Work for Free

Work for Free

WITH YOUNG PEOPLE NEARLY shut out of the market (by recession, regulation, “child” labor laws, and ghastly minimum wage laws), I would like to suggest the unthinkable: young people should work for free wherever they can and whenever they can. The reason is to acquire a good reputation and earn a good recommendation. A person who will give you a positive reference on demand is worth gold, and certainly far more than the money you might otherwise earn.

Many of the essays in my book Bourbon for Breakfast turn out to have forecasted both the current mess and this solution. But first let me tell a story of two cases in point, the first an example of the worst possible kind of worker, and the second an example of brilliant foresight.

The first case comes from a job I had in my teens. I was standing around with a few other employees in a clothing shop. The boss walked by and said to my coworker: “Please straighten these ties on this table.” My coworker waited until the boss walked away, and then he muttered under his breath: “I’m not doing that for minimum wage.”

That comment seared right through me, and I thought about it a very long time. The worker was effectively asking for money up front before working, even though he was employed to do things like straighten ties. This was even worse than insubordination. He had this idea that the value he contributes to the firm should never exceed the value of the money he is earning in exchange. If that must be true, one wonders why anyone should ever hire him.

The goal of every employer is to gain more value from workers than the firm pays out in wages; otherwise, there is no growth, no advance, and no advantage for the employer. Conversely, the goal of every employee should be to contribute more to the firm than he or she receives in wages, and thereby provide a solid rationale for receiving raises and advancement in the firm.

I don’t need to tell you that the refusenik didn’t last long in this job.

In contrast, here is a story from last week. My phone rang. It was the employment division of a major university. The man on the phone was inquiring about the performance of a person who did some site work on Mises.org last year. I was able to tell him about a remarkable young man who swung into action during a crisis, and how he worked three 19-hour days, three days in a row, how he learned new software with diligence, how he kept his cool, how he navigated his way with grace and expertise amidst some 80 different third-party plug-ins and databases, how he saw his way around the inevitable problems, how he assumed responsibility for the results, and much more.

What I didn’t tell the interviewer was that this person did all this without asking for any payment. Did that fact influence my report on his performance? I’m not entirely sure, but the interviewer probably sensed in my voice my sense of awe toward what this person had done for the Mises Institute. The interviewer told me that he had written down 15 different questions to ask me but that I had answered them all already in the course of my monologue, and that he was thrilled to hear all these specifics.

The person was offered the job. He had done a very wise thing; he had earned a devotee for life.

The harder the economic times, the more employers need to know what they are getting when they hire someone. The job applications pour in by the buckets, all padded with degrees and made to look as impressive as possible. It’s all just paper. What matters today is what a person can do for a firm. The resume becomes pro forma but not decisive under these conditions. But for a former boss or manager to rave about you to a potential employer? That’s worth everything.

Sadly, many young people who can’t get jobs have no work experience to show for themselves at all. They have been wildly misled all their lives about the great glories that await anyone who “stays in school” and gets great grades. There are innumerable aerospace engineers, mathematicians, and even lawyers who are in this situation, to say nothing of sociologists, historians, and people with degrees in communications and marketing.

Adding to the problem today is the burden of student loans. Kids are graduating today with six figures in debt that they will immediately be forced to service if they accept employment. But with no prospects outside Walmart and Starbucks, they opt to stay in school and get yet another degree, hoping all the while that the labor market will turn around. This is a terrible trap.

They have structured their lives around the speculation that a high-paying job awaits following graduation. But there is no such thing. A low-paying job isn’t even enough to pay the rent plus debt service.

It was a very bad speculation. Their dreams are being killed by a desperately tight labor market for anyone without work experience or any kind of work reference at all. Under these conditions, the solution is to gain that thing of highest value. That means volunteering. The state can’t come after you to start paying the student-loan debt, and yet you gain people who will become your benefactors later.

Where to volunteer? A nonprofit such as a church or educational group would be fine. But also fine might be a local plant nursery, lawn service, mail house or printer, or even at a law firm. You can make an application informally but be clear that you want no payment. If there are legal issues, try to work around them. If you are accepted (not a foregone conclusion), set hours for yourself and stick with them. Make yourself super useful, super dependable. Get to know as many people as possible. Explain that you are working only for the experience, which you value. Do this for six months up to a year. Then you will have something interesting and wonderful to tell future employers about.

A time will come when one of the people you came to know will receive a phone call. He or she will be asked their opinion of you and your work. That’s when the whole of your life can change for the better. Is that six months to one year of volunteer work worth it at that moment? It is worth everything.

On the other hand, you can spend your life refusing to straighten ties because you aren’t paid enough to do that. That person will never be paid to do anything.

Halloween and Its Candy Economy

DALE STEINREICH ONCE WROTE that Halloween has a “socialist tenor” because “menacing figures arrive at your door uninvited, demand your property, and threaten to perform an unspecified ‘trick’ if you don’t fork over. That’s the way the government works in a nutshell.”

And yet, for overall kid excitement, Halloween seems to surpass Christmas, at least from what I can observe. The kids spend months preparing their costumes, and thrill to every detail of the ceremony: pumpkins, scary things, and, of course, candy. For the children, too, there is the attractive fact that parents are not all that happy about Halloween, with its goblins, gore, and gluttony.

But, a deeper lesson to be drawn is that there is also an economic dimension to Halloween that goes far beyond simply demanding property with menaces, however lighthearted.

Unlike at Christmas, where kids must only be good little citizens all year in order to be showered with gifts from their beneficent Guardians, at Halloween, kids must actually work in real time for their candy.

Because there is no taboo in place about trading one’s proceeds, the kids also have a chance to participate in genuine market experiences.

For starters, they work hard on their costumes, under the very real expectation that those who hand out candy tend to be more generous to those with better costumes. Nor is the labor done there, for it clearly continues with the long walk around the neighborhood, with the prospect that each house visited will yield a gain of only one or two candies, at most.

This in itself forms an interesting feature of the ritual, since all of these same kids have lots of candy back at home that is being given out to other kids even as they tramp through the cold October evening. What could be the point of seeking out abroad what you already have at home?

There are two reasons: first, though the kids may not consciously recognize it, they surely appreciate the candy more if it represents something they have to go seek out for themselves, and second, by mixing their labor with the process of candy acquisition, they have a greater sense that the candy partakes of qualities of duly earned, private property.

No child really believes that the bowls of candy at home really belong to him or her, but, by contrast, the candy that the child collects from the neighborhood is said to be his or hers exclusively, even if mom or dad still oversees the overall patterns of distribution.

The candy you collect is yours, a product of your own efforts, and nothing can quite replace that feeling of merited ownership. And yet, the real thrill is far from over.

What children truly adore about Halloween is what takes place after the candy has been brought back to home base: the trading. Here is where the excitement begins.

No child can fully control what he or she is given, so it is up to that child to make exchanges with others in order to obtain what he or she really wants, and to do so in a strategic manner so that overall wealth is enhanced.

This process of trading began at our house at 8pm and lasted for about 30 minutes, at which point, the children concluded that they had come as close as was possible to what they wanted most and so, there was no more trading left to do.

During the 30 minutes of active haggling, nine kids sat around the dining room table and participated in a hectic, yet orderly—if complex—interchange, bearing a good deal of resemblance to a Wall Street trading floor.

Some traders shot up and shouted prices, deals, proposals, results, changes in preferences, new resource discoveries. Other traders remained quiet and moved with great subtlety and surprise. The more strategic the plan, the more impressed the other kids were by it.

It was fascinating to watch as the trading began slowly and as the first barter relationships began to form.

One for one; two for one; three packages of Nerds for one popcorn ball; two Snickers for one candy necklace; a Blow Pop for two pieces of caramel; and so on.

All children brought to the table their own subjective sense of what was valuable—a sense which was strongly influenced by the corresponding opinions of the other players, but one which also added to it a degree of prediction concerning just how the subjective values of others would stack up.

It wasn’t long before barter relationships, even those involving 3 or 4 simultaneous transactions, did not suffice.

What those around the table needed was some means to achieve indirect exchange. They needed to hit upon a good which everyone would desire to posses because of its more certain, onward marketability among all the other kids.

This entity did not need to be highly valued from the outset by everyone present. What the kids only needed to notice was that there was something which a sufficient number of their group tended to want more than any other competing candy on offer.

