Can Capitalism Survive?

Benjamin A. Rogge
Rogge, Benjamin A.
(1920-1980)
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Editor/Trans.
First Pub. Date
1979
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Indianapolis, IN: Liberty Fund, Inc.
Liberty Fund, Inc.
Pub. Date
1979
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Collected essays.
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Part III
ON THE NATURE OF ECONOMICS


Part III, Introduction

III.I.1

In this part on the nature of economics, pride of place goes naturally to the paper on Adam Smith, the Father of Economics. This paper was first presented to an audience at Hillsdale College. In it, I make no attempt to conceal my opinion that Adam Smith is still the best of all of us who have labored in this particular vineyard.

III.I.2

The second paper in this section, "Christian Economics: Myth or Reality?" was written as an attempt to relate economics as a science to those questions of right and wrong policy that are the stuff of the real world. I accepted an invitation to present a paper at a Seminar on Economics and Ethics held at Valparaiso University in early 1965, and this paper is the result of that rash acceptance.

III.I.3

The third paper, "College Economics: Is It Subversive of Capitalism?" was presented to the Conservative Club at Yale University in the fall of 1967. Many of the older alumni of schools like Yale were convinced then (and now) that the members of the economics departments of their old colleges were ringleaders in the conspiracy to "do in" the capitalist system. In my paper, I argue that the very nature of economics is such as to make those fears largely groundless.

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Part III, Chapter 1
Adam Smith: 1776-1976

III.1.1

"To prohibit a great people [the American colonials] ... from making all that they can of every part of their own produce, or from employing their [capital] and industry in the way that they judge most advantageous to themselves, is a manifest violation of the most sacred rights of mankind." Adam Smith, The Wealth of Nations, 1776.

III.1.2

"We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness." Thomas Jefferson, "Declaration of Independence," 1776.

III.1.3

In these two passages we find one of the common elements in the two significant bicentennials we celebrate this year. That element is the conviction that man is endowed by a source greater than himself with certain natural and hence inalienable rights. This common element in the two bicentennials is one of the themes I shall develop in these comments of mine. But first let me hasten to admit that, in the households of the United States in 1976, the two bicentennials (the publication of The Wealth of Nations and the proclamation of the Declaration of Independence) are not held in equal awareness or veneration, nor does Adam Smith's name compete for the attention of the young with that of Thomas Jefferson. Yet it is my firm conviction that the members of our own society (and in fact of all societies based on the concept of freedom under law) must look to Smith as well as to Jefferson (and his fellow Founding Fathers) to fully understand our goodly heritage of freedom with order.

III.1.4

Here, as in all matters of judgment, I admit to bias. Adam Smith is generally known as the Father of Economics, the field of study which is also my own. Moreover, Smith's brand of economics, carrying the trademarks of voluntary exchange, freedom in the marketplace, and limited government, is also my brand of economics—Brand X though it may have become in today's intellectual marketplace. Finally, I believe Adam Smith not only to have been possessed of true wisdom about the nature and possibilities of the human condition but also to have been possessed of a capacity to communicate those ideas with great clarity and great style. In other words, I am an admitted, card-carrying Adam Smith buff.

III.1.5

With no embarrassment, I admit that I hope through these words to encourage some of you who may now know little of Smith and his work to come to want to know more. Even for those who bring to their studies of Smith a presupposition against his strong free-market policy position, there is something to be gained. His writing is free of that obscurantism, technical jargon, and complicated mathematics that distinguish most modern materials in economics. In Smith's writings, the case for what might be roughly called "capitalism" is put in so clear and straightforward a fashion that it makes a useful stone against which even the convinced socialist can hone his own counter-arguments. Finally, no one who professes to understand even commonly well the course of events of these last two hundred years can afford to be ignorant of the influence on that course of events of the ideas of Adam Smith, whether they have been proven right or wrong. In the words of the historian Henry Thomas Buckle, in his The History of Civilization, published in the middle of the last century: "In the year 1776, Adam Smith published his Wealth of Nations, which looking at its ultimate results, is probably the most important book that has ever been written." Even a true Smith buff may be at least mildly embarrassed by this claim, but that his ideas did have consequences, no one can really doubt (but more on this later).

III.1.6

Who was this man, what did he have to say in 1776, and how, if at all, is his thinking relevant to the world of 1976? Adam Smith was born in Kircaldy, Scotland, in 1723 and died in Edinburgh, Scotland, in 1790. In between he lived a life free of scandal, wife or children, great incident, and severe disappointment. He was a student (at Glasgow and Oxford), a teacher (at Glasgow and Edinburgh), and a scholar, and his friends were students, teachers and scholars—but also artists, writers, businessmen, and men of affairs. In a sense, though, he was the true "spectator" of the human scene, involved in that scene, yes, but always capable of detached analysis and appraisal of everything that came within his view.

III.1.7

My intent here is to concentrate on Smith's words and ideas and on their usefulness (if any) in interpreting the modern scene. Those of you who wish to know more of Smith's life or of the intellectual influences that shaped his thinking or of his weaknesses and strengths as a pure technician in the science of economics will need to look elsewhere.

III.1.8

My plan is as follows: First, to present in concise form what I see as Smith's view of the social order. Next, to identify the ways in which he applied this view to the world of his day, particularly the British treatment of the American colonies. Finally, to identify those ways in which it seems to me that Smith speaks most directly to the problems and possibilities of today's world.

Smith's Basic Argument

III.1.9

We begin with what I believe to be the essence of the Smith argument—but first a word of preparation. The book whose bicentennial year we now celebrate has as its complete title, An Inquiry into the Nature and Causes of the Wealth of Nations.*20 The first sentence of Chapter I, Book I, reads as follows: "The greatest improvement in the productive powers of labour, and the greater part of the skill, dexterity, and judgment with which it is any where directed, or applied, seem to have been the effects of the division of labour." These substantial straws in the wind would seem to imply that we are about to grapple with a pure piece of economic analysis applied to the essentially vulgar question of how to multiply the quantity of "things" in a nation—and indeed Smith does have a kind word for those vulgar "things" when he writes, "No society can surely be flourishing and happy, of which the greater part of the members are poor and miserable."

III.1.10

But to see Smith as nothing more than an early-day consultant on how to make everyone rich is to do him an injustice. Smith was first and foremost a professor of moral philosophy, and his economic analysis was in a sense a byproduct of his concern with such questions as the nature of the universe, the nature of man, and the relationship of the individual to society.

III.1.11

When curiosity turns his attention to "the wealth of nations," he begins in effect by reaching into his philosopher's cupboard for the basic materials of his proposed studies. First and foremost he draws out his conviction that there exists a natural order in the universe which, if properly understood and lived in accordance with, tends to produce the "good." Coordinate with and deriving from this natural order is a set of natural rights of individuals (recall the phrasing of the opening passage from Smith—"the most sacred rights of mankind"). For a society to live in harmony with the natural order requires that it respect those "most sacred rights of mankind."

