process work its way to its appointed end? Is there nothing that can be done? Is mine not a defeatist message?
I begin my reply with a statement by Schumpeter in the preface to the second edition:
This leads to the charge of “defeatism.” I deny entirely that this term is applicable to a piece of analysis. Defeatism denotes a certain psychic state that has meaning only in reference to action. Facts in themselves and inferences from them can never be defeatist or the opposite whatever that might be. The report that a given ship is sinking is not defeatist. Only the spirit in which this report is received can be defeatist: The crew can sit down and drink. But it can also rush to the pumps.14
As you would guess, I am suggesting that such as are inclined rush to the pumps. But is the situation really all that desperate? Are there any hopeful signs? The flow of human experience is always disturbed by eddies and cross currents and the cutting of new channels, and is always complex. There are some businessmen who are aware of and attempting to do something about the problem. Not all the intellectuals are critics of capitalism. But the flood tide is still close to what Schumpeter predicted it would be, and the outlook is anything but reassuring.
My self-assigned task here has been one of diagnosis, not prescription. I offer you in closing the only possible assurance of my presentation. It comes from that master student of human affairs, Adam Smith, and it was penned at a time when the outlook for capitalism was less bright than it is today. Here is what he had to say:
This frugality and good conduct, however, is upon most occasions, it appears from experience, sufficient to compensate, not only the private prodigality and misconduct of individuals, but the public extravagance of government. The uniform, constant, and uninterrupted effort of every man to better his condition, the principle from which public and national, as well as private opulence is originally derived, is frequently powerful enough to maintain the natural progress of things toward improvement, in spite both of the extravagance of government, and of the greatest errors of administration. Like the unknown principle of animal life, it frequently restores health and vigour to the constitution, in spite, not only of the disease, but of the absurd prescriptions of the doctor.15
In this section I present those papers in which I have attempted to set forth exactly what I stand for and why. The first paper, “The Case for Economic Freedom,” was given as a speech on numerous occasions (particularly at seminars organized by the Foundation for Economic Education at Irvington, New York) before being put down on paper. The second paper was originally prepared for an appearance before the students and faculty of the college where I teach, Wabash College, and was my attempt to tell them the kind of person (in Rogge) they were harboring in their midst. “Who’s to Blame” was presented to an even earlier convocation at Wabash College, at a time when I was serving as Dean of the College. It is presented as a further development of the idea of personal responsibility discussed in the first two papers of this section. “Paradise in Posey County” was another of my chapel messages to young men; in it I explore (and criticize) the idea of Utopia as displayed in two famous experiments in communal living in Indiana.
My economic philosophy is here offered with full knowledge that it is not generally accepted as the right one. On the contrary, my brand of economics has now become Brand X, the one that is never selected as the whitest by the housewife, the one that is said to be slow acting, the one that contains no miracle ingredient. It loses nine times out of ten in the popularity polls run on Election Day, and, in most elections, it doesn’t even present a candidate.
I shall identify my brand of economics as that of economic freedom, and I shall define economic freedom as that set of economic arrangements that would exist in a society in which the government’s only function would be to prevent one man from using force or fraud against another—including within this, of course, the task of national defense. So that there can be no misunderstanding here, let me say that this is pure, uncompromising laissez faire economics. It is not the mixed economy; it is the unmixed economy.
I readily admit that I do not expect to see such an economy in my lifetime or in anyone’s lifetime in the infinity of years ahead of us. I present it rather as the ideal we should strive for and should be disappointed in never fully attaining.
Where do we find the most powerful and persuasive case for economic freedom? I don’t know; probably it hasn’t been prepared as yet. Certainly it is unlikely that the case I present is the definitive one. However, it is the one that is persuasive with me, that leads me to my own deep commitment to the free market. I present it as grist for your own mill and not as the divinely inspired last word on the subject.
You will note as I develop my case that I attach relatively little importance to the demonstrated efficiency of the free-market system in promoting economic growth, in raising levels of living. In fact, my central thesis is that the most important part of the case for economic freedom is not its vaunted efficiency as a system for organizing resources, not its dramatic success in promoting economic growth, but rather its consistency with certain fundamental moral principles of life itself.
I say, “the most important part of the case” for two reasons. First, the significance I attach to those moral principles would lead me to prefer the free enterprise system even if it were demonstrably less efficient than alternative systems, even if it were to produce a slower rate of economic growth than systems of central direction and control. Second, the great mass of the people of any country is never really going to understand the purely economic workings of any economic system, be it free enterprise or socialism. Hence, most people are going to judge an economic system by its consistency with their moral principles rather than by its purely scientific operating characteristics. If economic freedom survives in the years ahead, it will be only because a majority of the people accept its basic morality. The success of the system in bringing ever higher levels of living will be no more persuasive in the future than it has been in the past. Let me illustrate.
The doctrine of man held in general in nineteenth-century America argued that each man was ultimately responsible for what happened to him, for his own salvation, both in the here and now and in the hereafter. Thus, whether a man prospered or failed in economic life was each man’s individual responsibility: each man had a right to the rewards for success and, in the same sense, deserved the punishment that came with failure. It followed as well that it is explicitly immoral to use the power of government to take from one man to give to another, to legalize Robin Hood. This doctrine of man found its economic counterpart in the system of free enterprise and, hence, the system of free enterprise was accepted and respected by many who had no real understanding of its subtleties as a technique for organizing resource use.
As this doctrine of man was replaced by one which made of man a helpless victim of his subconscious and his environment—responsible
