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5

The Wealth of Nations




The goal of helping poor people is not to make them more comfortable
in their poverty or to help them adopt a Stoic ap´ theia”indifference or
a
impassive resignation”toward it. Nor is the goal to make them depen-
dent on the help of others. Nor, ¬nally, is the goal simply to assuage the
consciences of wealthy people by doing something, anything. The goal,
rather, is to enable the poor to become independent and themselves
wealthy. This is the only goal that is consistent with respecting their per-
sonhood and, I would add, with common human decency. So the central
remaining question is: How do we do it? How do we help the poor while
respecting personhood?
I made what I called a “principled” case for the classical liberal state in
chapters 2 and 3, and I argued in chapter 4 that the in¬‚uential argument
of the Singerians does not defeat it. In this chapter let us ask the “conse-
quentialist” question of what exactly are the actual effects on life under
such a state. This is an empirical question, after all, so, is there evidence
out there that can recommend a course of action? It turns out that eco-
nomics and history do have something to contribute to the discussion”
quite a lot, in fact. For not only has history yielded some fairly de¬nitive
recommendations, but economics has in addition gone a considerable
way toward explaining why what worked in the past did so.


what are the facts of the matter?
As I argued in chapter 4, the Singerian fails in the attempt to argue that
we are just as morally obligated to give money to distant peoples as we
are to help a child in front of us drowning in a pond. But what about

159
Working Out the Position
160

the more general question of what we should do to help poor people
to become independent and wealthy? If we are not morally obligated to
give our money to overseas relief agencies, and if the state may not take
our money away from us against our will, does that mean that morality
requires nothing of us? Does it mean that neither we nor our government
should do anything? Does it mean that poor people™s governments should
do nothing?
What we should do is encourage all governments to adopt those poli-
cies, structures, and institutions that history and empirical investigation
have shown to be most conducive to human success and ¬‚ourishing. They
should adopt those institutions that have allowed some nations and areas
of the world to become wealthy and prosperous, so that others too can
become wealthy and prosperous. The good news, indeed the great news,
is that evidence has largely settled the matter. We do not need to speculate
about what institutions will have the desired effects. We now know what
they are. And the still greater news, at least to my mind, is that they are
fully consistent with the concept of personhood and its entailed limited
government that I defended in the ¬rst few chapters. The evidence shows
that what is needed is (1) recognition of private property and (2) an exact
administration of justice. That™s it. There is nothing more that the state
need do, and nothing more it should do. If it respects people™s private
property, enforces that respect among enemies foreign and domestic, and
constrains itself to defending it and punishing breaches of it, the state
will have ful¬lled its complete duty and proper function”and, as history
has shown over and over again, the people under that state, including
most especially the poor among them, will ¬‚ourish.
There is so much evidence converging on these same recommenda-
tions, from so many disciplines and angles and perspectives, that it can be
overwhelming. Since it would be impossible to survey all of it, I propose
instead simply to indicate a few central ¬ndings of this evidence”enough,
I hope, to make the recommendations plausible, but not so much that
one cannot wade through it all. The reader who wants to pursue this
investigation further is reminded to consult the bibliography at the end
of the chapter, where suggestions about where to continue are made.


the contest
Those countries that respect private property and ef¬ciently administer
justice prosper, and those that do not do not. It is as simple as that. Let me
begin my case for this by taking the two historical ¬gures who are perhaps
most associated with nearly opposite forms of government”Adam Smith
The Wealth of Nations 161

and Karl Marx”and constructing a historical challenge. In his semi-
nal 1776 An Inquiry into the Nature and Causes of the Wealth of Nations,
Adam Smith made several predictions about what would happen in a
society that adopted the “obvious and simple system of natural liberty”
he recommended, a system that correlates quite closely with what I have
defended in respecting private property, administering justice, keeping
taxes and tariffs low, allowing free trade, and restricting state interven-
tions in the economic lives of individuals to a minimum. In his 1848
Manifesto of the Communist Party, Karl Marx, who read and studied Smith™s
Wealth of Nations, similarly made a series of predictions about what would
ensue if a society adopted Smithian recommendations as opposed to the
centralized and nationalized economic recommendations Marx made.
Remarkably, in several instances, the respective recommendations are
nearly exactly opposite. This affords us a singular historical opportunity
because we can now, more than two centuries after Smith and one and
a half centuries after Marx, look back over the historical record and ask:
Who was right”Smith or Marx?
Here are Marx™s four central predictions, all made in the Manifesto:
(1) Smithian-style capitalism will concentrate power and property in the
hands of a few and eventually create a society of only two classes, the
propertied and the propertyless; (2) under the “ideologies” of free trade and
free competition, capitalism will increasingly enslave the worker, ulti-
mately leaving the worker few or no rights or powers against employers;
(3) over time, workers™ wages will steadily decline to “subsistence” levels,
and their standard of living will hence also decline; and (4) we would all,
especially the working poor, be better off if instead of leaving matters to
greed-driven and “alienating” “market forces,” the “most advanced and
resolute” intellectuals “wrest” in a “despotic” fashion “all capital from the
bourgeoisie” and “centralize all instruments of production in the hands
of the state.”
In each case, Smith makes virtually the opposite prediction in his
Wealth of Nations: (1) the “obvious and simple system of natural liberty”
will enable more and more people to ascend out of poverty, creating a
large and thriving middle class; (2) free trade, free competition, and the
abolition of special privileges (such as state-enforced monopolies) will
allow steadily increasing economic prosperity for everyone, including
workers; (3) over time, employer competition will lead to steadily increas-
ing wages, bene¬ts, and overall standards of living for workers; and
(4) because prosperity depends on people exploiting their local knowl-
edge, decentralized markets will precipitate greater prosperity than cen-
trally planned economies will.
Working Out the Position
162

Well, who is right? Answer: Smith is. On every count.
Let us take the United States as our test case. The United States has
not by any means perfectly instantiated the Smithian (or Ottesonian) rec-
ommendations, and over time it has tended away from its original Jeffer-
sonian, Washingtonian, and Madisonian vision of limited government”
which was quite similar to, and indeed in¬‚uenced by, Smith1 ”and has
moved rather toward the authoritarian state with a command-and-control
economy envisioned by Marx and other advocates of state centralization.
But it is nevertheless still the case that America has come closer to embody-
ing the Smithian ideal than have most other countries, and it has done so
for a longer time. How, then, have Marx™s predictions fared in America?
To begin, the middle class dominates economic life, and its standard
of living has steadily improved. Consider, as one initial indicator of the
former fact, the size of the respective markets for Ford automobiles, on
the one hand, and Jaguars, on the other: the former sold 7.4 million cars
in 2000, whereas the latter sold 98,500. Consider similarly the relative
market sizes of Wal-Mart Stores versus the high-end stores on Rodeo Drive
in Beverly Hills, of luxury yacht manufacturers versus that of ¬shing boats,
and so on. As to the second fact, consider that over the last two centuries,
working conditions in America have steadily improved; these conditions
are now at previously unimaginable levels”and dramatically better than
that of most other countries today. Indeed, one is inclined to say that
there is in relative terms no poverty at all in the United States today. For
even the of¬cially designated “poor” in America have, for example, access
to the ¬nest medical care in the world free of charge, can easily procure
three hot meals and a hot shower every day, and can enjoy charity- or state-
subsidized housing for an inde¬nite length of time. Consider moreover
the following facts about America™s “poor”:2
r In 1995, more than 40 percent of all American “poor” households
owned their own homes. The average home owned by “poor” peo-
ple has three bedrooms, one and a half baths, a garage, and a porch

1 See, for example, Douglass Adair™s “Fame and the Founding Fathers” and Samuel Fleis-
chacker™s “Adam Smith™s Reception among the American Founders, 1776“1790.”
2 I got the following facts from the Bruce Bartlett™s National Center for Policy Analy-
sis™s (NCPA) report, “How Poor Are the Poor?” http:/ /www.ncpa.org/ba/ba185.html;
Robert Rector™s “Census Baloney,” http:/ /www.city-journal.org/html/10 1 sndgs03.html
and “America Has the World™s Richest Poor”; and Robert Rector and Sarah Youssef™s “How
Poor Are America™s Poor?” http:/ /www.heartland.org/Article.cfm?artId=797. Since stud-
ies such as these are widely available on the internet now, they are easily corroborated by
other sources.
The Wealth of Nations 163

or patio. Over 750,000 “poor” persons own homes worth more than
$150,000, and nearly 200,000 own homes worth more than $300,000.
r Only 7.5 percent of “poor” households are overcrowded, and nearly
60 percent have two or more rooms per person. The average “poor”
American has one-third more living space than the average Japanese
and four times as much living space as the average Russian”and that
is the average person in Japan or Russia, not the average poor person.
r Some 70 percent of “poor” households own a car; 27 percent own two
or more cars.
r Two-thirds of “poor” households have air conditioning.
r Some 97 percent of “poor” households have a color television, and
92 percent of those on federal welfare have color TVs. Nearly half own
two or more color televisions. Some 60 percent have a VCR; almost
20 percent have two VCRs. Some 64 percent own microwave ovens,
half have a stereo system, over a quarter have an automatic dishwasher,
and 7.4 percent have personal computers.
r Some 84 percent of the “poor” report that their families have “enough”
food to eat; 13 percent state they “sometimes” do not have enough to
eat; while only 3 percent report they “often” do not have enough to eat.
Note that that is not 3 percent of American families; it is only 3 percent
of of¬cially designated “poor” families”which means that, even by
the government™s in¬‚ated ¬gures, less than one-half of 1 percent of
Americans claim they “often” do not have enough to eat. (I say that
the government™s ¬gures are “in¬‚ated” because they frequently are
based on polls asking overly vague questions, such as, “Do you ever go
hungry?” Who cannot answer “yes” to that?)
r The “poor” are in fact quite well fed. For example, American “poor”
are more likely to be overweight than are middle-income Americans.
Nearly half of America™s “poor” adult women are overweight. They
may not be eating all the right foods, but their overall caloric intake
is high enough to put them well out of the range of the rest of
the world™s poor. Moreover, consider the following fact about overall
nutrition.
r The average consumption of protein, vitamins, and minerals is virtually
the same for “poor” and middle-income children, and in most cases is
well above recommended norms for all children. Most “poor” children
today are in fact “super-nourished,” consuming on average double the
recommended level of protein. “Poor” boys today grow up to be an
inch taller and ten pounds heavier than the GIs who fought in the
Second World War.
Working Out the Position
164