III.1.12

But what does all this have to do with getting more bread on the table? Comes now Smith, the eternal spectator, the observer of all that transpires around him, who is also curious as to what puts more bread on the table. His observations tell him very quickly that the wealth of a nation is primarily determined "by the skill, dexterity and judgment with which its labour is generally applied." But by what in turn are these determined? By two primary factors: (1) the extent to which the division of labor is carried in the society, and (2) the stock of capital available to the laborers.

III.1.13

But what forces give rise to or permit of the division of labor and the accumulation of capital? Must it be the forces of the ruler, commanding one man to do this and another to do that and ordering all to go without so that the stock of capital may grow? Not at all, replies Smith, the observer-philosopher. In the natural order of things, man is so disposed to act as to promote these very ends without the necessity of external commands.

III.1.14

The division of labor finds some part of its initial support in man's natural instinct to truck and barter. More importantly, the apparent problem of securing each man's cooperation in serving the needs of others proves to be no problem at all. His cooperation is readily secured, not out of his benevolence, but out of his natural regard for his own interest. "It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest."

III.1.15

Thus the seeds of the division of labor lie in the very nature of man, that is, in the natural order. In the same way, man's desire for improvement induces him to save and hence to accumulate the capital needed to add even further to the productivity of labor.

III.1.16

But how are the activities of all of these specialists coordinated, what assures that the various parts and processes will be brought together properly in time and place and quantity and quality and all other relevant attributes? Surely here the offices of government must be required. Not at all, Smith replies; a spontaneous order emerges in the very nature of things, an order that arises out of the interaction in the marketplace between the two great forces of supply and demand.

III.1.17

If any one element in this complex chain comes to be in short supply, its price will rise and suppliers will be induced to bring more to the market; in cases of excess supply, the reverse. In this way, in Smith's words, "the quantity of every commodity brought to market naturally suits itself to the effectual demand."*21

III.1.18

The marketplace, then, as a spontaneously emerging and self-regulating process, is but the natural order at work in the ordering of economic life.

III.1.19

The pattern is now complete and he concludes as follows:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenues of the society as great as he can. He generally indeed neither intends to promote the public interest, nor knows by how much he is promoting it.... [H]e intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.*22

III.1.20

Continuing with Smith's words,

All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society. According to the system of natural liberty, the sovereign has only three duties to attend to; three duties of great importance, indeed, but plain and intelligible to common understandings: first, the duty of protecting the society from the violence and invasion of other independent societies; secondly, the duty of protecting, as far as possible, every member of the society from the injustice or oppression of every other member of it, or the duty of establishing an exact administration of justice; and, thirdly, the duty of erecting and maintaining certain public works and certain public institutions.*23

Smith's Thinking Applied to the Problems of His Day

III.1.21

In a very real sense, The Wealth of Nations can be viewed as an attack on the prevailing economic philosophy and practice of the author's day—an untidy collection of ideas and actions identified as mercantilism. Mercantilism, as you know, was associated with the more powerful nation-states of seventeenth- and eighteenth-century Europe, with England, France, Spain, Portugal, and Holland. Its primary purpose was to enhance the power and wealth of the nation, whether led by a king or a Cromwell or a parliament. The techniques were those of control—control not only of foreign trade (for the purpose of assuring a favorable balance of trade), control not only of colonies around the world, but control of most aspects of domestic economic life as well.

III.1.22

Smith argued that such controls were in fact directly opposed to the ultimate ends they were designed to serve. Thus, not only were the economic controls placed on her American colonies "a manifest violation of the most sacred rights of mankind," but moreover, "Under the present system of management Great Britain derives nothing but loss from the dominion which she assumes over her colonies."*24

III.1.23

What were his proposals for the British colonies? Radical ones indeed! His first was "that Great Britain should voluntarily give up all authority over her colonies, and leave them to elect their own magistrates, to enact their own laws, and to make peace and war as they might think proper."*25 However, he admitted that this was "to propose such a measure as never was and never will be adopted, by any nation in the world." Why not? Not because such an action wouldn't be beneficial to the interests of the society but because it would be "mortifying to the pride" and because it would deprive the rulers "of the disposal of many places of trust and profit, of many opportunities of acquiring wealth and distinction, which the possession of the most turbulent, and, to the great body of the people, the most unprofitable province seldom fails to afford."*26

III.1.24

His next and somewhat less sweeping proposal was that Great Britain give the colonies direct representation in Parliament. "Instead of piddling for the little prizes which are to be found in what may be called the paltry raffle of colony faction; they might then hope, from the presumption which men naturally have in their own ability and good fortune, to draw some of the great prizes which sometimes come from the wheel of the great state lottery of British politics."*27

III.1.25

He goes on to argue that unless this or some other method is found of "preserving the importance and of gratifying the ambition of the leading men of America, it is not very probable that they will ever voluntarily submit to us." Moreover (in a phrase of shrewd prophecy), "They are very weak who flatter themselves that, in the state to which things have come, our colonies will be easily conquered by force alone."*28

III.1.26

"From shopkeepers, tradesmen, and attornies, they are become statesmen and legislators, and are employed in contriving a new form of government for an extensive empire, which, they flatter themselves, will become, and which, indeed, seems very likely to become, one of the greatest and most formidable that ever was in the world."*29

III.1.27

These words could have been written no later than 1775 and speak well, at the very least, of Smith's powers of prophecy.

III.1.28

In concluding this section, I wish to point out that Smith's handling of the colonial question was in full accord with and, in fact, derived directly from his general philosophy of free peoples, free economies, and free societies.

Is Smith Still Relevant?

III.1.29

The question now before us is whether Smith's work is of only antiquarian interest to those of us who inhabit the world of 1976—or does it have some continuing relevance? I intend to argue that Smith does indeed provide us with most useful insights into our own problems and with those insights often so phrased as to make them at least the equal in power of persuasion of any later versions of the same thinking. I offer up now for your examination a series of examples, presented in no particular order.

