[This lead article, and the surrebuttal that followed a reply by Dr. Walter Block, appeared in the Journal of Markets & Morality, Fall 1999, pp. 271-278 and 290-296.  This file contains both the lead article and Murphey’s rebuttal to Dr. Block’s reply.  Dr. Block’s reply and later surrebuttal are not included, because Murphey does not have republication rights as to that; but readers will want to read them in the Journal.]

Controversy:

Do Market Economies Optimally Allocate Resources?  

Dwight D. Murphey (1)

Wichita State University

        As we begin, let me offer some explanation of why I - someone who sees a market economy as a central institution within a free society - am not only willing, but anxious, to oppose what is arguably the linchpin concept in free-market ideology: the claim that a market economy makes an "optimum allocation of resources."

        The first reason is purely intellectual: that the concept is based on an elementary fallacy. The claim of "optimum allocation" has compelling rhetorical and ideological appeal, but I believe the theory underlying a free society should be based on the soundest possible foundation. Most supporters of market ideology do not see the fallacy in the claim. I do not doubt that their desire for a sound theoretical foundation is as great as my own. But we differ about what is required for a sound theory.

        The second reason is functional in the context of competing ideologies. (There, the theory underlying global free trade is one of the more influential today.) I have become persuaded that the system of free-market thought as we know it - which is essentially a self-contained system that provides an answer to all possible objections - will rapidly become a liability to classical liberalism as an overall theory of a free society. The world is changing so fundamentally that it is becoming necessary to rethink virtually all aspects of social, political and economic thought. The incredible technology of computers, robotics, materials sciences, and biotechnology is such that the future offers the prospect of a near-utopia, while at the same time there will be a move to a near-workerless economy. Both aspects will shake societies to their core. When work is largely replaced as a source of income, that will be a catastrophe in less developed economies, where income from work is almost the sole source of support. In the more advanced economies, the high incomes of those who own or manage the technology and of those who possess high skills may be enough to provide auxiliary service employment for everyone else, but the level of inequality will become so great that a free society will not be able to accept it; and, arising out of technology rather than from anyone's lack of market virtues, this inequality will not be the kind that free-market supporters have been willing to accept as a necessary concomitant to economic freedom.

        The world is only a small fraction of the way into the new age. The "old economy" still prevails for most practical purposes. But the vision of Jeremy Rifkin in The End of Work and The Biotech Century is very real, and is unfolding quickly. Those who do not begin to think in terms of it will find themselves holding positions that not only will no longer be tenable, but that may even become hateful to the billions of people to whom the policies will be ill-suited.

        In this discussion, let us see

.What is meant by the postulate that a market economy makes an optimum allocation of resources.

.How it serves as a linchpin to a self-contained theoretical system supporting a laissez-faire view of the market.

.In what way the concept is fallacious.

.And what sort of free-market theory will be called for by future conditions.

What the "Optimum Allocation" Claim Means

        It is sometimes argued that the claim of "optimum allocation" has a purely technical meaning in economics, and that "optimum" has nothing necessarily to do with a value judgment of "good" or "best." But that is not the way the concept is used in the most common form of free-market, free-trade ideology. There, the value judgment definitely does come in, and it is in that form that it is fallacious.

        A point is first made about "consumer sovereignty" as a description of how a market works. "Neither the entrepreneurs nor the farmers nor the capitalists determine what has to be produced," the great Austrian economist Ludwig von Mises wrote. "The consumers do that." "With every penny spent the consumers determine the direction of all production processes." (2)

        This is followed by a value judgment that declares the result good. Mises, under whom I studied briefly before going to law school, argued that "the social function of catallactic [market] competition... is to safeguard the best satisfaction of consumers which they can attain under a given state of economic data." To this, he added that "to assign to everybody his proper place in society is the task of the consumers." (3) [Emphasis added.]