To put the state of America™s “poor” in somewhat larger perspective,
compare their position with that of citizens of European countries. A few
suggestive comparisons:3
r In 1991, ownership of automatic dishwashers was lower among all peo-
ple living in the Netherlands, Italy, and the United Kingdom than
among “poor” Americans.
r Ownership of clothes dryers among all people in Sweden was about
equal to that among “poor” Americans.
r Among citizens in all of Europe, only in the United Kingdom was
ownership of VCRs higher than that among “poor” Americans.
r America™s “poor” had greater ownership of microwave ovens than all
citizens in every country of Europe.

Extending our comparison to include people in places such as Africa
makes for an even more startling contrast:4 in 1991“3, Guinea, Guinea-
Bissau, Kenya, Madagascar, Niger, Nigeria, Senegal, South Africa, and
Zimbabwe all had more than half their populations living on less than
$2 per day. This was true of more than 90 percent of the populations in
Guinea-Bissau and Madagascar. These millions of people would scarcely
be able to imagine the life ¬lled with indoor plumbing and running water,
food, medicines, schooling, bene¬ts, scholarships, and other opportuni-
ties that routinely characterizes the lives of America™s “poor.”
Does this mean that there are no truly poor people in the United
States? No, but the evidence does indicate several things. First, if you are
in America and you are poor, chances are overwhelmingly high that you
either just got to this country, you are hiding your assets, or you do not
want to avail yourself of the opportunities open to you. In the ¬rst case,
as economists such as Thomas Sowell and Walter Williams have shown,5
just wait a few years: in America, today™s poor are tomorrow™s middle class
are the day after next™s rich. As Stephen Moore put it recently, “Workers

3 NCPA, “How Poor Are the Poor?”
4 See the World Bank™s “Poverty Lines in African Countries,” http:/ /www4.worldbank.org/
afr/poverty/measuring/cross country poverty lines en.htm.
5 See Sowell™s Applied Economics, esp. chap. 5, and Basic Economics, esp. Part III; see Williams™s
Do the Right Thing, chap. 2. See also the Federal Reserve Bank of Dallas™s 1995 annual
report, “By Our Own Bootstraps: Economic Opportunity and the Dynamics of Income Dis-
tribution,” http://www.dallasfed.org/fed/annual/1999p/ar95.pdf; Arnold Kling™s “The
Rich and the Poor,” http:/ /arnoldkling.com/econ/richpoor.html; Alan Reynolds™s “For
the Record”; D. Mark Wilson™s “Income Mobility and the Fallacy of Class-Warfare Argu-
ments against Tax Relief,” http:/ /www.heritage.org/Research/Taxes/BG1418.cfm; and
Stanley and Danko™s The Millionaire Next Door.
The Wealth of Nations 165

[today] earn in less than four days a week what their parents earned in ¬ve,
and they make in three days on the job what their grandparents earned
in ¬ve.”6 And respect for your personhood means that we do not have to
worry about the second or the third group of people: in both these cases
people are making individual choices and therefore themselves must face
their consequences.7
A few more facts about life in America. Markets and competition have
led to unprecedented economic growth, steadily falling prices, and sub-
stantially higher standards of living. The average worker today enjoys
wealth, accommodations, and opportunities surpassing what was avail-
able to even the wealthiest quarter of the population just two generations
ago; today™s worker routinely has access to wealth that no one could have
dreamed of only a century ago. Andrew Carnegie, for example, was one
of the world™s richest men at the end of the nineteenth century (he sold
his empire to J. P. Morgan in 1901 for $480 million”an even more astro-
nomical sum then than today), but all his money could not enable him to
prevent his beloved mother from dying of pneumonia8 ”something even
the poorest of the poor could today get cured easily and free of charge in
any hospital in America. Today workers™ wages, bene¬ts, and standards
of living are arguably better in America than anywhere else in the world,
certainly better than most places in the world, and fantastically better
than what people for most of human history enjoyed. Free market“based
economies have utterly dwarfed centrally planned economies in produc-
tive power. We now know, to take one example, that the impressive num-
bers published during the Cold War by the Soviet Union of its economic
production were often distortions or just outright fabrications.9
Free economies have led to prosperity for everyone, including espe-
cially the poor, who are far better off in market-based economies than in
centrally planned economies. Here is why. The natural course of things
in market-based economies is for goods to become more plentiful and
for prices therefore to go down. That means that even those in the lowest
economic strata are able to afford ever more and more. Some exam-
ples illustrating this trend, according to W. Michael Cox and Richard

6 In his “The Wages of Prosperity.”
7 I note, for example, a recent article in the New York Times that investigates the choices
Europeans have tended to make more than Americans to opt for leisure time rather than
work more. See Katrin Bennhold, “Love of Leisure, and Europe™s Reasons.”
8 See Peter Krass™s Carnegie, chap. 17.
9 See Tom Bethell™s The Noblest Triumph, chaps. 1 and 10, and Richard Pipes™s Property and
Freedom, chap. 4, and Communism, chap. 5.
Working Out the Position
166

G. Alm™s Myths of the Rich and Poor: a three-minute phone call from New
York to San Francisco cost 90 hours of labor in 1915; in 1999 it cost
1.5 minutes. Three hearty meals in 1919 cost 9.5 hours; today only 1.6
hours. Housing cost 7.8 hours of work per square foot in 1920; today,
5.5”and with much higher quality and better amenities (including
indoor plumbing, central heating, and so on). In 1900, scissors cost the
equivalent in today™s money of $67, baby carriages cost $913, bicycles cost
$2,222, and telephones cost $1,202. In the early 1900s, only the super-rich
had automobiles; today, over 90 percent of American households have
cars, 60 percent have two or more, and America may soon be the ¬rst
nation with more automobiles than people. As Cox and Alm have shown,
despite the steadily growing slice of their incomes that federal, state, and
local taxes have taken, Americans now have to work much less to provide
their basic necessities than they once did.10 That means that Americans
are not only more comfortable now than ever, but they also have more
time left to spend as they wish than they have ever had.11
This ¬nal fact suggests another indicator of the fabulous wealth
Americans have been able to accumulate under Smithian polices: the
amount of leisure time they enjoy. Juliet B. Schor™s The Overworked
American argues that as “time on the job” has increased over the last twenty
years, leisure has dwindled. But Schor™s claims have been challenged by a
number of more recent studies. For example, in their Time for Life, John
P. Robinson and Geoffrey Godbey show that in fact Americans are today
working less than they did in 1965, having gained nearly a full hour of
free time per day. Now it is true that many people use much of their free
time to “work””to do things that, for example, are dif¬cult or that sup-
plement their income”but although Schor includes such activities in her
“on the job” estimates, they should not be considered such because this
is time people do not need to work to provide themselves the necessities
of life. Indeed, people do not themselves consider it “work”; it is instead
time they choose to “work” for other reasons, often because they simply
like doing it. One other indicator of contemporary Americans™ leisure:
conservative estimates have it that Americans average twenty-eight hours
per week watching television alone”which, at over sixty days per year, is
10 See the summary of their data at http:/ /reason.com/9808/fe.cox.shtml (accessed
December 14, 2005). See also Mark Skousen™s “Everything Is Cheap”and Getting
Cheaper.”
11 For further evidence supporting this claim, see Julian L. Simon™s The State of Humanity,
pp. 20“1 and 224“30; Stephen Moore™s “The Wages of Prosperity”; Stephen Moore
and Julian L. Simon™s, “The Greatest Century That Ever Was,” http:/ /www.cato.org/
pubs/pas/pa-364es.html (accessed December 14, 2005), and It™s Getting Better All the
Time; and Robert W. Fogel, The Fourth Great Awakening.
The Wealth of Nations 167

far more than the average of any other nation.12 A population that spends
about one-quarter of its waking hours sitting still and doing nothing is
one wealthy leisured class indeed!
The conclusion is that protections of private property, open markets,
and free trade have enabled us to work far less for far more, creating
thereby unprecedented levels of prosperity in America, for rich and poor
alike.
One might wonder, however, whether the income gap between Amer-
ica™s wealthy and poor has increased during this time. It is dif¬cult to say
de¬nitely whether or not this is so, owing to the number of variables at
work and the many different ways of measuring, but it probably is true.13
If the gap has increased, however, it has only done so while the status of
the poorest in America has gotten substantially better in absolute terms.
So: yes, the rich might be richer, and their “lead” on the poor might have
increased. But if we are concerned with the welfare of the poor, we should
celebrate this fact since in absolute terms the poor are far better off than
they were, and the evidence suggests that they are better off than they
would have been under most other scenarios.14 And remember that the
“poor” are not the same people over time. Many of the wealthy today are
the second- or third-generation descendants of the poor from before.
Hence although today™s poor do not have as much as today™s wealthy, just
give them time”and opportunity, of course.