III.1.30

To those who call for the businessman (or others) to act less on self-interest and more on the desire to serve others, he answers: "I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."*30

III.1.31

To those who are now calling for some kind of national economic plan for the United States, he responds:

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.*31

III.1.32

To those special interests who demand protection from goods produced in other countries: "By means of glasses, hotbeds and hotwalls, very good grapes can be raised in Scotland, and very good wines too can be made of them at about thirty times the expense from which at least equally good can be brought from foreign countries. Would it be a reasonable law to prohibit the importation of all foreign wines, merely to encourage the making of claret and burgundy in Scotland?"*32

III.1.33

To the tendency of governors and governments to reduce the purchasing power of the money (that is, to produce inflation):

In every country of the world, I believe, the avarice and injustice of princes and sovereign states, abusing the confidence of their subjects, have by degrees diminished the real quantity of metal, which had been originally contained in their coins. The Roman As, in the latter ages of the Republic, was reduced to the twenty-fourth part of its original value.... The English pound and penny contain at present about a third only; the Scots pound and penny about a thirty-sixth; and the French pound and penny about a sixty-sixth part of their original value.... Such operations have always proved favorable to the debtor, and ruinous to the creditor, and have sometimes produced a greater and more universal revolution in the fortunes of private persons, than could have been occasioned by a very great public calamity.*33

III.1.34

On the behavior of organizations of workers: "Their usual pretences are sometimes the high price of provisions; sometimes the great profit which their masters make by their work.... [T]heir combinations ... are always abundantly heard of. In order to bring the point to a speedy decision, they have always recourse to the loudest clamour, and sometimes to the most shocking violence and outrage."*34

III.1.35

In fact, though, Smith's sympathies were with the workers (as against the masters), and he was pleased with what he observed to be the improvement in the lot of the common worker in the England of his day.

III.1.36

"The common complaint that luxury extends itself even to the lowest ranks of the people, and that the labouring poor will not now be contented with the same food, clothing and lodging which satisfied them in former times, may convince us that it is not the money price of labour only, but its real recompence which has augmented."*35

III.1.37

To the argument that the workman (and those who use his services) must be protected by apprenticeships, licensing, wage-setting by law or what-have-you, he responds:

The property which every man has in his own labour, as it is the original foundation of all other property, so it is the most sacred and inviolable. The patrimony of a poor man lies in the strength and dexterity of his hands; but to hinder him from employing this strength and dexterity in what manner he thinks proper without injury to his neighbour, is a plain violation of this most sacred property. It is a manifest encroachment upon the just liberty both of the workman, and of those who might be disposed to employ him. As it hinders the one from working at what he thinks proper, so it hinders the others from employing whom they think proper. To judge whether he is fit to be employed, may surely be trusted to the discretion of the employers whose interest it so much concerns.*36

III.1.38

But his criticism of some practices of workmen should not be taken to mean that he was uncritical of the businessman or merchant. To many of both the initiated and the uninitiated, Adam Smith is seen as a spokesman for the business interest. Thus, for reasons that can only be guessed at, when the Modern Library edition of The Wealth of Nations was published in 1937, it included an introduction by Max Lerner, then editor of The Nation.

III.1.39

In his introduction, Lerner writes that Smith "was an unconscious mercenary in the service of a rising capitalist class.... [H]e gave a new dignity to greed and a new sanctification of the predatory impulses.... [H]e rationalized the economic interests of the class that was coming to power."*37

III.1.40

Even though Lerner admits that "Smith's doctrine has been twisted in ways he would not have approved," the damage is already done, and Smith is confirmed again in the mind of the reading public as the puppet of the bourgeois business interest—a view of him that continues to this day to color the thinking of those who might otherwise learn from him.

III.1.41

Compare this view of Smith with these words in which he describes the proper attitude of the society to proposals for legislation coming from businessmen (and which serves equally well to answer those today who believe that we can best solve our problems by turning over our economic decision-making to good, experienced, competent leaders of business): "The proposal of any new law or regulation which comes from this order [the businessmen] ought always to be listened to with great precaution, and ought never to be adopted till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention."*38

III.1.42

Nor is Smith at all unaware of the ancient (and modern) propensity of businessmen (as well as others) to attempt to combine to restrict competition. In a famous passage he writes that "People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices."*39

III.1.43

At the same time, his recommendations for dealing with such cases seem to me to reflect greater wisdom than our policies of today. He continues from the statement above: "It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary."*40

III.1.44

But wouldn't such a policy leave the public to the none-too-tender mercies of the conspirators? Not at all, replies Smith. Why not? Because in the absence of government backing, such conspiracies do not survive. "In a free trade an effectual combination cannot be established but by the unanimous consent of every single trader, and it cannot last longer than every single trader continues of the same mind. The majority of a corporation [i.e., of a government-granted monopoly power to a group of traders] can enact a by-law with proper penalties, which will limit the competition more effectually and more durably than any voluntary combination whatever."*41

III.1.45

As a matter of fact, in this whole area of competition and monopoly, it seems to me that Smith speaks with more wisdom than most modern economists and most of the associated legislation. Smith creates no unattainable ideal of "perfect competition" as a bench mark for use in appraisal and policy-making. Rather he argues that "all systems either of preference or of restraint ... being thus completely taken away"—that is, all government interventionist action removed from the marketplace—"the obvious and simple system of natural liberty establishes itself of its own accord."*42

III.1.46

In other words, all that governments must do to see that competition (i.e., the open marketplace) prevails is not to create monopoly. Competition does not need to be created or protected or restored—it inheres in the natural order of things and in the very nature of man. I believe this to have been true in 1776 and to be equally true in 1976. The technological changes of the last two hundred years have served only to make the competitive process more intense and to ensure the even quicker demise of the firm that doesn't maintain a perpetual effort to serve its customers better.

III.1.47

But enough of the examples. If you are not yet persuaded of Smith's continuing relevance, a further parade of cases is not likely to be useful. God knows I may be in error, but I am convinced that Smith is not only relevant today but that his insight and wisdom, if applied to today's world, would yield not only a freer but a more productive and equitable set of economic arrangements than if we applied a mixture of what was thought to be the best of contemporary thought.

III.1.48

This does not mean that I have no quarrels with Smith; his third function of government seems to me to be a Pandora's box; his handling of the theory of value, of what determines the ratio of exchange among goods and services, seems to me to be importantly in error, etc.

III.1.49

At the same time, I yield to no one in my admiration for his wisdom and for his magnificent contribution to our understanding of ourselves and of our institutions, in the form particularly of this book whose bicentenary year of publication we celebrate this year. It was from this book that such disparate types as William Pitt and Edmund Burke in England and Alexander Hamilton and John Adams in this country admitted having drawn some part of their own thinking on political economy. It is my reasoned conviction that the well-being of every society in the modern world would be at a significantly higher level if more of those in leadership roles in our societies of today were to be reading The Wealth of Nations rather than the modern works from which they draw their tragically mistaken policy advice.

III.1.50

I close now with a final offering of the wisdom of Adam Smith, this on the inherent error in all systems of control and this one coming not from The Wealth of Nations but from his first book, The Theory of Moral Sentiments.