It was a short step from there to the dawning of a realization that would occur to one or two kids. These would then try to acquire that particular candy, not to consume it themselves, but to use it to trade it for whatever other candy they really wanted to enjoy.

As more and more of the participants copied them, this one candy would come to play a role in more and more indirect exchanges. Child A would accept it from Child B for a less desired kind of candy and would instantly swap it again with Child C who happened to have the goodie he or she really preferred, but who hadn’t wanted any of A’s originally proffered treats.

This way, this one candy would come to posses a quality none of the others had. It would come to be money.

In general, money, whatever specific form it takes, tends to have a high value per unit of weight and yet it should be split into units small enough to cope with any scale of exchange. It should ideally have a fixed supply. Above all, it must be the one thing most readily accepted in settlement of a trade because the acceptor knows it is something which can, with the highest available degree of certainty, be used to facilitate additional future trades.

There is no way to know ahead of time what will fulfill this role; only the market process itself will reveal this choice.

In our house, the popcorn ball would not work since there were only four of them and these were not divisible into smaller units. The Twizzlers did not pass the test because only one child had any knowledge of what they tasted like and hence no one else had any concept of their value.

Though this problem might seem an intractable one, as it happened, it only took a few minutes for everyone to discover what would become money for the evening: a micro-size 3 Musketeers bar.

Before people realized the true measure of its usefulness, a 3M would trade for as little as a Smarty package. But, then, it began to rise in value—selling for the Smarty and a Tootsie Roll.

Once it became clear that 3M was the commodity of the most use in exchange, it didn’t matter whether you actually liked it or not. You were happy to trade the candies you didn’t much care for in order to obtain a 3M simply because this could then be traded again for something which really did make your mouth water.

Once the 3M became money, its own value was seen to rise as a consequence. What was occurring was that this extra property of “tradability” was being added to the underlying demand for it as a consumption item.

Indeed, by the end of the session, this value reached such a height that it became an instant legend as, at its peak, one solitary 3M changed hands for no less than three Tootsie Rolls and a Tootsie Pop!

Once this money was settled upon, it became much easier to price such candies as Reese’s and Kit Kats, which had previously had an illiquid and uncertain market.

Now they began to sell for one-half and one-quarter of a 3M, despite the fact that they had started out with much the same intrinsic value as a snack item. From there on, their prices hovered within a narrow trading range, roughly comparable to that of a small Tootsie Roll, while Snickers did slightly better than all of them.

Extreme scarcity led to very high prices—anything up to four 3Ms in the case of Jolly Rancher hard candy. Skittles, too, were highly prized and sold for as many five 3Ms. Reese’s “Inside Out” sold at a premium over the plain variety.

However, showing that scarcity is not just a numerical concept, the parents of all these kids had long discouraged gum chewing, so despite the gum’s similar rarity, no one wanted it.

In fact, the price quickly fell to zero where it was eventually given away free to the one child who was permitted to chew it.

Thankfully for the future of civilization, even that child soon lost interest in it!

Interestingly, the advent of money also encouraged the kids to think beyond the immediate trading round. Instead, they began to acquire a surplus, to be saved for successive rounds where it was hoped better terms might be on offer.

The kids soon adopted different strategies.

Some started saving (“hoarding”) 3Ms to trade them in at the end of the trading session, speculating that the goods price of 3M would continually rise.

Others would acquire this valuable thing solely in order to consume it (this money, after all, originated as a consumable good and so it remained).

But mostly—and this was the satisfying part for those anxious to observe the entrepreneurial discovery of money—kids would acquire 3Ms solely to facilitate other exchanges.

Outside observers of a Misesian bent imagined the following: Let’s say someone arrived at the scene and threw down 100 3Ms on the table. All kids know precisely what would happen. The price of 3Ms would tumble. Each one would purchase far less than it had before.

The “inflation” might be so extreme that 3Ms might even cease to be money—the good everyone wants to acquire in order to acquire other goods—and some other candy might take its place instead.

Imagine the chaos that would ensue, as the kids came loudly to bewail their recent exchanges of worthwhile candy for this now devalued commodity.

Imagine the loss of innocence as they saw honest bargains frustrated and vowed to be more cautious of extending their trust upon the market.

Imagine the general loss as trading once more became scattered and choices were again restricted as the idea of money fell into disrepute.

But, fortunately, no Halloween bogeyman from the Federal Reserve Candy Factory came to ruin their game. So the kids could remain free to trust in the soundness of their candy unit.

At last, the kids became exhausted by this frenzy and the market closed—not because someone sounded a bell, but simply because, in general, everyone came to see that each was as satisfied as they were likely to be with what they had.

This was the Misesian “plain state of rest.”

In Mises’s words,

people keep on exchanging on the market until no further exchange is possible because no party expects any further improvement of its own conditions from a new act of exchange. The potential buyers consider the prices asked by the potential sellers unsatisfactory, and vice versa. No more transactions take place.

Once the trading had ended, the status of the 3Ms promptly reverted to that of a purely consumable item, since the end of the trading game signaled the loss of their monetary properties, leaving them just a plain candy, much like any other.

Some kids left with a far lesser quantity of candy than when they first arrived, but that did not prevent them feeling far wealthier because now what they owned was a much closer approximation to their ideal mix.

As for the other kids, well, they were astounded to discover that their own bags were far heavier than before, that they too felt wealthier—and that nobody was complaining to mom about the fact!

Indeed, all children left the table with smiles and happiness, each feeling as if he or she had gotten a great deal.

What a stunning achievement!

After all, the available physical resources were unchanged. Nor had anyone planned or policed the trading. It had all happened spontaneously.

One was left wondering at the true magic of that Halloween—namely, at the transforming effect of something as simple as the opportunity for free exchange, for the chance to derive mutual benefit from the difference in tastes between individuals.

In this, at least, Halloween was all about treats, and, despite what the opponents of the exchange economy will tell you, there was no trick about it anywhere you looked.

A Market for Criminal Skills

WE’VE ALL SUSPECTED THAT the market economy has a civilizing effect on people, but I’ve rarely seen such a poignant example.

Here I was returning a rental car to the dealer, and some confusion set in about the keys. The attendant asked for them back, and I handed them over even as I was pulling bags and things out of the car. The attendant hopped in the driver’s seat to check the mileage, and left the keys in the car. He shut the door, I shut another, even as one more bag remained inside. But there was a hitch: the car was now locked.

We all looked at each other with a sense of: What were we thinking? Now the car was locked, and it was the only set of keys. This isn’t one of those old-fashioned cars that were easy to crack open. No sir, this was a new car with all the security features we’ve come to expect. It surely couldn’t be broken into.

I was imagining that we would have to throw a brick through the window, and we would be arguing for weeks about liability.

Then something amazing happened. The attendant, who didn’t look like a pillar of the community, called over some of his rough-looking buddies—authentic archetypes of street thugs—and gave them a special signal. They reached into their little bag of tricks and pulled out four little items:

A business card

A crowbar

A squeegee stick

A clothes hanger

I watched with intense interest, and then astonishment. One person slid the business card between the top of the door and the car. Another stood next to him and began to work the crowbar between the card and the door until it began to move outward. He gave it a bit of a twist, and a third person made the gap wide with the squeegee stick. The tools moved here and there until they locked into place and a clean gap separated the doorframe and the car body.

Next, one person bent the clothes hanger in a curved way, and put a loop at the bottom. He inserted it and with surgeon-like precision, he lifted the lock. The door opened right up, the tools were removed, and all was well. The car alarm did not sound, and there was not a single scratch on the car. No evidence remain that the car had been hacked.

Total time that it took to open this door: about 20 seconds.

The operation was a marvel, and it proved to me something I did not know: namely, that cars only appear to be locked. In the hands of these guys, every car was only superficially secure.

The owner of the rental place came over to see what had been happening, and he too was rather shocked. “If one of my cars ever turns up missing,” he said in a gruff way, “I’ll know who took it!” Then he smiled and winked: “Good job, men.”

Now, it is possible that this skill was one learned on the job. Possible, but doubtful. They were too accomplished at it. And one confirmed to me that this was the first time in memory that a set of keys had ended up being locked in the car.

So what do we have here? A skill gained from, mostly likely, years spent doing things they should not have been doing, now put to service in a way that is beneficial and profitable to the human community of civilized people.

