentence, I identified the problem as that of overexpanded government. This is not really correct for the purposes of therapy. Overexpanded government is, in fact, but the most noticeable, objectively evident symptom of our problem. Our problem is in the form of a set of ideas whose implementation calls for the use of force, and government is that agency of society given a monopoly of the right to use force. For so long as those ideas are dominant in society, Behemoth will continue to grow. Nor is it useful for those who hold and espouse those ideas publicly to regret the associated growth in government and all its instrumentalities. Thus Senator Edward Kennedy has said recently that “one of the greatest dangers of government is bureaucracy,” and Senator Gaylord Nelson has said, “The federal bureaucracy is just an impossible monstrosity.” All well and good, but that growth in bureaucracy which they so rightly lament is the necessary and inevitable outcome of the ideas that these two (and others) have so well and so convincingly espoused.

What are these ideas that produce bureaus as larvae do moths? They can be expressed in various ways but their essence is to be found in the following related propositions:

(1) There exist individuals and groups in society who know not only what is best for them but what is best for others as well.

(2) This wisdom, when combined with the coercive power of the state, can be used to produce “the good society.” An accurate verbalization of these ideas is to be found in the statement of Newton Minnow, who said as chairman of the agency controlling television in this country, “What is wrong with the television industry in this country is that it is giving the viewers what they (the viewers) want.”

Compare this, for example, with these words from Adam Smith’s Wealth of Nations:

What is the species of domestic industry which his capital can employ, and of which the produce is likely to be of the greatest value, every individual, it is evident, can, in his local situation, judge much better than any statesman or lawgiver can do for him. The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.94

Some of you may see in other idea-systems (such as economic determinism, relativism, envy, or what have you) the real source of our malignancy. God, my wife, my children, and all of you know that I am fallible, and perhaps I have chosen poorly in this case. What I am prepared to argue in a more strenuous way is my conviction that our struggle is at the level of ideas and not that of men or institutions. In the words of the celebrated John Maynard Keynes,

The ideas of economists and political philosophers both when they are right and when they are wrong, are more powerful than is generally understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.95

My first point then is that we are involved in a war of ideas. My second is that our target is not the masses but those men and women in society who deal in ideas and who shape the thinking of the masses. In the words of one of the great idea men of this century, the late Ludwig von Mises, “The masses, the hosts of common men, do not conceive any ideas, sound or unsound. They only choose between the ideologies developed by the intellectual leaders of mankind. But their choice is final and determines the course of events. If they prefer bad doctrines, nothing can prevent disaster.”96

My third point is that the ideas that finally count are those that relate to such fundamental questions as the nature of man, his purpose here on earth, and the moral character of human action. Arguments on the basis of economic efficiency are not alone capable of saving capitalism.

In the words of Joseph Schumpeter: “It is an error to believe that political attack (on capitalism) arises primarily from grievance and that it can be turned by justification. Political criticism cannot be met by rational argument.... Utilitarian reason is in any case weak as a prime mover of group action. In no case is it a match for the extra-rational determinants of conduct. The stock exchange is a poor substitute for the Holy Grail.”97

I have now enumerated my assumptions as to the nature of the task in which we are involved. I have argued that we are really involved in a struggle for the souls of men, that in that struggle it is ideas that count, and that the questions that are relevant are largely ethical in nature. Moreover, I have argued that our target is not the masses but those who live by the spoken and written word and who thus largely shape opinion in society.

If these assumptions be even roughly valid, what then is implied as to the role of the businessman in the fight to save capitalism? Before attempting an answer to that question, let me consider one that seems to precede it. Should the businessman as businessman even get involved in the struggle?

A number of factors would seem to indicate a negative answer to that question. To begin with, the businessman is not typically hired by the stockholders to carry on programs of social reforms; he is hired to add to the net worth of the company. Admittedly the net worth of the company may be adversely affected by particular acts of government, and the stockholders would surely approve of management action in opposition to those specific threats to profits—for so long as the potential gain exceeded the cost. At the same time, the company may often stand to gain through specific acts of government, including actions that work against the principles of capitalism. Is it a tariff against foreign steel producers? or an export subsidy that would increase the demand for the company’s products? or a government-enforced price or interest rate that adds to the profits of the company? How now the businessman? How can the president of the Mobil Oil Company be a convincing spokesman for free enterprise when his job seems to require that he oppose immediate decontrol of oil prices? How can the president of General Electric stand four-square for capitalism, yet support export subsidies for many of the products sold by his firm?

The fact is that there is hardly a businessman in this country who is not receiving favors from government in one way or another. The fact that this is true of most other elements in the society, including his critics in the ranks of the intellectuals, does not really change the nature of the businessman’s dilemma. His job may seem to require of him that he support specific government intervention in the economy of precisely the kind that, in the fight for men’s souls, he must condemn as general practice. Knowledge of Kant’s Categorical Imperative—do only that which you would be willing to see done by all—may get you an A in a college course in philosophy but may get you fired if you attempt to practice it as a businessman.

In other words, his very position may seem to require of the businessman that, in the struggle against government intervention, he be as often a part of the problem as of the solution. Moreover, how can he face those he is attempting to persuade to hold the capitalist faith when his own hands are so obviously unclean?

A second reason for a possible negative answer to the question of whether the businessman should get into the fight to save capitalism is that he is usually an amateur in the practice of the arts required by that struggle. The art required is not that of making or selling men’s suits or aircraft motors; the art is that of the dealer in abstract ideas, including and particularly systems of ethical judgment. Don’t misunderstand me; it is not that the businessman is unintelligent. I yield to no one in my respect for the great practical and theoretical intelligence required for effective entrepreneurship. It is simply that his intelligence is not applied, day in and day out, to the kinds of questions and considerations that are at the center of the argument. Not only is this not his turf, but he is usually not adept at the word games that go on on that turf.