The man of system, ... is apt to be very wise in his own conceit, and is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it. He goes on to establish it completely and in all its parts, without any regard either to the great interests or to the strong prejudices which may oppose it: he seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chessboard; he does not consider that the pieces upon the chessboard have no other principle of motion besides that which the hand impresses upon them; but that, in the great chessboard of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might choose to impress upon it. If those two principles coincide and act in the same direction, the game of human society will go on easily and harmoniously, and is very likely to be happy and successful. If they are opposite or different, the game will go on miserably, and the society must be at all times in the highest degree of disorder.*43


Notes for this chapter


20.
Adam Smith, The Wealth of Nations (New York: Modern Library, 1937), p. 79.
21.
Ibid., p. 57.
22.
Ibid., p. 423.
23.
Ibid., p. 651.
24.
Ibid., p. 581.
25.
Ibid.
26.
Ibid., p. 582.
27.
Ibid., p. 587.
28.
Ibid.
29.
Ibid., pp. 587-88.
30.
Ibid., p. 423.
31.
Ibid.
32.
Ibid., p. 425.
33.
Ibid., pp. 27-28.
34.
Ibid., p. 67.
35.
Ibid., p. 78.
36.
Ibid., pp. 121-22.
37.
Ibid., pp. ix-x.
38.
Ibid., p. 250.
39.
Ibid., p. 128.
40.
Ibid.
41.
Ibid., p. 129.
42.
Ibid., p. 651.
43.
Adam Smith, The Theory of Moral Sentiments (Indianapolis: Liberty Fund, 1976), pp. 380-81.

End of Notes


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Part III, Chapter 2
Christian Economics: Myth or Reality?

III.2.1

I wish to begin my discussion with some questions. What can we find in the Bible on the ethical rightness of the statement that two plus two equals four? What do the Papal Encyclicals tell us of the justice of Boyle's Law, that the volume of an ideal gas varies inversely with its pressure, other things being equal? Does Christian doctrine tell us that it is fair for a hydrogen atom to contain three isotopes while a fluorine atom contains but two? Or, to approach my own topic, is it Christian or un-Christian for a demand curve to be negatively inclined from left to right?

Economics as a Pure Science

III.2.2

Let me now put the general case: What does Christianity have to do with the questions of any pure science? So that there can be no suspense, I shall give the answer immediately. The answer is, "Nothing, absolutely nothing." There can no more be a Christian science of economics than there can be a Christian science of mathematics. It was a Hindu who first introduced zero into the set of real numbers and a Greek pagan who first analyzed the process of exchange in the marketplace. A microscope and a telescope seem to be quite indifferent to the religion of those who peer through them. The law of diminishing returns has no more relationship to the flight from Egypt than it does to the flight from Mecca to Medina.

III.2.3

Am I belaboring my point unnecessarily? Perhaps not. The proponents of all of the world's great religions, including Christianity, have often yielded to the temptation of dictating answers to particular questions of pure science—and have always been made to appear foolish in the process. Is the earth round or flat? Is the earth the center of the universe or isn't it? Was the world created at 9:00 on the morning of October 23rd, 4,004 b.c.? And, as Clarence Darrow asked, was that Central Standard Time or Mountain Standard Time? And as the quasi-religionists of modern communism ask, cannot acquired characteristics be inherited? I would be belaboring my point if it were not for the likelihood that many a scientist may yet be forced to kneel in the snow outside the temple and beg forgiveness for the impertinence of his findings.

III.2.4

If economics were only a pure science, we could now consider my presentation at an end and say, if all were to agree with me, that Christian economics is indeed a myth and a most unnecessary one at that. But economics is both something less and something more than a pure science, and therein lies the rub.

Economics as Something Less than a Pure Science

III.2.5

Let me begin with the implications of the fact that economics is something less than a pure science—but first let me define what I mean by a pure science. A pure science is one that is concerned with what is and not with what should be. I shall refer to economics as a pure science as positive economics and to economics as a set of do's and don'ts as normative economics.

III.2.6

Now economics is something less than a pure science only in a special sense. Its goal of finding out "what is" is no different from that of physics or astronomy, and economists often use research methods quite like those used by the natural scientists. What makes economics something less than a pure science is its present lack of success in developing a body of laws or generalizations accepted as correct by all or almost all serious students of the subject. The state of economics today is not unlike the state of physics at the time of Galileo's recantation.

III.2.7

Even at the level of what is, economists are so far short of agreement on so many fundamental questions that the well-intentioned layman can almost always find some economist who will provide him with scientific evidence of the correctness of what he wants to believe to be true.

III.2.8

Let me illustrate: The question of whether a minimum wage set by government does or does not increase the total wage payments going to a given group of workers is a question in positive economics. Yet in appearances before ministers, I have been accused of being un-Christian because my findings are that the long-run effect of a minimum wage is to reduce the total income of the workers involved.

III.2.9

Nor can I really be angry at this. The ministers involved want very much to believe that the problem of poverty can be solved in part by simply passing a law increasing hourly wage rates—and they can find economists of more repute than Ben Rogge who will tell them that this can, in fact, be done. When the scientists disagree, the layman is going to choose the scientist who tells him what he wants to hear.

III.2.10

What does the fact that economics is still itself an underdeveloped area mean to the Christian? If it is the economist who himself is also a Christian, it seems to me to require of him an open mind, integrity in dealing with his own findings and the findings of others, and a refusal to let his wishes be father to his facts.

III.2.11

When the great English historian Herbert Butterfield visited the Wabash campus a few years ago, he was asked if there was such a thing as Christian history. He replied that there wasn't, but that there was history as written by a Christian and that the man's Christianity would demand of him that he display the attitudes I have just described.

III.2.12

But what does the incomplete and confused state of economic science mean to the Christian who is not a professional economist but who wishes to use economic knowledge in making his own decisions? It seems to me that it requires of him the same openness of mind, the same refusal to let his wishes be father to his facts that it requires of the economist. He ought to be anxious to expose himself to various sources of economic information and to learn from them all that he can. Economic science may be in a primitive state, but this is only relative to some of the more mature sciences, and it still has much to teach the typical nonprofessional.

III.2.13

I will say flatly that the typical American who calls himself a Christian, and who makes pronouncements or joins in making pronouncements on economic policies or institutions, does so out of an almost complete ignorance of the simplest and most widely accepted tools of economic analysis. If something arouses his Christian concern, he asks not whether it is water or gasoline he is tossing on the economic fire—he asks only whether it is a well-intended act. As I understand it, the Christian is required to be something more than well-meaning; he is required to use his God-given reason as well. Inadequate as economic science may now be, it can save the layman from at least the grossest errors and can be ignored only at real peril to the society at large.