        The same point was made a century ago by Henry George: "On the whole, the ability of any industry to establish and sustain itself in a free field is the measure of its public utility, and that 'struggle for existence' which drives out unprofitable industries is the best means of determining what industries are needed under existing conditions and what are not." (4)

        In a 1996 book published by the pro-free market Foundation for Economic Education, John K. Williams argued that "profits simply show that people want" [a certain thing]... "Limited resources are being allocated in a people-serving, responsible way." In the same book, Garet Garrett included a quote from Adam Smith's The Wealth of Nations (1776): "Each individual... generally... neither intends to promote the public interest or knows how much he is promoting it... [H]e intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was not part of his intention... By pursuing his own interest he frequently promotes that of society." (5)

        Such statements show that the theory is advancing a value judgment favorable to a market economy's allocation of resources. It is not making some purely technical point.

How the Claim Serves as a Linchpin in Market Theory

        The claim is no small matter. By adding a value judgment it transforms market analysis from a purely descriptive science into an ideology that produces policy prescriptions, which in turn have social and political implications. The value judgment sweepingly validates the outcomes that arise from the laissez-faire market.

        It is this that provides the basis for the much-repeated argument that any deviation from unhampered free exchange, such as from "free trade" in international affairs, will "distort" the allocation of resources, introducing an "inefficiency" that produces a "sub-optimal" satisfaction of wants. That it might do so is treated as a definitive argument against the action. Nothing could better serve a theory of pure laissez-faire. It is, in effect, the key to the self-contained theoretical system, since it provides a compelling argument against anything that would deviate from unhampered exchange.

In What Way the Concept is Fallacious

        The claim of "optimum allocation" is thought to follow from the point that "consumers are sovereign, since it is their demand that entrepreneurs must respond to if they are to make a profit."

           To avoid misunderstanding, we should differentiate this from the view that I have long considered sound (even though it will not continue to be under future conditions). This accepts the allocation of resources and of social position that comes from consumer choices, but does not assert that the allocation is necessarily the best as an allocation. Whether it is best or not, I as a classical liberal have supported what the market does because it has been the allocation that has arisen out of a voluntary nexus of contractually-arrived-at exchanges. I have not favored individual liberty and the act of voluntary exchange because they produce the best allocation of resources; rather, I have favored the allocation of resources because it is the one produced by a free process.

        When a market theorist says that consumer sovereignty produces an optimum allocation of resources, he is making a "holistic argument." Ludwig von Mises himself is the one who argued most persuasively against "holistic" concepts. Chapter VIII of his monumental Human Action contains a section with the heading "A Critique of the Holistic and Metaphysical View of Society." Mises talks about the imputation of distinct existence to "society" as a collective whole separate from the individuals who make it up:

        The individual lives and acts within society. But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men. It is a delusion to search for it outside the actions of individuals. To speak of a society's autonomous and independent existence, of its life, its soul, and its actions is a metaphor which can easily lead to crass errors. (6)

        Such a concept as "society" is useful in many ways, but it contains what we might call "the fallacy of wrongly-imputed consciousness" if it is used in a way that attributes consciousness and decision-making to the abstraction as an aggregate. A society can make decisions through individuals who are its selected representatives, but the aggregate itself is not a conscious being. To talk as though it is is to treat it "holistically," asserting that the sum is different from the parts. (Interestingly, a human being is a validly holistic creature, since a person does have consciousness and is in that way more than simply the cells that make him up. But it is a metaphor to speak of society as having its own consciousness.)

        The concept of "the consumer" is the same. Consumers taken as an aggregate do not possess a consciousness; only consumers as individuals do. It is odd that Mises did not see this, since he saw it so powerfully in other connections.

        Now, let us ask: from whence can value judgments come? The answer is: only from a conscious being. Inanimate objects such as rocks, water, clouds, and sky do not make value judgments. Nothing is good or bad, desirable or undesirable, to a rock. A God, in most conceptions of God, is a consciousness, and so can decide what is good and bad, what is to be preferred and what is not. But here we notice an essential point: that between the consciousness of a God and of individual people, there are no consciousnesses. This is a point that everyone ignores who seeks a metaphysical imprimatur validating a given outlook. The source of the holistic fallacy and of all metaphysical claims is that many thinkers (in a secular age) do not want to base their value judgments on a God, but feel very uncomfortable about attributing them to no stronger a reed than individual minds and the preferences to which they give rise. They search for some source of values below God but above individuals. All efforts of this kind demand attributing consciousness to some metaphorical entity or process that does not really possess consciousness.