has the state contributed?
But what role has the state played in the indisputably impressive creation
of wealth in America? Growing prosperity here has, after all, been cor-
related with growing economic intervention: over the twentieth century
as Americans have gotten richer, their government has steadily grown

12 According to Nielsen Media Research, the television is on in an average American
household 7 hours and 40 minutes per day; see http:/ /www.tvturnoff.org/images/
facts&¬gs/factsheets/FactsFigs.pdf (accessed December 14, 2005).
13 See, for example, Philippe Van Kerm™s “Linking Income Mobility and Inequality: A
Re-assessment of American and German Inequality Trends,” http://www.wider.unu.edu/
conference/conference-2003-2/conference%202003-2-papers/powerpoint%
20presentations/Philippe%20Van%20Kerm.PDF (accessed December 14, 2005).
14 See Niels Veldhuis and Jason Clemens™s “A Rising Tide Lifts All Boats,” http://www.
fraserinstitute.ca/admin/books/chapter¬les/A%20Rising%20Tide%20Lifts%20All%
20Boats-Jan04fftide.pdf; James R. Hines Jr. et al.™s “Another Look at Whether a
Rising Tide Lifts All Boats,” http:/ /www.nber.org/papers/w8412.pdf; Aart Kraay™s
“When Is Growth Pro-Poor? Cross-Country Evidence,” http:/ /econ.worldbank.org/
working™papers/33614; and Dollar and Kraay™s “Growth Is Good for the Poor,” http://
econ.worldbank.org/working™papers/1696 (all sites accessed December 14, 2005).
Working Out the Position
168

from consuming about 10 percent of their net national product to today
approximately 40 percent, and it has slowly but steadily extended its regu-
lation of markets and private property. So perhaps, one might reasonably
suggest, America™s wealth has been at least partly because of state interven-
tion, not in spite of it.
This too is a tricky matter to sort out empirically, but evidence sug-
gests that this is in fact not the case. Strong evidence comes from the Eco-
nomic Freedom of the World (EFW) reports compiled annually by economists
James Gwartney and Robert Lawson, based on data from the United
Nations, the World Bank, and other international sources. Data have
been collected for some 120 countries, and what has been charted is their
historical correlation between, on the one hand, “economic freedom””
which is de¬ned as the extent to which the country™s people enjoy pri-
vate property rights, freedom of exchange and trade, low taxes, and an
effective system of enforcing justice”and, on the other hand, wealth or
poverty. So the EFW index™s question is what our question has been: What
kind of government is most conducive to material prosperity?
The countries most free according to 2004 EFW are, in order:
Hong Kong; Singapore; New Zealand, Switzerland, United Kingdom,
and United States (tied); Australia and Canada (tied); Ireland; and
Luxembourg. The least free are Russia, Burundi, Republic of Congo,
Guinea-Bissau, Algeria, Venezuela, Central African Republic, Democratic
Republic of Congo, Zimbabwe, and, bringing up the rear, Myanmar. Some
other notable countries and their economic freedom rankings: Chile,
Germany, Hungary, Sweden, and Taiwan, 22 (tied); Japan, 36; France,
44; Mexico, 58; India, 68; Brazil, 74; Bangladesh, 83; and China, 90.
As this list suggests, the answer to our question seems clear. These his-
torical surveys of countries around the world show that wealth is inversely
correlated with size and intervention of government”meaning that the
more decentralized or Smithian a country™s government is, the wealthier
it tends to be; and the more centralized or Marxian a country™s govern-
ment is, the poorer it tends to be. Governments limited in the way I have
argued is consistent both with respecting people™s ˜personhood™ and with
Smithian recommendations are, moreover, positively correlated with:15

r Per capita income. The top quintile of “economically free” countries
enjoy income that is larger than that of the bottom quintile by nearly
a factor of ten.

15 See http://www.freetheworld.com/2004/efw2004ch2.pdf (accessed December 14,
2005).
The Wealth of Nations 169

r Economic growth. The economies of the bottom quintile are shrinking
by an average of 1.25 percent annually and those of the top quintile
are growing by an average of 2.25 percent annually.
r Development. The top quintile scores more than twice as high on
the United Nation™s “Development Index””which measures life
expectancy, adult literacy rates, school enrollment, and per capita
incomes”than does the lowest quintile.
r Life expectancy. People living in the top-quintile countries enjoy fully
twenty years longer average life than those living in the bottom quintile.
r Child nutrition. Countries in the bottom quintile have more than three
times as many children suffering from malnutrition than do countries
in the top quintile.
r Health care. Approximately 60 percent of those living in countries in
the bottom quintile have access to health care, while countries in the
top quintile average better than 95 percent access.
r Food production. Countries in the top quintile produce three times as
many kilograms of cereal grains per hectare than is produced by coun-
tries in the bottom quintile.
Economic freedom is thus positively correlated with all these variables,
and in addition with infant survival, access to safe water, literacy rates,
and percentages of gross domestic product dedicated to research and
development. Two more correlations that I want to single out: the more a
country™s economic system approximates the classical liberal conception
I have been defending, (1) the cleaner its environment tends to be and
(2) the greater is its long-term political stability.
A word of explanation might be required for these last two bene¬ts.
There is an enormous amount of evidence that people take care of what is
their own better than they take care of something that belongs to someone
else (or that is owned communally or publicly). We might argue about
why that is the case, but that it is the case seems by now beyond dispute.16
That in a nutshell explains why economies based on private property
tend to have far better records in taking care of their environments than
do economies based on publicly owned or communally owned property.
Under the former, people own their own property, which means they
themselves enjoy the bene¬ts if they take good care of it and suffer the
consequences if they exploit it, harm it, or let it go to waste. Under the
latter, by contrast, since “the public” or “the country” or “the community”

16 For evidence, see Bethell™s The Noblest Triumph, chaps. 1“4; De Soto™s The Mystery of Capital,
chaps. 1“3; Richard Epstein™s Simple Rules for a Complex World, chap. 3 and passim; and
Pipes™s Property and Freedom, chap. 2.
Working Out the Position
170

owns it, no individuals stand to lose if they plunder the resources or let it
go to waste. We explore this familiar “logic of the commons” further in
chapter 8. For now, the important point is the fact that the more closely
a country approximates the classical liberal model, the better does its
treatment of its environment tend to be; and the further away from that
model a country is, the worse its treatment of the environment tends
to be.17
The last listed bene¬t, stability, also warrants a word of explana-
tion. Economically free countries enjoy decentralized power, whereas the
power in economically unfree countries is centralized. That is, in the for-
mer, individuals tend to have power over themselves and what they own,
and groups, associations, organizations, and so on will also have power
over whatever they own. That creates many different loci of power, each
under the authority of different, though of course possibly overlapping,
individuals or groups of individuals, and the scope of those individuals™
or groups™ discretion extends only to the limits of whatever it is they own.
In unfree countries, by contrast, decisions tend to be made by one person
or a small group of people for the whole of the country. This contrast is of
considerable moment. For if an individual or a group in the former case
makes a bad decision, the bad consequences redound upon only himself
or themselves, or is in any case bounded by the scope of their respec-
tive authority; the other loci of power and authority remain (relatively)
unaffected. In unfree, authoritarian states, however, if the leader or lead-
ers make a bad decision, its consequences can redound upon the entire
country. The result is that the social organization in a decentralized sys-
tem of order”the economically free countries”is far more robust and
able to withstand repeated (localized) bad decisions. Social organizations
in a centralized system of order, however, are far more fragile and can
collapse utterly under inept or corrupt leadership.18 This is the explana-
tion for the relative levels of stability enjoyed by the two kinds of society:
economically free countries are more politically stable because they are
decentralized and thus robust, whereas economically unfree countries
are more politically unstable because they are centralized and thus fragile.
Now, one might be inclined to be skeptical of the argument if it were
based on only one or two of the correlations listed above. Correlations are


17 See Mikhail S. Bernstam™s “Comparative Trends in Resource Use and Pollution in Market
and Socialist Economies”; Bethell™s The Noblest Triumph, chap. 18; and Epstein™s Simple
Rules, chap. 15.
18 See Maria Pia Paganelli™s “Adam Smith: Why Decentralized Systems?”
The Wealth of Nations 171

not causations, after all. But when statistically relevant correlations are
found with all of them”well, this is a statistician™s dream come true. And
it makes the case very dif¬cult to refute. It must also be pointed out that
the correlations go all the way down the line. That is, wherever a country
falls on the scale of economic freedom, that is approximately where it
will fall on the scale of relative wealth or poverty: a top-ten country in
economic freedom turns out to be top-ten in the above variables as well,
a middle quintile country in economic freedom is in the middle in these
variables, and so on. This implies, then, that in fact material prosperity
proceeds, if at all, despite, not because of, government intervention. State
intervention beyond the protections indicated by the classical liberal state
therefore cannot make a people rich, at least not directly, but it certainly
can make a people poor.


are we still conveniently overlooking
the world™s poor?
One might still be suspicious that the bene¬ts of economic freedom
accrue mainly to people already at the upper echelons of wealth. The old
refrain “the rich get richer and the poor get poorer” is usually repeated
here: is there any truth to it? In a word, no. That has not been true in the
United States for almost all of the twentieth century, during which time
both the rich and the poor got richer;19 and as evidence now readily avail-
able shows, it is not true for the rest of the world, either, when Smithian
policies are adopted.
Again, what is the evidence? For starters, according to a March 2001
study by the World Bank, which looked at data from fully 137 countries:20
“private property rights, ¬scal discipline, macro stability, and openness to
trade increases the income of the poor to the same extent that it increases
the income of other households in society” (p. 7; see also pp. 8, 10,
and 32; emphasis added). The report speci¬cally adds that this is not a
“trickle-down” process: the bene¬ts for rich and poor are created “con-
temporaneously” (p. 8). Another signi¬cant discovery of this study is that