III.2.14

Let me summarize my thesis up to this point: I have argued that the word Christian is totally out of place as a modifier to any of the pure sciences. Generically, economics is one of the pure sciences and hence this constraint must apply to the concept of Christian economics. The main thrust of this constraint is undisturbed by the fact that economics is still in a primitive state of development. However, this fact requires of the Christian, whether a professional economist or no, a certain caution, a certain openness to various possibilities not required (at least to the same degree) in dealing with the laws of the more precise and more mature sciences. But this fact does not excuse anyone, be he Christian or no, from the necessity of learning what he can about economics before making decisions on economic policy.

Economics as Something More than a Pure Science

III.2.15

This brings me to the second part of my discussion, to the implications of the fact that economics is something more than a pure science. There is a positive economics but there is also a normative economics—an economics that is concerned with questions of valuation, of right and wrong action or inaction. I have denied that there can be a Christian positive economics; let me now ask if there can be a Christian normative economics.

III.2.16

Normative economics is positive economics plus a value system. Christianity is a religion, and a religion need not involve a set of values—but, of course, Christianity does. It follows that the value system in the normative economics of a Christian should be the Christian value system. In this sense, then, Christian economics can be very much of a reality. It will be marked, not by its choice of materials from positive economics, but by its choice of fundamental assumptions about the nature of man, his purposes here on earth, and the obligations for right action imposed upon him by his Creator. I assume that these fundamental assumptions would be drawn from what the Christian believes to be the revealed word of God, that is, from the Bible and from such interpretations of the Bible as the particular Christian accepts as authoritative.

III.2.17

So far, so good; but as an economist embarrassed by the relative chaos in his own field, I cannot resist pointing out that there seems to be more than one value system labeled "Christian." Perhaps I should rephrase my earlier affirmation and say that not only can there be a Christian economics, there can be any number of Christian economics. However, I don't wish to disturb the state of happy (though perhaps superficial) ecumenism in which we seem to be basking at this time in America, and so I shall concentrate on what seem to me to be the least controversial, the most widely agreed-upon precepts of Christianity.

III.2.18

What I want to do now is to list a number of these precepts and then keep them in mind as I examine just one specific question in normative economics. If there is, indeed, a Christian normative economics (as I am arguing there is), we should be able to use it, should we not? My real purpose in doing this is not to provide you with an answer to this one question but to reveal some of the dilemmas the Christian encounters in applying Christian values to problems of economic policy.

III.2.19

In listing these precepts, I make no claim for completeness or absolutely universal acceptance by all Christians. I list them as the ones that seem to me and (to the best of my knowledge) to others as the ones most relevant to social problems.

Some Basic Assumptions

III.2.20

I begin with the assumption that man is imperfect, now and forever—that he is, indeed, somewhat lower than the angels. It follows that all of his constructs must be imperfect; William Blake and the Anglican hymnal to the contrary, Jerusalem is never to be built in England's green and pleasant land.

III.2.21

Next I place on the list the Christian view of man as a responsible being. In the words of John Bennett of Union Theological Seminary,

Man never ceases to be a responsible being and no mere victim of circumstance or of the consequences of the sins of his fathers. Man has the amazing capacity through memory and thought and imagination to transcend himself and his own time and place, to criticize himself and his environment on the basis of ideals and purposes that are present to his mind, and he can aspire in the grimmest situation to realize these ideals and purposes in his personal life and in society. It is this capacity for self-transcendence that Reinhold Niebuhr, following Augustine, regards as the chief mark of the image of God in man that is never lost.*44

III.2.22

My third of the Christian assumptions is that of the significance of man's freedom to choose. In its most elemental form, this signifies Christ's insistence that he wanted as followers only those who had freely chosen him and his way. I remind you of one of the most dramatic scenes in literature, the challenging of Christ by the Grand Inquisitor in The Brothers Karamazov. I shall argue in a moment that this Christian sense of freedom is a most annoying restraint on social action and, hence, is the one precept most commonly ignored in Christian communities.

III.2.23

Next and very important is the assumption of the brotherhood of man, with its clear implication of the necessity of assisting those in need. The crucial importance of this assumption in the drafting of Christian economic policy can hardly be overemphasized.

III.2.24

I now add one of the explicit guidelines (and another very annoying restraint on social action), Thou shalt not steal.

III.2.25

I close the list with the Christian's sense of the forgiving love of God and of the ultimate hope that comes with the knowledge that this is God's world. John Bennett, in discussing this sense in conjunction with a discussion of man's sin, puts it this way:

Christian teaching about human nature perhaps reveals most clearly the corrective elements in Christianity. It corrects all tendencies toward sentimental optimism or utopianism that fail to prepare men to face the stubborn reality of evil in human history, and it corrects all tendencies to disillusionment or cynicism that are the opposite danger. Men who lack the perspective of Christian teaching are in danger of oscillating between utopianism and disillusionment.

The first thing that Christians say about human nature is that man—and this means every man—is made in the image of God and that this image is the basis of man's dignity and promise.

The second thing that Christians say about human nature is that man—and this means every man and not merely those who are opponents or enemies—is a sinner.*45

Christian Economics: A Case Study

III.2.26

My choice of precepts to include may have already cost me your good will, but now that we have the list, good, bad, or indifferent, let us see if we can put it to work.

III.2.27

Here is our problem: A family in (say) Valparaiso, Indiana, lives in serious poverty, with not always enough money for food, clothing for the children, medicine or doctor's services, or for rent on their small, ramshackle house. What does Christian economics tell us to do about this? What kind of a war on poverty does it ask us to wage?

III.2.28

Let us turn first to the kind of answer usually given by the American society generally today (and also the kind of answer generally endorsed by the social action groups of the large denominational organizations and of the National Council of Churches).

III.2.29

First, we should pass a law called a minimum wage law to force this man's employer to pay him a living wage. Or we should encourage the development of a union in this man's work group so that he could expect to receive a fair and decent wage. Next, we ought to pass laws that will force such men to save for emergencies, for example, unemployment, which may be the man's real problem at the moment. If he is unemployed, the government should offer him subsidized retraining, so that he can find suitable employment. If he is in real need, as our particular man is at the moment, some combination of local, state, and national relief payments should be made to him.

III.2.30

This is what most Christians in America today deem appropriate, with perhaps the addition of a box of groceries collected by one of the churches to be delivered to the family each Thanksgiving and Christmas.

III.2.31

Does any of this lack good intent? I think not; on the surface, at least, it seems to meet the requirement imposed by the brotherhood of man.

Minimum Wages

III.2.32

Now let's go through it again to see if we've missed anything. We begin with the idea of a legislated increase in his wage rate. Perhaps it would be wise if we first asked what the consequences of this might be. For example, could it lead to this man's losing his job altogether, either immediately or as the employer is forced by the higher costs of labor to mechanize the operation, if he is to stay in business at all? Well, says the economist, that will depend in part on whether the labor market was competitive to begin with, whether the man was already getting all that he was really worth. It will depend on whether this law "jars" the employer into becoming more efficient. In other words, it will depend on a number of factors of the kind analyzed in positive economics.