What I am saying in essence is that here, as in most of life, the prizes (in this case, the souls of men) will go largely to those who are specialists in the arts involved. Admittedly there are some such (I could name you a dozen or so) from the ranks of the businessmen, but their skills in the arena of ideas and words are not a product of their business experience but of what they have done on their own initiative to improve their own understanding of the ideas involved here and their skills in communicating those ideas.

Where then does this leave us? Can the typical businessman do nothing but deplore the growth of government and go on about his task—which may have been made easier in some ways and more difficult in other ways by that self-same expansion of government involvement in economic life? I believe that the answer to that question is “no”—but I have some real sympathy with those businessmen (and this will be the great majority) who by their inaction say “yes.” After all, as Henry David Thoreau put it, “I came into this world, not chiefly to make this a good place to live in, but to live in it, be it good or bad.”98 Nor, as I have argued elsewhere, is it the administrator-businessman who has the most to lose from the passing of capitalism. Most of them will end up as administrators of socialist enterprises if and when full socialism arrives. It is the masses who have the most to lose—and who also have the least understanding of that fact.

But for those of you who are interested in doing something as business and professional people to counter the drift to collectivism, here is what I would suggest that might be both useful and consistent with the profit-oriented role for which you draw your pay.

(1) Work with your own staff members and employees. A work force that has some understanding of the marketplace and of where its own goodies come from may (and it is only a may) be a less troublesome, more effective work force over time. Any number of such programs, of varying effectiveness, are now in operation and available for general use.

(2) Work with the appropriate audiences in the communities where you have operations. Here again, there may be some payoff in terms of a better political environment in which to function. Again, there are a number of such programs now in operation.

Anything more? Frankly, I am not much impressed by the usefulness of business attempts to reach nationwide audiences with free-enterprise propaganda.

What else? The “else” is what the businessman shouldn’t do rather than what he should do. Moreover, it requires that the individuals involved must have done their own homework.

In fact, let me say right now that even the first two steps I have identified can do more harm than good if the people selecting and authorizing the operations have not themselves taken the time and effort to decide exactly what it is they believe and why. There is nothing about being a successful businessman (even a very successful businessman) that automatically endows one with an understanding of or an attachment to the principles of freedom—a statement I could support with a hundred examples, if time permitted. In fact, some of the great fortunes of America have been made by those who have learned how to use government intervention to their own advantage.

I cannot emphasize too strongly that the very first thing each of you who wishes to be a truly effective part of this struggle must do is your own homework. This requires reading, thinking and, yes, writing. I challenge each of you to go home tonight and put down in brief form your guiding principles in life and their applications in this area of the relationship of the individual to his government. You might also find it interesting to follow that with a list of those things which you and/or your company or group are now doing that are clear or possible violations of those principles.

Am I asking you to immediately cease all ideological wrongdoing? to cut yourself off completely from all areas of government involvement? Were you to do so, there would be literally no way you could eat or move about or keep warm or survive—such is the extent of government’s involvement in our lives. Each of you, in your professional role, must decide for yourself the limits of your compromise with the apparent demands of the moment.

Let me summarize:

(1) I am arguing that the first and indispensable step for any person who wishes to be a part of the effort to save capitalism is a determination of precisely what he believes and why. This will usually involve, not just putting down the already determined, but active study, reflection, and discussion. This is your intellectual and philosophical armor, and without it you are not only vulnerable but as likely to be a handicap as a help in the struggle.

(2) Try as best you can in this imperfect world to live by those principles.

(3) In using your professional role or your company in the struggle, do only those things that seem consistent with the long-run interests of those whose money you are using. Remember, not all stockholders will wish to have their money used in this or any other crusade.

(4) If you wish to play a personal role, apart from your company or professional connection, then you must dig deeper into what you believe and why; you must know even more fully the arguments and values of those with whom you disagree; you must continually seek to improve your skill in expressing your ideas and in demonstrating the errors in contrary positions. My guess is that only a few of you will carry through to this level of participation—but it is not a numbers game anyway; it is a game in which it is the quality of the few that finally counts.

I spoke earlier of the things that you should not do but didn’t specify them. What are they?

(a) Don’t make a pest of yourself by trying to force your free-enterprise ideas down the throat of every passerby—whether in your home, your office, or at the cocktail party. In the words of Leonard Read, founder and president of the Foundation for Economic Education, who has taught me everything I know on this and many other questions, “Go only where called—but do your damnedest to get good enough to be called.”

(b) You may not be able to avoid involvement in departures from principle, but at least don’t lend your voice or your money to the support of those departures. You may have to pay into social security or submit to a system of wage-price controls but you don’t have to join committees or groups who support such programs.

In a hundred different ways and forms, the American businessman is aiding and abetting the enemy by continuing his involvement in organizations and programs which are as likely to propose as to oppose extensions of government. Don’t let this reciprocity game you people of substance play with each other or your desire to be a good guy lead you to give your money and/or your name (and hence, by implication, your support) to activities or organizations that are working the other side of the freedom street.

To return to Thoreau:

It is not a man’s duty, as a matter of course, to devote himself to the eradication of any, even the most enormous wrong; he may still properly have other concerns to engage him; but it is his duty, at least, to wash his hands of it, and, if he gives it no longer thought, not to give it practically his support.99

Forgive me if I seem to blaspheme, but even your church and your college should be examined with some care before you bless them with your dollars and your support. You don’t have to prove you are a nice, broad-minded guy by providing the devil with the coal for your own burning.

Again to be specific, you needn’t insist that every professor on your old campus think exactly as you do, but I believe it completely appropriate for you to find out if the general idea system that you believe to be best is well and ably represented in the ranks of the faculty.

I close this sermon with these words: Avoid anger, recrimination, and personal attack. Those with whom you are angry are probably (taken by and large) at least as filled with or as empty of virtue as you. Moreover, they are the very ones you might wish later to welcome as your allies.

Avoid panic and despair; be of good cheer. If you’re working in freedom’s vineyard to the best of your ability, the rest is in the hands of a higher authority anyway. If you can see no humor in what’s going on (and even at times in your own behavior) you’ll soon lose that sense of balance so important to effective and reasoned thought and action.

