[This is Chapter 11 of Murphey’s book Emergent Man:]

 

Chapter 11

 

THE ECONOMICS OF LIBERTY AND EMERGENCE

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The Humanism of the "Economic"

I would not have us deny or oversimplify the humanism of that part of our lives that we have come to call "economic."

            With love, it is easy and commonplace to see how readily it touches the quick of our lives. Love is something more than commonplace: it is the ultimate, the pressing, the tender, the oftentimes painful, the almost childlike connection with other human beings in a way that grips all that is warm and vital and most personal within us. Certainly we can see in love the human potential for passion and despair, as well as for the commonplace.

             To some extent, too, we are aware of this about the intellect. The humanistic literature of our times has often underscored the personal, emergent quality of what I like to think of as the "bloodless quest" of the mind as it undertakes adventures that involve all of the grand excitement that is inherent in an inquisitive man's awareness of unsolved problems. I have many times, in considering various matters of philosophy and most particularly of economics, struggled through a desperate loneliness, accompanied by an awful twisting and turning and frustration, that has been a part of knowing that a problem exists that I could not seem to solve. The struggle in such a case is sometimes a desperate one. It is all-consuming in the way it takes hold of the mind and body and does not allow one to rest until the imponderables and isolated considerations are brought together and reduced to a coherent pattern. There may be weeks at a time when a man has thrown into doubt and uncertainty his every principle, which before may have seemed to rest quite securely. There may then be what has been called the "ah-ha" experience, which is the thinker's final quick conception of the missing coherency. The release of such a moment is one of singing rapture. There is an exaltation that leaps within the man, who has theretofore been in the throes of intellectual desperation.

             Ayn Rand has said in her Anthem that "to hold the body of women in our arms is the one ecstasy granted to the race of men."  Her superlative -- while close to being true --overlooks the very similar ecstasy of intellectual discovery.

             All is not desperation and ecstasy in the life of the mind, however. There may be the drudgery and oppressiveness of a "dull grind."  Or there may be the gentle, warm playfulness of a glowing and continuing inquisitiveness as to some part of the world that has somehow drawn and held the attention of a particular man. Every now and then I have had occasion to think of an essay that I read several years ago by a gentleman who, in the most glowing terms, made me aware of all the romance and interest he found in watching beetles working on a dung pile. To him, there was fascination in knowing that one beetle would work for hours to roll into a ball a large amount of dung so that, in that shape, it could be rolled to his lair, and in observing that other beetles, of a lazier variety, would wait until all of the work was done, at which time they would hop onto the ball and allow themselves to be rolled with it to the point of entrance to the other's lair. They would then jump off and steal the ball from the more industrious, though less cunning, beetle. To the writer of the essay these observations were not mere matters of mundane fact, but of poetry.  He brought to the watching of beetles a delightful sense of humor, an extreme patience, and a vital sense of attachment to this small part of existence.

These observations about love and the intellect are not at all surprising. We all of us realize more or less strongly the fact that these things bring us close to the subjective reality that is part of being alive. Each of them have within themselves an infinite variety of significance to different men, and each may contain a strong element of the poetic.

             If this is true about love and intellect, and about other of our occupations, is it not also true about those things that we have lumped together under the general heading "economic"? 

             Don't we somehow fail to be fully sensible to the complete range of what is meaningful subjectively to ourselves and to others if we do not credit the economic activities of men with the same, or perhaps even a greater, humanistic significance?  Does the activity of a man in a capitalistic society really reduce itself, as some would have us suppose, to a sterile, lifeless “profit-seeking”?  It would be well, I think, if we were to stop to think about whether what is called “profit-seeking” does not in fact embody a good deal more that is significant in the most personal sense through the actions of a man. This realization is a central one so far as the sound appreciation of emergent liberty is concerned. We will see that men must be free not only in their politics and in their more generically "intellectual" endeavors if they are to have this open possibility of emergence.  They must also be free economically, and for the same intensely humanistic reason. Openness of choice here, lack of subjection to the delimiting coercion of others, is essential to the private emergence of a man as he seeks to find expression through his mind, his pride, his integrity, and his sensual connection with the world about him.

             In his essay "On a Certain Blindness in Human Beings," William James told a story that illustrates the significance of what we might, according to our usual habits, classify quite sterilely as "economic activities."  Although his illustration, taken from his own life, is a very brief one, it contains the gist of the point we must appreciate, the vital connection between economic liberty and a way of life based on the religion of emergence.  James shows us the depth of his discernment when he says:

             "Some years ago, while journeying in the mountains of North Carolina, I passed by a large number of ‘coves,’ as they call them there or heads of small valleys between the hills, which had been newly cleared and planted.  The impression on my mind was one of unmitigated squalor.  The settler had in every case cut down the more manageable trees, and left their charred stumps standing.  The larger trees had been girdled and killed, in order that their foliage should not cast a shade.  He had then built a log cabin, plastering its chinks with clay, and set up a tall zigzag rail fence around the scene of his cabin to keep the pigs and cattle out. Finally, he had irregularly planted the intervals between the stumps and the trees with Indian corn which grew among the chips; and there he dwelt with his wife and babes --an ax, a gun, and a few utensils, and some pigs with chickens feeding in the woods, being the total sum of his possessions.

             "The forest had been destroyed; and what had 'improved' it out of existence was hideous, a sort of ulcer, without a single element of artificial grace to make up for the loss of Nature's beauty. Ugly, indeed, seemed the life of the squatter, scudding, as the sailors say, under bare poles, beginning again away back where our first ancestors started, and by hardly a single item the better off for all the achievements of the intervening generations.

             "Talk about going back to nature! I said to myself, oppressed by the dreariness, as I drove by. Talk of a country life for ones old age and ones children! Never thus, with nothing but the bare ground and ones bare hands to fight the battles! Never, without the best spoils of culture woven in! The beauty and commodities gained by the centuries are sacred. They are our heritage and birthright.  No modern person ought to be willing to live a day in such a state of rudimentariness and denudation.

"Then I said to the mountaineer who was driving me, 'What sort of people are they who have to make these new clearings?' 'All of us!' he replied. 'Why, we ain't happy here unless we are getting one of these coves under cultivation.' I instantly felt that I had been losing the whole inward significance of the situation. Because to me the clearings spoke of naught but denudation, I thought that to those whose sturdy arms and obedient axes had made them they could tell no other story. But, when they looked on the hideous stumps, what they thought of was personal victory. The chips, the girdled trees, and the vile split rails spoke of honest sweat, persistent toil, and final reward. The cabin was a warrant of safety for self and wife and babes. In short, the clearing, which to me was a mere ugly picture on the retina, was to them a symbol redolent with moral memories ~ and sang a very paean of duty, struggles, and success.

 "I had been as blind to the particular ideality of their conditions as they certainly would also have been to the ideality of mine, had they had a peep at my strange indoor academic ways of life at Cambridge.

 "Wherever a process of life communicates an eagerness to him who lives it, there the life becomes genuinely significant. Sometimes the eagerness is more knit up with the motor activities, sometimes with the perceptions, sometimes with the imagination, sometimes with reflective thought. But, wherever it is found, there is the zest, the tingle, the excitement of reality; and there is 'importance' in the only real and positive sense in which importance ever anywhere can be."

             The twentieth century would do well to note with care the truth of this insight discovered and expressed so well by William James. He found, much to his surprise, that to men very much unlike himself the joy of life was to be found in the excitement of putting under "cultivation" the desolate North Carolina coves. From this lesson that William James has given us, it should appear quite clearly that the unique expression of the individuality of human beings is tied intimately and inseparably to their economic undertakings. To allow coercive limitations to eat away freedom here is to cut deeply into much that has a vital religious bearing on the subjectivity of the men involved. Mind and pride, integrity and a sensuous relation to the world, all of the several ingredients of a man's emergence, are as mixed into his economic affairs as into his love and his intellect. Indeed, the large portion of his time he spends in gaining, through his toil, the satisfaction of his so-called 'material' wants is a constant fabric of absorption, of challenge, of passion, and of both intellect and love. Only in the shallowness of analytic delineation between the "economic" and the other affairs of men is there a seeming split between that which is subjectively meaningful and that which merely involves "profit-seeking".

             It is necessary to point this out with some emphasis because it has become commonplace in contemporary thought for the prevailing orthodoxy to consider that, while so-called "intellectual" and "political" liberties are worthy of protection, the protection of economic liberties that exist in a marketplace based on uncoerced voluntary exchange transactions is not at all necessary, but is, rather, contrary to that which is "humanistic" and "liberal".

             While innumerable reasons might be assigned in support of a social framework of liberty, probably the most important is that the reduction of coercion to a minimum and the accentuation of the voluntary undertakings of men are essential preconditions to a social setting in which men may take on the spirit and character of emergence. In light of this, it is particularly important that we appreciate -- as William James did -- the fact that economic life is life, not separated from it, and that all of the questions pertaining to human development, intellect and feeling are as related to this aspect of our existence as to any other. The use of the mind is not restricted to books, to science, and to the arts in an academic sense; rather, it is woven into our every choice. Must we not concede, for example, that the North Carolina covesmen were uniquely applying themselves, and thereby their minds, in their own way?  And if this is so, that the vital elan of human beings finds a vast expression in their economic pursuits, a vital elan that abounds in its multiplicity in keeping with differences in personality, in experience, in ambitions and yearnings, then the need for liberty, as a medium by which expression may be given to this multiplicity, is certainly present.

             Therefore, we see that the principal reason for economic liberty is not what we would consider economic at all; it is religious.  It is the recognition that the problem of scarcity and its solution (that is to say, economic endeavor) carries the man with it, and that if he is to have emergence here, he must also have the civilized setting in which emergence within himself can take root and blossom out, rather than be smothered. We must not forget that so far as emergence is concerned a lack of liberty is a smothering, since a delimitation of choice is a delimitation of mind, of intellect, in the most fundamental sense, and since pride and integrity are incompatible with such restriction.

 

The Economic Basis of the Free Society -- the "Market Economy"

 

Men may be brought together in a common effort through either coercive or voluntary methods. There is nothing clearer about economic life than that men must combine their efforts toward the production of those things, in the nature of goods and services, that they need or desire and that are not readily abundant through a natural supply. It is clear that men, acting individually, could not hope to produce for themselves the things they need. The interdependence of men, in the sense of a division of labor, is a characteristic of all human society at whatever degree of development.

             There is virtually nothing produced in our society today that does not involve the collaboration of innumerable individuals. In writing this book I am using paper produced through a process that involved the inventiveness and effort of a great many individuals over many generations. The same is true of the pen with which I write, or the dictating device into which I speak. I am sitting at a desk produced a number of years ago by persons whom I will never see or know. The room in which I study and write is likewise built by people who are faceless to me. It is heated by still others. Between us, there is a mutual dependence, by which our several efforts are brought together, each supplying the other with those things that we are each peculiarly adapted to produce because of our training, study or native ability.

             There is nothing strange or mystical about this whole complex of interdependence. The principles on which it operates are fairly simple, if we break them down into their ingredients. It is important that we understand these ingredients and the alternative ways in which the social relations of men may be organized to bring their talents and efforts into a certain harmony.

  Elsewhere in this book we have stressed the fact that vitalism, the way of life based on the philosophy of emergence, is – when properly understood – inseparable from voluntarism.  It would seem, then, that nothing is so important as for us to understand just what it takes to arrive at a voluntary way of life.  It should perhaps be noted that we are speaking of social relations that are voluntary in their nature, but that very much involve the cooperation and interdependence of men in their activities.  Later, we will look into the unrealistic basis of that present-day point of view that seems to consider that voluntarism and so-called “individualism” is chaotic, uncooperative and atomistic. Nothing, indeed, could be further from the truth.

             The basic ingredients of an economic system based upon voluntary individual activity are (1) private property and (2) the “act of exchange.”  Both of these together entail, as a necessary concomitant, a system of law providing for their protection and enforcement.  In addition, they have a rationale and an ethic of their own that is a part of the philosophy of liberty and that is very much at odds with the usual sort of ethic through which free economic activity is so often evaluated and criticized.

             Property takes a great many forms. It may consist of material objects, such as land, machinery, and the innumerable objects that are useful in one way or another; or it may take the form of something more inchoate, such as a legal right that people esteem as having utility, or such as a service that is itself identified with some object, person or organization. Virtually anything the mind can separate off from other things, provided the thing has some real existence either physically or in the recognition men give to its presence, can become property. It is essential, however, that before an object or a thing may be "property" there be some dominion exercised over it by human beings. An individual or a group of persons must in some way relate themselves to it, although this need consist of no more than their agreement or enforceable proclamation that the particular object shall henceforth be under their dominion. An object itself, of course, cannot really be said to be property unless it is brought into connection with human beings.

             The distinction between "private" property and "public," or "socialized," property rests entirely upon the political status of the people exercising dominion. If that entity that the law and society recognizes as the "state" is the exerciser of dominion, the property is "public."  If, on the other hand, persons or groups of persons outside the state exercise dominion, then the property is "private."

             A system of private property recognizes, in innumerable practical ways, the "exclusiveness" of the use to which the private entity may put the thing that is the subject of dominion. The given person or persons who are recognized by the society as having the proper dominion over the thing enjoy to themselves the direction of the use to which it is to be put, may lay claim to its fruits, and in so doing may deny to all others the use, manipulation or consumption of the object of property. Others are excluded, except by the consent of those who have the recognized rightful exercise of dominion. Needless to say, as we will more explicitly set out as our explanation continues, this "exclusiveness" of use is in large measure a product of law, of ethics, and of the mores of the society itself. These things, taken together, provide the underlying framework of recognition of a given person's dominion over a given object, and this framework, by its approval of the exclusiveness of use in that person, creates in him the quality of "ownership."  Because of this, it is very difficult to state the qualities of private property without first assuming a system of law and of societal organization that itself is oriented around the idea of private property that we are attempting to define. One might say that private property consists in the exclusive use of a thing by a non-political entity in a social setting that recognizes that exclusiveness of use as being a matter of right and that brings the various forces of society to bear for the protection and stabilization of that right.

             In addition to (1) an object (in the broad sense), (2) a person or entity of a private nature exercising dominion over the object, (3) the exclusiveness of use of the object by that entity, (4) the socio-legal recognition of that "ownership," it is one of the ingredients of private property that it be "alienable."  So far as the owner itself is concerned, one of the leading values of a piece of property lies in the fact that it may be passed into the dominion of others, either as a gift or as an item of exchange. This is no small part of the thing's utility. Moreover, the system of private property, as a system, relies upon this quality of alienability. It is this quality of private ownership that is most directly connected with the general fluidity of the economic order based upon private property.

             Therefore, we see that the whole conception of private property presupposes a number of private spheres, consisting of individuals or of associations, that are independent of the sovereign political power and to which the society permits a distinct attachment, through dominion, of things possessing utility.  In general, too, the object, the dominion, and the society's recognition of "ownership" may be passed from person to person in accordance with the will of the present owner.

             There are many ramifications of the matters I have just set forth so generally. Anglo-Saxon common law, for example, as supplemented by a very considerable body of statutory law, has dealt specifically with all of the many subtleties, rights, obligations and interpersonal relations that are involved in the practical implementation of these broad concepts.  Indeed, the concepts themselves would be of little real meaning unless filled in and given actual form and substance by the law of torts, contracts, real property, negotiable instruments, and the like, or other similar well-defined legal relations.  And I would not have us forget that, underlying the whole fabric of the law, there must exist a much broader social recognition of the mutual relations that the law particularizes and verbalizes. While all of this is necessary, however, we need not go into these things at great length here. It is enough for our purposes that we recognize that private property involves the various ingredients we have just stated. 