III.2.33

My own personal knowledge both of theory and of evidence would lead me to argue that the very probable consequence of a legislated increase in wage rates will be some loss of employment opportunities, and our particular worker could well be one of those to lose his job. I might add that his chances of being thrown out of work are increased if he is a member of a minority racial group.

III.2.34

I may be wrong on this, but I know of no competent economist who would deny the possibility that a legislated minimum wage will produce some unemployment. If this possibility exists, a Christian might well wish to examine the findings of positive economics before supporting a proposal of this kind. In supporting the idea of minimum wage laws, the Christian may well be causing problems for precisely those people he wishes to help, and be giving aid and comfort to a more fortunate worker-employer group which benefits by being freed of the competition of lower-wage firms. I repeat, good Christian intentions are not enough!

Trade Unions

III.2.35

Similar questions might well be raised about the second line of attack on our special problem of poverty—that of encouraging the development of a trade union to protect this worker. A union-induced increase in wage rates in the plant or store where this man works could lead to his losing his job altogether, just as in the other case. If he is a member of a minority race, the chances of this will be even higher under the trade union approach, because of the long-established discriminatory practices of many of the important unions. For example, in 1962, there were only three Negro apprentices in the union-dominated electrical trade in all of New York City and only one Negro apprentice plumber.

III.2.36

Here again the Ben Rogge version of positive economics could be wrong, but again the important questions are those of positive economics and not of good intent.

III.2.37

At least one additional question might be raised. In granting special privileges, immunities, and encouragement to trade unions, we would be sanctioning an activity that when undertaken by businessmen can lead to their being put in jail. As an economic institution (and a trade union is more than an economic institution), a union is a cartel; that is, it is a collusive arrangement among otherwise independent sellers of the services of labor, for the purpose of manipulating market prices to their own advantage. It is precisely the same in operation as the activities of the sales executives of the large electrical manufacturing companies that led to their being sent to prison a year or two ago. In encouraging workers (and farmers) to do that which we forbid businessmen, we seem to be violating a rather old concept of justice—that of equality before the law. To encourage trade unionism may be wise or unwise economic policy but surely the Christian cannot escape some concern for a policy that deliberately creates a double standard of right and wrong.

Social Security

III.2.38

We turn now to the third of the responses to our problem, that of social security. Let us force such people to contribute to a program to tide them over such emergencies. This may be wise or unwise economic policy, but at least it will assure some minimal flow of income to the family for some period of time. In other words, it does work.

III.2.39

Some Christians might be disturbed to know that as the system now works in this country, low-income Negroes are being taxed to support high-income whites. How does this come about? A low-income but fully employed Negro will pay into the fund almost as much money as will the high-income white. But the average life span of the Negro beyond age 65 is significantly less than that of the white, and the Negro can thus expect to draw less in total benefits. I present this odd circumstance, not as a criticism of social security per se, because the law could be changed to eliminate this feature, but as further evidence of the need for the well-intentioned person to examine policy proposals, not only in the large, but in detail as well.

III.2.40

But clearly, within certain limits, social security does work; it does provide much needed help to many in real need.

III.2.41

Surely the Christian can find no dilemma here. No? What, then, of the Mennonites and the Amish who have fiercely resisted any participation in this program? Of course, these are patently queer people, who wear funny-looking clothes and have other peculiar ideas, but they do call themselves Christians; in fact, they say that it is because they are Christians that they must refuse to involve themselves in social security.

III.2.42

How could this possibly be? Let us go back to our precepts of religion and see what we can find. Suppose we interpret the brotherhood of man, individual responsibility, and freedom to choose as meaning that each man should be free to choose, even in economic life; that if he chooses wrongly he is responsible and should seek himself to solve the problems he has created for himself; and that, if this proves impossible, it then becomes the responsibility of his fellow Christians, as a voluntary act of brotherhood, to come to his assistance. Surely, this line of reasoning cannot be immediately labeled as un-Christian—even if it would confront us with the embarrassing challenge of doing something individually, directly, and out of our own pockets for this family in Valparaiso, Indiana, of which we have personal knowledge.

III.2.43

Take "freedom to choose." Does this apply only in questions of pure religion, or does it constitute a general Christian presumption in favor of freedom of the individual? If the latter, then the Christian faces a dilemma. Social security tells a man that he must pay into the fund, how much he must pay at a minimum, and in what form the fund will be held. Whether on balance this is good or bad, it is clearly a denial of freedom. In the words of the English philosopher, Isaiah Berlin, in discussing this general type of dilemma:

A sacrifice is not an increase in what is being sacrificed, namely freedom, however great the moral need or the compensation for it. Everything is what it is: liberty is liberty, not equality or fairness or justice or human happiness or a quiet conscience.... This [loss] may be compensated for by a gain in justice or in happiness or in peace, but the loss remains, and it is nothing but a confusion of values to say that although my "liberal," individual freedom may go by the board, some other kind of freedom—"social" or "economic"—is increased.*46

III.2.44

Here then is a typical dilemma of the Christian as he approaches economic policy; his concern for his brother leads him to favor a measure that will help his brother (such as social security) but, to be really effective, it requires that he also reduce his brother's freedom to choose. I note, somewhat sadly, that given this choice, the majority of Christian peoples have usually chosen to sacrifice their own freedom and the freedom of others in the interest of compelling people to do what all good Christians know they should do. This may or may not be the right decision on the question of social security, but let no Christian say yes, it is the right decision, with a feeling that no sacrifice of any principle is involved.

Redistribution of Income

III.2.45

The last two approaches, retraining the worker and providing him with direct relief, are but two forms of the same thing and I shall treat them as a unit. Government-provided relief is a forced redistribution of income from one group of people to another group of people. Subsidized retraining is simply a form of redistributive payment that the beneficiary can receive only if he takes it in a given form, that is, in the form of tuition-free schooling, combined with subsistence payments. Whether redistribution is more efficient if the uses of the money by the beneficiaries are directed by the government (as in retraining programs, government housing, school lunch provisions, and the like) than if the money is simply turned over to the beneficiaries to be used as they wish, is a complex question and one that I don't have time to examine. I would point out only that he who pays the piper, whether he be private person or a government agent, will usually be strongly tempted to call the tune. In other words, as a matter of sociological probability, most schemes for redistributing income will usually involve some directing of the uses to which the beneficiaries may put the funds.

III.2.46

Whatever form the payments may take, relief provided by the state does work; it does provide assistance to the needy. It does provide food for the hungry, clothing and shelter for the cold, and medicine for the sick. Surely, here at last the Christian can relax, secure in the knowledge that in supporting such measures he is recognizing the obligations imposed upon him by the fact of human brotherhood in God.