Finally, take comfort in the thought that the cause of freedom can never be lost, precisely because it can never be won. Given man’s nature, freedom will always be in jeopardy and the only question that need concern each of us is if and how well we took our stand in its defense during that short period of time when we were potentially a part of the struggle.

[94. ]Adam Smith, The Wealth of Nations (New York: Modern Library, 1937), p. 423.

[95. ]John Maynard Keynes, The General Theory of Employment, Interest, and Money (New York: Harcourt Brace, 1936), p. 383.

[96. ]Ludwig von Mises, Human Action (Chicago: Henry Regnery Co., 1963), p. 864.

[97. ]Joseph A. Schumpeter, Capitalism, Socialism, and Democracy, 3rd ed. (New York: Harper & Row, 1962), pp. 144, 137.

[98. ]Henry David Thoreau, “Civil Disobedience,” in Walden and Other Writings (New York: Modern Library), p. 645.

[99. ]Ibid., p. 642.

The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc. Used with permision under the conditions of fair use. This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.

The Candlemaker's Petition

This is an audio version of Bastiat's famous satire, "The Candlemaker's Petition," where he pleads for the French government to protect France's domestic candle industry from unfair, low-cost foreign competition: the sun.

Bastiat's petition was published in 1845, and it is still effective as a brief but damning exposé of the self-serving logic of protectionism.

An excerpt...

" We are suffering from the ruinous competition of a rival who apparently works under conditions so far superior to our own for the production of light that he is flooding the domestic market with it at an incredibly low price; for the moment he appears, our sales cease, all the consumers turn to him, and a branch of French industry whose ramifications are innumerable is all at once reduced to complete stagnation. This rival, which is none other than the sun, is waging war on us so mercilessly we suspect he is being stirred up against us by perfidious Albion (excellent diplomacy nowadays!), particularly because he has for that haughty island a respect that he does not show for us."

You can print and read your own copy here.

You can down download a free audio version from FreeAudio.org.

Risk, Freedom, and Choice

"You can't just wave a magic wand and eliminate risk for free, which is what people want to do. If you restrict people from taking jobs, if you restrict the foods that they eat, if you place limits on how much they can weigh, all of these things will reduce their welfare as they perceive it. The proper role of government is to give people enough information so they can make reasonable decisions, and after that step aside and allow them to make their own choices."

W. Kip Viscusi of the Vanderbilt University Law School, interviewed in the Federal Reserve Bank of Richmond's publication Region Focus (Spring 2007), cited in The Cato Journal (Vol. 27, No. 3, Fall 2008).

March 2008 Monthly Meeting

Please be our guest at the next Bastiat Society monthly meeting to be held on Wednesday, March 5th.

Our distinguished speaker for the evening is Steve Lonegan, whose topic for the evening will be:

"The Dangers of the Entitlement State."

Date: Wednesday, March 5th
Location: Imaging Arts, 175 King Street, Charleston, SC
Time: 5 pm reception, 6 pm speaker
RSVP: Megan Rock

About the Speaker...

As the former Mayor of Bogota New Jersey, Steve Longegan successfully brought a "Taxpayers First" philosophy to his constituents. Steve fought against numerous proposed tax hikes and kept all municipal spending below inflation for the entire twelve years of his term in the face of reduced suburban aid and state mandates. Steve joined Americans for Prosperity in 2006 where he continues to fight for taxpayers. Americans for Prosperity is an organization dedicated to educating citizens about economic policy and engage citizens in the name of limited government and free markets. In 2007, Lonegan authored "Putting Taxpayers First," where he focuses on the entitlement state created by liberal Democrats and "moderate" Republicans.

Lonegan currently narrates the "Taxpayer Minute" on radio stations in New York, New Jersey and Philadelphia and he hosts a weekly radio show on WIBG in Ocean City. "New Jersey's Mayor" has been a guest on numerous TV news programs including Your World with Neil Cavuto, Fox & Friends, Good Day New York, The Big Idea with Donny Deutsch, Glenn Beck, Hannity & Colmes, Scarborough Country and New Jersey Power and Politics. He is a featured columnist on PoliticsNJ.com and news-papers throughout New Jersey.

Business, One Night Stands, and Polygamy

I gave the following presentation at the February 2008 monthly meeting of the Bastiat Society in Charleston, SC.

I did not enter the world of business via the usual paths. My family was not in business. My father was an artist and my mother worked for the state. As an undergraduate, I studied the humanities and sciences. At the risk of sounding pointy-headed, I came to business via my own search for the meaning of life. Little did I suspect that I would find it in earning a living.

My business career started in a philosophy class. A professor gave me subscription cards to reason and the now-defunct Inquiry magazines. Soon, I was voluntarily reading Adam Smith, Murray Rothbard, Milton Friedman, Friedrich Hayek, Ludwig von Mises, Frédéric Bastiat and others in the European liberal tradition, when I should have been studying something else.

Philosophy led me to economics, and economics led me to the belief that free market capitalism is the most productive form of large-scale social organization known. Through the pursuit of self-interest under the rule of law and an evolved moral code, entrepreneurs, business owners and executives create great wealth for themselves and for their societies.

But capitalism is more than just the creation of great wealth. Capitalism is morality in action, the morality of free and responsible individuals. Wealth without morality is theft. Morality without wealth is poverty. Only capitalism offers humans the opportunity to build a social order where they can be moral and they do not have to be poor.

When I announced my intention to go into business to my family and friends, along with some stunned silences, I got two memorable warnings. First a successful technology salesman told me I would never make it. He said, “You are too honest.”

This startled me, but I reasoned if there were that many crooks in business, honesty must be an unexploited marketing advantage. As Mark Twain advised, “When in doubt, tell the truth. It will confound your enemies and astound your friends.”

The second warning came from someone already in the same field. He told me getting clients was no different than picking up girls in bars. Now I was really worried. I was never any good at that. With slightly less confidence but a great deal of optimism, I went into business.