19 See, for example, Douglass C. North™s Institutions, Institutional Change and Economic Per-
formance, esp. part 3; Richard K. Vedder™s The American Economy in Historical Perspec-
tive; Vedder and Lowell E. Galloway™s Out of Work; and Jude Wanniski™s “Memo on the
Margin: A History of the 20th Century,” http://www.polyconomics.com/searchbase/12-
31-99.html (accessed December 14, 2005).
20 These citations come from the page given in parentheses in Dollar and Kraay™s “Growth
Is Good for the Poor,” http://econ.worldbank.org/¬les/1696 wps2587.pdf.
Working Out the Position
172

Smithian policies correlate with rising income among the poor more
than do other factors one might wish to credit, including “government
social spending, formal democratic institutions, primary school enroll-
ment rates, and agricultural productivity” (pp. 8“9). Take another look
at that: economic freedom helps the poor more than government spending
on them does and more even than having democratic institutions does”defying
precisely the recommendations of many of the campaigners for world-
wide poor, including for example Peter Singer.
Of course, the people who recommend government spending and
democratic institutions have good intentions, and so if their recommen-
dations did not have consequences in actual human suffering, we might
be inclined to forgive them as merely harmless or na¨vely idealistic. But
±
it turns out, according to the World Bank, that “reducing government
consumption and stabilizing in¬‚ation are examples of policies that are
˜super-pro-poor™” (p. 8)”meaning that they disproportionately bene¬t
the poorest quintile in a country. Thus, reducing government spending,
not increasing it, helps the poor. The report continues: “Social spending
as a share of total spending has a negative relationship to income share
of the poor that is close to statistical signi¬cance” (p. 9; emphasis in the
original). The EFW index also comes to the same conclusion: it shows
that the poorest tenth of the countries in the bottom quintile of economic
freedom earn on average only 12 percent of what the poorest tenth in
the freest quintile earn on average”$823 annually for the former ver-
sus $6,877 annually for the latter.21 By advocating increased government
spending, then, Singerian advocates of the poor actually advocate policies
that promote poverty. Some friends.
Consider moreover that since 1965, the United States has spent some
$5.4 trillion in its “War on Poverty.”22 That is about $20,000 for every
man, woman, and child in the United States, a sum equal to the total
2002 gross domestic products of Germany, the United Kingdom, France,
and Italy combined. Yet if the World Bank analysis is correct, it will have
had no signi¬cant bene¬cial effect on the poor. Think about that”¬ve
and a half trillion dollars, and no help at all! Even the federal government
has effectively admitted as much, since its of¬cial reports on American
poverty levels have held them to be relatively constant over the last four


21 See Economic Freedom of the World: 2004 Annual Report, p. 23.
22 See Stephen Moore™s “The Most Expensive Government in World History,”
http://www.ipi.org/ipi%5CIPIPublications.nsf/PublicationLookupQuickStudy/
6505E3B3E90495EC86256B4D003EB1A9.
The Wealth of Nations 173

decades. Indeed, according to the World Bank argument, all that govern-
ment spending would have had a negative effect, since that $5.4 trillion
would otherwise have been in the private sector, stimulating the economic
growth that all the evidence shows would have helped the poor.
And there even exists evidence that the poor have in some ways been
made worse off since the launching of the War on Poverty. Charles Murray™s
Losing Ground: American Social Policy, 1950“1980, chronicles, in fact after
dismal fact, just how systematically the welfare state has failed poor peo-
ple, including blacks in particular, in America. The welfare state has not
only led to new, unintended, and unforeseen problems; it did not even
help in the speci¬c areas it explicitly undertook to make better: by virtu-
ally every measurable criterion, America™s poor, especially its black poor,
were doing better and were on better trajectories in the 1950s than dur-
ing the ™60s, ™70s, and ™80s when the state of¬cially undertook to make
their lives better.23 Walter Williams™s The State against Blacks makes the
same case about blacks, expanding the evidence to cover a wider sweep
of American history as well as evidence from other countries, notably,
South Africa.24 And Theodore Dalrymple™s powerful Life at the Bottom:
The Worldview That Makes the Underclass makes the same case yet again,
this time for the “underclass” in Britain. Dalrymple does not employ the
facts and ¬gures that Murray and Williams do; he relies instead on his
anecdotal experience as a physician in the slums and prisons of England.
But although his experience is anecdotal, it is a far larger sample than
what one normally gets from any individual: over his years he has seen tens
of thousands of cases, and he has recorded thousands of people™s stories.
The patterns crystallize with pellucid clarity. There is no real sense any-
more, Dalrymple argues, in which one can claim that the British under-
class is poor, since they all have, courtesy of the state, minimally adequate
housing, food, medicine, and so on. Yet they remain an underclass and
continue to lead disastrously self-destructive lives. Why?
As Dalrymple shows for the English underclass,25 and as Murray and
Williams show for the American underclass, one of the central root causes
in both cases is the absence of individual initiative, common sense, and

23 Tanner™s recent The Poverty of Welfare updates and further substantiates Murray™s anal-
ysis. See also the Federal Reserve Bank of Dallas™s 1995 annual report, “By Our Own
Bootstraps,” and Alan Reynolds™s “For the Record.”
24 For a brief recent discussion, see Myron Magnet™s “Freedom vs. Dependency,” http:/ /
www.opinionjournal.com/editorial/feature.html?id=110005395.
25 See also James Bartholomew™s “The Failure of the British Welfare State,” http:/ /
www.fee.org/vnews.php?nid=6459, and Amy L. Wax™s “What Women Want.”
Working Out the Position
174

prudence that comes with having developed sound judgment. By not
requiring them to work and think for themselves and face and learn
from the consequences of their decisions and actions, the state has grad-
ually enervated their judgment and extinguished their independence.
By treating them as if they were not persons, it has effectively rendered
them things.


winning the economic, and intellectual, contest
Places that have approximated the limited governments for which I have
argued have prospered, while those that have adopted expansive central-
ized governments have not. That is the answer to the question posed by
that great economist and philosopher (and comedian), P. J. O™Rourke:
“I have one fundamental question about economics: Why do some places
prosper and thrive while others just suck?”26 O™Rourke goes on to con-
trast the United States with Albania, Cuba, and Russia, and Hong Kong
with Tanzania”in both cases drawing the obvious lessons. Alternatively,
think of the different respective political and economic paths taken by
places such as North versus South Korea, by China versus Hong Kong,
or by “Little Havana” (Miami, Florida) versus Cuba. Each of those pairs
has enjoyed similar climates, natural resources, and cultures, but their
economic histories”and their levels of prosperity”could not be more
different. Again, think also of the centralized authoritarian regimes of
the natural resource“rich former Soviet Union, Cambodia, Mongolia, or
India, and then consider the grinding poverty pervasive in each.
The economic contest has therefore been won, but the news of the
victory has not reached everyone. So intellectual battles still have to
be fought. Consider, for example, U.N. Secretary-General Ko¬ Annan™s
September 2, 2002, op-ed in the Washington Post, in which he set out
what he believes should be the world™s agenda for the twenty-¬rst cen-
tury. He says we face “the twin challenges of poverty and pollution,” and
that if we are to end the “wanton acts of destruction and the blithe self-
delusion that keeps too many from seeing the perilous state of the Earth
and its people,” we must organize a world-wide effort. “Action,” Annan
gravely intones, “starts with government.” Annan™s position is a common
one, especially among political leaders (who”pardon the cynicism”are
thereby giving themselves steady work), but given what we have seen in

26 In his book Eat the Rich, p. 1.
The Wealth of Nations 175

this and the previous chapters it is hard to imagine how a single article
could go wrong in more ways.
Here are Annan™s claims: (1) “We have ¬lled the atmosphere with
emissions that now threaten havoc in our lifetime”; (2) “We have felled
forests, depleted ¬sheries and poisoned soil and water alike”; and (3)
while some countries have grown rich, “too many people”in fact, the
majority of humankind”have been left behind in squalor and despair.”
Take these claims in turn. First, is it true that we have brought our atmo-
sphere to this perilous state? Well, no. Although systematic evidence does
not go back for more than about a century, all measurements of average
concentrations of dangerous particulate matter shows them decreasing
for the last several decades, despite growing populations and economies.
This is true for total suspended particles, for lead, for SO2 , for ozone pol-
lutants, for nitrous oxides, and for carbon monoxide. According to a 1992
World Bank study, “Air quality in OECD countries is vastly improved.”27
That same study cites an OECD study showing that since 1970, lead con-
centrations have dropped by almost 100 percent, suspended particulate
matter by 60 percent, and SO2 by 38 percent.28
How about the second claim? Is it true that we have depleted or poi-
soned our resources as Annan claims? Again, no. It is of course true that
some forests have been felled and that some ¬sheries are being depleted,
but on neither count are we anywhere near disaster. Global forestation
has dropped about 20 percent within historical times but has remained
relatively constant during the latter half of the twentieth century, even
increasing marginally from 30.04 percent global forest cover in 1950
to 30.89 percent in 1994.29 Indeed, forestation in North America has
actually increased since the day Columbus arrived.30 And Amazonian rain-
forest, the loss of which is much lamented, still retains about 87 percent
of what it was when man ¬rst arrived there; the rate of its loss is declin-
ing as well, currently standing at only about one-half of 1 percent per
year.31