        Can "consumers," taken holistically, make a value judgment? Are they collectively a consciousness that can decide that something is "best"? Of course not. The aggregate does not have a mind in itself, but is the sum of countless individual consumers, each making decisions about what is best in his own case.

        From the perspective of each one of these individuals as a consumer, the person may or may not think the allocation of resources flowing from the total economy is the best possible. In fact, he would almost certainly prefer an allocation that would bestow more resources upon him and the things he cares about. Actually, in spending his own money, he has not given the slightest thought to the economy's total allocation; he has only paid attention to his own little corner of the world.

        Next, think of each individual in his role as philosopher or social observer. Will he then think, as he looks out upon the sum total of what is resulting from market transactions, that what he sees is entirely to his liking in light of his philosophy, whatever it may be? Probably no one, including Mises himself, would be completely satisfied from this perspective. There are many things consumed, such as excessive alcohol, dope, pornography, or what-have-you, that hardly square with anyone's idea of what is "best," even from the point of view of those who engage in the consumption (if asked in their sober moments). More profoundly, people from competing philosophies and cultures bring very different preferences to bear on what they would like to see happen.

        If "consumers" as a metaphor cannot judge, and individuals as consumers are not judging, and individuals as philosophers find aspects to take issue with, and we are not premising the whole "optimum allocation" claim on a judgment made by God, what is there to the claim that a market economy makes the best possible allocation of resources? Nothing. The most we can justifiably say is, as was said earlier, that "I will accept the allocation, with a few exceptions as provided by law, since it is what results from a free process." The seeming deficiency in this, and the reason the closed system of market theory has so eagerly embraced the "optimum allocation" argument instead, is that it has no metaphysical pretensions, and hence less compelling polemical power.

        Socialists, of course, have never accepted that the allocation of resources effected by a market economy is ideal. They consistently urge a different set of priorities. Given that difference, one would think that they would have raised the criticism made here, pointing to the conceptual flaw. That they have not is probably due to the fact that most people really do not pay all that much attention to what people who differ from them are saying.

        Quite apart from the assertion that the allocation within a market is optimal, a free play of supply and demand does serve important functional needs within a market system. It provides an on-going adjustment to the effective demand that exists, so that neither gluts nor shortages come into being. The price mechanism serves as a guide, keeping everyone informed of the current situation. The "entrepreneurial function" involves people's looking ahead to future conditions, making a profit from being ready for them at an appropriate time. The idea of a market as a self-automating mechanism that can workably substitute for a command system is conceptually elegant and lies at the heart of any overall acceptance of a market economy.

What Those Who Endorse the Values of a Classically Liberal Free Society Will Need to Consider for the Future

             Even if no revolutionary changes were underway to recast world conditions, supporters of a laissez-faire free market would need to restate the justifications for their social and economic model if they wish to be intellectually sound.

        I believe, however, that, whether they wish it or not, events will force a change in their social model. This is because in a near-workerless world the market economy, as we have known it, will not work for everybody; in fact, hundreds of millions, even billions, of people will find themselves either totally displaced or standing on the margin.

        My many friends who champion the "unhampered market" are accustomed to denying that this is possible. "Human wants are without limit, and if prices and wages are left free to adjust, there will always be a demand for everyone's services." What this fails to appreciate is the extent to which modern technology is coming to minimize the need for human effort in virtually every area, including services. We are still far removed from that, so that employment in the United States has even continued to grow, for example, in building construction. But the technology is changing rapidly under our very eyes. Even those who do not grasp the implications need to begin the process of rethinking the set-piece theories of the past and present.

        A future economy based on immensely high productivity and little demand for labor will essentially pose two main questions:

.What will be needed to nourish the innovation and high productivity? and

.What system of distribution should be adopted to see to it that people in general get the benefit from that productivity?

        The consensus that exists among many people in the world today that a competitive market system, combined with science, is the most dynamic engine for innovation and productivity is sound. An implication of this is that a competitive global economy will remain invaluable. This much, at least, is congenial to free-market advocates.

        In a near-workerless economy, however, problems of distribution and of inequality raise issues that classical liberals have always associated with the socialist outlook. It is only with the greatest reluctance that they will embrace a non-market distribution. And yet, if they do not (in some form, at least), those who are displaced will come to hate them and all they stand for, with the probable effect that the market economy itself and the free society of which it is an integral part will both be washed away.