It is private property that constitutes the subject matter of  the second principal ingredient of a free economic system. This second ingredient is the "act of exchange."  It is through the act of exchange that productive combinations of the utmost significance are achieved. The act of exchange is the method through which voluntary cooperation is accomplished. In it, the various persons involved each give to the other something that will serve as an inducement to the other. Where a great many men exist in a social setting, and no one so marshals the forces of society or of circumstance as consciously to manipulate in a detrimental or limiting manner the alternative courses of exchange that are open to his fellow men, there exists to a person innumerable possibilities for the exchange of private property, including services. Each person may, according to his own circumstances and awareness of conditions, select the most favorable of these alternatives. When we use the word "favorable" in this connection, we necessarily mean that which is most advantageous from the point of view of the individual himself, though some other observer of the situation may disagree with his judgment or his values.

             It is important for the acting man to perceive the possibilities for advantageous exchange. It is sometimes necessary to foresee such possibilities far in advance, so that one may set about the necessary undertakings that are involved in producing the objects that are later to be given in exchange. The whole process of anticipation of the desires and the exchange abilities of others has been termed by economics the "entrepreneurial function."  It is a function that is performed not only by the businessman and the investor, but by every economic entity, whether it be a multi-million dollar corporation or an individual workman. The success of any person or other economic entity in a "market economy" depends very much upon whether that person has correctly apprehended the nature of the human circumstance so as to put himself in a position where he might secure the benefits of advantageous exchanges of his property for the things of value that are made available by others.

             There is nothing quite so important as to see that the act of exchange is one of very real mutuality. In each instance, both parties to the transaction give up something on their side in order to obtain something in return. But it is not enough merely to see that there is a flow in both directions. More than that, it is necessary to appreciate that in a very real subjective sense, where no coercion is involved, each party to the transaction must necessarily feel, at the time he enters upon it, though he may later change his mind and regret his act, that what he is going to gain from the act of exchange will have greater value, in terms of utility, to himself for the purposes he has in mind than that which he is surrendering in order to get it. There is not only a mutuality of exchange, but also a necessary mutuality of satisfaction. This is not to say, of course, that the subjective qualities of the satisfaction will necessarily be the same in one person participating in such a transaction as in another person. It may be true, in a given case, that one of the parties may gain a great deal, while the other may gain only slightly. While this may be true, it must necessarily be the case that both make what they consider to be a gain in their position. Otherwise, they would not carry through with the transaction. They would either retain the property that they have given up or would enter into one of the various alternative exchanges that may be open to them.

             In connection with the act of exchange, it is difficult to see where there is any question of "bargaining power" that even enters into the matter. It is entirely a matter of mutual inducement, based upon the respective needs and the respective capabilities of service that the parties bring to the market place. Any negotiation, any bickering back and forth, that may go on arises out of the need for determining what the actual possibilities of exchange may happen to be. There is really no question of power involved. This follows necessarily from our explicit assumption that coercive manipulation of the circumstances is not a part of the picture. It is undeniable, of course, that if coercion becomes a significant factor, as where so many of the alternatives are brought under the control of a given person or group of persons that better alternatives are either eliminated entirely or punished so as to have a lesser utility, in such a case the question of "power" becomes a very real and significant one. But where this is the case, the principles of the market economy have been violated and it can’t truly be said that the system has been adhered to. The analysis of the system, therefore, is not charged with a need to explain the operation of the system in terms of a juxtaposition of "bargaining powers" that are in fact in no meaningful sense present in the human relations involved.

             It is often the case that in looking at the act of exchange we will use the term "bargaining power" to refer to the respective senses of economic urgency with which the parties approach the transaction. As we have said, it may certainly be true that one person may come to the transaction with virtually no sense of urgency at all, but only with the anticipation that the transaction will afford him some meager increment as regards his present position. At the same time, the other party may have become so situated as to the economic circumstances and as to the possibilities of exchange with others that he very much desires and in fact "needs" the consummation of the particular transaction that is contemplated. In such a case, it may appear to an observer that the less eager person has been able to drive a "hard bargain" in his dealings with the other who is under so pressing a need. Whether it is a "hard bargain" or not is, however, a matter of perspective and definition. The bargain may “hard” to the observer if the observer has himself brought  a preconceived idea of what should be the substance of the exchange between the parties.  If this preconceived notion is not met, then the transaction may be considered a "hard" one. It is often said that this quality of hardness comes out of the respective "weakness" of the more eager party as against the "strength" of the other. Necessarily the ultimate terms of the transaction will he determined, if the transaction is allowed to proceed on a voluntary basis, by what the parties consider to be their needs and by what they consider to be most advantageous to themselves, according to their own personal standards of values.

             The fact that this is said to involve "bargaining power" is very much the result of the application of the semantics that authoritarian minds apply, as outside observers, to this process of exchange. Whether the bargain is a "hard" or an "easy" one, it must always be true that each party, including the "weaker" one, must benefit by it according to his own evaluation of it, and it must be the most advantageous of the various exchange alternatives open to him, or he will never carry it through.  We must recognize that those who demand more are bringing to the evaluation of the transaction an ethic that is alien to the rationale of the market economy itself, since it is one of the postulates of the philosophy of liberty that the moral quality of the transaction is to be judged entirely by whether it is voluntary; which is to ask, in substance, whether it is -- in the opinion of the parties themselves -- to their mutual benefit. The philosophy of liberty has no conception of an outside judge or arbiter who evaluates the transaction with a fatherly or paternalistic view toward one party as against the other party who has somehow come to the transaction with a lesser sense of need or urgency.

             The philosophy of liberty could take no other approach consistently with the liberty  it espouses.  It is the voluntarism itself, because of its uncontrolled nature so far as coercive pressures brought either by the parties or by some third force are concerned, that the philosophy of liberty must seek out and cherish. Emergent man, applying his own mind to the human circumstance and his own energies to the development of that situation in such a way as to enhance his alternatives, would necessarily be denied the opportunity for conscious self-adaptation if it were not the judgments and desires of the parties themselves that dictated the terms of any given exchange. It is certainly true that to a very large extent an individual's task in so adapting himself to the human circumstance that he can pick and choose between the various alternatives open to him without an impelling psychological pressure that drives him to accept immediate alternatives that may be less desirable than others that he could enjoy if he had a greater flexibility, is at the vital core of his successful development of his own ability to determine for himself his own course of life. Some people always let circumstances "creep up on them," and then find themselves in a position where it appears that it is less they than circumstances that determine the ultimate outcome of their lives in a given situation. To a large extent the contemporary debate between liberty and the "welfare state" revolves around this very point. A system of liberty, and the free market economic system that is a part of it, expects that the individual will, with foresight and character, anticipate conditions and prepare himself for them in advance, so that he may deal with them satisfactorily when they arise, or suffer the consequences of his inability or failure to do so. In any event, the circumstances, which flow on in very much of an impersonal manner, are to be dealt with through the means of mutual inducement, voluntarism, and -- what is the same thing -- the “act of exchange.”

             [Note in 2001: The refutation of the “bargaining power concept” that I gave in the preceding paragraphs was an important part of my thinking for several years after I wrote Emergent Man.  It is a view held to by virtually all thinkers who support a market economy, although it runs counter to the “commonsense” attitudes of people in general, many of whom also would count themselves as supporters of a free economy.  In my later thinking, I came to believe that the bargaining power concept is valid in some circumstances, although not as broadly as is usually assumed.  Instead of repeating here all of my later reasoning, I will refer the reader to my chapter on the socialist theories of exploitation in my book Socialist Thought, and to the article based on that chapter published by the Journal of Social, Political and Economic Studies.  I should say that I  have seen my later thinking not as a departure from the theory of a free society and a free economy, but as a more subtle and serviceable understanding of what ought to be its theory.] 

The act of exchange, containing as it does inherent psychological impulses (arising out of the mutuality of satisfaction) that tend strongly to bring men into interaction among themselves in the pursuit of their own values and of their own position, is the central method of the "market economy."  It is the act of exchange that, when considered in terms of hundreds and thousands of said acts, makes up the market itself.  And it is this market that, when we look at it through a certain perspective, is what we call "competition."  As we will have occasion to point out, the free market, based upon the act of exchange, and indeed what we even call "competition" itself, is nothing more or less than a vast fabric of cooperative human interaction. Its primary forces are centripetal and cohesive, although it is common for us in our observations of the system to place almost sole emphasis upon those of its qualities that appear to be centrifugal and atomistic. Every exchange is cemented by the fact that it is voluntarily undertaken to better the position of the actor. It is entered upon by his own impulse, as a matter of his own choice and of his own judgment. If the word "cooperation" means anything at all, it must surely apply to such voluntary behavior and to the enormous undertakings of economic production that, over a period of time, spring from the energies, intelligence, ambitions and applied effort of untold numbers of men and women who come together through the simple medium of the act of exchange based upon private ownership of the productive factors involved.

If in looking at the market economy we are preoccupied with the bidding among those persons who seek to participate in the same limited supply of exchange opportunities that may seem to exist at any given time, it may appear to us as a result of this preoccupation that this competitive setting is the opposite of cooperative.  Certainly the cooperation is not between each seller and each other seller, or between each buyer and each other buyer. Rather, it is between the particular buyer and the particular seller who, after selecting what seems to each of them to be the best exchange open to them from among the many offered, enter into an agreement or contractual relationship for the transfer of goods, services, money or other  property. It is in this relation that the cooperative aspect is most apparent. Its element of agreement and mutual satisfaction is most to be seen in the fact that each party, as we have remarked, views the relation with personal satisfaction and is not coerced to accept the other exchanges available that offer him less for what he himself must give up. The competitive bidding between sellers, or between buyers, is merely the peaceful method by which goods are offered on the market and by which each person or group of persons acts to secure for himself or itself the most favorable sort of exchanges, in view of the fact that other persons also want to effect such exchanges and that there is a scarcity of such opportunities for exchange. Necessarily there are frustrations arising from competition, but these frustrations are the result of the fundamental fact that the means by which human wants are satisfied are scarce. All men cannot automatically have all of the limitless satisfactions that they may desire.

The market economy, based upon the act of exchange and private property, is the form of economic order chosen as best by a philosophy of liberty precisely because of that philosophy’s desire to maximize the element of cooperation. We may easily conceive of relationships that promote action that is agreeable to some persons, whose action may be looked upon as being cooperative in nature, while in fact the agreement and cooperation of the few is founded upon the coercive subjugation of the interests of others.  Criminals act in cooperation with one another when they form themselves into a gang. Among themselves, they are involved in "cooperation."  The libertarian conception of the market economy cannot, therefore, be said to arise out of a desire to create cooperation where none could otherwise exist. Rather, while certain forms of cooperation may exist even in an authoritarian system, the philosophy of liberty seeks to promote and to protect those forms of cooperative human action that do not necessarily involve coercive pressures upon persons who are not parties to the particular act of agreement. We look upon the market economy as a way of maximizing cooperation, based upon the selection that takes place in the competitive process, because we see that it offers to each man a satisfaction of some of his wants and a basis by which he can provide a life for himself free from all of the humiliations and limitations that are involved in coercive human relationships.

             In addition to appreciating the essentially cooperative nature of a competitive market economy, it is important to understand also the other attributes of the system based upon the act of exchange. One of these attributes is the "price mechanism."  When historically the market economy has risen above the most elemental primitive level, the exchange of goods and services is most commonly accomplished through the use of money. The various items offered on the marketplace come to have a "price". Although to anyone who lives in a capitalistic system this fact is so elemental that it may seem unnecessary to mention it, the role that price plays in  the market economy is a major one.  It gives rise, for example, to the possibility of a bookkeeping or accounting system, which would not otherwise be possible. By it, the businessman can determine whether he has made a profit or a loss, and by anticipating certain prices and costs (which are also expressed in terms of "price") he makes the necessary adjustments in his production and inventories that are necessary if he is successfully to conduct his business.

             The price that is paid for a type of commodity or service in the market economy is the direct result of the willingness people have to pay a given amount in exchange for it. It is not the result of anyone's decree or judgment as to what the item sold "should receive."  The price reflects the state of the consumer demand as that demand interacts through the process of exchange with the available supply.

             In a very true sense, prices reflect freedom. They are the numerical shape, so to speak, of the innumerable acts of exchange that occur in the market place. Behind these many acts of exchange, there lies an infinity of determinants. The relative values that men have, their preferences of some things over others, their virtues and their vices, their entire conception of life as it crystallizes into specific purchases at department store counters, in music shops, at restaurants, at automobile showrooms, and elsewhere -- all of these things are finally reduced to what we very impersonally call "price."  Everything that is done in the market economy is done in the hope and anticipation that there are persons who desire the product that is created and have the means to pay for it. The ultimate values of the people are reflected most directly at the "consumer good" level, where the commodities and services are those that are sought directly for the satisfaction of human wants and needs. It is important to realize, however, that it is the demand that exists for a given "consumer good" that ultimately determines the demand for those goods and services that are required to bring about its production.

             In view of this, it is not surprising that the eminent Austrian economist, Ludwig von Mises, in his book Human Action, speaks of the "sovereignty of the consumers" in the market economy. Men train their abilities, invest their property, and combine together in business enterprise, in far-reaching undertakings that necessarily involve a great deal of effort and intelligence, for the sole purpose of creating something that may be entered into profitable exchange. And whether all of this work is going to "pay off" or whether it is going to lead the persons involved into failure is, in the last analysis, pretty well determined by whether there is a sufficient number of other persons, with sufficient economic means, who desire the ultimate product of all of this applied intelligence and labor. For the stockholders and the employees of a business corporation running a guava jelly factory, the success of their investment and the security of their employment, respectively, depend upon whether the public wants to eat guava jelly.

             Price, then, plays an important functional role in an economic system based upon free exchanges. It may be seen in several ways. It is a guide to economic activity, a quantification of the collective value judgments made by millions of consumers interacting in the market place, and is itself the result of these exchanges.

             Although, as we have remarked, the prices that ultimately result both as to consumer goods and producer goods must necessarily reflect the choices and preferences of the persons making up the economic system in their capacity as consumers, and although the consumers are for this reason with some justification to be called "sovereign," I think that those who argue the case for the free market by saying that this overall conformance to the will of the consuming public necessarily carries with it an approximation of the "best" allocation of resources so far as the satisfaction of the most urgent human wants are concerned are, unfortunately, not correct.  In so saying, they are unfortunately extending Dr. Mises' concept beyond its commonsense meaning.  A philosophical observer can look at the operation of the market economy and remark at the very least that it is responsive to the overall taste and culture that people, as consumers, accept.  But, while this is true, I would not have us pretend that the upshot of freedom, in terms of the allocation of resources arrived at, would more than as a matter of coincidence satisfy a critic who would apply to it some philosophical, aesthetic or other presumably "objective" standard of his own.  Nor does it in general allow private individuals to say at any given time that "the way things have worked out under the market economy is most in keeping with my own personal preferences," because it would remain true that those who prefer any one commodity or service would, when they would get right down to it, prefer a greater allocation of human production into the area of their preference.

             The rationale of the market economy is not to be found in the fact that it satisfies any person's ideals as to what ought to be produced. It lies, rather, in the fact that immense creative energies are released in a setting that is most compatible with human happiness and the emergent sense of life, and that the rewards of this activity are disbursed according to a voluntary pattern, chosen on an individual level by the persons involved, while in the overall the result for the mass of men is that there is a tendency for the economic system to produce the sort of thing that the individual men in that system desire most. The "consumer sovereignty" concept, then, has some validity as an all-encompassing rationalization of the free market, but the primary justification lies elsewhere, in the liberties that this system affords. Liberty, being itself a matter of the highest value, is very often its own principal justification.

 

[Note in 2001: I have discussed the inappropriateness of claiming an “optimum allocation of resources” by the market economy in several of my later writings, where I have made a more complete discussion of the fallacy involved in it.  A departure from the claim is not only called for intellectually, but is also important if the theory of a market economy is not to become the self-enclosed ideological system that so many of its theorists make it.  This self-containment prevents them for taking into account a number of other considerations that may become important precisely for a free society.   See my book Burkean Conservatism and Classical Liberalism, pages 139-143; my article “A Critique of the Central Concepts in Free-Trade Theory” in the Winter 1998 issue of the Journal of Social, Political and Economic Studies; and my “Controversy” exchange with Prof. Walter Block on “Do Market Economies Allocate Resources Optimally” in the Fall 1999 issue of the Journal of Markets & Morality.]