27 See Bjørn Lomborg™s The Skeptical Environmentalist, p. 175.
28 See the World Bank™s World Bank Development Report 1992: Development and the Environment,
p. 40.
29 See the Food and Agriculture Organizations of the United Nations, The Global For-
est Resources Assessment 2000: Summary Report, ftp:/ /ftp.fao.org/unfao/bodies/cofo/
cofo15/x9835e.pdf (accessed December 14, 2005).
30 See Stephen Moore and Julian Simon™s It™s Getting Better All the Time, p. 204.
31 See Lomborg, The Skeptical Environmentalist, pp. 114“17.
Working Out the Position
176

The world™s total ¬sh catch has increased steadily in the last ¬fty years,
but the 90 million tons or so of ¬sh mass now annually taken out of the
oceans is estimated to be about 10 million tons less than the total sus-
tainable amount. Thus the oceans overall are in relatively good shape;32
and the private property voucher schemes created in places such as New
Zealand, Iceland, and Australia, which have led to over 80 percent of their
¬sh habitats at or above sustainable rates, once again demonstrate the
ability of markets to succeed where government edict fails.33 Moreover,
like our atmospheric quality, both soil and water quality are, by virtually
any measurement, getting better worldwide.34 That is not to say that there
are not problems, of course, or that things could not be improved”only
that strong and credible evidence suggests that Julian Simon was indeed
right when he claimed repeatedly that things are getting better and
better.35
But what about those places where there are still problems? What about
the places in the world where there are local problems with water, forests,
¬sheries, and so on? This brings us to the other major error in Annan™s
article. He notices that most of these problems are in developing, not
developed, countries. But Annan fails to realize what is the most impor-
tant difference between them: property rights, markets, and relatively less
government regulation. If the evidence suggests anything, it is that the
remedies for poverty Annan proposes”government regulation of indus-
try, markets, and the environment”are precisely the things that have
slowed and even stunted progress in developing countries. These cures
are worse than the disease.
One could illustrate the point with the histories of any of the coun-
tries listed at the beginning of this section, but perhaps the recent case of
Ireland will suf¬ce. For centuries Ireland has had a negative immigration
rate, meaning that more people left Ireland than came to it. It has been
one of the economic backwaters of Europe for many generations. Sud-
denly, however, things have turned around: the immigration patterns
have reversed, investment dollars are rolling in, and the economy has
been growing at a robust 9 percent”far outstripping the anemic growth


32 See John P. Wise™s “Trends in Food from the Sea.”
33 See, for example, “A Fish Story,” Wall Street Journal Online, November 6, 2003.
34 See Julian L. Simon™s edited The State of Humanity, chaps. 40, 43, and 45, and Lomborg,
The Skeptical Environmentalist, chap. 19.
35 For a mountain of further evidence, see Steven Hayward™s 2004 Index of Leading Environ-
mental Indicators.
The Wealth of Nations 177

of other countries in Europe.36 This has raised the ire of the European
Union, which has reprimanded Ireland for the “reckless” policies that
are siphoning off business, investment money, and talented people from
the rest of Europe.
What has caused this sudden and stark about-face and turned Ireland
into the “Celtic Tiger,” as it is now called? Has it been the economic
intervention, the managed markets, and the globally organized world
governments that the Secretary-General of the United Nations recom-
mends? No. Ireland lowered its taxes. Ireland cut its capital-gains tax
from 40 percent to 20 percent and its top marginal personal income tax
rate from 48 percent to 42 percent, and it reduced its corporate tax rate
to 12.5 percent, one of the lowest rates in the developed world.37 In so
doing, it signaled to investors and entrepreneurs around the world that
it is a place of opportunity. As the evidence presented in this chapter
suggests, wherever there is opportunity, entrepreneurs will come”and
wealth will follow them.
Ko¬ Annan says he is concerned about the poor, and he claims that gov-
ernments must come to their rescue by taxing wealthy nations and giving
some of those proceeds to poorer nations. But that means is inconsistent
with the end. What the mounting evidence indicates is that what the poor
need is secure property rights and markets”and then they will take care
of themselves.


a matter of more than just money
Deciding what system of government to adopt is thus directly related to
how much its citizens will prosper: decentralized systems based on mar-
kets and private property allow the most prosperity, whereas centralized
systems based on regulation, bureaucracy, and “welfare” agencies precip-
itate economic stagnation and actually retard the poor™s ability to escape
poverty. That makes the issue not just a matter of economic concern, but
one of considerable moral importance as well. But nothing mentioned
so far takes into account the substantial human toll that is not based on
money.
The relative comparisons invoked thus far do not count, for example,
the approximately one hundred million innocents killed during the twentieth

36 See Ben Powell™s “The Celtic Tiger,” http://www.techcentralstation.com/091002M.html
(accessed December 14, 2005).
37 See Brian M. Carney, “The Secrets and Perils of Ireland™s Success.”
Working Out the Position
178

century in the name of Marxian or quasi-Marxian ideals. Some of the
execrable highlights:38
r The Soviet Union. Lenin, 1917“24: 4,017,000 dead; Stalin, 1929“53:
42,672,000 dead. The Soviet slave-labor system created by Lenin and
expanded by Stalin killed almost 40 million people in about seventy
years”more than twice as many as killed by four hundred years of
brutal African slave trade.
r China. Mao Tse-tung, 1927“76: 37,828,000 dead. The actual number
might be even higher, since, unlike the case with the former Soviet
Union, China has not yet opened its archives to Western researchers,
and so the hard numbers remain dif¬cult to get. Some scholars suspect
the ¬nal tally will have Mao surpassing Stalin in total number of people
murdered.
r Cambodia. Pol Pot, 1968“87: 2,397,000 dead. In absolute terms, Pol
Pot™s number of killed is only a fraction of Stalin™s or Mao™s, but con-
trolled for population size, he was the most lethal murderer in the
twentieth century: from 1975 to 1979, he killed 8 percent of his popu-
lation annually. In less than four years of governing, his Khmer Rouge
killed 31 percent of all men, women, and children in Cambodia; the
odds of any person surviving during those four years were only 2.2 to 1.

The state that is consistent with respecting people™s ˜personhood,™
that is economically free, and that adopts Smithian recommendations
has therefore more to recommend it than one might have suspected: it
may literally mean the difference between life and death. This kind of
society will not be perfect”no society ever will be”but morality and his-
tory combine to show that it is superior to any other known alternative.
If you want to help the world™s poor and oppressed, then, do not lobby
for government aid, do not lobby for massive wealth transfer, and do not,
God forbid, advocate the expansion of government powers over indi-
viduals. Lobby instead for free trade, for markets, for private property,
for punishment of injustice, and for the widest possible scope of individ-
ual liberty compatible with everyone else enjoying the same liberty. As I
argued in chapter 3, this is the vision of government going back at least
to the Magna Carta in the thirteenth century, through the Levellers and
John Locke in the seventeenth century, and adopted and endorsed by

38 These numbers are principally from Robert Conquest, Re¬‚ections on a Ravaged Century,
chaps. 1 and 3“7; St´ phane Courtois™s edited The Black Book of Communism, parts 1, 2,
e
and 4; and R. J. Rummel™s Death by Government, chap. 1.
The Wealth of Nations 179

Adam Smith and America™s founders in the eighteenth century. History
has now declared them the winners of this debate, so there is no longer
any empirical question at stake.39
But this is not a merely academic debate since actual human lives and
actual human suffering are at stake. Perhaps you and I are lucky enough
to live in one of the wealthiest countries, lucky”and wealthy”enough to
enjoy the luxury of not really noticing the other-side-of-the-world effects
of our imprudent politics. But others do feel those consequences, and
they do not have the luxury of ignoring economic, political, and historical
reality with impunity.


incentives: examples
I spoke in chapters 2 and 3 of incentives and how it matters considerably
how they are aligned. People take notice when they suffer from the conse-
quences of their own bad decisions, and they are thereby induced to seek
out and try alternative courses of action. This natural necessity disciplines
them to overcome their inclinations to otherwise not bother to pay atten-
tion and to do nothing. On the other hand, if this connection between
decision making and responsibility is severed, if this natural necessity is
absent, people lose this discipline and their natural inclinations to lazi-
ness can lead them into pro¬‚igacy.
Departments of motor vehicles are good illustrations. Their incom-
petence is legendary. Consider how much time you have had to spend
waiting in line”hours, no doubt”to do things that should have taken
only minutes, and that you probably should have been able to do online.
Why are they so bad? They are so bad, in fact, that true stories about
them sound for all the world like Monty Python-esque satires. Take
the recent goings-on in Nevada. Waits in the Nevada DMV of¬ces were
getting so long recently”in 1999 the average wait was an incredible