        It would appear that there is a way to combine a market economy with a broad-based distribution of the economic product. It is time we began to think about "a shared market economy." This is one in which there is a fully competitive market system, driving toward low-cost production on a world scale, but with each citizen of a country owning a part of the enterprises through accounts that would hold shares in "index mutual funds" (i.e., funds that would hold securities broadly representative of the market). Instead of deriving income from work, most people would receive income from the earnings of their portfolios. It would be something akin to a "guaranteed annual wage," but based on how well the competitive market does. The fund holdings would be purchased by government and "given" to people according to pre-established legal criteria. This would be a non-market distribution, made necessary by the demise of the wage system.

        The aspect that would keep the world competitive market going is that individuals and firms would remain free to earn more (subject to such limits as a given culture may find necessary) than the income that would come from the distributed shares, so that the "profit motive" would not be missing. A business could still have $100,000,000 in capital, for example, and could compete for profit - or perhaps fail. The only difference to it would be that a substantial portion of its capital would have come from money paid to it for the purchase of its shares to distribute to the citizens' accounts.

        There are a great many sources from which the money can come for government to purchase shares to place in the accounts, which could be built up over time. Just some examples: all of the money now going into welfare and Social Security, and the billions of dollars the Federal Reserve's Open Market Committee creates each year as a normal part of the desired expansion of the money supply. As a classical liberal, it hurts me to say it, but it is true: that impending technology is about to bring conditions that actually replicate much of what socialist thought has been saying (with far less justification) for over a century: that distribution amid plenty will be the central problem. The question for classical liberals will be how they can retain all of the central features of a free society while at the same time addressing the problem of distribution. (Since income-without-work will inevitably bring vast life-style and moral repercussions, and thus will do more than simply address the crisis of distribution, almost all aspects of social, political and moral philosophy will need to be rethought. Radical changes in all aspects of life are coming.)

A Welcome to Dr. Block

        My long-time friend, Dr. Walter Block, has agreed to take the position supporting the "optimum allocation" position. I look forward eagerly to what he will say. In the period of radical change that is almost upon us, what will be most important is not that we all agree with each other, because it is predictable that we will not. What will be critical will be that the discussion proceed with civility. For that to happen, the sooner the discussion begins, the better. Once vast numbers of people are hurting, civility will be a gem much to be cherished, but almost impossible to attain.  

NOTES

1. Dwight D. Murphey, a professor of business law at Wichita State University, is an associate editor of The Journal of Social, Political and Economic Studies, was associate editor of The Conservative Review while it existed, and is a former first vice-president of the Philadelphia Society. He has written prolifically from a classical liberal perspective.

2. Ludwig von Mises, Human Action (New Haven: Yale University Press, 1949), p. 270.

3. Mises, Human Action, pp. 276, 275.

4. Henry George, Protection or Free Trade (New York: Robert Schalkenbach Foundation, 1966), p. 96.

5. Mark W. Hendrickson, ed., The Morality of Capitalism (Irvington-on-Hudson, NY: Foundation for Economic Education, Inc., 1996), pp. 34, 71.

6. Mises, Human Action, p. 143. 

 

[Dr. Block then responded, to which the following is a surrebuttal.  Dr. Block was then permitted to respond to that.  The entire exchange, with the two pieces by each author, can be found in the journal, but Dr. Block’s portion of the discussion isn’t included here, since that would require permissions that could be inconsistent with the hoped-for permanency of this Web page compilation.]

Controversy:

Do Market Economies Allocate Resources Optimally?

A Response to Walter Block

Dwight D. Murphey

Professor of Business Law

Wichita State University

        In these "controversy" exchanges, the beginning article will have stated the opening author's thinking with a completeness and coherence to which the later surrebuttal will neither need nor be able to aspire. I see my function at this time as relatively limited: (a) to clear up a confusion that affects Professor Block's beginning discussion, and (b) to respond to him on the main points he has made. The clearing up of confusion will not be as intellectually interesting as the more substantive discussion, but is necessary because I believe my message may have become obscured.