             I have perhaps gotten ahead of myself in the explanation, however. It is true that economic energies are applied in response to the demand for consumer goods of specific types, that this response ripples back into the producer-goods industries, and that it is by way of the "price mechanism" that the acting men adjust their activities. But this is too oversimplified if we do not see that the real pressure put on the actor by the market economy, which causes the expansion of certain undertakings and the curtailment of others, arises out of success and failure, "profit" and "loss."  It is a corollary to the well-known law of supply and demand that, when exchanges are left uncoerced, price, as to a given commodity of service, will tend to find a level at which the market is "cleared" of all units produced, and yet will not go appreciably lower. The price that results reflects the underlying conditions of desire and the existing ability to satisfy that desire.  Either more or less supply will eventually be forthcoming as to a particular thing, with a consequent adjustment in price to either encourage or discourage those who wish to purchase, according to whether the result to the suppliers, when they consider their revenue and their expenditures, and therefore their consequent profit or loss, is either satisfactory or unsatisfactory.  No business can long run at a loss, and no business will tend to expand if its profits are less favorable than those obtainable in other comparable undertakings. An industry will tend to blossom if, however, the profitability is, relatively speaking, high. Though many other factors need to be considered in a complete analysis we can say that on the whole, and certainly in the long run, it is this pragmatic criterion that determines what people do with their energies and productive property in the market economy. It is in this manner that "resources" are "allocated."

             Wrapped up in all of this, as an integral part of it, is the "distribution" that the market economy makes of output.  Production, distribution and resource allocation all arise from the same process -- which ignores them all completely and does not consider them relevant, because the "process" is one of individual human beings joining together in economic cooperation through contractual relations to solve immediate economic problems that those individuals face and to take advantage of opportunities that they anticipate or apprehend. Production, distribution and resource allocation, as overall conceptualizations of what occurs, are results, offshoots, so to speak, and not ends that are sought in themselves. Nobody acts in order to “produce,” or to "distribute," or to "allocate resources."  The acting man, instead, merely contracts and works and builds to better his own condition according to his own values.  

I emphasize these things because, in reviewing quickly the structure and operation of the market economy, I would not have us lose the perspective we gained at the beginning, which is that the real, vital center of consciousness resides with the actors themselves, as they prepare for and consummate their exchanges. An overall look at what results is necessary to a total understanding, but when it is all said and done our preoccupation, if we are to appreciate the truly personal, human ramifications of the market economy, must revert to the act of exchange and its voluntary, cooperative nature. It is at this level that the individual finds his immediate existence. His concern with the overall, even when conceived in the most enlightened sense that takes into view the long-term and more general aspects of a problem, must necessarily be with whether or not the fundamental ingredients of satisfactory human relations at the individual level are to be gained or preserved. When we consider the matter in this light, it becomes apparent that liberty, as a personal thing, is a dominant consideration, a consideration that we more and more tend to overlook if we become so abstract and general in our analysis that we become preoccupied with the "mass" result to the exclusion of a truly appreciative consideration of the health or sickness of interpersonal relationships.

Reflecting back on the "over-all," however, it must be recognized that the constant fluid adjustment of individuals and enterprises to the market situation must be permitted to take place without impediment or significant maladjustments will develop that will not only cut down the general productivity of the people themselves, but that will also create a great deal of hardship on the individual level. The so-called "harsh" law of supply and demand must be allowed to operate so that the energies and resources of people engaging in the activity of the market will not become stagnated off into areas where there is no longer a demand for them. If at any given point in time there exist opportunities for exchanges as to a certain type of good or service and if it later develops that, through technological change or through a change in the desires of the consumers, or otherwise, there are fewer or less desirable opportunities to make advantageous exchanges, then it becomes imperative that those who have previously engaged in the industry reevaluate their position in light of the new facts and make the necessary provisions, as to their own training, location, etc., to seek out and engage in the new opportunities for exchange that exist elsewhere. Those who maintain themselves in a withering industry and who unintelligently, or through attachment to old ways, or for other reasons, will not face up to the problems of personal adjustment will not be treated favorably by the consequences of their own insistence upon a status quo that has ceased to exist. Those who remain doggedly in a ghost town after everyone has left can hardly expect to continue to live as though all of the former hustle and bustle and opportunity were still present.

             When considered in the overall, the dynamism of the economic system based upon free exchange counts on this adaptability. As things change, so must the capital investment, the location of the people and the direction of their efforts. It is through this process of constant renewal that progress is made. Certain things become obsolete when other things with greater utility become available. And this is as true of labor as it is of anything else. In our present society, there is no longer great need for the work of the candle-maker or of the blacksmith. We live in an age of electric lights and automobiles. In the future, however, both the electric light and the automobile may become outmoded and at such time it will become necessary for those who are now engaged in the making of electric lights and automobiles, and in all of the associated industries, to alter the direction of their efforts so that the new things of that tomorrow may themselves be produced. For us to say "no, this cannot and ought not to happen," is to say that we do not want the development of human society in the direction of those things that free men, in their day-to-day judgment of what is best for themselves, consider better. To struggle against this flexibility and to insist upon the preservation of presently acquired economic positions is to pursue a course that is reactionary in the extreme.

             This is not to say, of course, that such a reactionary position is not perhaps a very sympathetic one in terms of the human hardships that are involved in making the transition from the old to the new. For a man who has been a farmer for thirty-five years suddenly to face the hard reality that the land upon which he has farmed has become a dustbowl, or that there is no longer a demand for the type of commodity he has so long produced, is indeed difficult. There may be great personal tragedy in this.

             But we are blind to the more far-reaching consequences if we do not realize that there is an even greater tragedy in a failure to adjust as of the time when the change of conditions first becomes apparent. There can be no question but what adjustments that we fail to make now, we must make later, probably at a much greater cost, since the disparity between the condition to which we earlier adapted ourselves and the new conditions will in all probability become greater as time passes. Certainly the adjustment will be more difficult if we face the problem of adjustment ourselves, without later leaning upon others. And if, on the other hand, we do not choose to meet the need for change through our own intelligence and energies, but rather call upon the government to come to our aid, we are forcing others who support the government through their taxes to carry the burdens that we will have ourselves in part created through our own unwillingness to adapt. We will force those who are vital and adaptive to carry on their back those who are lethargic and unimaginative. Such a course is not within the ethic of liberty. It is the very opposite of the principles that must be adopted by a philosophy that seeks to maximize the voluntary and minimize the coercive. And, too, it is likewise the very opposite of that emergent religious sense of life that would seek to inflame in the individual an active use of his own  mind, a cultivation of his own self-esteem and a distinct involvement in the ever changing process of life. There is nothing truer than that life is essentially Process.  It is hard to imagine a man of mind, of pride, of sensuous delight in the world, allowing himself to persist in the old judgments that were made to decide between alternatives that have long since departed, or allowing himself to call upon others, against their will, to use the products of their own intelligence and effort to carry him safely through the process that constitutes his life. There can be no question but what the free market, and its ethic of liberty, require strength of character from the individuals who make it up. Nor should it be otherwise. The cold, harsh, ruggedness of "individualism," of the entire concept of economic "survival of the fittest," is in truth an open-eyed, calculated attempt to cut down on the hardships that human beings must face and to lay the foundations for that life that can be ours in the future. In this "inhumane" insistence upon strength of character there is a compassion that no socialist or advocate of the "weakling principle" that lies behind the modern Welfare State will be able properly to appreciate. It is the love of life that brings us to embrace the vitalistic conception of Emergent Man. And this love of life is not a blind thing that overlooks the miseries that lie in the opposite direction. Rather, it understands them all too well. Not that emergence is a panacea; even with the full use of intelligence and vigor, and of good character based upon an ethic that seeks to stimulate these forces, men must necessarily face a never-ending flow of new problems and changing conditions. Indeed, the task is so challenging and difficult even at best that human beings can hardly afford the luxury of a self-indulgent ignorance, moral weakness or lethargy.

 Millions of people still die of cancer. Many others suffer from arthritis, multiple sclerosis, tuberculosis, and other diseases. Fully to appreciate these things in a flesh and bone sense would fill us with horror. And yet, anything that stands in the way of the full dynamic utilization of human energies and intelligence must be given full responsibility for much of such disease and horror as shall exist a hundred or a thousand years from now, since it must certainly be apparent that many of these things will eventually be overcome and could be surmounted sooner if we were to give our total support to the ethic of emergence and liberty.

             To the great-grandchild of ours who will not die of polio or cancer a hundred years from now, therefore, it is the truly vital and progressive men of our age who must appear most compassionate if that great-grandchild looks back upon us with any depth of discernment.  It is likewise to the "rugged individualists" of the past that we owe our own well-being, such as it may be. These were the creative, energetic men who instinctively knew that life is a continuing process and that they must grow with it, or that we would all atrophy. In all probability such men did not stop in the course of their endeavor to say, with a heavy and yet joyous heart, "my driving of these nails today is a part of building the civilization that will allow a Jonas Salk to solve the polio problem in the 1950s."  Surely all of the common people who acted with character and strength of heart during preceding centuries could not have foreseen in a definite, concrete, non-abstract manner the benefits their efforts would bestow upon future generations. But it was nevertheless these creative men who, in the long run, have proved themselves to be most effectively compassionate in respect to continuing human needs, hardship, and fulfillment.  

I cannot stress these facts too much.  It has been the failure to realize these things that, more than anything else, has led America into a negative philosophy during the past few years.  So negative have we been, so equivocal in our understanding of the mainsprings of human well-being and, on the other hand, of human hardship, that we have come to consider it "progressive" to treat as political problems, to be solved by the state, the many challenges that men must face every day in the ordinary course of their economic endeavor. We have put the accent on weakness. In the long run, this will not help the weak; it will only create more weakness, and will breathe into the very spirit of our people a virtual religion of mediocrity that is in no way consistent with the nobility of spirit I have so strongly emphasized in speaking of the religious sense of emergence. Only human beings supply the "motive power" that makes human progress possible. It is through men who say, with Ayn Rand, "I am the motor of the world" and who live their lives in this fashion, that the condition of future men will be made better than our present condition.

 Not very long ago, I attended the University of Denver Law School. Each year in April or May the law school would hold its annual Derby Day. For that one day, all law students would wear black derbies and the seniors would carry canes. A number of activities went on during the day, including a scholastic awards breakfast, a banquet in the evening, a dance, a softball game in the afternoon, and a golf tournament. During my senior year the festivities were held at a mountain lodge a few miles west of Denver. Since it was not at all certain that the weather would be good on the particular day chosen, the student who was in charge of arranging the activities thought that it would be fun, in case we were all kept indoors by rain, to stage a debate between two law students. There was present in the law school another student who was almost as "conservative" as myself.  He was (and is) an excellent after-dinner  speaker, whose humor was like that of Will Rogers. In my effort to settle upon something that would be entertaining to the student body and their dates, I suggested to him, and we arranged, a debate between ourselves. It was our intention to imagine that we were debating back in approximately the year 1915 and to base every argument upon the perspective that we would have had back at such a time. The subject was to be "Resolved, That the Federal Government Should Subsidize the Horse and Carriage Industry."  In support of this proposition, I contrived a number of arguments analogous to the arguments that have since been used by those who have argued that the government should subsidize farmers. One of these arguments, for example, was that the horse and carriage industry should be guaranteed a "parity" level of income comparable to the income that horse and carriage makers enjoyed during the years 1809-1814, which we used as a "standard."  I was also prepared to argue that the "fair share" of the national "pie" (gross national product) that should go to the horse and carriage industry was one-seventh of the total pie produced.  I also planned to stress in every way the great humanitarian difficulties that arose out of the horse and carriage "problem."  I had planned to argue strenuously the case of the "family blacksmith," who had so long been the backbone of the nation.

             Unfortunately, it didn’t rain. My overwhelming compassion for the blacksmith, harness-maker, hay-raiser, and the like, was never given expression.  Instead, the student body was altogether too consumed with the pleasure of taking automobile drives in the mountains, driving down to the golf course for the tournament, and in other ways enjoying the benefit of the blue skies.

             While this whole debate was conceived in a spirit of fun, the moral that it would have taught was a deadly serious one.  In advocating a subsidy for the horse and carriage maker, even with the most genuine sympathy for him, I would not have been arguing intelligently for his well-being in any enlightened sense. I would have been arguing for his stagnation. I would have been making it easy for him to avoid facing the problems of a world in flux. The subsidy that I would have advocated would have retarded the growth of the automobile industry and of all associated enterprises. This in turn would have retarded our material progress in an indeterminate number of ways, and with this retardation there would ultimately have been a necessary slowing of our cultural and intellectual growth.

             The action that, tongue in cheek, I would have supported in this debate, that of subsidizing the horse and carriage industry, would not -- in short -- have been a "positive" act.  It does not take much insight today to understand that such a thing would have been intolerably negative. And yet it is the very same sort of governmental activity that is today thought, according to the prevailing orthodoxy, to be "forward-looking."  It is said that we must "get America on the move again," and this is taken to mean that government must pass a law declaring it illegal to work for less than a given wage, that government must make extensive provision for the health needs of everyone who in the future may reach old age, and that the federal government -- rather than the states or the people themselves -- must set about the task of providing schools to educate our people.

             All of this leads directly into our next point in the discussion of the economics of liberty. It is that the market economy, to work satisfactorily, must be founded upon the existence of certain preconditions of an institutional, legal and ethical nature.

Freedom in the economic sphere is not, nor could be, a thing unto itself. All of the rest of this book is, in a sense, concerned with the necessary preconditions of economic liberty, just as our concern over freedom in this area in this chapter touches closely the possibility of preserving freedom in the other so-called "non-economic" aspects of our lives. Later discussions of jurisprudence, the family, the role of government, the monetary system, and the like, just as with our earlier discussions of the need for moral principles and of the philosophy of emergence, all concern the preconditions of a general liberty in all of our undertakings.

 

In specific relation to the "economic," however, it is important to appreciate that private property and the Act of Exchange can serve as the basis for a well-functioning market economy only if a legal system exists that defines the rights appurtenant to the ownership of property, specifies the attendant obligations, and makes available the effective remedies that may be invoked through the courts to enforce the laws serving as the legal foundation.

 Different legal systems have evolved bodies of law dealing with these problems. The Anglo-Saxon legal system has developed over several centuries an immense body of case and statutory law, the greater portion of which is concerned with economic relations.

             Anyone interested in the history of the law will find fascination, for example, in the long evolution of the law of real property. Centuries ago, in the days when a large portion of the population in England was illiterate or did not have the means to handle their affairs through writing, it was the custom to transfer real property through a ceremony known as "livery of seisin."  The parties actually went upon the property and, taking a clod of earth or a twig from a tree, symbolically passed the ownership from the previous owner, called the "feoffor," to the new owner, the "feoffee."  Certain very definite phrases had to be used at the time of the livery in order to convey any specific type of interest in the property.  But the law was extremely involved and subtle, with complicated procedures and rules pertaining to such matters as the succession of real property upon the death of the owner, the conveyance of "future interests," the Rule against Perpetuities, the Rule in Shelley's Case, the Statute of Uses, and the like. Much of this still has an important place in our modern law of real property. 

             Our modern law of real property and of conveyancing contains much from this historic past, although new elements have been added. For example, the Colorado law as to water ownership, based upon a doctrine of "appropriation," is an innovation that was unknown to the law of England, which was based upon a "riparian" system that protected the full, undiminished flow of a stream as against the taking out of the water for appropriative uses.  Another important change has occurred in the modern recording statutes, which have gone a long way toward making the ownership of real property something that is reflected by public records.

