Economics for the Teachable; L.E. Read

ECONOMICS FOR THE TEACHABLE tg ofeonarJ G. Real The socialistic or governmentally planned system presupposes bureaucrats competent to control human action, whereas the market economy requires no supermen-just ordinary people freely exchanging their goods and serv ices as they choose. THE TEACHABLE-those who aspire to an ever greater understanding-are those with an awareness of how little they know. 1 Lest teachableness and lowliness or inferiority be associated, consider the case for teachable ness and wisdom as having a relationship: Said Socrates, "This man thinks he knows something when he does not, whereas I, as I do not know any thing, do not think I do, either." For such acknowledg ments of fallibility, Socrates was acclaimed a wise man. 1 The teachable shall inherit the earth appears to be a sensible interpretation of the Biblical pronouncement, "The meek shall in herit the earth." It is quite obvious that "the meek" had no refer ence to the Mr. Milquetoasts in society.

78 ECONOMICS FOR THE TEACHABLE 79 He and many others-for instance, Lecomte du Nouy and Robert Milliken, scientists of our time-discovered, as they expanded their own consciousness, that they progressively exposed themselves to more and more of the unknown. Edison's fact-packed, inquiring, ever curious mind concluded that, "We don't know a mil lionth of one per cent about anything. We are just emerging from the chimpanzee state." These teachable persons came to realize how little they knew and that, perhaps, is a measure of wisdom. For the student of economics, this poses an interest ing question: Is it possible to have a workable, produc tive economy premised on a society of teachable indi viduals, those who are aware that they know very little? We can assume that such an economy would differ markedly from the planned society of egotists or know it-aIls, those at the other end of the intellectual spec trum, the ones who see no difficulties at all in arrang ing the lives of everyone else in accord with their de signs. Further, they are quite willing to resort to the police force to implement their schemes for improving society by nationalizing it.

A group of seven economists, for example, recently voiced this view: "The federal government is our only instrument for guiding the economic destiny of the country.2 -Government, in such a role, must be staffed largely with those who are unaware of how little they know, 2 See First National City Bank Letter for August 1959. p. 90.

80 LEONARD E. READ who have no qualms about their ability to plan and regulate the national economic growth, set wages, pre scribe hours of work, write the price tags for every thing, decide how much of what shall be produced or grown, expand or contract the money supply arbitrarily, set interest rates and rents, subsidize with other peoples' earnings whatever activity strikes their fancy, lend bil lions in money not voluntarily. entrusted to them, allo cate the fruits of the labor of all to foreign governments of their choice-in short, decide what shall be taken from each Peter and how much of the "take" shall be paid to each Paul. A Presumed Wisdont Government control and ownership of the means of production is socialism, sometimes called "state inter ventionism" or "communism," depending on the degree of disparagement intended. It rests on the premise that certain persons possess the intelligence to understand and guide all human action. Socialism or state interven tionism is advocated by those who sense no lack of this prescience in themselves, by the naive followers of such claimants, by the seekers of power over others, by those who foresee an advantage to themselves in such manipu lations, and by the "do-gooders" who fail to distinguish between police grants-in-aid and the Judeo-Christian principles of charity. All in all, they are a considerable number, but still a minority of the tens of millions whose lives they would regulate.

ECONOMICS FOR THE TEACHABLE 81 The most important point to bear in mind is that so cialism presupposes that government or officialdom is the endower, dispenser, and the source of men's rights, as well as the guide, controller, and director of their energies. This is the Supremacy of Egotism: The State is God; we are the State! Let us then examine the competency of a typical ego tist. It matters not whom you choose-a professor, a professional politician, a Napoleon, a Hitler, a Stalin but the more pretentious the better. s Simply admit some supreme egotist into your mind's eye and take stock of him. Study his private life. You will usually discover that his wife, his children, his neighbors, those in his hire, fail to respond to his dictates in ways he thinks proper. 4 This is to say, the egotist is frequently a failure in the very situations nearest and best known to him. Incongruously, he then concludes that he is called to manage whole societies-or even the world! Fie on any thing small enough to occupy an ordinary man!

Let's further test the knowledge of the egotist. He wants to plan production; what does he know about it? For example, there is a company in the U.S.A. which manufactures well over 200,000 separate items. No one person in the company knows what these items are and 3 A high-brow is a low-brow plus pretentiousness," said H. G. Wells. 4 Napoleon's domestic affairs were a mess and his numerous fam ily drove him to distraction; Hitler was an indifferent paper hanger; Stalin tried first theology and then train robbery before he elected bureaucracy and dictatorship; many bureaucrats charged with great affairs have no record of personal success.

