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

 

Chapter 11

 

THE ECONOMICS OF LIBERTY AND EMERGENCE

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The Humanism of the "Economic"

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 

Whether the constant underlying potential for coercion in most ordinary human relationships will diminish or render "impossible" a man's full integrity, depends, I think, almost entirely upon the strength of his own character. It is here that we find the vast difference between the "harsh" doctrine of individual liberty and the much softer "empathy" of the prevailing attitudes. There can be no question but what liberty calls for a force of personal character that is inconsistent with the personal attitudes that, for want of a better word, I like to join together under the heading of the "weakling principle."  For the most part, a man can preserve his integrity in ordinary human economic relations only if he accumulates sufficient savings, or otherwise preserves in his life a practical flexibility, so that he need not feel so urgent a need to preserve a single attachment that it will become necessary for him to make major concessions of his integrity to "keep in good stead" with the people involved in that attachment. It might be well for each person to build up an "integrity fund" precisely