             In mentioning the law of real property, however, I have chosen as an illustration only a small part of the law as it pertains to property. The Law Merchant developed a great body of rules dealing with negotiable instruments. Today we have the Uniform Negotiable Instruments Law to cover the same area.  Rules exist as to bailments, nuisance, trespass, the administration of estates of both decedents and mental incompetents, and all of the other laws go together to provide for the definition of rights and for their enforcement.

             What is interesting about all of this in connection with the philosophy of liberty is that very few of the rules are themselves essential to the existence of private property. Other rules, more adapted to customs of other peoples, of different times or places, could be substituted for those developed in England and the United States without necessarily having a detrimental effect on the working of the free market or the existence of private property. What is important is that wherever there are mutual relations involved and potential conflicts of interest, there be applicable rules, of a general nature applying to everyone, that are certain and that are known in advance. Whatever rules are worked out must, of course, be such as to produce in their overall effect a workable system that will facilitate the essential requirements as to private property that we have set out earlier here, such as the requirement of free alienability and of exclusiveness of use.  For example, the law as to Wills and Estates could just as well say that a man's widow will receive all of his property upon his death without a will as for it to say that she will receive only one-half, and his children the other half.  Or the split could be according to any fraction chosen by the legislature, in keeping with the desires of the people of the given time and place. Whatever the rule, the outcome would be foreseeable in advance, and if the person contemplating death did not desire that particular outcome, he could execute a will to make other provisions. What would be harmful would be for the law to be uncertain as to the rules of devolution, so that a man would not know what intestacy would entail for his survivors, or for the law to make no allowance to the individual to make a will so that he could pass his property according to his own choice. This latter restriction would contradict the principle of free alienability. But, even here, the law as to the form and execution of wills can have infinite variation. It makes little difference whether the revocation of a will, for example, must be done by tearing the will, or whether it may be accomplished through other methods, so long as the rule about revocation is clear and knowable in advance. Whatever body of rules it is that provides the essential ingredients of the private property system, the individuals acting within the system are enabled to use the rules as tools with which they may work, and as guidelines for their own action.

             In working out a system of such law, or in judging a system that already exists, the philosophy of liberty will necessarily have a great deal to say.  Some rules will be more workable than others in achieving the ends that are required for liberty, as we have explained them earlier. A broad discussion of the philosophy of liberty could not, however, pretend to anticipate all of the problems that presently exist or that may come to exist in the future. It is a question of the adapting means to the attainment of certain well-defined ends. There may be a number of ways by which a given end may be accomplished, some of which are as good as others and some of which are deficient. The system of law must solve these problems very much as they arise. Many of the problems are not foreseeable in advance, because of the tremendous complexity of the human situation. Those of us who live during the 1960s can hardly prescribe the laws that will be necessary to control property transactions involving interstellar space. A hundred years from now there may very well be a need for the Congress to enact a statute providing for the homesteading of property upon some other planet. What the specific provisions of such a statute should be can hardly be set down in advance. Therefore, we can make no pretense of discussing all of the ramifications of the legal foundation that may be useful to support the market economy of the future. We cannot even attempt to discuss all of the present problems. It is enough that we appreciate, through the illustrations we have cited, that the market economy is by no means a "lawless" system. It is very far from being a system of anarchy or a condition of chaos. The law plays a vital role, even though the law makes no attempt to determine what the individuals will accomplish by their liberty. The law is present merely to provide the structural framework whereby that liberty may exist and flourish. Without this framework, there could be no private property and therefore no market economy. Without, for example, an effective enforcement of contractual obligations in the courts of the land, there would be no really stable relation upon which acts of exchange could be based. There is no antipathy between liberty and law, when considered from this perspective, unless the law fails in its task and is either inadequate in its definition of rights and obligations, and its provision of remedies, or actively seeks to impinge upon the freedom of choice of the individuals involved by doing otherwise than maximizing the alternative forms of conduct they may follow.

             But, while a proper foundation of law is necessary to liberty, if the principles we have mentioned here are forgotten and the law is allowed to become the instrument of some other ideology than that which seeks to enhance men in their voluntary activities, the laws that are promulgated may become very much at odds with the free market. This has been the case in the United States, as elsewhere, during the twentieth century with the growth of the so-called Welfare State. One of the outstanding features of American constitutional law prior to Franklin Roosevelt's New Deal was the doctrine of "freedom of contract," which was stated by the Supreme Court as a part of “substantive due process.”  There can be no question of the propriety of such a legal doctrine in a free society. The constitutional doctrine of "freedom of contract" was no more than a statement of the right of free men to engage in acts of exchange.  It expressed a right as fundamental as the freedom of speech or the freedom of religion. When the Supreme Court interpreted the due process clauses of the fifth and the fourteenth amendments as including the basic liberties that must be adhered to in any society if it is to remain free, the Court could hardly have left out the right freely to contract, which is -- as we have seen -- at the heart of the market economy.  If the Supreme Court had not found such a right to be present in the due process clauses, certainly such a right would be foremost among those contemplated by the ninth amendment to the Constitution of the United States, which states that "the enumeration in the constitution, of certain rights, shall not be construed to deny or disparage others retained by the people."  

The "freedom of contract" doctrine was an important restriction upon the movement away from economic liberty during the 1930s in the United States. It was under this doctrine that the Supreme Court struck down such legislation as minimum wage laws. From the perspective of the philosophy of liberty, it is to the everlasting discredit of the New Deal, and of subsequent administrations, that this sort of restrictive legislation was allowed to prevail over a constitutional doctrine of such fundamental soundness. Indeed, the whole concept of "freedom of contract" has been virtually eliminated from American constitutional law during recent years.  One of the more important and immediate tasks of jurists in any reawakening of libertarian principles as guides to political action would be to reinstate this doctrine to its former place. This would necessarily entail an outright rejection of much of the so-called social legislation that has imposed restrictions upon men in their economic choices. So long as the doctrine of freedom of contract is not effectively a part of our constitutional system, we will have deviated in a major way from the legal framework essential to economic liberty. We will have adopted the point of view that government has a right to make the decision for the people as to what economic exchanges are best for themselves, a point of view that is utterly opposed to a philosophy of voluntarism.

             And even though the anti-libertarian position may be derived sincerely from a desire to effectuate a system that its proponents consider superior to the unhampered market economy, it must be apparent from all that I have said and will say in this book that the consequences of so restricting the choices between which men may voluntarily choose are far from satisfactory in their effect upon the well-being of the overall society, not only when one considers the specific effects of the restriction itself, but also when one considers the very momentous moral and ideological deterioration that must necessarily accompany any serious deviation from liberty and in favor of authoritarian principles. Although I cannot discuss in this book all of the more specific aspects pertaining to the legal foundation of the market economy, it has been necessary to mention the "freedom of contract" doctrine, and its virtual disappearance from our constitutional law, because of the significance this has in relation to contemporary political issues.

             It might be well, also, to discuss at least one other matter. This is the question of whether it is appropriate for government to regulate the uses to which property may be put through zoning legislation. When one is among that small body of persons that is today concerned intellectually with these questions of underlying philosophy as they relate to the preservation of liberty, one oftentimes hears the thought mentioned that zoning restrictions may be incompatible, per se, with the principles of exclusiveness of use and of free alienability.

             It would seem that zoning restrictions on the use of real property might either militate against the system of private ownership or, on the other hand, might do a great deal to enhance the workability of the system. There is no doubt but that the zoning of real property may be used as an arbitrary tool to impose restraints that, giving expression to the particular tastes or policies of those who possess the political power, serve to restrict the overall alternative forms of property ownership and of use. But while this may be true, it is likewise true that the use of zoning may very considerably increase the effective existence of just such alternatives, so that there is a richer area of choice and of opportunity here.

             Examples may easily be cited. On the one hand, it is possible for a zoning ordinance, in an authoritarian state, to provide that all persons who are not politically approved by that state shall not own property within a given area or use any property for particular purposes. As with other coercive legislation, zoning regulations are subject to severe abuse if not guided by sound principles. On the other hand, to choose another example, a zoning ordinance might provide that "no factory shall become located within the Cherry Hills residential area."  The effect of such an ordinance is to provide a stable basis for the ownership of residential property, without the continual threat of nearby smoke, fumes, and factory noises and odors. Provided that the overall zoning plan makes ample provision for different forms of use, seeking to accommodate all of the possible categories of use, the total effect may very well be to render more satisfactory virtually all of the types of uses than they would be if each could readily be encroached upon by the others.

             It would seem to me that the same test applies here as elsewhere in the "weighing" process that is involved in determining a great many social questions. It is necessary to look at the particular problems of a given locale to see what sort of regulation, if any, may be helpful toward increasing the effective alternative forms of human activity. If such a broadening of alternatives, by providing a framework of zoning regulation that will amply accommodate the many uses of real property, is made the guiding end toward which zoning regulation points, and if every particular regulation is scrutinized with a critical eye to determine whether it in fact aids or impedes the accomplishment of such a purpose, then such zoning regulation is altogether justifiable under the second part of the principle of liberty I have discussed at some length thusfar, the part that enjoins us to "accentuate the voluntary" and that would have us develop institutions and laws that will strengthen those many types of human endeavor that are essentially non-coercive.

             The foremost objection to zoning regulation by those who are concerned with liberty stems, I think, from an over-emphasis on the principle of "exclusive use". The argument runs that "if some person or group of persons wants to use a given tract of property for some given purpose, and does not desire a surrounding property to be put to other conflicting uses, it should be incumbent upon such persons to acquire the ownership of that surrounding property."  The idea is that only through the ownership of that property can any legitimate regulation be made about its use. Although I can certainly understand this point of view, it seems to me it is misguided, because it fails to understand that the "exclusiveness of use" principle is not an absolute, any more than other principles are outside of the area of mutual adjustments with one another, and because it fails to understand, too, that the free society requires an extensive institutional framework precisely for the purpose of "accentuating the voluntary" through the use of law and regulation.

             Zoning regulation, properly used, is an excellent example of the role a legal framework has in connection with the satisfactory functioning of the market economy. Other examples may be seen in the proper use of eminent domain and in the granting of exclusive monopolistic franchises to certain public utilities. The power of eminent domain involves the condemnation of private property for public use, and the payment therefore of a "just compensation," as set in accordance with the ordinary processes of fair adjudication.  The principle of "just compensation" is itself a considerable limitation upon the arbitrary use of this power. Even then, however, the exercise of this power, if it is to be compatible with liberty and enhance it, must be restricted by certain principles. It is an appropriate tool only if used for appropriate purposes. To some extent, the propriety of these purposes must be judged by the various other principles that a philosophy of liberty would set down in the other areas. For example, the power of eminent domain might quite legitimately be used to acquire land upon which a courthouse or other government buildings are to be located. If the functions performed by the offices housed in such buildings are themselves consistent with the principles of a free society, then it is a necessary corollary -- for the effective performance of those functions -- that the necessary buildings be acquired.  Such purposes for the use of the power of eminent domain are obvious and give rise to little dispute.

             In addition to the obviously sound purposes for which the power of eminent domain may be applied, there is another legitimate use that involves somewhat more philosophic difficulty and subtlety. This is in connection with its use to make possible certain broad categories of human activity that, though significant as creative types of non-coercive endeavor, would be impossible or not nearly as practicable if the power of condemnation could not be used to connect the land that they need in the particular configuration the use would require.  For example, the operation of railroads, or of private toll roads, might well be considered categories of activity that a free society should, through its legal framework, make possible. But neither of these would be possible if a single owner of real estate could, by a simple refusal to sell property lying in the projected route of the road or the railroad, defeat the entire activity. Here again, we find a place where a legal framework, such as through the use of the power of eminent domain, may provide the means for a broadening of the categories of voluntary activity. And, as before, the warning must be emphasized that each particular exercise of the power of eminent domain must be looked upon with a critical eye as to whether it does in fact implement, rather than obstruct or impede, the possible areas of endeavor.

             This same sort of thing is illustrated by the granting, as we have said, of exclusive monopolistic franchises to certain public utilities. Here, too, we find the rationale for the use of such power to be in whether or not it assists the blossoming of voluntary activity. There may be certain industries, such as with public transportation systems, where the capital outlay is so great and the potential demand for the service so known and limited, that no activity in the area could be satisfactorily undertaken in the absence of a guarantee that competing enterprises would not attempt to enter the already-limited market. If such is the situation, the effect of a failure of the legal framework for the free society to exercise its power through the granting of exclusive franchises would be for that legal framework to forego its opportunity to strengthen an area of human activity and for it to leave an essentially unworkable vacuum in which no flourishing and extended enterprise could develop.

             It is to be noted that the use of the legal system in such an instance is not to favor any given individual or organization. Its purpose is a much broader one, quite independent of existing persons and their respective interests. The purpose is to enable enterprises to grow and exist where otherwise they could not.

             In this connection, I must be careful not to be misunderstood. The legal framework of the market economy exercises no value judgment as to the relative merit of particular undertakings. It would not seek to subsidize or encourage one industry because of anyone's determination that "that industry is meritorious."  Rather, the orientation of the libertarian legal framework is in the direction of opening up avenues of approach for as many practicable alternative forms of activity as possible. At this point, the legal system sits back and lets the people themselves, as producers and consumers, determine for themselves the fate of the particular activities, in terms of whether they are actually used. Thusfar here I have illustrated and stressed several aspects of the legal structure that may "accentuate the voluntary" to provide the setting for a well-oiled market economy. The reader ought not to forget, however, that the legal framework is equally to be preoccupied with the question of "minimizing the coercive," which is the other part of the broad doctrine of liberty we have set out.

             It would seem that often the mistake is made of looking at "coercion" as being primarily physical violence.  But coercion is much broader, and has much more subtle methods of attainment, than this. Indeed, one of the primary forms of coercion is to be found in the deliberate manipulation of economic alternatives by one person or group of people against another, so as to limit those alternatives or punish them as an inducement to causing the persons who are victimized to act in a manner that the manipulator desires. All of the "economic weapons" of organized labor, as we know them, are coercive. Peaceful picketing, even if not conducted with physical violence or through the presence of a mass of pickets, carries with it a coercive aspect. This would be true even if crossing a picket line did not entail a fear of ultimate violence. It would be true because the picketing is intended to perform a wider function than merely to communicate a grievance to the general public. The purpose is to cause workers or consumers to cut back on their dealings with the business enterprise that is picketed. Thus, we see that the enterprise, which had a wide number of opportunities so far as possible exchange transactions was concerned, finds them suddenly restricted, or completely cut off, by the picketing, when the persons who see the picket restrict their purchases or other dealings with the business. Necessarily, this restriction of alternatives, of opportunities, is detrimental to the enterprise, is for the purpose of changing in some manner its previous form of labor policy, such as its wage rates, and is accomplished through the conscious intervention of people who desire this effect through the limiting of the enterprise's alternatives. Every ele- ment of coercion is present. Of course, if violence is added, the coercion may become even more distasteful and even more effective.  

Where millions of people are dealing on a day-to-day basis in a market economy, it is not easy for one person to exercise concentrated economic coercion upon others by himself. It is, rather, through the combination of persons that it becomes possible sufficiently to control enough goods or services to make an influence felt on a broad scale. The combination of persons, then, is what brings into play the really great problems of economic coercion. There is so much involved here that I will defer my discussion of it and will devote an entire separate section to the problem of the role of groups in the market economy. As we will see at that time, there is much that the law should say in regard to the proper activities of the different kinds of economic combinations that are possible.

             Because it also involves the accumulation of vast economic resources under central direction, government is the other major threat so far as the exercise of economic coercion is concerned. In a society that seeks liberty, the use of such power by government, as with its other powers, must be severely circumscribed so as to assure the accomplishment of the limited objectives of government without permitting the government to go further and attempt any central direction of what the people in the society are to do in the disposition of their energies and talents. The whole purpose is to leave these energies and talents to the people themselves, to be applied according to their own personal desires and judgment.  Since this, too, is an area of vast discussion, I will explore it more fully in a separate section pertaining to “interventionism” and “socialism.”