There I discovered the truth. First, honesty is a valuable business skill, not a liability. Honesty builds better marriages, families, friendships and business relationships. Human nature craves honesty and trust, and it quickly punishes those who fail to deliver them. It appears we operate based on an internal rule of, “Trust someone until they give you a reason not to.”

Second, I discovered that building business relationships is not at all like picking up women in bars (lucky me). It is not about lots of short term, unstable, one-sided relationships. It is about lots of long term, stable, mutually satisfying relationships. It is really like a successful marriage. Or, to be more dramatic, it is like successful polygamy.

The keys to success in business are the same as in any relationship: honesty and reliability. How then, did business get such a bad reputation? Why didn’t I know this before entering business and discovering it for myself? Why didn’t the technology salesman know it? Why didn’t the guy who treated his clients like one night stands know it? How could something so important be so misunderstood?

The answer lies in human nature, where the first rule is “survive.” All that we are, both the good and the bad, is there because at some point in the history of our species, it proved useful in the struggle for survival. Violence, lying, cheating, fear of strangers, envy, love, trust, peaceful competition, and cooperation are an ancient set of behavioral tools. We are all stuck with them, whether we want them or not.

However, through our culture and civilization, we have been steadily expanding the social and physical space where peaceful competition and cooperation work better than violence, fraud, and cheating. This doesn’t mean those awful behaviors aren’t there or that we’re not still tempted to use them – witness the warnings I received. Those behaviors just aren’t as effective in the struggle for human survival as peaceful competition, trust, and cooperation.

Consider, for example, the specific behavior of violence. Many people feel the world is becoming more violent. But the psychologist Stephen Pinker of Harvard has demonstrated that the world is undeniably becoming less violent, making violence more conspicuous when it does occur. In a world where lots of people die violently, another violent death is not news. In a world where few people die violently, it is. It grabs our attention and skews our perception.

The same logic applies to the business world. In a world where most commercial transactions conclude honestly, peacefully, and to mutual benefit, those that do not are news, and the bigger the breach of trust, the bigger the news. Think Enron. Think WorldCom. Psychologists call this an anchoring bias. When one event acquires far more significance than it should, it creates the impression that the exception is the rule. To borrow the title one of Bastiat’s essays, “What is Seen and What is Unseen,” we see the business scandal, but we do not see a much larger market that works extremely well.

The danger in anchoring bias – something we are all subject to as humans – is that people will act on the basis of biased perception, not on the basis of facts. The undeniable fact is that for-profit businesses employ, feed, clothe, house, transport, heal and entertain more people than all the charity in the world, and they do these things faster and better. Yet, consider the following news stories which paint an entirely different picture.

In the February, 2008 edition of Scientific American, Michael Shermer began an article on the evolutionary basis of the psychology of corporate environments with a loaded question, “Do All Companies Have to be Evil?”

In the 2006 movie, Superman Returns, Superman’s archenemy Lex Luthor is no longer the mad scientist he was in the old comic books. The director, Bryan Singer, said he wanted Luthor to be more bitter, more angry, and more evil. So he made the character a businessman. Luthor swindles an elderly, terminally ill woman. Then he tries to create his own continent (he must have been a developer). Kevin Spacey, the actor who played the role of Luthor, said he based his character on Enron’s Ken Lay.

According to a 2005 study of network television by the Media Research Center, corporate executives are twenty-one times more likely to commit a kidnapping or murder than mobsters, five times more likely than terrorists, and four times more likely than gang members.

With news and entertainment like that, it is easy to see why the exception becomes the norm in expectations, why headlines anchor the perception that all business is evil. Unless we can change this perception, we run the risk of a social and political war on the system of exchange that makes the modern world possible. Certainly, we all agree that any business guilty of theft, fraud, or violence should be punished. But an indiscriminate attack on all business is nothing less than an attack on civilization itself.

In Europe, the attack has already begun. Stefan Theil, the European economics editor for Newsweek, describes in detail what he calls “Europe’s Philosophy of Failure.” In a 2005 poll, just 36 percent of French citizens said they supported the free-enterprise system. In Germany, support for socialist ideals is running at an all-time-high. The most important French history text describes capitalism as “brutal,” “savage,” “neo-liberal,” and – the most damning word of all – “American.” In Germany, students are told India and China are successful because they have large, state-owned enterprises and have protectionist trade policies. Sub-Saharan Africa is held up as a case-study on what a free-market does to people.

The expansion of peaceful competition, trust, and cooperation under a private property rights system has been long and powerful. But it is not inevitable. What must be done to ensure its continued success?

First and foremost, we should proudly proclaim that a profitable business, honestly run, is one of the great achievements of mankind. The world is getting better and it is free enterprise that is doing it. Each mutually beneficial business transaction increases the overall well-being of the world. It reinforces trust, and it is trust that makes commercial civilization possible. Trust is the essential lubricant for commercial activity. Cheating, lying, stealing, violence and fraud are sand in the system.

On the other hand, cheating, lying, stealing, envy, violence and fraud are tools of the trade for criminals and politicians. We should be very skeptical about relying on politics and public policy to improve the world. As social tools, they are tempting because of their immediacy and power. The truth is that nothing is easier to change than public policy. All it takes is another election. The United States tax code is a depressing example of what happens when we rely on public policy to improve public policy. True reform must come from the culture, from the ground up (individual decision making), not from the top down (political decision making). If top down political reform worked as well as its faithful followers believed, Iraq would be a peaceful democracy today.

There is another danger in relying on public policy to improve the world. It comes from those unscrupulous souls among us who are eager to use the power of government to crush their competition and loot their customers. These businesses are often successful, but they are not market successes. They are political successes. They rely on government-sanctioned violence to collect the profits they cannot earn in the marketplace.

The best way to keep business out of government and government out of business is not to limit the size and influence of business. It is to limit the size and influence of government. A large and powerful government – even one with good intentions – is simply too tempting a prize to lay in front of that part of human nature that would rather steal wealth than earn it. Our Founding Fathers knew this well. That is why they drafted a Constitution: not so much to free humans as to bind the government’s ability to meddle in the affairs of free men.