It’s hardly the only example. We can think of the number of computer hackers now serving large companies to the benefit of everyone, or toughs who might otherwise be hurting people who play sports, or people with a penchant for guns and violence now serving as security guards or bouncers. There are many ways in which skills associated with criminality can serve a productive purpose.

Imagine a world without market-based opportunities to serve. These people would be social parasites instead of producers who are valued by others for their contribution. The more the division of labor expands and capital is accumulated in a context of the freedom to trade, the more opportunities there are for civilizing what would otherwise be destructive impulses.

These are the effects of markets that are impossible to quantify but they have a grand impact on the culture in turning people away from crime and toward peaceful forms of human engagement.

They can also teach us a few things about security holes that exist in the world we inhabit. In the same way that a hacker can provide a good test against holes in program code, the crowbar kids at the rental place showed me something important: if you are worried about the security of your automobile, you need to do more than lock your car.

The Debt We Owe to Trade

IT WAS THE YEAR 1600 and coffee had become wildly popular all over Europe, just as it had been popular all over the Muslim world since its discovery 900 years earlier. The sitting pope was Clement VIII. His advisers urged him to do something to stop the coffee mania then spreading across Christendom. He tasted the coffee, reflected on its properties, and then, to the astonishment of his advisors, blessed it as a Christian beverage.

Long live the pope!

Matters weren’t so simple in the Protestant world. The beverage was still a raging controversy in parts of Germany in the eighteenth century, as J.S. Bach’s hilarious “Coffee Cantata” demonstrates.

The story, which is apparently true from all the checking I’ve done, appears on page 247 of a marvelous book that covers not only the expansion of the coffee trade but all trade of all goods and services from the Stone Age to the present day, and does so in a marvelously intriguing way. The book is A Splendid Exchange: How Trade Shaped the World, by William J. Bernstein. The book is long—494 pages—but engaging on every page.

After finishing the book, I found myself thinking about its contents constantly. Its subject is so ubiquitous that it is hardly ever closely analyzed. The time period stretches from age to age; the geography covers the planet; and the items covered include spices, coffee, silk, pigs and pork, precious metals, oil, and, really, just about everything else. Bernstein demonstrates thousands of times that the world as we know it would be unrecognizable without trade, and shows that trade has shaped who we are in ways that none of us fully recognizes. The historical detail is amazing. The writing is scholarly but clear and fascinating on every page.

Try to imagine Italian cuisine without the tomato, the highlands around Darjeeling without tea plants, an American table without wheat bread or beef, German cooking without the potato, or a café anywhere in the world beyond coffee’s birthplace in Yemen without coffee.

Such was the world prior to 1492, before billions of acres of farmland were taken over with species from remote lands. It is not part of natural law. It was a result of deliberation and work. Fantastic economic and physical risks were involved. It is one of the ways in which the garden of this world has been tilled and kept by mankind, inch by square inch.

The Bernstein book helps keep all the controversy about globalization in context. There is absolutely nothing new about globalization. Nothing. The progress of “globalization” has been on its current trajectory for the whole of recorded history. This trade has made the world ever-more prosperous. And why? Because trade has permitted populations across the globe to cooperate to their mutual betterment. Without trade, the human population would shrink and most all of us would die. Even a slight curtailment of trade can bring on economic depression and dramatically shrink our standards of living.

It is one of the great failings of the human race that we tend to regard the wealth that surrounds us as a given, something that is just part of the world that will last forever and requires no work to acquire. Part of the reason we commit this error is our general tendency to contemplate only what we experience in our lifetimes. But the wealth that surrounds us is the fruit of the whole of history, the accumulated capital of the human race from all time. We are born into it; it grows while we live; and then we die. Appreciating the bigger picture entails transcending one’s own, brief interval of experience.

This is precisely what Bernstein’s book does. It takes us outside the here and now and helps us understand the big picture, and he does this by looking at the details of goods traded in lands far away during all times. The book is beautifully written and wonderfully interesting on every page. I can’t recommend it enough.

My only complaints are minor ones: Bernstein doesn’t seem to have a solid theory of trade that goes beyond neoclassical economic conventions. Had he put one up front, he would have been able to go beyond the very good chronicle here to actually forge a solid theory of the social order itself. It is another example of how Smith’s “propensity to truck and barter” has misled: instead of seeing trade as an extension of human rationality, a mutually beneficial exchange that extends from the desire to better one’s lot in life, he treats the entire subject as if it were an instinct of some sort. But that is a regrettable oversight that in no way diminishes the contribution here.

My second complaint concerns the final chapter, which conforms to a rule often cited by the late Murray Rothbard—that all final chapters of books should just be removed. Bernstein spends the entire book showing how trade can take place without any government management, and then uses the last chapter to argue for government-managed trade in the form of the North American Free Trade Agreement and the World Trade Organization.

You just want to shout, Read your own book, Mr. Bernstein!

In general I would have appreciated a less tentative conclusion, something along the lines of pointing out that trade is what makes it possible for all great and glorious things to take shape in this world, and without which only a few people would be alive, living in caves and eating whatever they could hunt or gather.

The book is even more important than the author knows.

The End of the U.S. Piano Industry

TODAY THE HIGHEST-PRICE good that people buy besides their house is their car, and this reality leads people to believe that we can’t possibly let the American car industry die. We couldn’t possibly be a real country and a powerful nation without our beloved auto industry, which is so essential to our national well-being. In any case, this is what spokesmen for the big three say.

What about the time before the car? Look at the years between 1870 and 1930. As surprising as this may sound today, the biggest-ticket item on every household budget besides the house itself was its piano. Everyone had to have one. Those who didn’t have one aspired to have one. It was a prize, an essential part of life, and they sold by the millions and millions.

That too was new. Americans before 1850 mostly imported their pianos. American manufacturing was nearly nonexistent. After 1850, that changed dramatically with the flowering of what would become a gigantic U.S. piano industry. The Gilded Age saw a vast increase in its popularity. By 1890, Americans fed half the world market for pianos. Between 1890 and 1928, sales ranged from 172,000 to 364,000 per year. It was a case of relentless and astounding growth.

They were used in classrooms everywhere in times when music education was considered to be the foundation of a good education. They were the concert instruments in homes before recorded music and iPods. They were essential for all entertainment. American buyers couldn’t get enough, and private enterprise responded.

New York, Boston, and Chicago were the homes of these companies. There was the great Chickering piano made by a company founded in 1823 and which later led the world in beauty and sound. There was Hallet and Davis in Boston, J. and C. Fischer in New York, as well as Strich and Ziedler, Hazelton, William Knabe, Baldwin, Weber, Mason and Hamlin, Decker and Sons, Wurlizer, Steck, Kimball in Chicago, and, finally, Steinway.

The American piano industry was the greatest in the world, not because the Americans came up with any new and great manufacturing techniques, though there were some innovations, but because the economic conditions made it most favorable to be manufactured here.

With the rise of this industry came a vast marketing apparatus. Piano ads were everywhere, as a tour of old magazines shows. It was widely believed that spending money on a piano wasn’t really spending. It was an investment. The money you paid would be embedded right there in this beautiful and useful item. You can always sell it for more than you paid for it, and this was generally true. So people would make great sacrifices for these instruments.

With the growth of this manufacturing came an explosion of shops that served the piano market all up and down the industry. Piano tuning was a big-time profession. Retail shops with pianos opened everywhere, and the sheet-music business exploded with them. Ever notice how in big cities the music stores are typically family owned and established 40, 50, and even 100 years ago? This is a surviving remnant of our industrial past.

All of this changed again in 1930, which was the last great year of the American piano. Sales fell and continued to fall when times were tough. The companies that were beloved by all Americans fell on hard times and began to go belly up one by one. After World War II the trend continued, as ever more pianos began to be made overseas.

In 1960, we began to see the first major international challenge to what was left of the U.S. market position. Japan was already manufacturing half as many pianos as the United States. By 1970, a revolution occurred as Japan’s production outstripped the United States, and it has been straight down ever since. By 1980, Japan made twice as many as the United States. Then production shifted to Korea. Today China is the center of world piano production. You probably see them in your local hotel bar.

And what happened to the once-beloved and irreplaceable American piano industry? Steinway survives to make luxury instruments that few can afford (a reader notes that Baldwin is still around today too). Mason & Hamilin has made a great comeback in the high-end market. The rest moved overseas under new ownership or were completely wiped out.