Clearing Up the Initial Confusion

        Block's "Introduction" is based on a misreading of my own opening comments. I was not at that point giving reasons why the "optimum allocation of resources" concept is wrong, but rather telling why I am anxious to have the idea recognized as fallacious. The "purely intellectual" reason that I gave was that the concept is based on "an elementary fallacy" - but I did not in my Introduction seek to explain what that fallacy is, leaving the discussion of that to later. Secondly, I indicated that the on-rushing non-labor-intensive technology will largely make the system of income-through-wages obsolete, and that this will lead to labor displacements and inequalities that will make the "self-contained systems" of laissez-faire thought no longer serviceable to hundreds of millions of people. That was not itself a demonstration that the "optimum" concept is wrong; instead, it merely told why we must start questioning the self-contained systems that, by justifying anything that happens, will impede our ability to formulate sound theory for the world that is fast developing. As an (erstwhile?) classical liberal, I do not want all of the values and principles of classical liberalism to pass into disrepute because its advocates cling to inadequate theoretical systems.

The "Fallacy of Wrongly Imputed Consciousness"

        Let us first examine his rebuttal to my point about the "optimum" concept's being based on an "elementary fallacy." This is the central point in my paper so far as the "optimum" claim is concerned.

        Readers will do well to reread my discussion of the source of value-judgments, in which I said that there is neither "good" nor "bad," "best" or "better," to inanimate objects or forces, and that value-judgments must come from some consciousness or other. Since the only consciousnesses we know of (capable of judgment) are God (or gods) and individual human beings, there is an error of "wrongly-imputed consciousness" when someone seeks to impute judgment-making to some in-between entity, such as "consumers" taken as an aggregate. I pointed out how Ludwig von Mises had been fully aware of this in other areas, but fell into it about "consumers" when he treated them holistically.

        I looked forward to receiving Block's rebuttal, because I was curious about just how he would overcome this difficulty. I see, however, that he passes over it entirely, apparently never grasping its importance. He considers my central argument as merely a "gratuitous slap at Mises," and, dismissing it, moves on. (I never intend to slap at Mises, gratuitously or not. I remember him with the greatest affection and respect. But I do not confuse those assessments with a need to agree with him on every aspect of his thinking, which in my opinion is the worst form of homage that can be shown to a serious thinker.)

        As Block goes on to other things about the "optimum" concept, it would seem that he is mainly arguing for the market's allocation on the very ground that I myself have accepted: that, whether the allocation is "best" or "proper" or not, we are willing to accept it because it is what results from a free process. I have made the point that that is something distinct from a claim of "best allocation."

Other Conceptual Issues Raised in the Rebuttal

        Let us take these randomly as they come to mind:

        1. Block says that the "optimum" concept "is hardly the rallying cry of libertarians," who base their thinking on deduction from "private property rights and the non-aggression axiom."

        I agree that the optimum concept is not a linchpin for that particular axiomatic approach, as found, say, in Robert Nozick's writing. I am critical of closed axiomatic systems, but on grounds other than those I have expressed in my opening article. Readers should realize that it is a subject that goes beyond our present task of critiquing the "optimum" claim. It is important to notice, however, that any closed theoretical system that will not allow market theory to meet the on-coming displacement and inequality will put the whole classical liberal enterprise on a course to self-destruction.

        2. In his Endnote 14, Block says that the "optimum" concept "is predicated upon the concept of Pareto efficiency: no one can be made better off without at least one person being made worse off."

        I agree that much economic literature does relate "optimum" to "Pareto efficiency." But the free-market, free-trade school that is so influential in the world today, and that finds its best expression in Mises and his followers, does not. Mises was fully aware of the fallacy of what he called "the Montaigne dogma" (which is today often referred to in connection with "a zero sum game"). He didn't base his ideas of consumer sovereignty and best allocation on the notion that one person's gain is necessarily somebody else's loss, as though there were a fixed pie. He argued eloquently against that as a crude fallacy.

        3. Block rightly devotes much attention to an effort to refute my expectation that the on-rush of increasingly non-labor-intensive technology will make the wage system untenable as a source of income for perhaps billions of people. This is, after all, the ground for my sensing a coming crisis for economic systems that depend on wage income as the means by which most people participate.