Third, we in business should watch our language. We should never use phrases like “giving back” to describe the money or time we give away. It implies we took something that wasn’t ours. Phrases like this make us sound like a generous gangster or a Congressman running for re-election, not a valuable member of society.

Fourth, we all should learn enough to defend capitalism ourselves. This doesn’t mean we have to become PhDs. We can take small steps to improve our awareness of the ideas that make freedom work so well. For example, in Charleston, SC, we created the Bastiat Society to educate business people on how their efforts to make a profit also make the world a better place. We named the Society after the great 19th Century French economist and statesman Frédéric Bastiat, who was a master at explaining complex ideas in language anyone could understand – even maids and merchants. Our motto is, “Those who work in freedom should know how freedom works.” In addition to monthly meetings, the Bastiat Society maintains this blog where we try to have something new and thought-provoking every day. I encourage individuals interested in these ideals to consider starting their own discussion group, or consider partnering with the Basitat Society.

The Bastiat Society has worked with Liberty Fund, a private, educational foundation that promotes wide-ranging discussions centered on the topic of a society of free and responsible individuals, directing conferences for business people, addressing issues such as eminent domain, business ethics, and corporate social responsibility.

There are also opportunities for business people to engage in the self-study of economics. The Mises Institute offers an online course in Austrian economics. The Austrian School included Ludwig von Mises and Friedrich Hayek and played an important role in the development of free market theories. Austrian Economics influenced programs at the University of Chicago and the University of Virginia, and influenced Nobel-prize winning economists like Milton Friedman and James Buchanan. Friederich Hayek’s The Road to Serfdom is available as an audio book in most medium-sized public libraries. Many Austrian lectures and videos are available on YouTube. The Foundation for Economic Education a number of educational opportunities, including the periodical The Freeman: Ideas on Liberty.

Fifth, as wealth creators, business people have many opportunities to influence the intellectual and cultural opinion about business for generations to come. When philanthropy is carefully planned, the time and money successful business people donate can sway public opinion far more than the profit they earn. Business people should make sure they are not handing their money to their ideological enemies in the university, in public policy, or in the popular culture. They can avoid this by consulting with the Philanthropy Roundtable before making major gifts. They can use legal documents to enforce their intentions and prevent “mission drift.” They can also set up their own foundations with documents that clearly express donor intent, rather than making an unrestricted contribution to existing foundations or institutions.

None of what I have said should be taken to mean that business makes saints out of sinners. The crooked timber of humanity cannot be straightened out by an economic system. We will always struggle with inappropriate behaviors that are the vestiges of our beginning. However, capitalism is the economic system that is most consistent with our human nature as it really is, not as we wish it could be. Free market capitalism makes heroes out of ordinary men and women, one satisfied customer at a time.

The Laffer Curve, Part II

Dan Mitchell continues his lucid explanation of the idea that government can actually increase tax revenue by cutting tax rates.

Yes Virginia, there is a Santa Claus: tax cuts can pay for themselves.

View Part I here.

Sowell on "Economic Facts and Fallacies"

Thomas Sowell of Stanford University's Hoover Institution talks with EconTalk host Russ Roberts about the ideas in his new book, Economic Facts and Fallacies. He discusses the misleading nature of measured income inequality, CEO pay, why nations grow or stay poor, the role of intellectuals and experts in designing public policy, and immigration.

Listen to it here.

The Moral Foundations of Capitalism

We often hear that business has few friends in the universities. This may be true...for now. But there are promising signs of change, such as the Institute for the Study of Capitalism at Clemson University. The following video is from its 2007 conference on the Moral Foundations of Capitalism.

A Bad Retirement Plan

What an irony that the Supreme Court just decided that workers can sue for losses in their 401(k). According to the Wall Street Journal, "recent cases have included allegations that employers offered participants unwise investment choices, or allowed investment managers to charge participants unreasonably high fees."

In 1960, the Supreme Court ruled that individuals have no claim on any of the money they pay into the Social Security system. They cannot claim that money as a property right. They cannot sue the government for mismanagement. They cannot sue for excessive administrative fees or unwise investment choices. In fact, they have no absolute right to any benefit at all.

The Supreme Court said, "To engraft upon the Social Security system a concept of 'accrued property rights' would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands."

Or, in the words of P.J. O'Rourke, " Unfortunate people who scrutinize the Social Security Trust Fund discover two facts: It's not there. It's not theirs."

Yet another case of a double standard of justice: a strict one for the private sector, and a lax one for the public sector.

Skin on the Wall

Mark Cuban, American entrepreneur and billionaire, makes a point about the media and ambitious government prosecutors. From an interview in GQ...

"...look at the way the media handled Barry Bonds. They never pay attention to the fact that no one in government ever gets fired for trying to put a skin on the wall. They’ll only get promoted—other than Nifong from Duke.

Nifong was an extreme case.

It wasn’t an extreme case. He was just stupid enough to drive it in the media with his own name. You don’t know the guys behind the Barry Bonds investigation. You don’t know that someone’s not saying, “If I can only get Barry Bonds, I’ll be the stud in this government office.” Barry Bonds can’t sue the person who’s trying to make him a poster child. To spend however many years of government money to prove something that happened four years ago—what does it accomplish for the American people?"

Dangerous Tool, Deadly Master

When people allow the government to make up the rules, regulations and taxes that govern the most personal aspects of individual behavior, from diet to sex, it should come as no surprise that personal decisions suddenly become political flashpoints.

The result is toxic to civil society. While my neighbor and I may differ in our diet, we can peacefully co-exist, until we attempt to deny one another a choice. Then, we are no longer neighbors. We are political combatants locked in a struggle only one of us can win.

The great strength of business is that it labors to give people a choice. The great strength of government is that it can demand obedience. A healthy society encourages the former, and keeps the latter in reserve, knowing it to be a dangerous tool and deadly master.