Does anyone care that much? Not too many. Have we been devastated as a nation and a people because of it? Not at all. It was just a matter of the economic facts. The demand went down and production costs for the pianos that were wanted were much cheaper elsewhere.

Now, a piano aficionado reading this will say, Buddy, you are crass. Listen to the sound of an older model Chickering and you can tell the difference. It was warm and wonderful, nearly symphonic. It is mellow and perfect for the best repertoire. By comparison, this new Chinese piano is sharp and angular and pointed. It sounds like a marimba. You can’t play Schubert or Brahms on such junk. No one wants to hear that thing. Bring back the old days when pianos made sounds that sounded like real music!

Well, you can still get that old Chickering sound, even from a piano made in New York. You can buy a Steinway. Of course you have to pay $50,000 plus and even as much as $120,000, but they are there. You say that is unaffordable? Says you. It is all a matter of priorities. You can forego your house and live in a tiny apartment and still own the most gorgeous instrument money can buy. In any case, it makes no economic sense for you to demand a magnificent piano at a very low price when reality does not make that possible.

In the same way, many people will bemoan the loss of the U.S. car industry and wax eloquent on the glory days of the 1957 Chevy or what have you. But we need to deal with the reality that all that is in the past. Economics demands forward motion, a conforming to the facts on the ground, and a relentless and realistic assessment of the relationship between cost and price, supply and demand. We must learn to love these forces in society because they are the only things that keep rationality alive in the way we use resources. Without them, there would be nothing but waste and chaos, and eventual starvation and death. We simply cannot live outside economic reality.

Let’s say that FDR had initiated a bailout of the piano industry and then even taken it over and nationalized it. The same firms would have made the same pianos for decades and decades. But that wouldn’t have stopped the Japanese industry from taking off in the 1960s and ‘70s. Americans would have far preferred them because they would have been cheaper. American pianos, because they would be state owned, would fall in quality, lower and lower to the point that they would become like a Soviet car in the 1960s. Of course you could set up tariff barriers. That would have forced American pianos on us. Except for one thing: demand would still have collapsed. The pianos still have to have a market. But let’s say you find a workaround for that problem by requiring everyone to own a piano. You still can’t make people play them and value them.

In the end you have to ask, is it really worth trillions in subsidies, vast tariffs, impositions all around, just to keep what you declare to be an essential industry alive? Well, eventually, as we have learned in the case of pianos, this is not essential. Things come and things go. Such is the world. Such is the course of events. Such is the forward motion of history in a world of relentless progress generated by the free market. Thank goodness that FDR didn’t bother saving the U.S. piano industry! As a result, Americans can get a huge range of instruments from all countries in the world at any price they are willing to pay.

Today government is even more arrogant and absurd, and it actually believes that by passing legislation it can save the U.S. car industry. It can subsidize and pay for uneconomic activities, and pay ever more every year. The government can also pay millions of people to make mud pies because mud pies are deemed to be an essential industry. You can do this, but at what cost and what would possibly be the point? Eventually, even the government will have to accord itself to the reality that economics reminds us of on a daily basis.

Should There Be Shop-Closing Laws?

A REALLY COOL THING IS happening in Germany. After decades of strict laws regulating when stores can open and close (Ladenschlussgesetz), the laws are progressively liberalizing. Since 2006, the decision has been left to the individual states. Whereas commercial establishments once could not open their doors before 6 a.m. or keep them open past 10 p.m., now many open earlier and close later.

Consumers are celebrating, while labor unions and regulators are not.

In the United States, we have no national history of such laws, apart from restrictions on Sunday shopping, which are left to the states and counties. And even with these so-called blue laws, the general trend has been toward liberalization.

The subject intrigues me because it is like many other such subjects that touch on the very viability of liberty itself. If you were to think this issue through using what F.A. Hayek calls a “constructivist” mindset—the presumption that society is a giant Lego model with pieces that must be assembled and disassembled at will—it is not difficult to dream up many seemingly reasonable arguments for why a commercial society must have such laws. Do we really want to leave such things to the “anarchy of the market”?

So let’s just pretend to be statist constructivists for a moment and see how this works.

• A civilized home business will stand no chance against a heavily capitalized corporation that can more easily absorb the high costs of early openings and late closings. There are electrical bills to pay and labor costs involved that a small business—which might have better products and services—will not be able to afford.

• So, what is the undercapitalized company going to do? It will have to choose between adopting the hypercapitalistic focus of its competitors or closing its doors. In a footrace, all competitors have the same starting line. One would never permit one runner to start at a different place from the others. Why should we permit this in enterprise?

• Competition is fine, but the rules have to be the same for everyone.

• And think of the workers. They have families. They need downtime. They need a breather to have dinner with others, read books, and cultivate a civilized lifestyle. No one should be forced to choose between working ridiculously early (or late) and having no job. And yet this will surely be the result if we just let any business open or close whenever it wants to.

• As for the consumers, surely people can figure out a way to get their shopping done between 6 a.m. and 10 p.m. That leaves a solid eight hours for sleep, which everyone needs.

• If we let people shop at any hour, consumers will naturally choose times when the streets aren’t crowded and the store lines are shorter, which means that businesses will have to stay open ridiculously long, even 24 hours a day! But with mandatory limits on commercial hours, consumers will figure out that they need to get real lives and stop commercializing the whole of them.

• And think about this: what kind of society do we want to be? Do we want the entire nation engulfed in the buying and selling of things, or do we believe that there are other human values that must be part of the balance? If we permit the anarchy of the market to rule, we make profit and loss the measure of all human success and failure. This is not something anyone wants.

OK, now that I’ve made what seems to me to be an impenetrable case for shop-closing laws, consider that we do not have these laws in the United States (for the most part). And somehow, against all seeming rationality, the system works, as we all well know. Chick-fil-A voluntarily closes on Sunday, and McDonald’s does not; somehow they both make a profit. Many stores stay open 24 hours and the workers love it: they have more options to adjust their working hours. This is good for employment.

Consumers may or may not take advantage of longer hours. In fact, it is the consumers that dictate whether it is in the interest of the store to stay open after hours. Stores might try it and find it pointlessly unprofitable and stop. For some reason I don’t understand, most barbershops in the South close on Wednesday. Such is their right. It works for them. When it stops working, they will change.

Or it could go the other way. In my own town, a pharmacy long had short hours (8 a.m.–5 p.m.) until a big chain store came in across the street with a 24/7 policy. Faced with declining profits, the old store adopted the same hours. Now there are two pharmacies facing each other, each of which is open at all times. Who wins? Both seem profitable, but the real winner here is the consumer.

My point is that this is a case where the idea of freedom would seem not to work—from a constructivist point of view—and where a plan seems needed. This is true in a host of areas: the freedom to live where you want, work where you want, invest in what you want, drink or smoke what you want, freely trade with anyone from any nation, etc.

You hear these kinds of objections when you propose that any law be repealed: why, there will be chaos!

It turns out that the real chaos comes when the state attempts to allocate scarce resources rather than leaving it to the price system and its talent for revealing what is economically rational or irrational. Shop-closing laws presume to tell people how they should use their time. But time, writes Mises, is a scarce resource; man “must economize it as he economizes other scarce factors.” Only private actors—not politicians and bureaucrats—are in a position to make decisions concerning how it is used. Their choices can be accessed based on a business model rather than arbitrary political wrangling.

This is why liberty works and the state fails so miserably, and why the best-laid plans in politics never work out as expected.

Consider the case of patents. People say that if we get rid of patents, no one will invent anything anymore, and those who do will have their ideas and just profits stolen. And yet for most of human history, patents have not existed; and patents have not been part of the biggest technological explosions in our history. In fact, the opposite is true: patents slow down the pace of development by granting monopolies to favored producers. They thereby discourage innovation in the name of encouraging it.

This is why I found Ron Paul’s answer on the drug question at an early Republican debate to be so incredibly brilliant. The questioner asked him if he would favor legalized heroin. The viewers are supposed to be horrified, and surely many were. He said the real issue is liberty, and then he asked the question: how many people here in this room would start using heroin if it were legal? How many people would say: oh, we have to have these laws to keep me from being an addict? Everyone cheered, because we knew the answer!