III.2.47

Perhaps—but perhaps not. As I understand it, these obligations rest upon each individual to be acted upon as a matter of conscience. As I remember the parable, the Good Samaritan was not acting upon an order of government in performing his good deed, nor was he a paid official of a local welfare agency, drawing on local tax funds. Does Christian virtue consist in passing a law to force oneself to do what is charitable and right? Given man's imperfect nature, this might be a tenable position. Unfortunately, though, the law must apply to all; and thus many, who, for whatever reason, do not wish to give up what is theirs for the use of others, are physically compelled to do so.

Under Which Christian Precept Can Force Be Justified?

III.2.48

Ah, but you say, they should wish to do so. Of course they should, but if they don't, is the Christian then authorized to use force to compel them to do so? If so, under which of the precepts of Christianity?

III.2.49

Aquinas apparently had found such a precept when he wrote, "The superfluities of the rich belong by right to the poor.... To use the property of another, taking it secretly in case of extreme need, cannot, properly speaking, be characterized as theft."*47 Others might be troubled, though, by the apparent conflict between this interpretation and the commandment, Thou shalt not steal. Perhaps it should read, Thou shalt not steal, except to give to the poor. Under this interpretation, King Ahab and Jezebel would have been justified in seizing Naboth's vineyard, if their purpose had been to distribute its fruits among the poor.

III.2.50

It is interesting to note the way in which these questions are handled in the thirty-eighth of the Articles of Religion of the Protestant Episcopal Church in the United States:

The Riches and Goods of Christians are not common, as touching the right, title, and possession of the same; as certain Anabaptists do falsely boast. Notwithstanding, every man ought, of such things as he possesseth, liberally give alms to the poor, according to his ability.

III.2.51

It would seem possible to develop what might be called a Christian position on this issue that would strike against all public charity and make assistance to the needy a response of the individual conscience. This is in fact a position taken by certain denominational groups in the country today.

The Personal Practice of Freedom

III.2.52

Am I really saying that I think the vast responsibilities for assistance to the needy in our modern, complex society could be entrusted to private individuals and voluntary welfare agencies; do I really think that, under such a system, no one would be left out, no child would ever die of hunger or cold? I honestly don't know what the consequences would be of such an arrangement. I only know that the Christian who enthusiastically embraces coercive, collective charity may very possibly be deriving his mandate from some source other than his own religion. For example, such an approach fits very well with a psychological interpretation of man as a helpless victim of his environment, as a creature not to be held responsible for his own successes or failures. If you answer the question, "Who's to blame?" not with "Mea Culpa," but with "Society," you need not hesitate to turn to the central agency of organized society, the state, to solve any and all problems.

III.2.53

It is of course as presumptuous of me to talk of Christian doctrine as it might be for some of you to talk of technical economics; but I must confess that my own personal interpretation of Christianity does not fit well with most of the approaches to social and economic problems of official Christendom in this country today. Today's Christian economics seems to me to be neither good Christianity nor good economics.

III.2.54

But my function here is not to offer you advice on what to accept and what to reject. That I have done so, both directly and by implication, lends further credence to the thesis of one of my favorite modern philosophers, Charlie Brown of the Peanuts comic strip, who was once led to remark, "This world is filled with people who are anxious to function in an advisory capacity."

If Economists Disagree, Let Christians Be Tolerant

III.2.55

My function here has been to discuss the topic, "Christian Economics: Myth or Reality?" I have argued that the word Christian cannot and must not be used as a modifier to economics as a pure science. To do so is to indulge in the ancient sin of trying by appeal to revelation to answer certain questions that were meant to be answered by man himself with the use of his God-given reason.

III.2.56

I have argued as well that, in spite of its present state of imperfection, economics as a pure science, that is, positive economics, has much to offer to those who are interested in questions of economic policy. As a matter of fact, I think myself that much of the diversity of opinion among economists, both amateur and professional, on questions of public policy stems not from disagreement over ultimate goals or values but from disagreement over the findings of positive economics. In a sense this is encouraging, because it implies that these disagreements can be reduced over time by improvement in the science itself. Disagreements over ultimate values cannot be resolved; they can only be fought over or ignored. Disagreements over questions of fact and analysis are conceptually open to solution.

III.2.57

I have also argued that there can be a Christian economics at the normative level; the Christian can combine his Christian ethics and Christian assumptions about the nature of man with his knowledge of positive economics to decide whether any given proposal should be approved or condemned. The combination can very properly be called Christian economics.

III.2.58

Unfortunately, because of disagreements at the level of which positive economics to accept and at the level of which interpretation of Christian values to accept, there is no single set of conclusions on economic policy that can be said to be the definitive and unique Christian economics. The socialist and the free enterpriser, the interventionist and the noninterventionist, the business spokesman and the labor spokesman, the Mennonite farmer and the Episcopalian President of the United States, Ben Rogge and John Kenneth Galbraith—each will argue that his answers are the ones most nearly in accord with true Christian economics. In this lies the challenge to the Christian.

III.2.59

The only advice I can offer the now thoroughly confused Christian is that he avoid hasty judgment and that he think with his head as well as with his heart. He must learn what he can from positive economics and carefully examine precisely what values are imposed upon him by the fact that he is a Christian. In the meantime, he can draw some comfort from the knowledge that the professional economists and the ministers of the Christian churches are but little less confused than he.


Notes for this chapter


44.
John C. Bennett, Christianity and Communism Today (1960), p. 118.
45.
Ibid., pp. 116-17.
46.
Isaiah Berlin, Two Concepts of Liberty (1958), p. 10.
47.
Thomas Aquinas, Summa Theologica, 2a, 2ae, quaestiao 66, art. 7.

End of Notes


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Part III, Chapter 3
College Economics: Is It Subversive of Capitalism?

III.3.1

So that you will not be left in suspense, let me tell you immediately that the amount of subversion that takes place in college economics courses is probably much less than you may have imagined. The reasons for this are many; two of the most important are as follows:

III.3.2

(1)  In general, the level of teaching in economics (and particularly in the introductory course, which is the only formal course in economics taken by most American students—if they take even that) is generally of such poor quality that the students are neither subverted nor enlightened—primarily, they are bored!

III.3.3

(2)  The second reason that less subversion by the left takes place in American college courses in economics than you may have imagined is that the student in these courses is exposed to less purely leftist economics than you may have imagined. But don't be too encouraged by this. Where the student does encounter the true economic nonsense of the left is in his courses in literature, history, political science, social psychology, sociology (one of the worst offenders), and philosophy. The degree of certainty of this exposure to economic nonsense becomes almost absolute if he goes on to study to be a minister, a priest, or a rabbi.