A Business Education

Kathy Gornik, President of Thiel Audio, points out the paradox of a business school asking for political money to teach young people the principles of business. Her letter appeared in Business Lexington.

Kathy is also the first recipient of the Bastiat in Business Award.

Dear Editor,

I'm writing in response to Tom Martin's article about the University of Kentucky seeking state funding for a new high-tech home for the Gatton College of Business and Economics. I hope that the irony of this request is not lost on readers of Business Lexington.

Businesses create wealth by economic means, the ONLY way wealth is created. Businesses voluntarily produce good and services for which customers voluntarily trade their money. However, it is possible to OBTAIN wealth through political means, i.e., stealing it.

For the sake of the students they are teaching, one would hope that the Gatton College of Business, of all colleges within a university system, would raise its money through economic means, both as an educational example and moral reflection of what free enterprise, markets, and businesses are all about. By using tax dollars extracted from productive workers and business owners in Kentucky to build their new high tech home, Gatton College contradicts the very nature and meaning of what is being taught. Every dollar taken from the private sector impedes the ability of businesses to grow, prosper, and hire more workers. Why would the Gatton College of Business want to participate in such a system?

What an inspirational and educational statement it would make if Gatton would raise its own money through a voluntary system of private donations or some other means that put into practice what I can only assume they are teaching about business, entrepreneurship, economics, and wealth and job creation based on the American founding principles of private property, individual rights, and limited government. Business owners and their employees are the antithesis of a government handout.

Sincerely,

Kathy Gornik

A Seat at the Table

The most appalling thing about the capital city of any government is the number of groups that feel morally entitled to more of someone else's money. Every year, these groups line up to beg and whine before the legislature. When that doesn't work, they make threats.

If the spectacle didn't involve real money, it might make good theater -- of the absurd. Wikipedia says that kind of theater is defined by "broad comedy, often similar to Vaudeville, mixed with horrific or tragic images; characters caught in hopeless situations forced to do repetitive or meaningless actions; dialogue full of clichés, wordplay, and nonsense; plots that are cyclical or absurdly expansive."

That is a pretty good description of a legislative hearing. Nothing can drive a rational human being to existential despair and suicide faster than listening to a few days of testimony and Q&A before a sub-committee. No one in their right mind goes there voluntarily. Anyone who shows up every day is suspect.

The problem is we just don't have enough money to give all those groups all the money they want. Even if we took ALL the money from the people who have it, and gave it ALL to those people who want it, we'd still come up short. We just can't eat the rich. There aren't enough of them. Or there are too many people who want a seat at the all-you-can-eat bar-b-que. Either way, the only way to handle too many claims and not enough money is to develop a set of priorities.

The worst way to do this would be to divide up the money equally and give everyone the same amount, regardless of merit. Even a sub-committee wouldn't do that. Not usually. Well, maybe sometimes. But it is still a bad idea.

A better idea is to ask the question, "Where can we get the biggest bang for the buck?" Of course, every group shouts back "Right here!" Want to improve the condition of the poor, the balance of trade, stop global warming, end racism, promote dental hygiene, fight terrorism, and end obesity? Amazing! Everyone who wants your money can tie what they do to what you want. Now that is creative capitalism (Bill Gates take note)!

That is why I tend to be skeptical about any group that insists its project is the most important one on the agenda. Even when that group is the modern equivalent of Egyptian priests asking the Pharaoh for enough money to ensure the flooding of the Nile: a bunch of scientists.

Too Many Convictions

In the December 2007 edition of Imprimis, the historian Paul Johnson writes about what great statesmen have to teach us. Johnson is the author of more than forty books, including Modern Times, A History of the American People, and A History of the Jews.

"The best kind of democratic leader has just a few -- perhaps three or four -- central principles to which he is passionately attached and will not sacrifice under any circumstances. This was true, for instance, of Truman, of Konrad Adenauer of Germany, Alcide de Gasperi of Italy, and Robert Schuman of France -- all the outstanding men who did most to raise Europe from the ashes of the Second World War and who built up the West as a bulwark against Soviet advance and a repository of a free civilization. It was also true of Ronald Reagan and Margaret Thatcher, the two outstanding leaders of the next generation who carried on the work. I am not impressed by leaders who have definite views on everything. History teaches it is a mistake to have too many convictions, held with equal certitude and tenacity. They crowd each other out. A great leader is someone who can distinguish between the essential and the peripheral -- between what must be done and what is merely desirable. Mrs. Thatcher really had only three musts: uphold the rule of law at home and abroad; keep government activities to the minimum, and so taxes low; encourage individuals to do as much as they can, as well as they can."

The Independent Women's Forum

I'm adding a new link to the Independent Women's Forum. The Forum describes itself as:

"The Independent Women's Forum is a non-partisan, 501(c)(3) research and educational institution. Founded in 1992, IWF focuses on issues of concern to women, men, and families. Our mission is to rebuild civil society by advancing economic liberty, personal responsibility, and political freedom. IWF builds support for a greater respect for limited government, equality under the law, property rights, free markets, strong families, and a powerful and effective national defense and foreign policy. IWF is home to some of the nation's most influential scholars—women who are committed to promoting and defending economic opportunity and political freedom."

When Profits Aren't Greed

The New York Sun is having way too much fun pointing out the hypocrisy of the New York Times. Like most newspapers, the Times is in trouble. The family that controls the Times would like it to make more money. So where do they turn for help? Harvard? Yale? Nope...

When a director of an oil company tries to make profits for his shareholders, he is accused of "greed." When a Wal-Mart director tries to make profits for her shareholders, she is lectured about being "tight-fisted." But when The New York Times Company's shareholders start getting restless for profits, where does Arthur Sulzberger Jr. turn to for "exceptional individuals"? Why, to veterans of the boards of Wal-Mart and Chevron. When it is the Times that is hoping to make the profits, somehow it isn't "greed" but, as Mr. Sulzberger put it, "skills, expertise and leadership qualities." We couldn't have put it better ourselves.