There is a remarkable rationale behind what he said. He pointed out the simple truth that we are all what we make of ourselves, and the state isn’t really making us better people. To be a good or bad person is a choice, and the state’s laws don’t really possess the magical power to influence that decision. This was an extremely rare moment in human history, when good sense actually emerged from a political debate.

It often happens that when societies adopt some constructivist rule, the inner contradictions eventually end up leading to its repeal. This is what happened in Germany. The closing laws couldn’t really apply to gasoline, for example. After all, we can’t have people pulling over on the Autobahn and sleeping while they wait for the gas stations to open. Then the bakers too pointed out that they have to be open earlier. Then there are shops for tourists, who don’t have all the time in the world. So special zones of freedom were created for them.

Gradually, the laws were eroded to the point where human choice was permitted to prevail. Does this cause a race to the bottom? No, it causes a race to serve people through excellence. In other words, it makes everyone happier than they would otherwise be. It makes for a better society. Liberty works because it permits people to work out their problems through exchange and cooperation. No one is coercing anyone to do anything. Everything happens through consent; nothing happens through force.

In some ways, liberty is the craziest and most implausible idea anyone ever dreamed up. And yet only liberty really accomplishes that seemingly elusive dream of a prosperous, orderly, and peaceful society in which every member is permitted to have a role in its development. It takes some imagination to understand how.

We are fortunate to be living in times when the digital world of relative freedom is providing us a model of the ideal. Every day, there is improvement. Every day, we are served up better and better ways of doing things. Imagine if the physical world were just as free as the digital one, drawing on the creative powers of everyone in the world in the service of the common goal of finding ever-better ways to do things.

What would life be like? How much are we being held back by seemingly necessarily laws that actually make us all poorer and less civilized than we would otherwise be? It takes a certain kind of brilliance to imagine such counterfactuals. This is why we owe a particular debt of gratitude to the liberal tradition of thought for helping us make sense of how the truly implausible can become the only truly workable ideal.

The Miser Hurts No One but Herself

THE LATEST CHAPTER of John T. Flynn’s Men of Wealth that has my head spinning concerns someone I probably should have known about, except that late-nineteenth-century Wall Street lore is in short supply these days. But thanks to Flynn, I now know all about Hetty Green (1834–1916), whose weird and creepy life now haunts me to no end.

She was the richest woman of the Gilded Age, and sometimes the richest person, having died with a solid $200 million. But she was a miser. In fact, if the term describes her, it should describe no one else, or else we need some other modifier like x-treme miser or hyper-miser. This is a woman who refused to pay the doctor to treat her son’s leg wound, so it later had to be amputated. She was once offered a horse for $200 and she was outraged at the price so she found out everything terrible she could on the seller and intimidated him down to $60. She rode the ferry with the cars rather than pay the passenger fee. She lived in a dumpy house in Hoboken. She had two changes of clothes, both black and tattered. She would travel hundreds of miles to collect debt payments. She never tipped.

She was wicked smart. Emphasis on wicked: she was called “the witch of Wall Street.” On the smart part: her key to success was rather simple, so simple, says Flynn, that everyone preaches but hardly anyone practices it. She bought things that no one wanted and sold them when everyone wanted them. Nothing was permanent in her mind. So she bought bonds when they were crashing and dumped them when they were in high demand. She did the same with real estate and railroads. She seemed to have money to lend when no one else did, so a long line of borrowers was always at her door. She offered tough terms and charged a high price.

Before she invested a dime in anything, she would find out the names of all the principals of the company. She would dig up every bit of dirt she could find. She would then take all the accusations against each person and interview them at length, demanding detailed answers. She would do the same when people came to her to borrow money. She wouldn’t lend unless she felt she effectively owned the person in question.

As Flynn writes: “She was not a builder. She projected no great productive industry. Her business was to stand on the side and take her toll from those who were producers and builders and needed her money.”

She was crazed with paranoia. She was convinced that everyone was out to kill her. When a wood beam fell nearby, she was sure that it was intended for her. Same with every mishap: the entire world was organizing against her, in her mind. She hated everyone and everything, truly.

Normally in a market economy, such people don’t thrive. But she did, if only because she had the goods. She had been fascinated by finance when she was a young girl, as she read aloud the stock pages to her aging family members. She inherited some of their money made from the whale oil trade. She turned that into an enormous financial empire with which she did absolutely nothing except spend it on litigation. She loved the courtroom and sued many people. She insulted them in the courtroom with venomous comebacks and cruel words. She always lost.

Did she love? Briefly, apparently. Edward H. Green was a wealthy bachelor who, for some odd reason, took a liking to her. He wrote her a love letter, and, on the same day, wrote a check for a cheap suit of clothes from a tailor. He inadvertently switched the letters, so that Hetty got the letter intended for the tailor. She was so touched that he would spend so little on a suit that she agreed to marry him. Later he lost all his money. She provided no help and let him languish in poverty the rest of his days.

One good thing: she hated politicians. When they asked her railroad officials for free passes, she instructed the officials to hand them a card that read:

MONDAY: “Thou shalt not pass.” Numbers XX, 18.

TUESDAY: “Suffer not a man to pass.” Judges III, 28.

WEDNESDAY: “The wicked shall pass no more.” Naham I, 15.

THURSDAY: “This generation shall not pass.” Mark XIII, 30.

FRIDAY: “By a perpetual decree it shall not pass.” Jeremiah V, 22.

SATURDAY: “None shall pass.” Isaiah XXIV, 10.

SUNDAY: “So he paid the fare thereof and went.” Jonah I, 2.

What became of her money? Part of the estate was divided up in a thousand directions, owing to a complication in a family will. Part went to various family members. Nothing much came of any of it.

What can we say about this miser? I think we can say that she did much good, despite her wickedness and despite her horrid ways. She lent money at a profit. She bought when no one was buying and sold when everyone was. She engaged in mutually beneficial exchange. She was a pill to work with, but evidently people were happy enough about what she had to offer that they were willing to put up with it. Both sides of the exchange ended up better off than they were before.

Now, people on the left sometimes think that the market economy breeds such types. Not so. Hetty was famous for being unlike all her colleagues. Everyone was liberally minded by comparison. Indeed, the Gilded Age gave rise to the accusation that vast wealth makes people wild spendthrifts. Both can’t be true.

What we can observe from the life of Hetty Green is that there are bad people in all kinds of institutions. Capitalism doesn’t create misers; it turns their ways toward productive good. Hetty hurt no one but herself and those dear to her. The market economy localized the effects of her sins and contained them. She created massive value to society and was rewarded for it.

It is even hard to argue that she hurt herself. She was as happy as she could be just the way she was, and no amount of forcing her to be otherwise could have improved the situation. She embodied traits that we think of as being awful but she worked in an industry that allowed these traits to be turned to good for all. That is a credit to the market economy! Indeed, it is the highest praise of the free market that it can find a place even for someone so awful as this.

A note about Flynn’s extraordinary book: it was published in 1941. Flynn was an old-time progressive, a journalist deeply suspicious of the business class. He was disgusted at the truth he saw about the New Deal: it was a racket concocted by the corporate class. He turned against FDR. He was shocked to see that his fellow liberals did not follow suit. Then he opposed U.S. entry into World War II. I suppose this book was written during his period of sadness, as a way of investigating the complex relationship between government and business. He gradually came around to a full-blown embrace of the free market as the only means to check the power of the government-business combine.

This is only one chapter. Every chapter is just as great. It is a phenomenal work, and it is a mystery to me that it seems to have been forgotten. Thank goodness this reprint is now available again.

What’s a Job Good For?

MOST PEOPLE SAY THAT a job is good for making money. So, if you don’t need money, what’s the point? The fabled English aristocratic class of the late nineteenth and early twentieth century apparently thought that way, if the caricatures painted by Jeeves and Wooster, Brideshead, and the like, have any truth to them. Their main job was getting dressed and undressed. It seems like young Americans are thinking the same way.

Doug French drew my attention to some statistics from the Wall Street Journal on teenage employment that knocked me out. In 2000, slightly more than a third of 16-and 17-year-olds had jobs. Today, in 2011, it is 14 and 15 percent. These are shocking numbers. But in retrospect, I’ve seen enough anecdotal evidence to back them up.

I was speaking for a group of 200 plus high school students (location I will not disclose) and I casually asked how many of them have worked in a retail environment, working directly with customers. Not a single hand went up. Shocked, I asked the question more broadly: how many have had a job that yielded a paycheck? Not a hand went up.