 What is important for us to recognize at this point is that the legal framework of the market economy must be one that takes a careful view of the whole potential existence of economic coercion.  It must act vigorously to eliminate the forms of coercion that may exist in private life, where those forms of coercion are separable from other activity that is essentially non-coercive and creative.  And the law must not overstep its own bounds so as itself to become a source of authoritarianism through its own playing of God in the economic area.

             Our later discussions will make it clear that there is coercive potential in almost all economic endeavor, including that engaged in by individuals acting as single units, and that it would be impossible to eliminate this coercive potential, or even the exercise of it, without also destroying the basic forms of voluntary activity. For example, imagine an instance in which one man operates a sole proprietorship, with a single employee. The proprietorship is founded upon the owner's desire to produce a certain good or service for sale in the market. The central aspect of the undertaking, therefore, is a voluntary, cooperative one. It is what we would consider one of the "creative," productive enterprises. But it should be clear, too, that to the owner the work of his single employee is of considerable importance, and that to the employee a satisfactory relationship with the owner is likewise a matter of great personal concern. This is so, because strong attachments of experience, training, habit, etc., have been formed that make the alternative of continuing the association an important one to both, as against the alternative of breaking it. In such a situation, both of the parties have a significant ability to coerce the other in a very practical sense.

             What is to be done here to reduce the effect of coercion, or the possibility of its being used, from strongly affecting the lives of the people involved?  Might not the potential of coercion in such personal relationships go a long way toward dulling the possibility of full integrity on the part of the people concerned?  Surely these are serious questions that go to the very heart of the practical possibility for emergent life by men in general. They are particularly difficult questions because the problems they raise cannot be solved by the intervention of law, and because any individual's attempted solution through the deliberate development of greater potential coercive power on his own behalf only increases the problem for all others.

 

Whether the constant underlying potential for coercion in most ordinary human relationships will diminish or render "impossible" a man's full integrity, depends, I think, almost entirely upon the strength of his own character. It is here that we find the vast difference between the "harsh" doctrine of individual liberty and the much softer "empathy" of the prevailing attitudes. There can be no question but what liberty calls for a force of personal character that is inconsistent with the personal attitudes that, for want of a better word, I like to join together under the heading of the "weakling principle."  For the most part, a man can preserve his integrity in ordinary human economic relations only if he accumulates sufficient savings, or otherwise preserves in his life a practical flexibility, so that he need not feel so urgent a need to preserve a single attachment that it will become necessary for him to make major concessions of his integrity to "keep in good stead" with the people involved in that attachment. It might be well for each person to build up an "integrity fund" precisely for the purpose of giving him this flexibility. Knowing that he has it to fall back on, he will not so strongly feel the need to compromise his basic principles under the pressure of any given situation. In the absence of such "independent means," whether deliberately saved for that purpose or not, the only real preserver of a man's integrity, in drastic situations, lies in his willingness to bear very considerable personal sacrifices in order not to buckle under where really fundamental matters are concerned. Needless to say, knowing human beings as we do, such willingness to sacrifice will only characterize the exceptional individual, although a religion of emergence may do a great deal to cultivate the personal character that is needed for this.

 These thoughts lead us directly from our discussion of the legal framework necessary for a free market into our discussion of the broader ethical principles that are essential to it.

             In contemporary thinking, it is quite usual to judge the market economy by some ethical system that itself fails to understand the philosophy of liberty. Many of the ethical maxims by which we evaluate the capitalistic system are themselves alien to that system. Necessarily, when such criteria are used as the yard-stick for judgment, an economic order based upon liberty will not appear very satisfactory in a moral sense.

              The philosophy of liberty is sufficient to provide its own ethic, which is to say, its own standard of judgment. Thus, the battle becomes one between two or more conflicting ethical systems. It is not in truth a battle between "immoral" capitalism, on the one hand, and morality on the other. At least this is so unless we are willing to concede the essential validity of those moral  systems that hold to conceptions inconsistent with a society based upon personal liberty.

             If the religion of emergence and the corresponding philosophy of liberty to which it gives expression are to be the root of our ethical system, then all that is consistent with liberty, all that minimizes coercion and accentuates the voluntary, and all that constitutes a satisfactory expression of the modes of behavior permitted by that free environment, is to be considered "moral."  Those things that destroy liberty in the broad and enlightened sense by which we would have it understood are, per se, to be considered "immoral."  This perspective makes liberty its own judge, so to speak: the axiomatic basis for the system.

             What are the implications of this liberty-centered ethic?

  First, it gives rise to a positive expression that emergence -- mind, pride, integrity and sensuality -- is at the heart of personal virtue. It further considers as virtuous, in a social as distinguished from a personal sense, any activity that abides by the principles of the free society. Thus, a given act will be considered altogether moral, even if it constitutes a "hard bargain" and even if it results from a "selfish" motivation, if the act is freely arrived at through common consent so as not to be the result or the means of anyone's coercion.  Whether such an act is "virtuous" in the more limited religious sense depends upon whether the voluntary act involved aids or impedes the emergent vitalism of the individual involved.

             Virtually all of this book is concerned with the ethic of liberty as it touches upon the many aspects of human life. We are concerned in this section most particularly with the ethics of the market economy. Probably the most important thing to understand in this regard is that the whole conception of a "fair price" and a "fair wage" is impressed upon the market economy from without.  It is a conception that is alien to the ethic of liberty.  So far as the rationale of the market economy is concerned, there is no such issue as whether a price or a wage (which is itself a "price") is "fair" or "unfair."  Where the resolve is precisely one of letting things be decided by the judgment of the individuals concerned themselves, there necessarily are no criteria by which the "fairness" of a given transaction can be determined. Such criteria would have to assume that there is some external principle, following the judgment of some third party, that is to be accepted over and above the product of the participants' own judgment. The ethic of the market economy does not ask "Was the transaction 'fair'?," but rather "was the transaction 'voluntary'?." If it was voluntary, then -- by definition -- it is "fair," since the standard of judgment is itself one of voluntariness.

This is a peculiarly difficult matter for our contemporaries to understand. We constantly hear labor leaders talking about a "fair wage."  

We are concerned in our "fair trade" laws with the presence of "fair prices."  Rent controls are sometimes imposed with an eye toward keeping rents "fair."  We talk about a "fair day's pay for a fair day's work."  Pickets throughout our country most commonly carry signs upon which are marked in large black letters the word "Unfair."

             But even with all this, have we ever really had any decently intelligent exposition of what it is that makes a thing "fair" or "unfair"?  It seems to me almost paradoxical that very few people have thought it necessary to devote any kind of intellectual effort to defining this very common term, or to spelling out the principles behind it. Even though in a very practical sense the whole conception of "fairness" has become our leading ethical maxim, almost no one (if, indeed, there be anyone at all) has the slightest idea what it requires of the parties involved.  About all that we can say is that it gives us a very easy framework for rationalizing our own sympathies and prejudices.  If something coincides with such of our feelings, then it is said to be "fair."  Otherwise, it is not.  And since pressure groups pushing some special interest have become by far the most articulate elements in our society, this central conception to a large extent voices whatever they articulate as being sound or unsound.

             The concept of fairness, as I have remarked, is extremely vague.  It is bound, then, to express in any given case the truisms we have come to accept as a part of the intellectual orthodoxy of the time. If the prevailing intellectual orthodoxy were to adhere to the philosophy of liberty, the content of "fairness" would be very much different from what it is today.  The very fact that we have in the United States an intellectual orthodoxy that strongly opposes the market economy and, indeed, the overall philosophy of liberty, necessarily means that "fairness" will be given a content that is essentially opposed to the principles the religion of emergence and the philosophy of liberty would support.

             The struggle between the vague ethics of "fairness" and the ethical foundations of liberty will probably continue forever, just as it has thusfar continued through the centuries that have preceded us. It is to be recalled that usury laws, regulating the maximum interest rate that may be charged upon the lending of money, were at one time the object of a very strong attack by the proponents of liberalism, most particularly by Jeremy Bentham. While liberalism was at is height in the nineteenth century, such regulation was at a minimum. But today, we again hear a good bit said about "loan sharks" and about a "fair rate of interest."  There can be no doubt but that this whole matter involves a significant clash of semantics, and that the semantics used reflect underlying conceptions of whether voluntary human relations should or should not to be tolerated.

             This leads us to the following realization: That anti-capitalist theories will often assume the outward garment of morality and, under the guise of this assumed piety, more effectively press their assault upon the more tolerant views that they oppose.

             One of the major points Ayn Rand made in Atlas Shrugged was that the very creative people who should most support tolerance and liberty will often themselves accept a morality that expresses the very opposite of  what they should in fact be supporting. To choose an example outside the economic sphere, it is apparent that a great many healthy human beings accept as a truism the whole conception that human sexuality is ugly and unworthy, involving a regrettable shamefulness. There is tragicomedy in their acceptance of this perverse "ethical" conception.  While it is a doctrine utterly contrary to their own interests, they permit themselves to accept it and thereby -- through lending it the force of their own personality and conviction -- give it its only pretension to validity and an effective control that it otherwise could not exercise. And the same is certainly true in economic matters.  How many businessmen, for example, have come to accept the underlying principle of "minimum wage" legislation?  Not long ago, I attended a meeting where businessmen were discussing the best way to keep the employees of a certain plant from unionizing.   One of the businessmen suggested that in order to show the "good faith" of the employer, the employer should publicly endorse the "minimum wage" proposals then pending in Congress.  From the reaction of the others, I seem to have been the only one who saw the incongruity of this suggestion.   To me, it was fantastic because it meant that they had accepted the very ethic that, in the connection, they rejected.  They had no understanding of what they were fighting.  To them, the struggle against unionization of the plant was something distinct, which had no relation to the doctrines that have given rise to "minimum wage" laws.  They did not see that both the union and those laws stem from a common source that is basically alien to the philosophy of liberty and to the market economy in particular. 

             One of the great needs, therefore, if we are ever to reverse the trend toward statism, is that we develop an appreciation for the libertarian ethic. Indeed, it even goes further than that: We need to know that such an ethic exists.

             Although so far I have emphasized the ethical conceptions opposed to the market economy, there is a considerable body of ethical thought that we act consistently with every day that is altogether compatible with the free market and necessary to it. There is, for example, no principle more consistent with liberty, and with a system of economics based upon private property, than the principle of "Thou Shalt Not Steal."  This is certainly a capitalistic ethic if ever there was one.  Nothing could be more obvious, and I will not labor the point. We need merely notice that this commandment that all honest men accept as a truism is a fundamental ethical mainstay of the free society.

             The same is true of the principle that a man "should keep his word."  Any lawyer in the general practice of law, who deals constantly with the practical problems of enforcing promises that some men have made and others have relied on, and who knows how unsatisfactory it is to have to go to court to obtain their specific performance or damages for their breach, will recognize without any hesitation that the willing, good-faith fulfillment of obligations -- which is to say, rudimentary honesty -- is among the most important of the "cements" that hold a society together. There is a great deal of "keeping one's word," or we could not get by at all. But, while this is true, it is possible to take yet another perspective, from the opposite view, and wonder how we get by as well as we do in light of the number of occasions upon which people cannot be counted upon to carry through as they have said they would.  Last summer, I ran for political office in the state of Colorado, and I found that it became a psychological necessity completely to overlook what would otherwise have been the intense frustration that would have arisen from the utter undependability of a great many people. For example, a printer will promise that he will have ten thousand copies of a pamphlet ready on a certain day. When that day comes, he will have only half that many ready, if in fact he will have any ready at all. I don’t want to multiply the examples, which were abundant within my own experience. I want just to make the point that a widespread lack of conscientiousness must be looked upon as a dangerous erosion of our morality. It is not consistent with that strength of character that is absolutely essential to satisfactory human relations, especially in a free society.

             In discussing the ethical foundations of the market economy, it is necessary to mention, before concluding, that some of the greatest breaches of the libertarian ethic today lie in the action of government and of large coercive institutions, such as labor unions. What an individual could not ethically do himself has often come to be regarded as proper when done on his behalf by government. One man could not steal from another to build himself a house, but it has become accepted for government to use its coercive power of taxation to raise funds to spend on public housing to provide a home for that very person who could not legitimately steal it himself. Writers, such as Bastiat, who are seriously concerned with the problems of liberty have often commented upon this "legal plunder."  Whenever government takes from some in order to give to others with no other justification than the private gain of the recipient, there is to be seen a significant breach of the moral order.  It makes no difference that the whole thing is commonly rationalized as being a consequence of the "majority will" or of the desire for "human welfare."  Essentially, it deviates from the ethic of liberty in precisely the same way that a private theft would deviate, with one possible exception. This exception is that the taking by government involves a lesser chance of a breach of the peace, since the person from whom the property is taken through taxation is in so weak a relative position that he would not dare take up arms to oppose the transfer. To this extent, at least, the action by government is more compatible with continuing civilization than would be the acts of private thieves themselves. But this very virtue arises from the unquestionable success of the injustice itself.

Another illustration exists in the fact that we allow labor unions to obtain the enforcement of "featherbedding" provisions in labor contracts.  I have at least once been connected with a labor arbitration in which unnecessary "work" had been forced on the employer, and in which the labor union was upheld in so doing.   This was not the fault of the arbitrator, but of the applicable law.  In personal matters, how would we react to the same situation?  If a person knocked on your door in the middle of the summer and demanded that you pay him a dollar for having "shoveled the snow from your sidewalk," you would consider him a racketeer and report him to the police if his threats of physical violence were not so strong as to prevent you from doing so.  Yet, there is no difference between this and the "featherbedding" the law has come to condone in labor relations.

             Again, there is no need to belabor the point. It is enough that we appreciate that we have deviated greatly from the ethical system that is the underpinning of a free society, and that we have done so under the very color of law and of government.

             Before closing this discussion of the market economy and its underpinnings, at least one other major observation needs to be made, although almost surely there are others.  This observation isn’t particularly related to what we have just been discussing about the ethical framework of the system.  It is, rather, more an observation about the effect of unhampered capitalism upon the material well-being of the people in general.

             Not long ago a movie came to Denver called "A Journey to the Center of the Earth," based on Jules Verne’s adventure story. This movie was very enjoyable, involving much that was fun and interesting.  A second feature appeared, however, on the same bill at the theatre.  Its theme strongly expressed one of our prevailing prejudices today.  It was about a minister who went to a  nineteenth century western mining town. He found that the two main buildings in the town were a hotel and a brothel. A former madame of the brothel had since sold her interest in it and had become the manager of the mines that provided the town’s basic industry.  She lived in a large mansion high on a hill at the edge of town. The movie pictured her as cold and ruthless.  She operated the mines so unsafely that there were repeated disasters, which killed some of the townspeople. The minister concerned himself with the problems of the townspeople, and especially with the problems of a young widow with several adorable children and a dog.  This widow suffered from tuberculosis, and her husband had been killed in the mine. The movie centered on the minister's effort to organize the mineworkers into something of a labor organization. These workers, under the leadership of the minister, eventually marched on the ex-madame’s mansion.  She remained cold and relentless, but finally changed her attitude at the end of the movie after two of the widow’s children were almost killed in the mine.  While this movie was one of the most blatantly obvious pieces of anticapitalist propaganda I have seen, it was nonetheless extremely effective.   This was because it played  upon one of our most important misconceptions of the history of a free economic system.  It is important as an illustration both of the sort of propaganda we have been subjected to in recent years and of one of our prevailing attitudes.

             The movie had much in common with several men who came up to me and grabbed me by my arm while I was circulating "right to work" petitions in Denver several years ago. After pushing me somewhat, they demanded to know whether by opposing the union shops, I intended that we "go back to the twelve hour day and the twenty-five-cents-an-hour wage."   This was what the unhampered market economy meant to them.