39 I would be remiss if I did not name some recent criticisms of the view I am defend-
ing. Some in¬‚uential ones are Amy Chua™s World on Fire, John Gray™s False Dawn, Joseph
Stiglitz™s Globalization and Its Discontents, and Erik Olin Wright™s Class Counts. Since the
majority view among politicians and academics (outside economics) strongly favors gov-
ernment intervention and aid rather than the classical liberal state, other critics of my
view are very easy to ¬nd. One reason I have focused primarily on evidence and work
supporting my view is that, again outside economics, it is typically far less familiar. For
other work that in various ways supports the conclusions I reach, see that of (details in
the bibliography): Barber, Bauer, Bhagwati, Hicks, Higgs, Jones, Lal, Landes, Norberg,
North, North and Thomas, Rosenberg and Birdzell, Seabright, Surowiecki, Weede, and
Wolf.
Working Out the Position
180

three to ¬ve hours”that some Nevadans started threatening DMV work-
ers, telling them that they were going to kill them or that they should
watch out when they leave work. I think we can all understand the frus-
tration involved with queuing for an hour, only to be told that one has
to wait in another line, for another hour of course, then only to be told
that our forms were not properly ¬lled out and we will have to come
back another day”a weekday, meaning yet another day off work. What
was Nevada governor Kenny Guinn™s solution to this problem? Was it to
abolish all those tedious, Soviet-style make-work forms that everyone is
required to ¬ll out? Or to ¬re all the unmotivated incompetents who staff
the of¬ces? Or perhaps to end Nevada™s “sick time” policy that leads to
state worker absenteeism rates averaging an unbelievable 49 percent? Oh
no. Instead, according to an editor of the Las Vegas Review-Journal, “The
governor . . . asked members of the Legislature™s Interim Finance Com-
mittee to provide funding for armed guards in the Las Vegas and Reno
DMV of¬ces, to keep these unruly peasants in line.”40 So it is not that
anything has to change with the DMV; no, the governor™s comical con-
clusion is that the citizens must be “persuaded””by the threat of armed
guards, of course!”simply to grin and bear it.
Now, in fairness to Governor Guinn and Nevada™s DMVs, a concerted,
and expensive, effort has now been made to reduce average waiting times,
with the result that in 2001, according to the director of the Nevada DMV,
“eighty percent of residents now wait an hour or less in lines” and they
have “come close” to meeting the one-hour average wait goal set by the
governor.41 Approaching a one-hour wait time average is a substantial
reduction from the three-to-¬ve-hour average wait time of just two years
earlier, but it is still waiting for an hour! Ask yourself this: when was the
last time you had to stand in line for an hour waiting to get your purchase
refunded or exchanged at a department store? Or to have your Visa card
transaction completed? My guess is the answer is “never.” The Nevada
DMV director points out in his agency™s defense that they have to process
about one thousand transactions per day. That seems like a lot”until
you ¬nd out that Visa, for example, processes almost one hundred million
transactions worldwide per day, or about ¬ve thousand per second, each


Vin Suprynowicz, “And Now . . . Armed Guards at the DMV,” Las Vegas Review-
40

Journal, December 8, 2000. Http:/ /www.billstclair.com/blog/vin/001208.html (accessed
December 14, 2005).
41 See Ed Vogel™s “Report to the Legislature: DMV Nears Guinn™s Hour-Wait Goal,” Las
Vegas Review-Journal, January 27, 2001.
The Wealth of Nations 181

taking only seconds and enjoying a nearly perfect accuracy rate of almost
100 percent.
Other government ventures fare similarly badly. Despite increasing
ticket revenues, Amtrak, America™s government-owned and government-
operated passenger railroad system, lost $903 million in 1999 and
$2.5 billion over the previous three years.42 Since its creation in 1970,
Amtrak has received almost $25 billion in subsidies from the U.S. federal
government, and still it has lost money; and this despite carrying only
0.3 percent of intercity passengers, running more slowly than trains ran
on the same routes ¬fty years ago, and posting consistently abysmal on-
time performance ratings. But what is the solution that the people in
charge of Amtrak offer? Yet more state money. Amtrak president David
Gunn threatened Congress in 2003 that without a doubling of its current
subsidy, bringing it up to $2 billion per year, and without several billion
additional dollars for maintenance and repairs, Amtrak might not survive
even one more year.
The U.S. Post Of¬ce, to take one ¬nal conspicuous example, is the
largest civilian government agency in America; it enjoys a state-enforced
monopoly on the delivery of ¬rst- and third-class mail and on the use
of mailboxes; it pays no federal, state, or local taxes; and any private
competitor must by law charge more than double what the USPS charges
for the same service.43 Under such extraordinarily favorable competitive
circumstances, who, you might think, could possibly fail? Well, the USPS
fails, and impressively. The Post Of¬ce has over the last four decades taken

42 See “Amtrak Continues to Lose Money,” Memphis Business Journal, July 25, 2001, http:/ /
www.bizjournals.com/memphis/stories/2001/07/23/daily22.html?t=printable. Other
sources for the information I present about Amtrak include Pamela Hasterok™s “Public
Trains in Public Hands”; Iain Murray™s “Privatizing Rail, Avoiding the Pitfalls: Lessons
from the British Experience,” http:/ /www.cei.org/gencon/025,04546.cfm; “National
Corridors Initiative: Interviewing David Gunn of Amtrak,” July 31, 2002, http:/ /
www.nationalcorridors.org/features/gunn073102.shtml; Joseph Vranich and Edward
L. Hudgins™s “Help Passenger Rail by Privatizing Amtrak”; and Joseph Vranich, Cor-
nelius Chapman, and Edward L. Hudgins™s “Time to Liquidate Amtrak,” http:/ /
www.cato.org/dailys/02-14-02.html (all sites accessed December 14, 2005).
43 Sources for information about the U.S. Post Of¬ce include James Bovard™s “Slower
Is Better: The New Postal Service,” http:/ /www.cato.org/pubs/pas/pa-146es.html;
Collinge and Ayers™s “First-Class Mail, Third-Class Competition”; “Going L™Postal,”
Wall Street Journal Online, July 23, 2004; Edward L. Hudgins™s “A Holiday Gift: Post
Of¬ce Going Private?”; Robert Knautz™s edited “Privatizing the Post Of¬ce,” http://www.
free-market.net/features/spotlight/9901.html; and Brian Summers™s “The Postal
Monopoly,” http:/ /www.libertyhaven.com/theoreticalorphilosophicalissues/economics/
monopolyandindustrialorganization/postalmono.html (all sites accessed December 14,
2005).
Working Out the Position
182

progressive steps toward considerably easing its workload by abolishing
Sunday mail pickups, moving ¬nal mail pickup times back from 5 p.m.
to 4 or even 3 p.m., reducing service hours, and phasing out individual
home delivery and instead relying increasingly on “cluster boxes” where
many people™s mail is deposited and the individuals must then retrieve it
themselves. Despite all this, however, and despite the tremendous gains
in technology at its disposal, the Post Of¬ce™s average delivery times have
actually gotten longer. Benjamin Franklin announced a goal in 1764 of
delivering mail between New York City and Philadelphia in two days;
one hundred years ago the Postmaster General said that it should be the
goal of the Post Of¬ce by the middle of the twentieth century to deliver
mail from anywhere to anywhere in the country in two days. Yet in 1991
the USPS claimed it a “success” to be able to deliver mail between New
York City and neighboring Westchester County in two days. The private
company Federal Express, by contrast, will guarantee overnight delivery
to any location in the United States, and many locations elsewhere in
the world. Since 1969 the average delivery time for a ¬rst-class letter has
increased 22 percent, and for this increasingly poor service Americans
have had to pay increasingly more: ¬rst-class stamp rates have increased
over 300 percent, from 6 cents to 39 cents. The Post Of¬ce™s delivery
rates have gotten so bad, in fact, that it has stopped publishing its failure
rates and claims the information is now “proprietary.” Watchdog groups
estimate, however, that the Post Of¬ce struggles to successfully deliver
mail by advertised deadlines 85 percent of the time; Federal Express, by
contrast, has a 99.82 percent worldwide delivery success rate, and that is
with the majority of its packages being guaranteed for next-day delivery.
One study estimates, “The Postal Service is probably losing or throwing
out over a billion letters a year”; at about 0.5 percent of its total volume,
that is roughly ¬fty times the loss rate of Federal Express.
One could multiply such examples. The question, again, is why these
state-run affairs routinely do so poorly, especially when compared with
private competitors. The answer in large part is incentives. State-enforced
monopolies give all the wrong incentives by divorcing punishment and
reward from actual production. If a private company is consistently
incompetent, consistently loses money, consistently loses out to compe-
tition, or consistently frustrates and displeases its customers, it will soon
have no more customers and it will go out of business. That creates strong
incentives to look for ways to please customers, to remain competitive,
and to continually reduce costs. But the state-run enterprises face no such
market incentives. They get money no matter what, and often their very
The Wealth of Nations 183

failures are used as reasons to justify increasing their subsidies rather than
cutting them off. Despite their own best intentions, people are inclined
by nature to be lazy: if they are not forced by natural necessity to innovate,
compete, strive, and contend, they will tend not to. The state-enforced
monopoly is just the security they need to rest on their laurels without
facing any real repercussions, and the predictable result is exactly what we
do in fact see: increasing and widespread stagnation, waste, and incom-
petence.
I cannot resist adding one more spectacular example that has recently
come to the world™s attention. The Scottish Parliament, which gained
limited independence from England™s in 1999, decided that it needed
a new, august building that could properly house its new, august self. It
began construction in 1997”before the body was even of¬cially elected,
in anticipation of the event”on an impressive facility in its capital city
Edinburgh, right next to Holyrood Palace, the Scottish home for the
monarchs of the United Kingdom. At the time of breaking ground the
total projected cost of the edi¬ce was £40,000,000, or about $68,000,000.
Now, several years and countless “setbacks,” “unforeseen problems,”
“accounting errors,” hearings, and investigations later, the total ¬nal cost
will be over £450,000,000”a greater than ten-fold increase!44 That is
approximately £90 for every man, woman, and child in Scotland, for just
this one single government project. Lots of people are upset about this,
of course, and the newspapers editorialize against it; many different peo-
ple have been ¬ngered for the blame and there has been an admirable
display of righteous indignation, of shock and horror, and the obligatory
promises for reform. But no one has been ¬red, no one has been jailed,
and no one has been shot, guillotined, hanged, or even run out on a
rail. So construction and pro¬‚igacy continue unabated. Who knows how
much it will actually cost when the ¬nal accounting is completed, if it ever
is? But the crucial point to make is: should we really have expected any-
thing different? The parliamentarians are not spending their own money,
and naturally, therefore, no expense is spared and no luxury omitted: a
“brilliant” and “imaginative” design from Enric Miralles, an “avant-garde”
Catalonian architect; state-of-the-art technology and exotic materials
throughout; unique and nonstandard windows, walls, desks, doors,