In talking to parents, it seems that a new attitude has taken hold among them. Their kids don’t work. They are in school. They should spend their extra time doing sports and studying. Work is for the lower classes. What’s to be gained? Putting the kids to work implies that the breadwiners in the household can’t provide for their offspring. What are they going to do with the money they earn anyway? Buy more iPhone apps?

And there’s also the problem of legal restrictions. Hardly any 16-year-old is worth the prevailing minimum wage, which has risen dramatically over the last five years. No employer would choose a teen over an adult willing to do the same job for $7.25 an hour. Also, schools require all kinds of permission slips—because of ghastly “child” labor laws—and what employer wants to jump through those hoops? And it is ever harder to fire people you hire so few are willing to take the risk of hiring kids in the first place.

Faced with all these barriers, the culture has adapted. Since, as we know, no parent has ever made a bad choice for the life of their own beloved offspring, parents have just decided that working is for other people’s kids, not theirs.

And so fewer and fewer people know anything about the workplace. They will sit in desks and run around on fields until they are 24 years old and then present themselves, fully formed, to waiting employers who will proceed to cough up as a reward for staying in school.

Well, what’s the loss? Let’s talk about the loss by talking about what might be learned from a job that will go unlearned.

There is the “work ethic,” a phrase that is batted around all the time, but what does it really mean? You have to actually work to acquire one. As innumerable titans of the Gilded Age attempted to tell us, no young person is born wanting to work. How do you learn to come to thrive on it?

To have a “work ethic” means the willingness to experience discomfort on the way toward the completion of a job done with excellence. This doesn’t come naturally. The “natural” thing is to stop doing what you are doing when it begins something discomforting or when more is expected than you want to give. But this approach goes nowhere. In fact, if this is your approach, you trim more and more until the point that you become a sofa slug, which pretty much describes … a whole generation.

I recall when I was 10, or so, working on a roofing job with my great uncle. It was in the middle of a boiling-hot summer. We were balancing ourselves on a black, slanted roof, banging nails into things. After about 30 minutes, I thought I was going to die. We continued working up there for hours and hours. Finally he said it was time to take a break. I shoved the garden hose in my mouth and swallowed what must have been a gallon. He went inside and drank a cup of coffee. Now, that was inspiring.

I have an early memory of my brother’s first job on a construction crew. He came home the first day looking like a zombie. We spoke to him but he could not speak back. He held onto the wall as he found his way to his room and collapsed. It was this way every day for weeks and then suddenly he got the hang of it. He became a machine. This was one summer that gave him a lifetime work ethic.

Other memories of my early jobs include: repairing organ pipes in a high loft; crunching pigeon bones under foot and wearing a protective mask; drilling water wells in the blazing sun; scrubbing honey off tables in a fish restaurant for which I served as busboy; collecting paper plates from 500 tables after a lunch catered by the company that hired me as a gofer; fighting off mobs of people who were trying to buy the $10 pants that went viral in a retail outlet; feeling terror that the piano I was moving up a flight of stairs would double back and crush me; picking up tiny pins on dressing room floors in a department store; learning to run the floor-waxing machine in the china department and having later nightmares that I hit an entire shelf of fine crystal.

You quickly learn in any job, and especially low-paying ones, that it hurts to work, physically and mentally. You must focus intensely for longer than you really want to. You do things you don’t like. You can find every excuse to drift off but you can’t because there are tasks that must be done. And if it is the right kind of job, if you don’t do the task, it doesn’t get done and then everyone up and down the line that depends on that task finds their tasks are harder and so everyone hates you.

If you are cleaning bathrooms, you must make sure there is toilet paper there, else customers are going to be very unhappy. If you are frying fish, you have to change the grease or else you will destroy the whole business. If you are moving a fence, you have to dig deep holes or it will fall down in six months. And so on. You learn to avoid these bad results in the only possible way: complete the task.

We are not born into this world of plenty understanding that there is a direct relationship between what we do and what the consequences are. Quite the opposite: the very definition of immaturity is failing to take responsibility (as our mothers always said). Well, how do we learn about this connection between our actions and the results? There is no better place than the workplace, or commerce generally. We work, we see the results, and we are paid. This is direct. It is beautiful. It emblazons on the brain the relationship between actions and results.

School doesn’t always teach us this, and, besides, the “action” in school is pretty limited. It is about studying, which too often means mimicking what the assigned authority says. In real work, you have to be creative. You exercise volitional control over your body and what it does and you see the results. And the results are not abstractions like As, Bs, and Cs, but very material: dollars and cents that can be used to acquire anything. And this reward comes from using the whole of yourself in a productive activity.

As John Wanamaker, the pioneer of marketing said, a “well-ordered, modern retail store is the means of education in spelling, writing, English language, system and method. Thus it becomes to the ambitious and serious employees, in a small way, a university, in which character is broadened by intelligent instruction practically applied.”

That’s it! Work is like university—a real university that builds up a person and makes him or her better than he or she would otherwise be!

What you get out of a job is all about what you bring to the job, and what you bring must be more valuable to the employer than what you take out. I recall some bum who once worked with me who snarled once: “No way am I straightening ties for minimum wage.” Very interesting perspective. He wanted more money to do more work. But that’s not the way it works. You have to do more work in order to get more money. You must provide more value than you extract in order to advance.

Work (and I should specify that I mean private-sector work) is the best way to learn this hugely valuable lesson and carry it with you your entire life. This is surely a feature of what we call the “work ethic.”

A part of this means acquiring a sense of the need to serve others in order to gain for your service. This is the very essence of a job, whether it is frying up potatoes, crushing boxes out back, or planting shrubbery. You are always doing something for someone else. If you do enough of this, you begin to make this need to serve part of your mental outlook.

I’ve never understood the celebration of “volunteering” for a soup kitchen or whatever. Most of the “customers” are not grateful and the employees are mostly self-congratulatory about their wonderful pious deeds. Far better would be, for example, a fast-food restaurant where people pay and where workers are truly serving others—in their own self-interest. This is the ideal. This is the setting where true virtues are learned.

You might say: Oh, this whole world of commercial life is the big phony. The service providers pretend to like customers because the business wants money. And the customer is faking it too. You could say that, but then there is this: if we behave a certain way all the time for years, we might eventually find that our minds conform. We become sincere. We begin to value others for what they do and give. We learn how to get along, how to appreciate differences among people, how to look for unique qualities in others and see their merit.

Someone once said that a capitalist society is a friendly society. This is not surprising at all, since the essence of capitalism is mutual service, cooperation, and trade to the betterment of the whole. To take part in that reshapes who we are. It makes us better people.

Contrast this with the blasé existence of desk sitting, coach potatoing, or working in the public sector (they don’t call it “going postal” for nothing). It’s the private sector and its commercial ethos that can give us that thing we need most: self-improvement.

What strikes you immediately about jobs in commerce especially is how forward looking they are. It takes some getting used to. If you had a bad day without many customers and sales, there is always another day. If you had a good day, there is another day coming and you can never be sure of how it will go.

So you learn to live in a world in which bygones are bygones, and the future is always uncertain but possibly bright. In commerce, there are no grudges because today’s seeming enemy could be tomorrow’s customer, co-worker, or business partner. The past is merely an assembly of passing data; it is the future where the action and excitement are. And in this way, a job in commerce is completely different from the world of sloth, in which neither past nor future matter, or school, where the past is stockpiled and never goes away.

With a job in commerce, you have your finger on the pulse of life itself, the thing that is active, moving, growing, and reflective of changing social values and interests. You have something that becomes you, something that gives you bragging rights, something that connects you to others. You become defined, skilled, useful, experienced. You have stories. You are in some measure liberated from the authority structures you inherit from birth and growing up and adopt new ones of your own choosing.

Now, consider all of this and imagine whether teens really are better off not working. Research has demonstrated that retirement in general “leads to a 5–16 percent increase in difficulties associated with mobility and daily activities, a 5–6 percent increase in illness conditions, and 6–9 percent decline in mental health, over an average post-retirement period of six years.”¹ And this is after a lifetime of work. The effects on the mind are much worse with the young who have never developed the mental habits that come with working.

Do we really want to deny all of this to an entire generation and then expect these people to just leap into the “real world” at the age of 24, or so, fully formed? They will not be formed. They will not be ready. They will be less useful, less skilled, less productive, less shaped in their character, less ready to be free and responsible. Sorry, but languishing and pretending to study aren’t substitutes.