82 LEONARD E. READ there is no individual on the face of the earth who has the skills, by himself, to make anyone of them. 5 It's a safe bet that the egotist under examination has never been closer to this company than a textbook descrip tion by some fellow egotists. Yet, he would put this in tricate, voluntary mechanism under the rigid control of government and would have no hesitancy at all in ac cepting the post of Chief Administrator. He would then arbitrarily allocate and price all raw materials and man power and, after long and complicated statistics of the past, arbitrarily allocate and price the more than 200,000 items, most of which he never knew existed. Involved in the operations of this company alone-a mere fraction of the American economy-are incalculable human en ergy exchanges, many billions of them annually; but the egotist would manage these with a few "big man" gestures! Such cursory attention he would find neces sary for, bear in mind, he also would have under his control the lives, livelihoods, and activities of the 176, 750,000 individuals not directly associated with this company.

Next, what does the egotist know about exchange? In a specialized or division-of-Iabor economy like ours, ex change cannot be carried on by primitive barter. It is accomplished by countless interchanges interacting on one another with the aid of a generally accepted me dium of exchange or money. The socialistic philosophy l> See my "I, Pencil" (Essays on Liberty, Vol. VI, p. 371) for a demonstration that no one person knows how to make an item even as simple as a wooden lead pencil.

ECONOMICS FOR THE TEACHABLE 83 of the egotists presupposes that there are persons com petent to regulate and control the volume and value of money and credit. Yet, surely no one person or com mittee is any more competent to manipulate the sup ply of money and credit to attain a definite end than he or a committee is able to make an automobile or a wooden lead pencil! Is There a Better Way? An economy founded on the premise of know-it all ness is patently absurd. But, can there be a sensible, rational economy found edon the premise of know-next-to-nothingness? An economy that would run rings around socialism? In short, is there a highly productive way of life which pre supposes no human prescience, no infallibility, nothing beyond an awareness that it is not the role of man to pattern others in his own image? There is such a way! Contrary to socialism, this way of life for teachable people, who concede their fallibility, denies that gov ernment, staffed by fallible people, is the source of men's rights. It holds, instead, that men "are endowed by their Creator with certain unalienable rights, that among these are Life, Liberty, and the pursuit of Hap piness. That to secure these rights, governments are in stituted among men.... " With this as a premise, sov ereignty-the source of rights-rests with the Creator; government is but a man-made means to protect this arrangement between man and his Creator. When Crea84 LEONARD E. READ tivity is assumed to exist over and beyond the conscious mind of man, a whole new concept of man's relationship to man emerges. Man, once he conceives of himself in this setting, knows that he is not knowledgeable but, at best, is only teachable. The greatest conscious fact of his life is his awareness of the Unknown.

To illustrate, let us observe how such a person "builds" his own house. He does not think of himself as actually having built it. No man living could do that. He thinks of himself as having done only an assembly job. He is aware of numerous preconditions, two of which are: 1. The provision of his materials. Others cut trees, sawed them into boards which were kiln dried, planed, grooved, held in waiting, delivered. Some mined ore, assembled blast furnaces from which came the metals for saws, planes, pipes, tubs, nails, hardware. There were those who assembled the machinery to mine the ore and those· who assembled the machine tools to make the machinery. There were those who saved the fruits of their labor and loaned or invested it that there might be these tools. There were the growers of flax and soy beans, the extractors of their oils, chemists, paint mak ers. Others wrote books about mixing concrete, archi tecture, engineering, construction. There were publish ers, typesetters-how does one make a linotype machine?

-on and on, creative energies and energy exchanges through time and space, ad infinituml 2. A reasonable absence of destructive energies. No thieves stole his supplies. Those who supplied him had ECONOMICS FOR THE TEACHABLE 85 not defrauded him nor had they misrepresented their wares. Violence, like coercively keeping men from work ing where they chose (strikes) or like coercively keeping men from freely exchanging the products of their labor (protectionism) had not succeeded in denying these services to him. In short, interferences with creative ef forts and exchanges had not reached the point where a house was impossible. Respect for the Unknown The man who knows how little he knows is aware that creative energies, and creative energy exchanges, work miracles if unhampered. The evidence is all about him. There is his automobile, the coffee he drinks, the meat he eats, the clothes he wears, the symphony he hears, the books he reads, the painting he sees, the per fume he smells, the velvet he touches and, above all, the insights or inspiration or ideas that come to him from where he does not know.