The view expressed by the movie and by the men who came upon me on the street is widely held precisely because it has a certain plausibility. It is altogether possible that freely-arrived-at economic transactions, as between the ex-madam and the townspeople, can have as their subject-matter poor working conditions and unsafe practices. It is a matter of question, of course, why the people of the town persisted in working in that particular town, rather than enter upon their own undertakings either in the town or elsewhere. It is obvious that they permitted themselves to get into a "weak" and inflexible position by not developing for themselves the preconditions of their own mobility.  But, be this as it may, we may nevertheless recognize that the situation described in the movie was not one that we would desire. There can be little question but what the unsafe practices in the mine could legitimately have been controlled by the existing political bodies as a matter of "public health," which has traditionally been a proper concern of government in a free society.

 The fallacy in the movie is a fallacy of misplaced emphasis.  While it is true that free transactions can produce such a situation, especially if the people involved do not have the character essential to the satisfactory conduct of liberty, it is also true that the great movement of the market economy (of "capitalism") is away from a low standard of living, from poor working conditions, and from unsafe practices.

             It was one of the characteristics of the pre-capitalistic system called "Mercantilism" that it primarily produced goods that appealed to the wealthy. Cabinet makers, for example, spent a good deal of time on the detailed carving of their product, and the result was a product that was not intended for mass consumption; i.e.,  by people of ordinary means.  Not nearly as much investment capital existed as we find today, and as a result mass production did not become possible.  Most of the society was agrarian, seeking its low standard of living from agriculture.

             With the advance of capitalism, and its encouragement to the accumulation of capital for productive investment, the emphasis necessarily would have to shift from the production of luxury goods for the few to the production of mass-production commodities for the many.  It is true that luxury goods are created under capitalism, but the mass market lies elsewhere where the society is fluid and the "common man" finds himself able actively to participate in productive enterprise for his own advancement.

             There ought to be nothing clearer than that mass-production, and its necessary corollary which is mass-consumption, carry with them a significant increase in the well-being of people of all economic classes. There is no tendency, contrary to the impression made by the movie referred to and to the misconception held by the men who came upon me on the street, for unhampered capitalism to maintain the general mass of mankind upon the level of a twelve-hour work day and a twenty-five cent an hour wage.  Rather, the tendency is just the opposite. The disappearance of most child labor and the fact that most people have an automobile and television set in the United States today are both due primarily to the underlying economic fact that the standard of living of Americans is greatly enhanced by the vast multiplicity of energies and abilities we have released through a society based upon freedom. It is very superficial, for example, to say that child labor has disappeared because of legislation to that effect, or to say that wage levels have risen because of union or legislative activity seeking such raises. Child labor would not disappear, despite legislation to the contrary, if persons having families consisting of four children found it impossible properly to feed and clothe those children without first making them go to work. Where industrialization is just starting, and relative poverty is the general condition, child labor may be an economic necessity. But it is bound to be one of the first things eliminated by a free people, as a matter of their own choice, as the industrialization continues and as the mass-production makes available a standard of living on a higher level.

             What economists call "real wage rates," defined in terms of the actual goods and services that can be purchased at a given wage rate expressed in terms of money, necessarily reflects the presence or absence of such productive factors as accumulated investment and skilled labor.  If these factors are absent, real wages will be low.  If they are present in abundance, an economic system centered on mass-production and its consequent mass-consumption will necessarily bring about a higher level of real wages.  The fact that industries are so institutionalized in terms of labor organization or in terms of regulatory legislation that it appears that an increase in wages is a product of such institutional activity, makes no difference.  It is quite true that workers may go out on strikes and that a wage raise may follow.  This may, indeed, become the principal outward form all wage increases may take in a given economic system. But this does not mean that the credit for an increasing standard of living is to be given either to the unions or to the government. They are merely the "Johnnies on the spot" who take the credit. We often fool ourselves, in our unquestioning acceptance of our various contemporary "truisms," into taking a very distorted view of the actual cause-and-effect relations that exist in our society.  We do a great injustice to liberty if we identify it in our minds with "sweatshop" conditions.  It is foolish to identify an entire social and economic system with such conditions as may have existed in a semi-industrialized community prior to the invention of the electric light, the combustible engine, the automobile, the radio, the airplane, and the innumerable other inventions that we take so much for granted today.  We would do much better to realize that all of these things are available for mass-consumption today precisely because, for the most part, we have allowed men to pursue their private undertakings vigorously.  As I have mentioned earlier, for example, the entire automobile industry and associated industries are present today precisely because we did not choose to stultify progress by subsidizing the blacksmith, the harness maker, and the carriage maker.  Instead, we provided a milieu in which the automobile could come into being.

             I am well aware that, by way of criticism of all I have just said, those persons who hold to "under-consumption" economic theories, such as those who hold to the "purchasing power" concept, will say that the mass-production that takes place in a capitalistic system will not find its way into the hands of the consumers in many cases, but will rather merely create a glut that cannot be satisfactorily distributed to the ordinary man-on-the-street.  But what are we to make of such a criticism?

             There are several things to be said in this connection.  The first is that there can exist no long-standing "gluts" as to any commodities in a market economy where flexibility of price exists, so that a price can be freely negotiated that will clear the market of all of the goods produced.  Over-production in this sense can only take place where price rigidities are introduced into the market through such institutions as labor unions or government, or through the holding by the producers of a conception of a "fair price" that they feel they must receive before they will sell. If for one of these reasons prices cannot be lowered, or are forced higher than the free interplay of supply and demand would call for, then it is true that inventories may move very slowly or remain idle. But they will not otherwise do so. There can be no general under-consumption or over-production in a free market economy for any substantial length of time, if that economy is not hampered by institutions and attitudes alien to it.

             What we have said is not nearly as true, however, in the case of an economic crisis following a "boom" period as a part of the business cycle. Even in such a case, inventories will be cleared on the market if prices are flexible, but it may be a very painful, and consequently a slower, process.  It is for us to realize, though, that the crisis period of the business cycle is a special case and is not to be taken as the basis for a general perspective.  We are just now in the United States coming out from under the psychological impact of the Great Depression sufficiently to see that the cynical and pessimistic impressions that many of us received during the depression should not be taken as characteristic of a free economic system.  Instead, as we will remark in much greater detail in the chapter that will deal with the need for a monetary system that will provide a stable foundation for the market economy, it is necessary to look back with intelligence and discernment upon the Great Depression not with an eye to condemning the market economy, but rather with a constructive eye to determine precisely what the monetary foundations of a free market should be.  Those who urge us into socialism, or who moan pessimistically about "under-consumptionism," appear to me to lack completely a spirit of constructive intellect in relation to the problems we are discussing.  They have intellectually abandoned, and taken to the role of criticizing, the market economy before they have even bothered to exercise the slightest intellectual effort in the appropriate solution of its problems.

             In another connection, we sometimes hear it said that a person may be excused for having been a Communist or a Socialist during the 1930s, because of conditions then and because of the prevailing intellectual attitudes.  I would have us take exactly the opposite view.  If a society based upon liberty is ever in difficulty, through a lack of perfection in its own institutions or otherwise, that is precisely the time we must be most loyal to it and must give most constructively in terms of our thoughts and our energies toward making it work better. To adopt, as has been so fashionable in our contemporary period, a degraded perspective that holds that “alternatives to an ‘unworkable’ liberty must be found” is to lack all moral and intellectual character at a time when they are most needed.   [Note in 2001: It is worthwhile for the reader to notice how strongly I have felt about the need to affirm the market.  In the late 1990s I came to believe that the revolution in technology is, by introducing workerless processes that won’t need the employment of hundreds of millions of people, creating a crisis for a market economy, which has counted on work as the primary source of income for the great mass of people.  If this concern is valid (and many devotees of the market don't acknowledge that it is), it becomes necessary to seek ways to affirm the fundamental values of an individualistic, free society despite not being able to base it on the economic foundation that I assumed for it in Emergent Man.  This creates a major challenge to both the theory and the practice.  I have addressed these issues in my book manuscript on the impact of workerless technology.]

             Let us conclude here, then, with the following observations by way of summary.  The "capitalistic system," which we have called the market economy, is an economic system that has as its general tendency the increase of economic wealth for the members of the society as a whole.  It primarily engages in mass-production, and this mass-production necessarily means a very considerable mass-consumption.  Capitalism is itself an active enemy of the "sweatshop" conditions that characterize the beginning of industrialization.  The market economy is essentially justified by the liberty it makes possible at the individual level and -- in turn -- it is precisely this liberty that releases the productive energies that are responsible for greater human productivity and well-being.  And, as we have further remarked, the system of economic liberty should certainly be able to work well and with stability if those persons who make up the society have sufficient character to address themselves to such problems as may arise.

             But one final warning: The value of a free society is never to be measured exclusively, or even predominately, by its economic successes.  It may very well prove to be possible that a totalitarian society, through the coercive funnel- ing of human effort into "crash programs" directed toward the development of such things as solar energy or the like, may surpass a free society in its economic aspect, especially where freedom and totalitarianism exist side by side and are in competition with one another so that the rulers of the coercivist state do not settle back into that lethargy and self-indulgence that is so characteristic of statism.  If we think that the principal justification of liberty is in its economic productivity, we fail to appreciate the great cultural and humanistic reasons why liberty is so important. If it is with the emergent expression of individual human lives that we are concerned, then there can be no doubt of the infinite desirability of liberty as against its alternative.

 Business Organizations, Unions and Monopoly

Up to this point, we have deliberately refrained from discussing in detail the many complicated problems associated with the bringing together of productive factors in combination.  This is an immense area by itself.  It is necessary that we understand what constitutes the valid role of group economic action in a free society and what, on the other hand, is not legitimate.

As with the philosophy of liberty as a whole, the problem is essentially one of distinguishing voluntary activity from coercive activity. The coercive is to be minimized and the voluntary is to be encouraged and provided an institutional base.

It is a truism, which seems almost so evident as not to need expression, that the bringing together into combination of raw materials of all kinds, including human skills and energies and  investment capital, is a necessary part of effective production, just as in other areas, such as with a concert orchestra, little could be accomplished without combination.  We would have very little effective human activity, in comparison with what we are familiar with in our everyday lives, if each individual were to act separately as a productive unit without combining together with others for creative purposes.

The explicit recognition of this is important precisely because this creativity is the justification and rationale for our acceptable forms of business organization.  The combination of persons, by itself, may be either for coercive or non-coercive purposes, but in any case the very fact of combination increases the effective potential for coercive activity if such purposes were to be developed and pursued by those who are acting in combination.  We can see that, though this coercive potential is increased, there are innumerable creative, completely voluntary, and non-coercive purposes for which people may come together in virtually any area of life, including the economic.

             In saying that we should minimize the coercive and accentuate the voluntary, the philosophy of liberty would best make a very positive value judgment in favor of business enterprises established for such productive purposes. This carries with it all of the moral force that the ethic of liberty can bestow upon a given activity.  Productive activity in the pursuit of trade enjoys all the blessings of the philosophy of liberty.

             This is not so, however, with certain other organizations.  These other organizations may appear superficially to have much in common with productive business enterprise.  But if their activities are essentially coercive, and their coercion is not to be considered an incidental off-shoot of other non-coercive purposes, then they are not to be treated the same by a consistent philosophy of liberty. The distinction is one that truly makes a difference. The distinction between coercive and non-coercive undertakings is one that should never be overlooked.  To overlook the distinction is to blank out the essential moral difference.  They are, in underlying fundamentals, so basically different from one another that they call for vastly different treatment, both under our laws and in our ethical evaluations.

             Although what we have just said has been stated in very general terms, it has profound ramifications in terms of the specific institutions that exist in the twentieth century.  When reduced to its specific meaning, it imports that by far the greater proportion of what we have come to know as business enterprises are to be considered not only highly ethical, but are to be recognized, as well, as the life-blood of our society based upon liberty.  Although there are a considerable number of young people today, especially among those who are relatively well educated, who consider it immoral to make a profit, and who feel as one physicist friend of mine expressed it, that they are "prostituting" themselves if they work in private industry, it is nevertheless certainly very true that what I have just said praising business enterprises is less controversial than the other conclusions we are about to reach here.

             These other conclusions pertain principally to labor unions. When we think about labor organizations, it is apparent that they could be brought into being to exercise exclusively non-coercive purposes, with only incidental coercive attributes of such a nature as would be inseparable from the other purposes they might follow.  For example, workers may combine together to participate in social activities, such as dances, sports, and the like. Or they may organize to act as an association to assure a decent burial for each of their members.  In short, they could organize for any of the non-coercive purposes for which so many other people get together in their ordinary relations.

             To the extent that they do this, they are in no way objectionable under the ethic of liberty. 

 But the mere suggestion of this must necessarily be repugnant to many readers of this book, who will immediately remark that such purposes are "weak" in the extreme and would render virtually "impotent" those vast institutions that we have come to know as labor unions.  To insist that labor organizations exist solely for such non-coercive purposes would be, to present-day thinking, to insist upon the virtual "busting" of unions.

 Instead, labor unions as we know them characteristically are centered about coercive purposes, wielding what are known as the "weapons of labor."  The labor market is seen as a "battle ground" in which business enterprises come together with labor unions in an "economic conflict" through which wage levels and working conditions are established by superior force.

             How does the labor union measure up, then, when judged by the ethic of liberty?  It should be readily apparent, if we do not dissimulate about the matter, that they are, when considered in light of the purposes for which they are presently organized, completely alien to an ethic that says "minimize the coercive."  A consistent ethic of liberty must judge the present-day labor union harshly.  It will not consider the labor union on a par with creative business enterprises organized for non-coercive purposes.

             This goes much deeper than most people are willing to admit. It goes to the very validity of the so-called "right to strike" and of the right to engage in economic picketing, the two principal weapons of organized labor that Americans accept almost unanimously today.  A philosophy that says "minimize the coercive" will not consider such combined activity to be analogous to other forms of association that themselves fall within the area covered by the freedom of association.  The ethic of liberty will praise business organization, but will condemn labor unions, as we know them.  It will not consider them as being on an ethical par.

             The thoughts just expressed will most certainly be received by the great number of critics of this book as being virtual obscenities.  They are thoughts that it is simply not permissible to hold in the United States today without evoking a violent repulsion.  But does this fact alone render them unsound?  Are we, in our attempt to determine what is most necessary for a society based upon liberty and in our seeking to express the preconditions for individual emergence, to accept as unquestionable institutions that, in their practice, violate the most basic principles of our libertarian ethic and that, in their inception, have arisen from attitudes and misconceptions that have very much  misunderstood and, in the main, despised the whole concept of individual liberty as it applies in economic affairs?

             I have just expressed the principal philosophical reason the ethic of the market economy will favor business organizations and oppose labor unions: That the one is a voluntary association that is to be accentuated, while the other is a coercive combination that is to be condemned.  In order to understand the immense practicalities behind these judgments, it is necessary for us to reawaken our appreciation of the value of liberty as we have spelled it out in every other section of this book. We must, for example, recall the problem of Tolstoy and his firing squad. We must bring to this connection, in like manner, all that we have said so far about the value of tolerance among human beings, about the spiritual necessity for a religious sense of emergence, and about the perspective that essentially the entire question of liberty pertains to the free use of the human mind. This book attempts to bring into focus the humane and progressive nature of liberty.  Let us not forget all of those insights at this point in the discussion.  Rather, we must appreciate them here, more than at any other point, if we are to understand precisely why the view the libertarian ethic takes of labor organization as we presently know it is a dynamic and humanistic one.

             Although the need for liberty is itself a sufficient reason for open hostility between the philosophy of liberty and present-day labor organization, there are economic criticisms of these institutions that are themselves quite important.  A close analysis will necessarily show that many of the notions we presently hold about the "beneficial effect" of labor organizations simply are not sound.  We find ourselves here, once again, coming up directly against ideas that have come to be accepted as truisms.   And yet, as before, one cannot avoid, for that reason alone, applying his reason to the questions involved. Much is to be gained from an intelligent analysis of the economic effects of labor union activity.