---

¹ “The Effects of Retirement on Physical and Mental Health Outcomes,” Dhaval Dave, Inas Rashad, and Jasmina Spasojevic (National Bureau of Economic Research, 2006).

The Economics of Happy Feet

GARY NORTH RECENTLY SUGGESTED that we count our capitalist blessings and name them one by one, while inviting people to add to a list that would be inexhaustible. My addition: shoes.

For years I’ve read to my kids a story about a cobbler and his wife who can’t seem to make enough shoes to bring in enough revenue to put food on the table. One day they wake to find a pair of fabulous, fully finished shoes on the worktable. They put them in the display case. The shoes sell immediately, and for a high price. The same happens the next night.

They stay up the next night to discover tiny elves have taken pity on this hard-working couple and made shoes for them to sell. Once prosperous, they pay back the elves by making tiny shoes for them. And thus is the old saying that “Him that makes shoes goes barefoot himself” made false by the intervention of benevolent visitors from the world of fantasy.

These days, the fantasy of such a story stretches in every direction. There are no more cobblers who make shoes (well, there are some who cater to highly specialized foot issues). There are people who repair shoes, and we call them cobblers for nostalgic reasons.

If we go back far enough in time, we can see that in the greatest portion of known history, shoes consisted of nothing but wrapped animal skin, bark, or leaves. The stage of economic development that permitted people to specialize in making shoes was itself a great step forward. And yet today, the specialization of shoemaking itself has been displaced but for eccentrics who choose to “reenact” their making and even pay for them (just as some people like vinyl records).

We’ve all had the experience of reading old works of literature and finding that various shoe miseries and dramas play a huge factor in daily life. We read long details of the way in which shoes are falling apart and bringing about terrible pains, and how difficult it was to find a new pair. They were expensive and the wait was long. Shoes are the subject of great longing (Cinderella), sin (Anderson’s Red Shoes), magic (Dorothy), and suffering (Valley Forge). They are made and presented at major turning points in life: communion, confirmation, weddings. Great ceremony was attached to their acquisition. They were the defining mark of class (“nor no more shoes than feet”—Shakespeare on poverty). They were the subject of comment, regulation (Sumptuary laws), envy, and crime.

Today, because we take the availability of shoes for granted, we can only wonder what all the fuss was about. Some data FYI. Americans bought 2 billion pairs of shoes last year, mostly women’s shoes and sports shoes made in China. On this we spend about 0.65 percent of our budgets, a figure that has been falling precipitously for decades. This is in a period when domestic production of shoes has fallen by 75 percent in ten years.

Concerning China, accounting for 80 percent of imports, how interesting a turn of events this is! When capitalists of old used to speak of China, they imagined all the shoes that could be sold to a country so populous. Who would have imagined that it would be China that would turn out to be the maker and seller of shoes to the world? This represents a reversal of the “open door” policy that led to the Boxer Rebellion, among other infamous events of Chinese history. But today, it is our door that is open. Meanwhile, U.S. shoe exports go mainly to Mexico.

The history of shoes online assumes that in the middle ages there were women’s shoes and men’s shoes, both dreadfully uncomfortable, and that there were either low-quality or high-quality shoes available for peasants and elites, respectively. Shoes were a coveted mark of social advancement. That was true for most of history until very recently. If you enter a shoe store today—and actually even my local grocery store sells shoes—you find a seemingly infinite variety, produced not by elves, but a coordinated international marketplace of corporations and suppliers and factories that make shoes for all the feet of the world.

For men, there are what are called “work shoes” (which today, strangely, means shoes for manual labor), which are made of hard rubber soles, “dress shoes,” meaning leather soles or the faux version with leather uppers with rubber soles, office shoes of hundreds of varieties of styles that most men wear, and sports shoes, designed specifically for leaping or running, or playing tennis or basketball or baseball or anything else. Whole chain stores are devoted to selling the hundreds and thousands of styles of sports shoes alone. And lest we are tempted to think that this is an example of capitalist redundancy and repackaging, trying running a few miles in a racquetball shoe (as compared with the brilliance of a running shoe proper) and you discover that there really is a point.

And prices. You can go to the military surplus store and get excellent dress black for a dollar or two. You can pay between $6 and $600 for a pair of sports shoes. You can do the same for men’s dress shoes. It seems, too, that the prices are always falling for shoes, but it is more likely that, as always in a market economy, yesterday’s luxury good becomes tomorrow’s sale item at Big Lots. If wearing status shoes is what you seek, you have to act fast since the poor will be wearing next week what only the rich wore last week. As for women’s shoes, I would guess that the average consumer has more in her closet than Marie Antoinette ever dreamed of owning.

And this is true all over the world. Even in the poorest countries, shoes are available everywhere and at rock bottom prices. One of the great miseries of living in the third world used to be the aches and pains associated with poor quality footwear (if you could find it at all). But no more. American capitalist “excess,” which led entrepreneurs to pay workers in China and Indonesia to make shoes for American consumers, has yielded surpluses that spread affordable shoes to all corners of the globe.

Today a peasant in the fields of a Guatemalan village wears shoes that medieval lords would have traded for their own models made of wood and leather. Even bums who beg for a living in big cities, and want to do their best to look the part, have a hard time finding shoes that look appropriately worn and ragged. The trash bins are filled not with leather shoes taped and tied together but only mildly worn sneakers that a quick application of bleach can make look nearly new.

Shoes all over the world are all of extremely high quality as compared with previous times. Even in my youth, I can recall that “track shoes” were black with white stripes and had a thin little layer of rubber on the bottom that would allow you to feel every pebble beneath your feet. Today, a running shoe is a spectacular thing. With the proper fit, it goes on with a suction sound, hugs and holds your foot, seems to put jet propulsion at your back, and creates the illusion that you could run up a wall and across the ceiling—all this without creating a blister even on the first wearing. And for less than $40.

Now “quality” might not be the same as “long lasting,” of course, which is a feature that is dictated by consumer preference. A hand-made shoe of the nineteenth century might have lasted two generations but we no longer need or want our shoes to last that long—any more than we want our houses to have the enduring power of medieval churches. Mostly, people would rather buy new rather than apply new soles. Of course for those who do prefer shoes that live generations, those are available too.

And yet this is all rather new to our time, and crucially important for health and well-being. Podiatrists tell us that the bones and tendons in the feet begin to weaken severely with age, especially past forty. Now consider that the average life expectancy didn’t pass the age of forty until 1850 (in the U.S.). Throughout the whole of world history when shoes were so shabby and miserable, most people didn’t have to worry about weakened foot bones and tendons because they were dead long before this became a problem. But now that we are living twice as long as our great-great-grandparents, it becomes crucially important that we have shoes that treat our feet with loving attention.

How interesting, how marvelous, that the coordinating powers of the free market grant us comfortable, healthy, pain-reducing shoes in the very time when we are living longer and longer and thereby requiring even more sophisticated ways of forestalling or otherwise dealing with bodily decay. It is conventional to credit medicines and hospitals for long lives but we should also give due regard to such conventional consumer products as shoes that make life past the age of 40 worth living at all. When we go the way of all flesh, we should request not to be buried with boots, but with Rockports.

The great irony of living in the age of entrepreneurship is that we no longer have to put thought into life’s necessities such as the production and acquisition of shoes. It has made a problem that has vexed all people in all times obsolete, and so much so that to even write about the topic is considered frivolous and obsessive. There are even whole interest groups calling for shoes to be less plentiful and more expensive. In a world without markets, such as these people seek, many things would be missed, but I’m guessing that footwear would be at the top of the list.

When Capital Is Nowhere in View

A TRAVEL CHANNEL EPISODE OF No Reservations, a cooking-focused show narrated by Anthony Bourdain, took viewers to Port-au-Prince, Haiti. I had heard that the show offered unique insight into the country and its troubles. I couldn’t imagine how. But it turns out to be true. Through the lens of food, we can gain an insight into culture, and from culture to economy, and from economy to politics and finally to what’s wrong in this country and what can be done about it.

Through this micro lens, we gain more insight than we would have if the program were entirely focused on economic issues. Such an episode on economics would have featured dull interviews with treasury officials and IMF experts and lots of talk about trade balances and other macroeconomic aggregates that miss the point entirely.