The teachable person looks with awe upon all crea tion. 6 He agrees that "only God can make a tree." And he also understands that, in the final analysis, only God can build a house. Nature, Creation, God-use your own term-if not interfered with, will combine atoms into molecules which when configurated in one manner 6 "If I may coin a new English word to translate a much nicer old Greek word, 'wanting-to-know-it-ness' was their characteristic; wonder ... was the mother of their philosophy." The Ohallenge of the Greek by T. R. Glover. New York: The Macmillan Com pany, 1942. pp. 6-7.

86 LEONARD E. READ will form a tree, in another manner a blade of grass, in still another manner a rose-mysteries upon mysteries! And, there are demonstrations all around him that the creative energies of men, when not interfered with, do, through space and time, con figurate, in response to hu man necessity, and aspiration, to form houses, sym phonies, foods, clothes, airplanes~things in endless pro fusion. The teachable person is likely to be aware of some wonderful cosmic force at work-a drawing, attracting, magnetic power-attending to perpetual creation. He may well conceive of himself as an agent through whom this power has the potentiality of flowing and, to the extent this occurs, to that degree does he have an op portunity to share in the processes of creation. As agent, his psychological problem is to rid himself of his own inhibitory influences-fear, superstition, anger, and the like-in order that this power may freely flow. He knows that he cannnot dictate to it, direct it, or even get re suIts by commanding, "Now I shall be inspired" or "Now I shall create a symphony" or "Now I shall dis cover a cure for the common cold" or "Now I shall in vent a way of impressing upon others how little they know." He is quite certain he must not thwart this power as it pertains to his own personal being.

Society-wise, the teachable human being, the one who conceives of himself as agent through whom this mys terious, creative power has the potentiality of flowing, concedes that what applies to him must, perforce, apply to other human beings; that this same power has the ECONOMICS FOR THE TEACHABLE 87 potentiality of flowing through them; that his existence, his livelihood, his own opportunity to serve as an agency of that power, depends on how well these others fare creatively. He realizes that he can no more dictate its flow in others than in himself. He knows only that he must not thwart it in others and that it is to his interest and theirs, and to the interest of all society, that there be no thwarting of this force in others by anyone. Leave this power alone and let it work its miracles! Creative action cannot be induced by any form of au thoritarianism, be the commands directed at oneself or at others. However, any idiot can thwart these actions in himself or in others, precisely as he can thwart the forces of creation from manifesting themselves as a tree.

He can prevent a tree from being, but he can't make it be. Coercive force can only inhibit, restrain, penalize, destroy. It cannot create! The teachable individual imposes no inhibitions, re straints, or penalties on creative actions. He leaves them free to pursue their miraculous courses. The man who knows how little he knows would like to see the removal of all destructive obstacles to the flow of creative energy and energy exchanges. But, even this, he doesn't quite know how to accomplish. He would rely mostly on an improved understanding of the Golden Rule, the Ten Commandments, and other con sistent ethical and moral principles. He hopes that more and more persons eventually will see that even their own self-interest is never served by impairing the creative actions of others, or living off them as parasites.

88 LEONARD E. READ Let Government Be Limited In summary, then, the teachable person is content to leave creative energies and their exchanges untouched; and he would rely primarily on ethical precepts and practices to keep these energy circuits free of destructive invasion. The governmental apparatus would merely assist these precepts and practices by defending the life and property of all citizens equally; by protecting all willing exchange and restraining all unwilling ex change; by suppressing and penalizing all fraud, all misrepresentation, all violence, all predatory practices; by invoking a common justice under written law; and by keeping the records incidental thereto. Very well. So far, in theory, creative energies or ac tions and their exchanges are left unhampered. Destruc tive actions are self-disciplined or, if not, are restrained by the societal agency of law and defensive force. Is that all? Does not the person who is aware of how little he knows have to know a lot of economics?