             It has become almost unthinkable to doubt the merit of union activity aimed at setting wages. Although there is occasional criticism that the union activity produces inflation, few people express any doubt today about the truth of the view that labor unions have played a major part in attaining the high standard of living American workers enjoy. As a matter of economics, however, this view of the effect of labor unions upon the workers' wages is false and misleading.  It is, indeed, far more probable that the organization of American workers into labor unions, with the strikes, picketing, secondary boycotts, featherbedding and physical violence that have attended the movement, has -- on the whole -- held Americans back from what they might otherwise have achieved.  It may well be true, although it is heresy to say so, that labor organizations have in fact lowered the standard of living for American workers.

             In their economic effects, collective bargaining wage-setting and minimum wage legislation are very similar. Both involve an attempt through the use of coercion to raise wages for particular workers above what those wages would be if left strictly to the operation of supply and demand.

             At first glance, a person is inclined automatically to think that collective bargaining and minimum wage legislation raise wage standards, and that they thereby improve the lot of those who had previously made a lower wage. Unfortunately, this is almost entirely an illusion. The collective bargaining and the minimum wage legislation do not in fact make any provision for the continued offering of jobs to all of the workers who had previously worked for the lower wage. The labor contract, or the minimum wage statute, merely states that those who are hired will be hired at a given level and that none will be hired for less. They eliminate all transactions, within their sphere of influence, in all of the situations where the employers and the workers still seeking jobs cannot mutually agree that a profitable relationship can be entered into between themselves at the wage that has been set. The upshot is that any worker whose productivity, in terms of the money value of whatever it is he produces, is less than the prescribed minimum wage or less than the union wage will automatically lose his job. He will suffer the hardships of unemployment.   If the wage had not been set by a given group or by the government at a level higher than that at which supply and demand would have set it, he could have continued to work in that particular industry for a wage that would have been sufficiently low to induce someone to hire him.   [Note in 2001: The cause-and-effect may not be quite this direct.  It may be that existing employers won’t just add more workers.  Instead, the availability of lower-cost workers may make new enterprises feasible that previously were not; and as they come into being, they may be the ones that will provide the further employment.] 

             The important fact to remember is that no one in the ordinary run of business, unless forced to do so, will hire a worker for more than the worker seems worth to him. This is in no way different from any other free transaction.  Acts of exchange, in the labor market as elsewhere, take place only when each party feels that the exchange is beneficial to himself.  For example, if a worker only produces 65 cents an hour worth of goods, very few employers will pay him more than that.

             If a labor union enters the scene, or a minimum wage law is passed, and says that there can be no further exchanges of labor for less, say, than 70 cents an hour, what is the result of such an action?   Certainly it must be that opportunity vanishes so far as the individual who can only produce 65 cents per hour worth of value is concerned. Instead of being able to work at the "low" wage, he has forced upon him the alternative of total unemployment. This is so even though the union activity and the minimum wage legislation are intended quite ostensibly for his benefit.

             Union wage policy and minimum wage legislation provide no benefit to workers whose wages and productivity fall below the wage level that is established. They harm that worker.  In this connection, it is well to point out that in the case of Adkins v. Lyons, one of the first cases to come before the Supreme Court to test the constitutionality of minimum wage legislation, it was the employee who opposed the law. She sued for a restraining order against the government on the ground that her employer could not continue to employ her at the wage-level established by the government board enforcing the law. She had, because of the board's action, lost her job as an elevator operator for a children's hospital. In the light of such a situation, can we dogmatically insist that the effect of the legislation was truly humanitarian?

             These same considerations apply even in cases where a worker's productivity is higher than the union wage or the minimum wage level, and where competition among workers to fill a limited demand for labor would otherwise have bid the wages down to a lower level. What we must remember about the lower wage is that it has been bid sufficiently low as to make it profitable for the employers to hire the entire labor supply. The employers, in such a situation, may find it profitable to use the labor available instead of spending investment capital on the purchase of additional "labor saving" machinery.  In a labor market based upon individualized competition, all workers seeking employment would find employment. It is quite true that this full employment is brought about by the bidding down of the wage level to a point at which the employers will begin to see profitable uses to which to put the many workers available. If a law or a labor union comes in to eliminate all jobs below a minimum higher than the established wage rate, what will the employer do then? About his only alternative is to hire as many of the workers as he may find profitable at the higher wage and has the resources to hire. Therefore, as a part of this, he will hire only those whose productivity is higher than the wage level set. The other people will find themselves out of jobs. The total labor supply could be consumed only at the lower wage level.  The result is that some men are benefited, while others become unemployed.  These unemployed workers consequently must seek jobs elsewhere, either in industries they have considered less desirable, or where there is no union organization, or no minimum wage laws.

             It has become characteristic of our times that there is a separate wage called the "union wage" and, in addition, a "non- union wage."  The union wage is invariably higher than the non-union wage. The inference most people automatically draw from this is that the union organization is beneficial and has produced a higher wage for its workers.  The non-union industry or employment is thought of as substandard.

 By this time, however, from what we have said, it ought to be plain that in an individualized labor market there would only be one wage for comparable work. Where there are separate wage levels created by union activity, the union wage has been pushed higher by coercion, and the non-union wage has been made appreciably lower. The use of the so-called "weapons of labor," the strike, picketing and secondary boycott, has coercively set the union wage higher than it otherwise would be. As a result, the number of jobs available in the enterprises have been limited. Over the period of time involved, which may be a lengthy, there must inevitably be a migration of labor, among those who cannot find employment at the higher wage, into other areas.  Wages are bid down there as a direct consequence of the union activity. Until the men who are thereby displaced can find such employment, those men rank among the unemployed. It has become characteristic of our economic system in the United States during the past three decades or so for there to be a large continual residuum of unemployment. This is almost invariably blamed on the capitalistic system itself, but common sense would indicate the cause for the unemployment lies elsewhere. One cannot help but feel that this significant residuum of unemployment is of a sort that economists have come to know as "institutional unemployment" resulting from labor union activity or from minimum wage legislation.

             It is misleading for us to conclude that jobs that fall below an arbitrarily chosen wage level are "substandard" and an evil that we can best do without.  One thing we should remember is that each man and woman -- each worker -- has chosen his or her "substandard" job precisely because that job appears the best available.  If it is, the forcing of a higher wage by union activity or by legislation may ruin his opportunity for the promotion of his own interests.  If it is not, then the solution lies merely in acquainting the worker with his better opportunities, of which he has apparently been unaware. To ruin his earlier job opportunity may be one way to make him aware of the other opportunities, but I do not believe anyone would seriously argue that this is a good way to broaden his outlook.  It wouldn't hurt us, too, to have a little humility. What looks to us to be a better job opportunity may not look nearly as enticing to someone else.  That other person may have subjective standards that we cannot even come close to understanding, as we saw by my earlier reference to William James's essay "On a Certain Blindness in Human Beings."  Even if a job pays more money and if a worker knows about it, it may not be as attractive to him as another job for which lower wages are paid. The higher paid job may involve work, conditions or personal relationships that are distasteful to the particular worker. Or it may be that the very fact that the worker would have to change jobs would involve hardships upon him that he would prefer to avoid. From such a worker's point of view, the destruction of his present "substandard" job by union coercion or by law is against his own best interests.  He finds himself with less satisfactions afterwards than he did previously.

             Probably, though, he will not blame the union or the law for his hardship. In fact, not understanding the causes of his predicament, he may even become a strong labor union adherent or one of the many voters who support public officials who favor minimum wage legislation. It is likely that he will accept the usual interpretation our contemporary thinking puts on his problems, which is that for some vague and indeterminate reason free capitalism by itself generates the hardships he experiences. 

             Where the demand for workers by employers, relative to the supply of workers, has been sufficient to cause the wage to be bid up to a level at or near the productivity of the workers that are hired, the forcing of a higher wage can only have the effect of destroying some jobs. Even if the employer were to raise the price of his product, it remains true that no employer would hire for more than the employed person produces. To do otherwise would mean that the employer would incur losses. If, upon raising the price of his product, the total volume of his sales does not fall, then the higher wages are paid, in a certain sense, by the consumers.  However, it is to be expected that the businessman will hold his price as high as he can consistent with the sale of his total production or inventory.  If he had thought he could raise his prices without a decline in the volume of his sales, he would have done so. If a coercive raising of the wages forces him to raise his prices and he discovers that he still makes the same number of sales, he must necessarily know, if he thinks about it, that he has previously been underestimating the demand for his goods and has been bypassing a profit that he could have made without the elevation of wages. In relation to the businessman's total opportunity for profits in such a case, the increase in wages has in fact subtracted from it, although his actual profit may be very much the same as before because he has discovered, to his surprise, that he could charge a higher price without selling fewer goods. However, whatever the case may be, the businessman finds that he is does not make the profit he otherwise could make, and the consumers paying higher prices for the same goods.  If, on the other hand, the businessman had formerly correctly understood the demand for his product and a price increase brings about falling sales, the consumers are again injured.  They will not have available to them the goods or services at the lower price.  Also, the business enterprise loses profits by the loss of sales. Thus, in either of the alternatives mentioned, the business- man will not sustain the loss of profit unless he is forced to undergo it by coercion.  He will react in fairly predictable ways.  So far as the worker is concerned, the important consequence is that the employer – if not forced to hire the entire unemployed supply of labor at the fixed wage -- will merely adjust himself as best he can to the more expensive labor and will not hire any worker whose output seems to be less than the wage demanded.

             It is good for us to understand these economic consequences. It will also be well to appreciate that any classification of what is considered a "substandard" wage must necessarily be arbitrary.  It is the type of arbitrary thinking that tends strongly to create intolerance toward the freedom of men to act in the ways that seem best to themselves. It produces philosophies and programs that seek to restrain free men from seeking the best jobs as far as their own evaluation of their own interests is concerned.  This is as true in the labor market as it is elsewhere.  

Although I have been critical of the economic effects of labor unions, and have expressed strong opposition to their use of coercion through the strike or otherwise, I think labor organizations should be able to do a great deal of good by performing the non-coercive functions mentioned at the beginning here. In addition, as a political force, they may do a great deal to cause the effective passage and enforcement of proper laws concerning public health, safety and the like. It is a proper function of government to provide needed regulations to safeguard the public health.  Of course, to be legitimate, such a use of government power must be palpably connected with public health, and health should not be used as a mere excuse for putting into effect the very coercive programs we have just discussed.

             It seems, too, that labor unions may legitimately perform a significant role in a free society in at least two other areas. One of these is the role of educating their members. They could establish classes, student  programs, scholarships, and the like. They could inform their members about any number of useful things, including about job opportunities of which the individual worker may not otherwise be aware.  The other of these important functions is that the labor union might do much to elevate the social standing and respectability of its members in the society as a whole and to make their particular functions more appreciated in the particular enterprises in which they work. Associations of workers may be able to do a lot to break down the artificiality and snobbery that may otherwise stratify a society uncritically into certain classes.

 But while labor unions may legitimately exercise these functions in a free society, their coercive "weapons," which so characterize labor unions today, possess no qualities that render them consistent either with the freedom of men to work for their own peaceful self-advancement or with the maximum growth of overall production to satisfy the needs of the people. In the overall, the labor union as we have come to know it is not an institution compatible with the philosophy of liberty.  It may become so only if we insist upon its return to sound principles.

             Looking at the positive side, can there be any doubt but that there are powerful reasons why the standard of living of the American worker has risen during the twentieth century and would have risen even without the growth of labor unionism? Those who will shout, in response to all we have just said, that we "must be blind to fail to recognize that unions are responsible for the well-being of the American worker" aren’t taking into account the enormous creative energies our free society has been able, despite the impediments placed in its way, to unleash in the past seventy-five years. For example, there have been a great many inventions and technical discoveries, some small and some revolutionary.  How much has the electric light increased our standard of living?  How much the automobile? Certainly the airplane has done much.  Has not the telephone raised our standard of living? There is a danger in mentioning some things, because it means leaving so many others unmentioned.  Each of these technological discoveries is, by itself, historic in mankind’s development.  It is ridiculous to ignore these factors and give the credit, instead, to institutions that periodically cause work stoppages, that promote featherbedding, and that restrain trade in the labor market as their principal method of action.

             Instead, then, of the present day opinion that is held as a virtual truism, that labor unions have increased the standard of living of American workers, it would seem most reasonable to assign that increase in well-being to other causes, and in particular to the process of vast capital accumulation that free society has made possible and to the inventiveness that has gone with it.  Taking the workers as a whole, labor unions have impeded the advance of their real wages.

             One of the reasons this is so hard to understand is that labor unions have become so common a part of American industry, and play so intimate a role in it, that collective bargaining has become the institutional medium by which a great many changes in wages and working conditions are put into effect.  Where this is the case, the simple logical fallacy of post hoc will easily tend to create in the mind of the observer the conclusion that there is a cause-and-effect relationship.  It is almost certain that it is not until we recognize the substantial invalidity of such an analysis that the public in general, and the labor union leaders and members in particular, will be willing to re-examine the fundamental philosophical premises behind the so-called “economic warfare” that our contemporary law and mores have come to accept.  So long as the public believes that labor unions are a primary cause for increasing the well-being of people employed in our economic system, most people will not permit themselves to be greatly bothered by what we have raised as our main point here, which is that the use of broad coercive powers by groups outside of government, in the pursuit of ends that have no particular relation to (or in fact are very much opposed to) the overall reduction of coercive activity in society, destroys the liberty of  the individual to the extent the use occurs and, in a broader and ultimately even more significant sense, erodes the intellectual and moral principles upon which liberty is based. To refer to such erosion may sound alarmist, but the reason those of us in America who have been concerned about these problems for the past several decades have been concerned about such erosion is that we understand well the social necessity of  basing human conduct upon sound moral principles.  I would refer the reader to my earlier chapter 'Notes on Future Slaughter: A Defense of Morality."

 In what we have said so far, it has been impossible to anticipate all the many arguments that will be raised in defense of the "right to strike" and other labor weapons.  We tend so greatly to misunderstand today the entire operation of capitalism that the views that arise out of this misunderstanding take an indeterminate number of shapes.

 One such view of particular importance is the opinion that the worker is somehow at a disadvantage in a free labor market where men bid competitively for jobs and businesses bid for the supply of labor. When most people express this opinion, they almost invariably illustrate their opinion by pointing to a hypothetical situation in which there is an overabundance of labor in relation to the demand for it at the prevailing wage. Such a hypothetical situation, of course, is the best one for them to use to lend plausibility to their opinion. It is the view of the consistent supporter of capitalism that if workers are to avoid low wages in such a case they must be mobile, as all other persons in the market economy must be, to shift their labor out of the industries that are already oversupplied with it. If many men offer their services in a competitive labor market where only a small need for labor is present, it is understandable that wages will be comparatively low.  Under that condition they would necessarily have to be low if the large total supply is to be employed. To many of our contemporaries, this seems "harsh" and seems to allow the employers to exert "power" over the market.  But just where does the "power" exist?  In hiring all the workers who want work at the low wage, the employers are providing the only means by which all of the available workers can find employment in the industry.

If they are to obtain higher wages than that, the workers must retrain their abilities or shift their physical position in such a way as to meet some more urgently felt need for other services that may exist elsewhere. In other words, they must find those places where the supply of labor is lower and the need for it higher. This is not to say that this course of action win not require initiative, foresight and sometimes even considerable sacrifice on the part of the worker .

             In the United States recently, we have heard considerable talk, especially from President Kennedy, about the need for aid to "depressed areas."  Several times lately I have seen pictures in magazines and newspapers of unemployed coal miners in Pennsylvania.  It has seemed, in this connection, that the memories of Americans are very short.  I can remember the time a few years ago when the school I was attending in Denver was closed because of a shortage of coal that resulted from the annual coal strike.  Very much because of such union activity, the coal industry has been forced into a decline, to some extent because consumers shifted to other types of fuel rather than face the perpetual threat of shortages arising out of the recurrent strikes.  Now, today, we see pictures of unemployed coal miners and hear considerable bemoaning of the fact that our economy is in a "recession" because of their unemployment. We must recognize at least three things about this: (1) that the unemployment is the product of labor union activity; (2) that it is not the product of the "'unworkability" of the unhampered market economy; (3) that the particular workers in question must ultimately face the fact of the decline of their industry and must shift their efforts elsewhere. For those workers to spend years in depressed coal areas waiting for jobs to come to them, characterizes an immobility and inflexibility for which a free society may have great compassion, but very little indulgence.  No one would deny the human aspects of the problem, or would wish that they could not be solved without hardship to the people concerned. But to encourage these people in their inflexibility is to adopt a principle altogether alien to the religion of emergence, the ethic of liberty, the long-run interest of the people involved, and the ultimate satisfactory functioning of a free economic system.