44 There is now an of¬cial inquiry under way, whose activities can be tracked here and which
provides an overview of the spectacle so far: http://www.holyroodinquiry.org/index.htm.
One wonders how much the blue-ribbon inquiry itself will end up costing. Here
is yet another story about yet another recent “delay”: http:/ /news.scotsman.com/
topics.cfm?tid = 276&id = 844122004 (both sites accessed December 14, 2005).
Working Out the Position
184

bathroom ¬xtures, chairs, and so on”all raising the cost, of course. No
one is so generous as when he is spending someone else™s money. And all
this, it must be remembered, is for a parliament that is still partially under
the authority of the Parliament in London: four hundred million pounds
for a largely advisory board to contemplate and discuss Scotland™s future!
Had I known, I would have told them that I was available for half that
price. All kidding aside, this case perfectly captures the perverse incen-
tives involved in state-run enterprises, and it amply demonstrates why we
should restrict them, or perhaps beat them back bodily, to the smallest
number and the fewest responsibilities humanly possible.45
That is not to imply that in the private sector market forces guarantee
constant innovation or perfect customer service. Human beings are falli-
ble and imperfect, and any human system of organization will re¬‚ect that.
The comparison is rather with actual alternatives: under which system”
state-run or privately run”should we expect better service overall? His-
tory and everyday experience con¬rm that it is in the private sector, and
the respective alignment of incentives explains why. An entire ¬eld in
economics, called “public choice,” has arisen in the last forty years or so,
complete now with its own Nobel laureates”a founding father of public
choice economics, James Buchanan, won the Nobel prize for economics
in 1986 for his pioneering work in the ¬eld46 ”to study exactly how such
incentives in¬‚uence behavior in government and private sectors, and
a now impressively large body of data has been assembled that validates
exactly this conclusion. No system is perfect, but waste and incompetence
multiply in the security provided by the “public” or government sector,
and they are punished and reduced in the produce-or-perish arena of
the “private” sector.


45 Lest it appear I am being overly critical of the Scots, I bring to the reader™s attention
just one contemporary example from the United States”and as one might expect from
America, a waste of public monies on an even more colossal scale: Boston™s so-called
Big Dig underground highway construction project. Here is Governing Magazine™s recent
summary: “The Bay State [has] embarrassed itself with its handling of the ¬scally misman-
aged ˜Big Dig,™ the Boston highway project that ran up the largest capital cost overrun
in U.S. history. The Big Dig was originally supposed to cost slightly more than $2 billion
and ended up with a price tag closer to $15 billion. Even when the project was largely
¬nished and seemed to have survived its troubles, it began developing new ones. In the
past few months, a series of leaks in its Interstate 93 tunnel have been making news.”
Http:/ /governing.com/gpp/2005/ma.htm (accessed December 14, 2005).
46 Perhaps the founding document in the ¬eld is Buchanan and Tullock™s The Calculus of
Consent.
The Wealth of Nations 185

business power versus state power
It is an element of commonly received wisdom that politics is a sordid
affair, and that, despite the occasional notable exception, most politi-
cians are crooked and most bureaucrats are surly, pampered, and lazy
petty tyrants. Though widely held, these beliefs do not noticeably deter
most people from a seemingly inextinguishable faith that the next batch
of politicians will straighten it all out, because the new ones, we are always
sure, will be imbued with the noble sentiment of “public service” people
speak of so reverently. This faith is especially apparent when discussion
turns to public schooling, where hope does indeed spring eternal. We
reserve discussion of public schooling until chapter 6, but even on the
basis of the examples mentioned here”departments of motor vehicles,
Amtrak, the Post Of¬ce, and the Scottish Parliament building”one can
probably safely say that although one suspected that government enter-
prises were not exactly paragons of virtue and ef¬ciency, the actual extent
of their corruption and waste is still shocking to behold. When one gen-
eralizes this level of failure to the other arms of the government (have
another look at the Appendix to chapter 2), one begins to get an inkling
of just how large the unseen damage is.
In a famous 1850 essay entitled “What Is Seen and What Is Unseen,”
French economist Fr´ d´ ric Bastiat highlighted the “unseen” in eco-
ee
nomics by pointing out a common fallacy.47 If a thug throws a rock
through a baker™s window, some people say it is actually a good thing,
since now the glazier who will replace the window gets some work. But
the glazier™s new work, Bastiat says, is what is seen; what is unseen is what the
baker would have done with the money he now has to give to the glazier.
Perhaps he would have bought himself a new suit, and thus given work
to the tailor; perhaps he would have saved it in a bank, freeing funds to
help an entrepreneur start a new venture; perhaps he would have helped
pay for his child™s tutor. The point is that all that people usually see is the
immediate effect”the glazier gets work”while not pausing to consider,
partly because it is “unseen” and thus requires thought to understand,
all the things that might instead have taken place and that, because they
would have been what the persons in question wanted to do instead of
what they had to do, would have constituted a far greater satisfaction of
their interests. Bastiat™s lesson is a sound one. Politicians and publicists

47 In Selected Essays on Political Economy, pp. 1“50.
Working Out the Position
186

routinely, or conveniently, forget it, but since the unseen damage is in
lost opportunities for actual people, for you and me, we, at least, would
do well to remember it.
Yet some argue that despite government™s failures and the further fact
that its failures are coercively enforced, one should not forget that busi-
ness too has failures and that business can often exercise power over
people as well. A recurring charge from critics of business is that unreg-
ulated markets can lead to monopolies, to people losing their savings
in bad investments, and to periods of “boom and bust”; and that busi-
nesses and their advertisers can carefully shape or indeed manipulate
consumers™ preferences so that consumers come to believe that they
“absolutely must have” or “just cannot live without” whatever the com-
pany wants to sell them.48
This argument reminds one of what P. T. Barnum is reputed to have
said, that a sucker is born every minute. People can indeed be talked into
all sorts of things, and as I have had occasion to mention elsewhere, the
world has an apparently endless supply of con men and charlatans who
are only too happy to help part a fool and his money. Con men will never
go away, however, no matter how many times we outlaw them; so the only
real question is how can we minimize their effectiveness. The answer, I
propose, is by encouraging people not to be so gullible and to develop a
healthy skepticism”in other words, to develop good judgment. And how
do we help people do this? Precisely by not rescuing them every time they
make a bad decision, and by thus introducing natural incentives for them
to wise up. You will never make people wise or give them good judgment
by protecting them from the consequences of their bad decisions or
from trying to prevent them from being able to make bad decisions in
the ¬rst place. That would be like trying to teach people how to be skilled
mountain climbers by never letting them get near mountains for fear
they might fall and hurt themselves. People will make mistakes, yes, and
some people will pay high prices for their mistakes”there is no getting
around that, under my scheme or any other you can think of. The only
matter at issue is how to hold those mistakes to a minimum, and I submit
to you that our best chance to do that is by encouraging each individual
to develop judgment on his own.


48 For a discussion sympathetic to the notion of business power, see John Christman™s
The Myth of Property. For a good general discussion of some of the issues involved here,
see Anne Cunningham™s “Autonomous Consumption”; see also James Stacey Taylor™s
“Autonomy, Coercion, and Distress.”
The Wealth of Nations 187

But what about monopolies and manipulative advertising campaigns?
Let us take a clear-eyed look at the matter. There are monopolies, but
probably every successful monopoly known to man has been successful
only because it has been chartered, supported, or defended by the coer-
cive sword of the state.49 Governments grant monopolies all the time
and have always done so; in America today we have state-granted monop-
olies in utilities, schooling, broadcasting, and so on, effected by licensing
restrictions, outlawing competition, or prohibitive tariffs and subsidies.
Some of these monopolies are indeed successful, but only because coer-
cive measures are adopted to enforce them. Strip them of their special
legal protections, and see how long they can continue to monopolize their
respective markets. And that is exactly what we see in actual, that is to say,
free markets: successful monopolies in competitive markets are as rare as
the proverbial bird. At one time in America everyone worried about the
“monopoly” of U.S. Steel and how we would soon all be beholden to it;
there were congressional hearings, talk of government anti-trust action,
and much general fright. Then what happened? Other companies started
making steel for less money”and guess what: all of U.S. Steel™s vaunted
and feared “power” just evaporated. Similarly, we have been nervous
about General Motors, about IBM, about AT&T, about Microsoft; we have
similarly held congressional hearings and talked of (and sometimes acted
on) taking legal measures. And what happened in each case? Again, a little
competition goes a long way: the Japanese made small, cheap, and ef¬-
cient cars; Apple computers came along; Sprint appeared and then Lord
knows how many cellular phone companies; the internet happened”
and poof! all that power just went away. Those companies might well have
had, and some still do have, a lot of money, but when it comes down to
it, what does all that money really matter if you and I and everyone else
can just go right next door and buy from someone else? The fact of the
matter is that no business can retain its market share unless it continues
to please the customer, and does so better than others. Consumers are
exquisitely demanding”exasperatingly so, if you ask any businessman”
and their loyalty is to the satisfaction of their own interests above all else,
above anything they feel for any company, business, or brand. If they do
not like your product, they drop you like a hot potato without batting an