The man, mentioned previously, who "built" his own house, has about as much economic understanding as is necessary. He reflects on all the countless antecedent services which he assembled into a finished home. Orig inally, all of these items came from Nature. They were there when the Indians foraged this same territory. There was no price on them in their raw state-they were for free, so to speak. Yet, he paid-let us say $10,000 for them. What was the payment for? Well, when we slice ECONOMICS FOR THE TEACHABLE 89 through all the economic terms, he paid for the human action that necessarily had to be applied to things of the good earth. He paid for actions and energies which he himself did not possess, or possessing, did not choose to exert. Were he limited to his own energies to bring about the services antecedent to his assembly of them, he could not have built such a home in a thousand life times.

These human actions for which he paid took several forms. Generalizing, his $10,000 covered salaries and wages that had been paid for judgment, foresight, skill, initiative, enterprise, research, management, invention, physical exertion, chance discovery, know-how; interest that had been paid for self-denial or waiting; dividends that had been paid for risking; rent that had been paid for locational advantage-in short, all of the $10,000 covered payments for one or another form of human action. Literally millions of individuals had a hand in the process. The major economic problem-the root of economic hassles-reduced to its simplest terms, revolves around the question of who is going to get how much of that $10,000. How is economic justice to be determined? What part shall· go to the grower of soybeans, to the investor in a saw mill, to the man who tends the ma chine that pours nails into wooden kegs, to the inventor of the machine, to the owner of a paint plant? Who shall determine the answers?

How much economics does one have to know to settle, in one's own mind, how and by whom economic justice 90 LEONARD E. READ shall be rendered? He has to know only this: Let the payment for each individual's contribution be deter mined by what others will offer in willing exchange. That's all there is to an economy for those who know they know not. It is that simple. 1 The concept underlying such an economy-never for malized until the year 1870-is known as the marginal utility theory of value. It also goes by two other names: "the subjective theory of value" and "the free market theory of value." Testimony to its simplicity was given by Eugen von Bohm-Bawerk, one of its greatest theo reticians: And so the intellectual labor that people have to perform in estimating subjective value is not so astounding as may appear ... incidentally, even if it were a considerably greater task than it actually is, one could still confidently entrust it to "John Doe and Richard Roe." ... For centuries, long before science set up the doctrine of marginal utility, the common man was accustomed to seek things and abandon things . . .

he practiced the doctrine of marginal utility before economic theory discovered it.8 The labor theory of value held scholarly sway prior to this free market theory. It contended that value was '1 There are some who will contend that one must understand money, the medium of exchange. This, also, is an impossible re quirement. For extended comments on this point of view, see my Government: An Ideal Concept. Irvington-on-Hudson, N. Y.: The Foundation for Economic Education, Inc., 1954. pp. 80-91. 8 From pages 203-4, Vol. II, Capital and Interest by Eugen von Bohm-Bawerk, The Libertarian Press, South Holland, Ill. This volume may be the best treatise on the marginal utility theory of value extant. The 3-volume set, $25.00. Available through the Foundation for Economic Education, Inc., Irvington-on-Hudson, N. Y.

ECONOMICS FOR THE TEACHABLE 91 determined by the amount of effort expended or fatigue incurred. For example, some persons make mud pies, others mince pies. The same effort, let us assume, is ex pended, in the preparation of each. Under the labor theory of value the mud pie makers should receive the same return for their efforts as the mince pie makers. The only way to accomplish this-consumers being un willing to exchange the fruits of their labor for mud pies-is for the government to subsidize the mud pie makers by taking from the mince pie makers. Karl Marx elaborated upon and helped systematize this theory governments taking from the productive and subsidiz ing the less productive. The labor theory of value, proved over and over again to be the enemy of both justice and sound economics, nonetheless, continues to gain in popular· acceptance. Emotional reactions to effort expended and fatigue in curred do not readily give way to reason. Sentimental thoughts, such as "the poor, hard-working farmers," set the political stage for agricultural subsidies. Similarly, sympathies which emanate from such outmoded and er roneous reflections as "the down-trodden laboring man"

condition most people to accept the coercive powers allowed labor unions. Practice of the labor theory of value is rationalized by spenders, inflationists, Keynesians, egotists, on the ground that it puts purchasing power in the hands of those who will spend it. As set forth earlier, this man concocted system of forcibly controlling creative human action-interventionism, socialism, communism-pres up92 LEONARD E. READ poses all-knowing bureaucrats but, to date, not a single one has been found, not even a reasonable facsimile. The free market, on the other hand, is for the teach able, who know their own limitations, who feel no com pulsions to play God, and who put their faith in volun tary, willing exchange-a manner of human relation ships that miraculously works economic wonders for all without requiring infallibility of anyone.