             These men are hardly under anyone’s “power.”  If employers were to come and offer them a low wage as an alternative to their unemployment, such employers would not be malefactors, but benefactors.  But it is doubtful whether such employers would be seen favorably.  They would be charged with “taking advantage of a bad situation” and with the “exercise of superior economic power.”  It must be clear from all we have said, however, that the “power” exists almost entirely as a concept within the warped ideology of those who prefer to look at the human relationships involved in their most cynical and pessimistic light.

             One further argument should be anticipated and discussed.  It is the argument that the “right to strike” is really no more than the exertion by union members of the individual’s right to quit his job when he wishes.  When I hear it, I find it hard to believe in the sincerity of the speaker.  There is a great deal of difference between the quitting of a job by an individual, and a concerted refusal to work entered into by a number of workers.  In many connections, our law recognizes a distinction between individual activity and conspiracy.  The legal distinction is based on a recognition of the tremendous practical difference between what one man does, acting independently, and what many men do together.  To overlook this distinction and to refuse to see the difference between a “strike” and the termination of employment by given individuals is far-fetched.

             Because of our failure to see the extent to which coercive labor organizations deviate from the normal patterns of our society, an important jurisprudential question has been raised that we eventually will have to face.  The question concerns how we are to assimilate such groups into our free society as permanent institutions and at the same time offer the individual those protections that were formerly developed to provide safeguards against the misuse of coercive power, which theoretically is to be centered in government.  Most such protections have been framed only with reference to government, since it alone has been deemed in the past to be the seat of substantial power for violence and coercion. The Constitution, with its strict enumeration of the powers of government and with its Bill of Rights, was designed to keep the use of coercive power flowing along its proper channel in the performance of the appropriate functions of government.

             But what are the safeguards against the misuse of power by non-governmental organizations where we permit them to be vested with legally protected coercive functions?  Is it merely a matter of whether our legislators and labor administrators see fit at any given time to regulate in certain ways the use of union power?

             Some "liberals" have suggested that, because of this very question, labor unions should be assimilated into our government and become public agencies.  Of course, a number of objections may be raised to this. One important one, though it is procedural in nature, is that this would constitute an amendment to the United States Constitution and could be legitimately effected only through the formal method provided by the Constitution itself for the amendment of that document.  Another objection, substantive in nature, is that it would substantially increase the functions of government, giving to the government powers (presently exercised by the labor unions) far in excess of the power legitimately held by government in a free society.  Looked at in an historical perspective, it would mean that labor unions will have served a transitional function by which government is vested with powers over the economic life of the people that we in all probability would not have been willing to give it directly.

             We see, then, that the large-scale existence of coercive groups in our society raises conflicts of a fundamental nature with the development of our free institutions and with the fullest possible expression of the principles of liberty.

             We have remarked that groups that extend and promote peaceful and beneficial trade without introducing coercive elements into the society are to be looked on with favor and to be protected.  They are in keeping with the productive aims men would follow in their voluntary activities. We have remarked, also, that the mere fact that any grouping-together of energies or resources creates a potential for coercion is not a significant argument against such groups, if that potential is for the most part unexercised and is inseparable from their following of their essentially non-coercive beneficial activities.

             We now come to the discussion of monopolies and large economic aggregates.  I have sometimes heard it argued that any " large economic group is coercive by its very nature.  But this is not correct in any meaningful sense.  The fact, for example, that businesses seek the most beneficial exchanges to themselves, and take only those while disregarding the less beneficial exchanges that are possible, does not constitute coercive action against those who advance the less beneficial possibilities.  As to those exchanges that are "turned down," the businessman who is making his choices between the alternatives is not controlling the situation with an eye to inducing any given response on the part of the other person involved.  The self-interest of the businessman indicates that he will buy the services of the workers or accept the offers of the buyers of his products whenever what he will receive appears to him to be more valuable than what he must give in exchange, and so long as he has the means to make the exchange. He must necessarily exercise a certain selection. He is forced by the scarcity of his means to disregard some of the offers open to him, if there are any, and to select only those that are to him the most satisfactory. This involves no element of coercion toward the persons whose offers for exchange are not accepted.  He has not purposefully refused them with the idea of inducing another type of action from the person whose offer has been rejected. We can only say that the business has, in a way that has been most in keeping with its own self-interest, furthered trade to the furthest extent possible within its means. This must certainly be the way businesses operate in general.  It is hardly to be classified as coercive.

             However, there is at least a latent possibility for coercion. This exists in the ability of the business to withdraw its offers of exchange with the hope of penalizing certain actions by others or of causing customers to pay higher prices or employees to accept lower wages. The difference here with what was considered non-coercive above is that in the coercive situation here the business is deliberately controlling the situation -- that is, the supply of goods or of employment – in order to lessen trade and production, hurting the interests of others, to induce a more favorable exchange for itself.  It is deliberately restricting its production or employment for these purposes. In the non-coercive case discussed above, production and employment were pursued to the maximum possible extent consistent with the means the business had for doing so.

             Actually, the difference between the two lies in the different situations confronting the businessman in respect to the various types of exchanges open to him. In the first example, his self-interest lay in producing as much as possible and in multiplying the occurrence of beneficial exchanges. In the second example, the situation was such that he believed he would benefit more from restricting his production and from accepting the offers  

that would be available to him under the resulting restriction.  Such restrictionism falls under my definition of coercive action.  It is harmful to the interests of others (when we consider the total supply that could have been available if the businessman were to have acted otherwise), and it discourages the development and extension of those relationships that form the economic basis for a free society.

             But the larger question with respect to all this is: Just how prevalent is this sort of action in a market economy? We have seen that it is incorrect to say that coercive action of such a sort is a necessary part of the operation of large business enterprises. This is so because it is possible that the businesses will find it in their best interest to promote the widest possible trade in the area in which they are dealing.

             For the use of such coercive power by business enterprises, several conditions must exist.  Because they are often absent, it becomes less likely that restraint of trade will take place. The first of these conditions is that it must be possible for the restraint of trade to be accomplished without other people or enterprises being able to take advantage of the demand that is left unsatisfied because of the restraint.  Other people may move in to fill this vacuum. Their presence makes a deliberate restraint of trade impracticable in many cases.

             The second condition is that, even if there is no threat to the business restraining trade of other people coming in to fill the vacuum, the "configuration of possible exchanges," so to speak, must be such that the fewer exchanges at a higher price or at a lower wage will be more profitable than a greater number of exchanges at a lower price or a higher wage.   Even where a business has a complete monopoly over the supply of a good or service, or over the demand for employment, it will nevertheless often be true that the forcing of a higher price at a restricted volume will be unprofitable to it so that the restraint could only be carried out by it at an overall loss. So far as this is true, it must appear that, although a business could act coercively (through the restraint of its own trade), its own self-interest will keep it from doing so unless it is misinformed as to where its best chances for profit lie.

             An important fact about "monopolies" and other large business enterprises is often overlooked.  It is that even where there is no direct competition in the supply of the particular thing they are selling, the "monopolistic enterprise" is in most cases involved in competition with the other producers and sellers in the economic system. This is because the commodity or service it produces, unless the monopoly relates to one of those rare things that is are absolutely necessary in itself, is bound to be competing with a lot of other types of goods and services in the thinking of the consumers, who must decide just what it is they want to buy with their money.

 Even a slight rise in the price of the "monopolized" product may render the attainment of that product less desirable to many of its possible buyers when they compare it, at the new price, with the many other services and commodities that are offered on the market. Prospective buyers may find that they prefer to spend their money for other satisfactions than that offered by the item produced by the "monopolistic" enterprise.

 If, for example, the higher "monopoly price" is placed on fishing tackle, a prospective buyer, looking about himself and not finding lower prices offered by competitors, is not faced with the single alternative of buying the tackle at the higher price. Rather, he may choose to give up the sport of fishing altogether and turn to hunting as a substitute. The monopolistic fishing tackle merchant is faced with  the competition of the gunsmith, and in like fashion with that of anyone who is producing goods or services that are vying for the favor of the buyer. It may very well be that the "monopolistic pricing" may so decrease the "monopolist's" sales as to render it advantageous, by comparison, to offer a lower price in order to get an increased sales volume.  In light of these facts, it appears that a monopoly is in many cases only ostensibly devoid of competition.  More likely than not it is subject to the usual competitive processes of the market place.

             There has been a marked tendency on the part of some writers during the twentieth century to regard "monopoly" or "oligopoly" as a highly significant factor in the current American economic system. They sometimes say that these call for a "re-appraisal" of capitalism as it operates today.  I personally feel that this is a highly alarmist point of view.  It has no valid application if we look at the "modern" developments realistically.

             For sake of argument, let's assume for a moment that existing economic aggregates in the United States are in fact most often in a situation where "monopoly pricing" is profitable.  Under such an assumption, the amount of a good or service produced would be restricted from what it would be under a competitive situation.  The price charged would be higher.  To this extent the situation is one that violates the wish of a free society to extend trade and to avoid any sort of restrictive, coercive activity.  But let’s look at this a little more carefully. We must especially look at the over-all and long-range effects of the existence of such enterprises.  It may well be that the overall effect of the existence of the large corporate entities has in fact been greatly to extend trade beyond what it would have been if the productive unit had remained smaller and seemingly more competitive.  We might legitimately feel that the benefits would be even greater if the monopoly pricing were to be eliminated, but it may be that the large business aggregates have added considerable benefits by way of the extension of trade and the actual lowering of price.

             Some will ask, "How can this be, if we have assumed a higher 'monopoly price'?" In answer to this, it is for us to note that it may very well be that the "monopoly" or "oligopoly" has resulted from the economy and basically superior efficiency of a larger productive unit as compared with a smaller one.  The larger unit may be able to produce at less cost than under a competitive system of small business organization.  And the efficiency of the larger unit may be so much greater than it would be with smaller units that the price for the commodity or service may be a lower one for the consumer even though because of "monopoly pricing" the cost is not as low as the large enterprises could make it.

It is well for us to realize that the "coercion" or "power" the "monopolist" or "oligopolist" has exercised in levying his "monopoly price" has consisted of no more than causing the buyer to pay more than he would need to pay under a greater supply.  Even though we might quite legitimately rebel against any such control of one man over the satisfaction of others, through any restraint of trade of any type, we must not lose sight of what we specifically mean by this "coercion."  If, despite its monopoly pricing, the large corporation has produced more goods at a lower price than small business organizations could do competitively, the total effect from the development of the large aggregate is that consumers have been benefited and trade extended.  The society is better off economically and its individuals suffer no coercive result when compared with "small-unit" competition.

It is only when we compare the new and better situation under large economic aggregates with what could be achieved under such business organization that the undesirable effects come into view.  But our "coercion" and "restraint of trade" is largely a comparative one.  It is not, in fact, a "restraint of trade" when compared with what would be accomplished in the same industry if that industry were based upon smaller enterprises.

While this does not mean that we may not wish to take certain action, under the law, to stop even this type of restraint of trade, it does mean that we cannot legitimately look upon the larger business aggregate - in an economic sense - as a danger rather than an asset to a free society.  Certainly the large enterprises ought not to be taken as an excuse for bemoaning the present state of capitalism or for offering radical solutions that are themselves harmful in their effects.  The task of the philosophy of liberty in this connection is, rather, to point to the value of these large aggregates, where they are more efficient, and at the same time to work to reduce or eliminate such actual restraints of trade as may be involved.

Our above discussion has assumed, of course, as we stated, that the large unit was in fact more "efficient," and that the prices actually settled upon by the large corporation are actually lower than they would be if that corporation did not exist.  In an economic system where this sort of situation exists, there need be no great dismay over the merely superficial movement away from non-coercive business enterprise.

 All of this is not to say that the large entity could not in other ways, than by imposing a general "monopoly price," abuse its position.  It could, for example, engage in discriminatory pricing or in what has come to be known as "tying practices."   A "tying practice" occurs where a business requires those dealing with it to buy a second commodity or service at the same time they buy the one that the consumer primarily desires.
This limits the choice of the consumer for the benefit of the producer making the requirement, and this limitation of choice is without any economic justification in terms of the furtherance of trade, or otherwise.  Restraints and limitations that are separable from actual productive activity may legitimately be restrained by a free society, in line with the general policy of accentuating the voluntary and minimizing the coercive.  Legal measures could appropriately be taken against such activities on the part of large business enterprises.

Let us point out, however, that any legislation for the regulation of such practices ought to be framed in such a way as to allow the businessman to know in advance just what it is that is being inhibited.  A very great criticism of our current "anti-trust" legislation concerns its extreme vagueness and uncertainty.  While we may support certain types of anti-trust action by government, we cannot do so, consistently with liberty, unless the law is given a thorough degree of certainty so that acting men may know what it is they must avoid doing.

The detailed discussion we have made above has, as we have stated, been based upon the assumption that the large business enterprise is more economically efficient than would be a smaller business unit producing the same commodity.  What would be the case under the contrary assumption?  It remains for us to examine the problem of "monopolies" where they are no more efficient, or perhaps less efficient, than smaller "competitive" units.  Under such conditions, the "monopoly price" would in fact be unfavorable to the consumers when compared with the price that the consumers would enjoy if there were an industry based on a number of competitive enterprises.  This would be so because the monopoly price is, by definition, a price that is pegged higher than would otherwise be obtainable because the industry has decided to restrain the amount of its production.  Where the greater efficiency that we previously assumed is lacking to provide a counterbalancing lowering of costs, the consumers will necessarily be worse off than they otherwise would be.

The important thing to note about this, however, is that such "monopolistic pricing" can only with great difficulty become present on a wide scale in a free society.  Whereas under the assumption of a greater efficiency in the larger units the large business enterprises are able to flourish and continue to exist precisely because they excel over the smaller units, this economic favorableness to them assuredly cannot exist where they have no advantage, in terms of efficiency, over smaller competitors.  If they are no more efficient than smaller firms, those large enterprises seeking to charge a "monopoly price" based upon a restraint of trade will face the constant potential of an underselling process by smaller firms.  Careful note should be taken that these smaller firms, not needing a great deal of investment capital, would find it relatively easy to come into existence.  Where the more efficient plant is a small one, the large plant will have difficulty maintaining a monopoly.  The measures that it applies to maintain its position against the smaller and more efficient firms will tend to drain it of its relative profitability, since more than likely it will be necessary for it to keep up such activity throughout its life.  Certainly little encouragement exists for those who may wish to maintain a monopoly under such an economic condition where there are no "natural" economic advantages to support the monopoly position.

The various economic acts that such a monopoly would use to force its competitors out of business would necessarily have to ve of a kind, such as discriminatory pricing, that would be most susceptible to anti-trust prosecution.

This examination of monopoly-pricing situations should not make us lose sight of the fact, however, which we have previously mentioned here, that monopolies and "oligopolies" can profitably establish a "monopoly price" only under certain unique conditions as to the "demand" existing in the market.  The mere fact of large size does not signify that a business is operating monopolistically in terms of its pricing or other activities.

In light of all this, it should be apparent that, despite the many alarmist views that have been expressed over the past several decades, thee is certainly no inherent tendency of the free market toward the creation or abuse of business monopoly.  Rather, the tendency is toward highly beneficial business organizations that have as their central impulse the extension of trade.  While in the great flux of human relations in this area there are bound to be a number of coercive features as between the individuals involved arising out of their own unique circumstances, these coercive features are, in the main, incidental to and inseparable from the essentially non-coercive mainstream of activity.