49 For both theoretical and historical analysis of monopolies and monopolistic behavior, see
the works of (details in the bibliography): Armentano, Bork, McChesney and Shugart,
Posner, and Vedder and Galloway. For a classic account, see Adam Smith™s Wealth of
Nations, pp. 78ff., 630ff., 647ff., 740“1, and 755; and Lectures on Jurisprudence, pp. 471“2,
497“8, and 529.
Working Out the Position
188

eye. Today™s business “monopoly” is tomorrow™s historical artifact and case
study in a business class. When it comes to markets, the consumer really is
king.50
And that gives the lie, I believe, to claims about our being manipulated
or even brainwashed by advertising. If an advertiser defrauds people, that
is one thing, and it is true that the difference between putting a “positive
spin” on something and offering a “misleading” description can some-
times be hard to tell. But the thousands and thousands of failed busi-
nesses, the fact that indeed one out of every three new business ventures
fails within two years, and the fact that advertising companies themselves
have among the highest turnover and failure rates in business amply
demonstrate that if businesses have the power to manipulate and brain-
wash, they apparently are not aware of it. They might well trigger a new
desire in you, but there is nothing forcing you to act on it. I did not
have a desire for a Lamborghini Countach sports car before I ¬rst saw
a picture of one years ago in Car and Driver magazine, but that does not
mean that I suddenly had no choice in whether to buy one or not. Okay,
I cannot afford a Lamborghini, but the point holds for other things too.
You might not have wanted a pair of Nike shoes until you saw Michael
Jordan wearing them or a VCR before you saw one; and you probably
never could have imagined how important e-mail could be to your life
until you began to use it, and now you cannot imagine not having it. All
of that is true, but none of it means that you had no choice in the mat-
ter. Could you do without a VCR? Of course. You probably have a DVD
player instead now anyway. Could you do without a cell phone or with-
out e-mail? Again, of course you could: the fact that you choose not to do
without them does not mean you couldn™t (there were a few human beings
who existed before cell phones and e-mail, after all); and remember that
there are always options about which cell phone company to use, which
internet service provider to use, and so on. Finally, do not forget the fact
that there are lots and lots and lots of things that you would never buy
no matter how slick the ad campaign was or how many other people you
know did. There is some breakfast cereal, for example, that will never be
in my house; likewise with some music, some movies, some books, some
kinds of alcohol, and, for that matter, some people, and I could not care
less what their advertisers or supporters or spokesmen have to say on their
behalf. And the same holds true, I am sure, for you.

50 I borrow this phrase from Ludwig von Mises™s “The Sovereignty of the Consumers,” in
his Human Action, pp. 270“3. See also George Reisman, Capitalism, chap. 6.
The Wealth of Nations 189

I think we should bear those considerations in mind when we hear
someone going on about the “power” that businesses have over you.51
If you do not like the product your department of motor vehicles is giv-
ing you, you have little choice since they have legally enacted their own
monopoly; similarly with Amtrak, with the Post Of¬ce, and with every
other agency of the state. If you decide, for example, that you do not like
what your tax dollars are going to support in the National Endowment
for the Arts, what choice do you have? Try not paying that portion of your
taxes: the state will (eventually) look you up and want to have a word with
you. If you persist in your obstreperousness, in the end men with guns
will come and take you away. That is power to make you do what they
want. You might hate Bill Gates and wish that Linux or Apple or whatever
were used by more people than use Microsoft products, but if you decide
to go with Apple, Bill Gates does not, and cannot, send men with guns to
take you away.
The natural state of business power is thus temporary, dependent, and
only provisionally granted at the pleasure of individual consumers; the
natural state of government power, by contrast, is irresistible, absolute,
and indifferent to what any individual citizen wishes. To succeed, a busi-
ness must convince me to choose it, and in so trying it is respecting my
personhood; by contrast, however, to succeed, a state simply makes me
do what it wants, and in so doing it disrespects my personhood. Now,
it is sometimes claimed that the right to vote in a democratic or quasi-
democratic society is what constitutes respect for my personhood. Not
quite.52 If the vote does not go my way in politics, people do not shrug
their shoulders, say “live and let live,” and leave me to my own devices;
no, they send their men with guns to make me comply or take me away.
On the other hand, if a majority of the people prefer Microsoft while I
prefer Linux, well, I can still go get Linux. Even if there were no alter-
native to Microsoft”something that could hardly happen in a market
with open competition, since there are always entrepreneurs out there
looking for ways to get a slice of the market™s pro¬t by catering to peo-
ple unsatis¬ed with what is already available”I am still free to not buy
Microsoft.

51 See Thomas Sowell™s “Economic ˜Power,™” http:/ /www.townhall.com/columnists/
thomassowell/ts20031211.shtml (accessed December 14, 2005).
52 For a good discussion of the lack of “causal” power of voting in contemporary demo-
cratic regimes, see Gordon Graham™s The Case against the Democratic State, chaps. 2“4. You
might also have a look at my review of Graham™s book: http:/ /www.independent.org/
tii/content/pubs/review/books/tir91 graham.html (accessed December 14, 2005).
Working Out the Position
190

Many historians have credited the success of Europe and its colonies
in the last ¬ve hundred years or so to its increasing adoption of what is
often called a “contract” society and its gradual abandonment of a “sta-
tus” society. The contract society is one based on people entering into
voluntary transactions and agreements with one another; it is the soci-
ety based on limited government, markets, and social power. The status
society, on the other hand, is the one run by political power. In the for-
mer, people succeed by innovation, enterprise, industry, perseverance,
and self-discipline, and by ¬nding ways to please and not frustrate or
alienate or force or imprison or kill others; in the latter, people suc-
ceed by conquest, by force or threat of force, and by ingratiating them-
selves to those in power. What these historians have argued is that the
evidence suggests that societies of the former type are vibrant, growing,
and diverse; societies of the latter type are adversarial, bellicose, and stag-
nating. Economist Nathan Rosenberg made this case in his 1986 How the
West Grew Rich; economist David Landes made the case again in his 1999
The Wealth and Poverty of Nations; historian Jacques Barzun made it again,
though in a different way, in his massive From Dawn to Decadence: 1500 to
the Present: 500 Years of Western Cultural Life;53 and social scientist Charles
Murray has made the case yet again, in a different way, in his 2003 Human
Accomplishment. Jared Diamond™s chapter “From Egalitarianism to Klep-
tocracy,” from his Pulitzer Prize-winning 1999 Guns, Germs, and Steel: The
Fates of Human Societies, shows how even a person antithetical to market
economies nevertheless recognizes how differently societies of contract
versus societies of status fare, how much of human progress in the last
half-millennia or so can be attributed to the opportunities and incentives
provided by the former, and how the existence of the latter slows and
retards progress, sometimes with catastrophic results.
Numerous other studies have reached similar conclusions; I list more
in the bibliography. I bring this up not only in the hopes that it will
encourage you to have a look at some of these studies, but also to highlight
the difference between social and business power, on the one hand, and
political power, on the other. Reliance on the former, and thus on the
society of contract based on it, is the only one consistent with respecting
personhood and with wanting everyone to prosper. The latter, and the
society of status based on it, is a society ¬t not for ˜persons™ but for ˜things,™
and of course for the conquerors, exploiters, pirates, and brigands who
hope to bend them to their own ends.

53 You may be interested to see my review of Barzun™s book: http://www.bama.ua.edu/
∼jotteson/barzun.pdf (accessed December 14, 2005).
The Wealth of Nations 191

Grand Uni¬cation Social Theory
I predict that many people on thus coming to the conclusion of Part I
of this book will remain skeptical about the limited government it rec-
ommends. They may still have lingering doubts about its practicality, or
they may continue to think that respecting people™s personhood must
somehow mean using the state™s coercive apparatus to do positive things
for them, not just relying on their capacity to do things for themselves
or using only the voluntarily offered help of other private individuals
and organizations. Or, ¬nally, they may think that while the classical lib-
eral state may perhaps have suf¬ced in the eighteenth century or for
America™s founding, nevertheless it is”or somehow must be”outdated
or otherwise inapplicable now. I understand these hesitations, even if I
no longer share them. I once did share them, though, and it was only
after long investigation and consideration that I came to adopt the views
I have defended here. Like Robert Nozick, whose 1974 Anarchy, State,
and Utopia articulated and defended a libertarian state similar in part
to the classical liberalism I have defended here, I am quite aware that
the position I have adopted puts me in the minority, especially among
academics.54
But having conducted these investigations, having looked into the
actual functioning of so many state programs, agencies, bureaus, and
institutes, and having compared their relative levels of success with the
levels achieved by private individuals and private organizations, I have
found that the discrepancies could not be more pronounced. The local
knowledge argument, natural necessity and incentives, and the nature
of decentralized versus centralized systems of order”all these explained
the discrepancies. And when I realized that the classical liberal political
vision that is presupposed by the private, decentralized systems of order
is also consistent with a true respect for the humanity, the ˜personhood,™
of others, then the pieces of the puzzle fell into place. It therefore forms,
I believe, a quite powerful argument. Nothing beyond the classical liberal
state is consistent with respect for persons, and, in a spectacular piece of
good fortune, it turns out that human beings are also far more able to
succeed and ¬‚ourish under precisely that kind of state than under any

54 I note, for what it is worth, that Nozick went on in later work to raise doubts about his own
position. See, for example, the chapter “The Zigzag of Politics,” in his 1989 The Examined
Life (though he apparently never abandoned the core principles of Anarchy, State, and
Utopia: see Roderick Long™s “Robert Nozick, Philosopher of Liberty”). Economist Daniel
Klein has recently offered an intriguing hypothesis to explain why people, especially
academics, tend to oppose political positions calling for limited government. See his
“The People™s Romance.”
Working Out the Position
192

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