Europe's Philosophy of Failure

Government schools in France and Germany are training the next generation to fear and despise a group of their own citizens.

This group is accused of blood sucking greed, violence, and an attack on the existing national order.

Sounds familiar, doesn't it? All that's missing is an anti-Semitic slur. However, in this case, the villains are not the Jews. The villains are business owners, corporate executives, and entrepreneurs. In short, anyone that doesn't have a government job.

In a truly excellent article in Foreign Policy, Stefan Theil, Newsweek's European economics editor reports on his research of American, French, and German textbooks. His conclusion: Europe is sowing the seeds of its own economic distress.

Consistently and across the board, French and German students are told that capitalism is savage, unhealthy and immoral. A French text goes so far as to use the ultimate French condemnation. It calls capitalism "American." The same French text warns students that globalization kills people.

German textbooks teach students that the internet dehumanizes people. German students are also taught India and China are big successes because they have powerful governments running the show, and that free markets made Sub-Saharan Africa the mess it is today.

The list of offenses goes on and on. Private companies destroy jobs; government policy creates them. Employers exploit their employees; government protects them. Capitalism creates market chaos. Governments establish order. Profit is a zero-sum game.

Of course, this is all hogwash. But there is a new generation rising in Europe that has heard nothing but hogwash.

The CEO of the Sofa

I've been re-reading P.J. O'Rourke's 2001 book, The CEO of the Sofa. It is classic O'Rourk: smart and laugh-out-loud funny. Some excerpts:

"Anthropology is just travel writing about places that don't have room service. Sociology is journalism without news, and Psychology is peeking into your sister's diary after your parents have sent her to rehab."

"Fascism sought to bring people together, to heal the fragmentation of society, to remedy the alienation that the individual feels in the ruthlessly competitive atmosphere of the free market. But, at the same time, fascism wanted to preserve and improve all the material benefits of industrialism and trade. So far it sounds -- as I've pointed out before -- like a New Democrats campaign platform. But instead of recounting votes in Palm Beach County, Mussolini, Hitler, Franco, and Tojo believed they could accomplish their aims with mindless patriotism, genocide, and secret police. It didn't work."

"Species extinction is sad, in a way, but it's nonetheless pleasant to go get the paper in the morning without being bothered by pterodactyls. And a mastodon would wreck the lawn."

"The world has been collapsing for more than two thousand years. Either the world was once a very wonderful place with a long way to fall (of which there is no historical evidence) or people my age are full of crap."

"The Founding Fathers, in their wisdom, devised a method by which our republic can take one hundred of its most prominent numskulls and keep them out of the private sector, where they might do actual harm."

"Women are successful in the business world because the business world was created by men. Men are babies. And women are ... good with kids."

The Average Wage

We often hear that it's getting harder and harder to make ends meet. That, however, is simply not true. Many of the things we buy are getting less expensive, largely due to the competitive pressure of international trade.

Michael Cox and Richard Alm discuss this in an op-ed in the New York Times. An excerpt:

At the average wage, a VCR fell from 365 hours in 1972 to a mere two hours today. A cellphone dropped from 456 hours in 1984 to four hours. A personal computer, jazzed up with thousands of times the computing power of the 1984 I.B.M., declined from 435 hours to 25 hours. Even cars are taking a smaller toll on our bank accounts: in the past decade, the work-time price of a mid-size Ford sedan declined by 6 percent.

There are several reasons that the costs of goods have dropped so drastically, but perhaps the biggest is increased international trade. Imports lower prices directly. Cheaper inputs cut domestic companies’ costs. International competition forces producers everywhere to become more efficient and hold down prices. Nations do what they do best and trade for the rest.

Thus there is a certain perversity to suggestions that the proper reaction to a potential recession is to enact protectionist measures. While foreign competition may have eroded some American workers’ incomes, looking at consumption broadens our perspective. Simply put, the poor are less poor. Globalization extends and deepens a capitalist system that has for generations been lifting American living standards — for high-income households, of course, but for low-income ones as well.

The Laffer Curve

Dan Mitchell of the Cato Institute explains why money-hungry politicians should love tax cuts. The right kind of tax cuts can actually increase tax revenue.

Facts and Fallacies

Mindful of the sage advice, "It isn't what you don't know that hurts you. It's what you know for sure that just isn't so," Thomas Sowell has published a new book, Economics Facts and Fallacies.

Among the fallacies he discusses are:

1. Government programs are needed to create “affordable housing.” (Actually, government intervention is what has made housing so unaffordable in places where even hovels are expensive.)

2. Employer discrimination is the main reason for differences in income between women and men. (Tons of evidence point in other directions.)

3. College tuition is going up so fast because of rising costs. (Only if you call voluntary increases in spending “rising costs.”)

4. Foreign aid helps poor countries become more prosperous. (Only if you don’t look at the evidence.)

5. The rich are getting richer and the poor are getting poorer. (It all depends on whether you are talking about flesh and blood human beings or statistical brackets.)

The Mind of the Market

From reasontv...

Michael Shermer is the founding publisher of Skeptic magazine, a columnist for Scientific American, and most recently the author of The Mind of the Market: Compassionate Apes, Competitive Humans, and Other Tales from Evolutionary Economics.

Shermer's new book--which The Washington Post says "has earned the right to our attention"--seeks to explain "how evolution shaped the modern economy and why people are so irrational about money."

Shermer, who lives and works in Southern California and is the author of previous books such as Why Darwin Matters and The Borderlands of Science, sat down with reason.tv to talk about the intersection between evolution and capitalism, trust in a globalized world, his "Google theory of peace," and his ideological journey toward libertarianism.

And why it's extremely tough to convince left-wingers who believe in evolution that capitalism is a good thing and conservatives who believe in free markets that evolution is real.

Discuss this story online at reason's Hit & Run blog.

The Best Books for Business

One of the best books for quickly understanding the way the world works is the classic text by Henry Hazlitt: Economics in One Lesson.