        The two premises that "human wants are without limit" and "if prices and wages are left free to adjust, there will always be a demand for everyone's services" are themselves central to current thinking about a market economy, and seem to dispose of the possibility of crisis. We do not need to quibble long over the unlimited nature of wants: even if at some point the great majority of people were to decide that they do not want "consumerism" to be central to their lives, there will still be vast tasks to be accomplished. So let us grant the unlimited nature of wants. But the second premise, about wage adjustment providing full employment under all conditions, leaves a lot to be desired. It gives a neat theoretical answer, but makes no comment upon how low those wages will be when non-labor-intensive technology does most things and billions of people (and here I speak especially of the billions who lack the intelligence and aptitude to master advanced skills) compete to earn a living by doing the few tasks that remain. We can grant the theoretical "truth" of the full-employment premise and nevertheless see the coming of a crisis of any economic system centered upon income-from-wages.

        4. This merges with a related point. When Block defends the inequalities that arise in a marketplace, he draws upon classic free-market thinking: that the productivity of a market economy will raise all boats, and that inequality, rather than being an evil, is a hallmark of the freedom the market embodies.

        These premises have certainly been true, and I have held to them myself. But in the context of a radical new future, they take on a different character, and are compounded of faith and myopia. How can we be confident that the near-utopian technology will raise all boats, when the result of that technology is that literally billions of people will be left to compete to perform the few things that remain labor-intensive? (1) And, as to the second, have we forgotten that classical liberalism was once, for good reason, the enemy of aristocracy and hierarchical society? There are cultural prerequisites to a free society that were once understood by classical liberals but that have been lost sight of under the narrower theoretical systems held to today. It is predictable that vast inequality, even though market-originated, will lead to a hardening of classes and a total change away from the open culture of a society that values individual freedom. We take the "inequality is the hallmark of freedom" idea too far when we make it an apologia for impending hierarchy.

        I realize that I am looking farther ahead than most people want to think. Right now, the premises I am criticizing continue to apply pretty well, because, despite all the daily announcements of new scientific and medical discoveries, we are just at the beginning of the new age. I do not blame people for wanting to stay with those well-known premises, since my concerns seem speculative and futuristic. But a new world is coming upon us at a hitherto unheard-of pace, and I urge that those who are not convinced keep their eyes and minds open.

        One great potential difficulty will be that, armed with an ideological support for inequality, classical liberals will not be able to spot a disastrous situation when they see one. Most societies historically, such as Brazil with its squalid urban slums, seem to take any amount of inequality in stride. In doing so, they are not adequately sensitive to the effects of social hierarchy upon the institutions, principles and way-of-life of a free society.

        Nor are they sufficiently sensitive to the moral issues. An inequality born out of differences in ability, effort, character, market discernment, and the like, is a morally justifiable inequality. But, as Henry George pointed out a century ago, some wealth accrues to individuals without any relationship either to merit or to a productive meeting of consumers' needs. George made this point with regard to the increase in land values that comes from increasing population near the land. During the past century, most classical liberals, including myself until recently, have not become followers of George (who was in all other ways a devout free-market thinker) because it has seemed better to let the market work without qualification than to make an admission that socialists could use to their own advantage. Now, however, with the rapid advance of computerization, robotics, materials sciences and biotechnology, Henry George's observation becomes even more pertinent. Those in the year 2030, for example, who make a fortune as computer experts will make only a part of that income from their own effort; instead, they will have inherited from the civilization in which they live the work of countless geniuses who will have preceded them, and much of their income will be due to that. How appropriate will it be then to say that "any amount of inequality is all right, because it arises out of the successful peoples' success in the market"? Will future classical liberals be able to say that with a clear conscience if billions of people are faring quite badly?

        And why will those billions be faring badly? Will it be because of their own inertia, laziness or lack of effort? Perhaps with some it will be; but with vast numbers it will be despite every desire to work hard and to participate in the economic system.

        What is at issue more than anything else is the methodology by which classical liberals reason about a free society. Do they see society as a whole and seek ways to accomplish individual freedom, limited government, and the fulfillment of advanced civilization? This can be called a "systems theory of a free society." Or do they settle upon a few axioms or insights and deduce from them a complete system that is so fully explanatory that they allow no new axioms or insights to enter? This is a "closed or self-contained" system, which is the sort of thing ideologues love so well. The trouble with it is that no axioms can include everything that human beings need in an advanced and free society. "There is more in heaven and earth, Horatio, than is dreamt of in your philosophy."