Instead, with the focus on food and cooking, we can see what it is that drives daily life among the Haitian multitudes. And what we find is surprising in so many ways.

In a scene early in the show set in this giant city after the earthquake, Bourdain and his crew stop to eat some local food from a vendor. He discusses its ingredients and samples some items. Crowds of hungry people begin to gather. They are doing more than gawking at the camera crews. They are waiting in the hope of getting something to eat.

Bourdain thinks of a way to do something nice for everyone. Realizing that in this one sitting, he is eating a quantity of food that would last most Haitians three days, he buys out the remaining food from the vendor and gives it away to locals.

Nice gesture! Except that something goes wrong. Once the word spreads about the free food—word-of-mouth in Haiti is faster than Facebook chat—people start pouring in. Lines form and get long. Disorder ensues. Some people step forward to keep order. They bring belts and start hitting. The entire scene becomes very unpleasant for everyone—and the viewer gets the sense that it is worse than we are shown.

Bourdain correctly draws the lesson that the solutions to the problem of poverty here are more complex than it would appear at first glance. Good intentions go awry. They were thinking with their hearts instead of their heads, and ended up causing more pain than was originally there in the first place. From this event forward, he begins to approach the problems of this country with a bit more sophistication.

The rest of the show takes us through shanty towns, markets, art shows, festivals, and parades—and interviews all kinds of people who know the lay of the land. This is not a show designed to tug at your heart strings in the conventional sort of way. Yes, there is obvious human suffering, but the overall impression I got was not that. Instead, I came away with a sense that Haiti is a very normal place not unlike all places we know from experience, but with one major difference: it is very poor.

By the time the show was made, the glamour of the postearthquake onslaught of American visitors seeking to help had vanished. One who remains is actor Sean Penn. Although he’s known as a Hollywood lefty, he’s actually living there, chugging up and down the hills of a shanty town, unshaven and disheveled, being what he calls a “functionary” and getting stuff for people who need it. He had no easy answers, and he had sharp words for American donors who think that dumping money into new projects is going to help anyone.

The people of Haiti in the documentary conform to what every visitor says about them. They are wonderfully friendly, talented, enterprising, happy, and full of hope. Like most people, they hate their government. Actually, they hate their government more than most Americans hate theirs. Truly, this is a precondition of liberty. There is a real sense of us-versus-them alive in Haiti, so much so that when the presidential palace collapsed in the recent earthquake, crowds gathered outside to cheer and cheer! It was the one saving grace of an otherwise terrible storm.

With all these enterprising, hard-working, and creative people, millions of them, what could possibly be wrong with the place? Well, for one thing, the earthquake destroyed most homes. If this had been the United States, this earthquake would not have caused the same level of damage. This led many outsiders to think that somehow the absence of building codes was the core of the problem, and hence the solution is more imposition of government control.

But the reality shows that this building-code notion is some sort of joke. The very idea that a government could somehow go around beating up people who provide shelter for themselves while failing to obey the central plan is simply laughable. Coercion of this sort would bring about no positive results and lead only to vast corruption, violence, and homelessness.

The core of the problem, says Robert Murphy, has nothing to do with a lack of regulations. The problem is the absence of wealth. It is obviously true that people prefer safer places to live but the question is: what is the cost, and is this economically viable? The answer is that it is not viable, not in Haiti, not with this population that is barely getting by at all.

Where is the wealth? There is plenty of trade, plenty of doing, plenty of exchange and money being exchanged. Why does the place remain desperately poor? If the market economists are correct that trade and commerce are the key to wealth, and there is plenty of both here, why is wealth not happening?

One can easily see how people can get confused, because the answer is not obvious until you have some economic understanding. A random visitor might easily conclude that Haiti is poor because somehow the wealth is being hogged by its northern neighbor, the United States. If we weren’t devouring so much of the world’s stock of wealth, it could be distributed more evenly and encompass Haiti too. Or another theory might be that the handful of international companies, or even aid workers, are somehow stealing all the money and denying it to the people.

These are not stupid theories. They are just theories—neither confirmed nor refuted by facts alone. They are only shown to be wrong once you realize a central insight of economics. It is this: trade and commerce are necessary conditions for the accumulation of wealth, but they are not sufficient conditions. Also necessary is that precious institution of capital.

What is capital? Capital is a thing (or service) that is produced not for consumption but for further production. The existence of capital industries implies several stages of production, or up to thousands upon thousands of steps in a long structure of production. Capital is the institution that gives rise to business-to-business trading, an extended workforce, firms, factories, ever more specialization, and generally the production of all kinds of things that by themselves cannot be useful in final consumption but rather are useful for the production of other things.

Capital is not so much defined as a particular good—most things have many varieties of uses—but rather a purpose of a good. Its purpose is extended over a long period of time with the goal of providing for final consumption. Capital is employed in a long structure of production that can last a month, a year, 10 years, or 50 years. The investment at the earliest (highest) stages has to take place long before the payoff circles around following final consumption.

As Hayek emphasized in The Pure Theory of Capital, another defining mark of capital is that it is a nonpermanent resource that must nonetheless be maintained over time in order to provide a continuing stream of income. That means that the owner must be able to count on being able to hire workers, replace parts, provide for security, and generally maintain operations throughout an extended period of production.

In a developed economy, the vast majority of productive activities consist in participation in these capital-goods sectors and not in final consumption-goods sectors. In fact, as Rothbard writes in Man, Economy, and State, at any given time, this whole structure is owned by the capitalists. When one capitalist owns the whole structure, these capital goods, it must be stressed, do him no good whatever.

And why is that? Because the test of the value of all capital goods is conducted at the level of final consumption. The final consumer is the master of the richest capitalist.

Many people (I’ve been among them) rail against the term capitalism because it implies that freedom is all about privileging the owners of capital.

But there is a sense in which capitalism is the perfect term for a developed economy: the development, accumulation, and sophistication of the capital-goods sector is the characteristic feature that makes it different from an undeveloped economy.

The thriving of the capital-goods sector was the great contribution of the Industrial Revolution to the world.

Capitalism did in fact arise at a specific time in history, as Mises said, and this was the beginning of the mass democratization of wealth.

Rising wealth is always characterized by such extended orders of production. These are nearly absent in Haiti. Most all people are engaged in day-to-day commercial activities. They live for the day. They trade for the day. They plan for the day. Their time horizons are necessarily short, and their economic structures reflect that. It is for this reason that all the toil and trading and busyness in Haiti feels like pedaling a stationary bicycle. You are working very hard and getting better and better at what you are doing but you are not actually moving forward.

Now, this is interesting to me because anyone can easily miss this point just by looking around Haiti where you see people working and producing like crazy, and yet the people never seem to get their footing. Without an understanding of economics, it is nearly impossible to see the unseen: the capital that is absent that would otherwise permit economic growth. And this is the very reason for the persistence of poverty, which, after all, is the natural condition of mankind. It takes something heroic, something special, something historically unique, to dig out of it.

Now to the question of why the absence of capital.

The answer has to do with the regime. It is a well-known fact that any accumulation of wealth in Haiti makes you a target, if not of the population in general (which has grown suspicious of wealth, and probably for good reason), then certainly of the government. The regime, no matter who is in charge, is like a voracious dog on the loose, seeking to devour any private wealth that happens to emerge.

This creates something even worse than the Higgsian problem of “regime uncertainty.” The regime is certain: it is certain to steal anything it can, whenever it can, always and forever. So why don’t people vote out the bad guys and vote in the good guys? Well, those of us in the United States who have a bit of experience with democracy know the answer: there are no good guys. The system itself is owned by the state and rooted in evil. Change is always illusory, a fiction designed for public consumption.

This is an interesting case of a peculiar way in which government is keeping prosperity at bay. It is not wrecking the country through an intense enforcement of taxation and regulation or nationalization. One gets the sense that most people never have any face time with a government official and never deal with paperwork or bureaucracy really. The state strikes only when there is something to loot. And loot it does: predictably and consistently. And that alone is enough to guarantee a permanent state of poverty.

Now, to be sure, there are plenty of Americans who are firmly convinced that we would all be better off if we grew our own food, bought only locally, kept firms small, eschewed modern conveniences like home appliances, went back to using only natural products, expropriated wealthy savers, harassed the capitalistic class until it felt itself unwelcome and vanished. This paradise has a name, and it is Haiti.