Among many other valuable insights, he retells Bastiat's fallacy of the broken window.

Someone breaks a shopkeeper's window, creating work for the window repairman. The window repair creates a visible job.

But before the window was broken, the shopkeeper had a window and enough money to buy something else, perhaps a new pair of shoes or a new suit of clothes. Now he must spend that money on repairing his window, i.e. that which is seen.

What is not seen is the loss of business suffered by the man who makes shoes or the tailor who makes clothes. This is the kind of loss that is often overlooked by politicians who are hell-bent to create jobs.

Buy your own copy of Economics in One Lesson with a forward by Steve Forbes from the Mises Institute for only $14.

We Found the Middle Class!

The Lowly and Despised

For most of human history, the economy was built to satisfy an elite few: kings, courtiers, priests and generals.

Ours is the first economy built to satisfy everyone. This still shocks many of the elite. That's why they make fun of people who live in trailers, own guns and go to church.

The consumer economy serves the humble and lowly as well as the powerful and wise. The apostle Paul didn't know anything about a consumer economy, but he understood the revolutionary potential among those the world had used and ridiculed.

1 Cor 1:26-31

Consider your own calling, brothers and sisters.
Not many of you were wise by human standards,
not many were powerful,
not many were of noble birth.
Rather, God chose the foolish of the world to shame the wise,
and God chose the weak of the world to shame the strong,
and God chose the lowly and despised of the world,
those who count for nothing,
to reduce to nothing those who are something,
so that no human being might boast before God.

The Morality of Capitalism

Rev. Robert A. Sirico is interviewed by James Freeman, assistant editor of the Wall Street Journal’s editorial page, about markets and morality and about the Acton Institute’s Call of the Entrepreneur documentary.

A New French Hero

NPR reports that Jerome Kerviel, the rogue trader who lost Société Générale $7 billion, has become a folk hero of the French left for exposing the weaknesses of "Anglo-Saxon capitalism."

A few more revolutionary successes like this and France -- unofficial motto: "One Nation Above God" -- won't have to worry about capitalism any more. It will join North Korea -- official motto: "Powerful and Prosperous Nation" -- at the vanguard of human progress.

Unlimited Limited Liability

Consider the growing list of human activities associated with the words "zero tolerance." We have zero tolerance for weapons in school, drunk driving, underage drinking, and pesticides in our food.

We have zero tolerance for medical mistakes, sexual harassment, drugs in school, hate speech and carbon dioxide emissions. We have zero tolerance for indoor smoke.

And of course, we have zero tolerance for product liability.

With all this "zero tolerance" running around, why don't we try a zero tolerance policy on public policy itself? As the situation currently stands, the governing class is free to exaggerate, obfuscate, and lie about the effects of its policies from behind a shield of almost unlimited limited liability. They can tinker with the lives and property of millions. They have the power to compel, coerce and destroy anyone who disagrees with them. They and their predecessors around the world have ruined, wounded and killed more people than shoddy products, tobacco, alcohol and privately owned firearms, combined.

If the governing class had a marketing motto, it would be "Millions and Millions Sacrificed."

The true believers in the power of governance will argue that we should not focus on the mistakes of governance, but on its successes, all the while working to repair and remove mistakes from the system. In other words, they are willing to live with a high tolerance for failure, harm and death when the government is involved. Everybody else gets zero.

In ancient Athens, a lawmaker was held responsible for the consequences of any legislation he proposed. He could be fined, imprisoned, or even executed for sponsoring a bad law. Today, bad laws and regulations flow out of Washington with impunity. It's a dream come true for every ambitious person who wants power without responsibility. It's a threat the rest of us have grudgingly learned to tolerate.

Compete, Don't Cheat

In Scientific American, Michael Shermer asks the question, "Do all companies have to be evil?"

The question reflects the popular belief that companies are evil. Shermer makes the point that they can be very good so long as their organizational principles encourage the virtue of trust.

This reminds me of Coach Lou Holtz's advice to a man in the business of financial advice. Coach Holtz told him the customer only wants to know three things:

1. Can I trust you?
2. Do you care about me?
3. Are you committed to excellence?

Trust is the essential lubricant of commercial activity. Cheating, lying, stealing, violence and fraud are sand in the system.

Stephen Moore at February Meeting

Stephen Moore, member of the editorial board and senior economics writer for The Wall Street Journal will be our speaker at the next monthly meeting of the Bastiat Society.

Mr. Moore focuses on economic issues, including budget, tax and monetary policy. A frequent contributor to the Journal over the years, Stephen has also written for Human Events, Reader's Digest, Chief Executive Magazine, and many other publications.

He was the founder and first president of the Club for Growth, which raises money for political candidates who favor free-market economic policies. Just prior to joining the Journal, Stephen was president of a new organization, the Free Enterprise Fund (founded by Bastiat Society board member Mallory Factor).

He has appeared on many national TV shows, including CNN's Inside Politics, Crossfire, and Moneyline, NBC's Nightly News, Fox Morning News, and The McLaughlin Group. Stephen has served as a senior economist on the Congressional Joint Economic Committee, as a budget expert for the Heritage Foundation, and as a senior economics fellow at the Cato Institute, where he published dozens of studies on federal and state tax and budget policy.

He was research director for President Reagan's Commission on Privatization. He is the author of five books, including (with the late Julian Simon) "It's Getting Better All The Time: 100 Greatest Trends of the Past 100 Years" and most recently "Bullish on Bush: How the Ownership Society Is Making America Richer." He graduated from the University of Illinois and holds a masters degree in economics from George Mason University.

DATE: Thursday, February 7th

TIME: 5pm Hors d'oeuvres & 6pm Presentation

LOCATION: Imaging Arts Gallery, 175 King Street, Charleston

Please RSVP here: megan.rock@imagingarts.com

900 Pages in Under 6 Minutes

On The Daily Show, P.J. O'Rourke summarizes 900 pages of Adam Smith's magnum opus, The Wealth of Nations, first published in 1776.

His unique insight? The market decentralizes our badness.