        This is not to say that we should not use a principled approach, both to understanding and to behavior. There is great value, even intellectual necessity, in principles. This is largely negated, however, if they congeal into closed systems that "explain everything" and admit of no new facts or further considerations.

        5. Block ends by suggesting - all within the bounds of the civility that both our friendship and fruitful intellectual discussion require - that I am "flirting with socialism."

        Indeed, I am - at least as to one important feature of socialism. Let's be clear about that. Several years ago, I wrote an essay for The Freeman pointing out how fraudulent it was for Louis Kelso to claim to be advancing capitalism while he advocated what was clearly socialism. I want no part of such a fraud. What I favor for the future is a non-market distribution of property (shares in the economy by way of shares in index mutual funds) to everybody in a given society, whether they have done anything to "earn" them or not. Being non-market, and involving in part compulsion through taxation, we can easily identify it, by itself, as a socialist means. What I am saying is that it will be a necessary means if we are to keep the market economy, global and local, going; are to prevent revolution that can destroy everything we value; and are to formulate a theory (and practice) of a free society based both upon sound thinking and a tenable moral foundation. In this, I think I am on sounder ground precisely as a classical liberal than those who would label me a socialist. Time and events will tell who is right.

        Concerns over the future of society in an age of computers are new to those of us on "the right." When not long ago I wrote a book (which remains unpublished) about all this, I did not expect that many, if any, of my friends would start by agreeing with me. I suspect that more and more will come to agree as time goes on.

        6. Block takes issue with my prediction of "catastrophe in the less developed economies." He rightly argues that the plight of people living in the third world stems from excessive government (although we should add innumerable cultural and ideational factors that join in holding them down). What he misses is that I am looking ahead to the future as a time when there will be virtually no demand for the products of such societies' enormous pool of unskilled labor. That will not itself be a product of too much government.

        7. As I have discussed these subjects with well-read conservatives and libertarians, they have joined Block in knocking Jeremy Rifkin as both a socialist and a Luddite. I have no reason to defend Rifkin in general (he can very well do that for himself); it is enough for me to say that his books The End of Work and The Biotech Century are among the more provocative and insightful in recent memory. My attitude is that it is time that thinkers who are not socialist and who have no anti-technology tendencies begin to consider the impending future seriously. Nothing very meaningful can be said about the world today without a reasoned futurism.

        Certainly my own views should not be confused with a Luddite rejection of technology (and I do not suggest that Block pins that on me). I see the new technologies as offering incredible hope. Humanity would be extremely foolish to block these new technologies and the productivity they portend. We will only realize those benefits, however, if we address appropriately the social problems that will arise concomitantly with those technologies. By "appropriately," I mean in ways that are consistent with a free and advanced society.

        8. Let me conclude by thanking the Journal of Markets & Morality for making its pages available to a very serious discussion, and by thanking Walter Block for being my partner in the exchange.

NOTES

1. At one point, Block observes how it would have seemed, at the beginning of the Industrial Revolution, that all work would soon be displaced; and from this he infers that my concerns over displacement and inequality from today's new technology are equally unrealistic. Let us consider that. Following the Industrial Revolution, people migrated from farming into industrial pursuits, so that, as Block rightly points out, only 2 percent of Americans are engaged in agriculture. In the twentieth century, people have migrated out of industrial work and into service industries. According to Block's expectation, service work can continue to occupy unlimited numbers, serving as a permanent sop. Now, however, we see that great fields of service work are becoming non-labor-intensive, as virtually all "middle-men" professions are beginning to be displaced by "disintermediation" (i.e., consumers are beginning to go directly to providers through the Internet and otherwise, cutting out stock brokers, real estate agents, retail clerks, wholesalers, college professors, and countless others). With voice-recognition computers and robotic lawn-mowers (just announced the same day this is written), the new technology offers to require little, if any, human effort. Even in the skilled areas, the technology is becoming increasingly "user-friendly," so that less and less skill is being needed for it. All of this is a process that is new to the economic equation, and all that Block has to answer it with is an article of faith. Past experience has borne out that faith. Will the new realities do the same?