III.3.4

I intend to concentrate on the introductory course, not only because it is the one taken by the largest number of students, but also because it reflects as well what happens in almost all of the advanced courses that follow it. Obviously I will be painting with a broad brush, and my comments will not be a description of each and every introductory course in economics in America nor of each and every teacher of such a course.

III.3.5

Let me begin by describing the organization of the typical introductory course in economics at an American university. (I might note that this description would apply equally well to the introductory course in almost any discipline or subject in the university.)

III.3.6

The director of the course will be a middle-level member of the department who has already been marked as a nonproducer; i.e., as a man who is not likely to bring fame to the department by his creative scholarship (or by what passes for it in most of the social sciences). His staff will consist largely of the several dozen graduate students and young instructors in economics who have not been able to secure research grants for the year; supplemented by a few regular members of the department who are told that they must teach in the introductory course at least once every fourth term; supplemented in turn by lectures delivered on occasion by some of the Big Names in the department—whose lectures must be fitted into their schedules of shorter or longer stays in Washington, D.C., at the U.N., or in Thailand.

III.3.7

Two or three times each week, the thousand or so students will gather in the largest auditorium on campus to hear lectures delivered by the director or one of his peripatetic stars; once or twice each week the students will meet in small quiz sessions, led by the young graduate students, who have nothing to gain by doing the job well and everything to lose if they spend so much time on their teaching as to fall behind in their graduate courses or their research for the doctoral dissertation. I speak from several years of direct personal experience in this role.

III.3.8

Assignments are made in a textbook, chosen usually from the list of "in" books—Samuelson, Reynolds, Bach, McConnell, etc. I might note that a really popular textbook can bring a Samuelson (say) as much money as Keynes made in speculating on the international money market, if not as much as Ricardo made in speculating in government consols at the time of the Battle of Waterloo. Students are also given assignments in workbooks, computing demand elasticities or deflationary gaps (why seldom an inflationary gap, I wonder?). A readings book presenting a range of views on questions of public policy is a very common adjunct to the course, but is rarely at the heart of the course.

III.3.9

Every few weeks, students will be given a common, objective examination, patterned after the workbook problems and exercises. These exams will be machine scored; the scores will be scaled, and each quiz section instructor will be given a suggested grade scale for his students. At the end of the term, each student will receive a grade and the mighty struggle to push back the walls of ignorance will be at an end. If Karl Marx himself were director of such a course, it would still produce more glassy-eyed boredom than red-eyed subversion.

III.3.10

Let me now go on to the second of my statements, to my assertion that, by and large, the economists in American colleges and universities are not all-out socialists or even unwavering critics of the market system.

III.3.11

Let me quote first a selection from Samuelson's textbook:

A dramatic example of the importance of a pricing system is postwar Germany. In 1946-1947 production and consumption had dropped to a low level. Neither bombing damage nor postwar reparation payments could account for this breakdown. Paralysis of the price mechanism was clearly to blame: Money was worthless; factories closed down for lack of materials; trains could not run for lack of coal; coal could not be mined because miners were hungry; miners were hungry because peasants would not sell food for money and no industrial goods were available to give them in return. Prices were legally fixed, but little could be bought at such prices; a black market characterized by barter or fantastically high prices existed. Then in 1948 a "miracle" happened. A thorough-going currency reform set the price mechanism back into effective operation. Immediately production and consumption soared; again the what, how, and for whom were being resolved by markets and prices.

The fact to emphasize is that such so-called miracles are going on all around us all the time—if only we look around and alert ourselves to the everyday functioning of the market.*48

III.3.12

If I hadn't told you, to whom would you have ascribed those two paragraphs? Mises, Hayek, Friedman? But the paragraphs actually come from the book used by more students in America and around the world than any other book in the history of the teaching of economics.

III.3.13

Ah, you say, but in other selections Samuelson reveals his true colors. Yes, it is true; Samuelson does say much with which I disagree and with which most of you disagree. But, in common with almost all professional economists, including the best of the socialists, he does recognize the critical and necessary role of the marketplace, with an excellent, explicit development of subjective, marginalist value theory.

III.3.14

In a current study of mine on the impact of minimum wage laws on the Negro, I have found much good sense in the work of Samuelson and of Yale's own Lloyd Reynolds. The typical well-meaning minister or civil rights worker may urge the Negro to demand a $2.00-an-hour minimum wage—but not the typical economist.

III.3.15

George Stigler once wrote an article in which he argued that the study of economic theory tends to push the student in the direction of the market system, that it has a built-in-conservative bias.*49 From my own observations, I would tend to agree, much as I dislike agreeing with Stigler behind his back.

III.3.16

Please don't misunderstand me; I am not trying to persuade you to accept Paul Samuelson or Lloyd Reynolds or George Leland Bach or the other high priests of the introductory course into membership in the Yale Conservative Club—a suggestion that any one of the three would find decidedly amusing. Although I find much to admire and agree with in their works, I also find much with which I disagree.

III.3.17

But I still insist that, in spite of his faults as we would see them, the professional economist around the world (whether on this side or the other side of the iron curtain) is not our greatest enemy. Our greatest enemy is he who (whether of good intent or evil) is totally oblivious to the fact that there is a process at work in the economic affairs of man, that effects are related to causes, and that this process is a great datum of human experience. One of the brothers in Dostoevsky's classic says to the other, "There is no God and hence everything is possible." His modern counterpart says, at least by implication, "There is no Economics and hence everything is possible." Again, this is not a statement commonly made by economists, although John Kenneth Galbraith comes close to saying this in his recent writings. Perhaps Galbraith is the only economist of wisdom in America today—or perhaps (as I think more likely) Galbraith is not really an economist at all, but rather a man of letters. And men of letters, by and large, when they turn to subjects in economics, tend to produce nonsense. Thus George Bernard Shaw, self-appointed economist for the early Fabians, in his preface to Major Barbara, eliminates poverty everywhere with one stroke of his pen. "The thing can be done easily enough," he says, "in spite of the demonstrations to the contrary made by the economists."

III.3.18

Here is our real enemy, and in the struggle against him, the typical professional economist may as often be with us as against us. If he has sometimes led students into what we believe to be error, at least he has also given them basic awareness of the economic process—the beginning of economic wisdom. As always, if we who are now called "conservatives" are losing, it is because of our own weaknesses and imperfections and not because we are undone by a vicious and entrenched and invincible enemy. Let us look to our own inadequacies, not to the sins of the Paul Samuelsons, if we want to understand the mess we are in and what we can do to correct it.


Notes for this chapter


48.
Paul Samuelson, Economics, 6th ed., pp. 37-38.
49.
George Stigler, "The Politics of Political Economics," in Essays in the History of Economics (Chicago, 1965), pp. 51-65.

Part V

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