Book Reviews

Nock had a genius for seeing things as they are, and Charles Hamilton, in a Nock anthology just published by the Liberty Fund of Indianapolis, has given us a fine selection of farsighted excerpts from Nock's books and essays. The title is The State of the Union: Essays in Social Criticism (340 pages, $20 cloth, $7.50 paper). The state of the Union in Nock's estimation was never very good, for there was always too much reliance on the coercion in statism. Nock believed in broad principles. Following the German sociologist Franz Oppenheimer, he insisted that there were only two means by which human beingscould satisfytheir needs and desires. One was by the economic means. This involved work, sometimes heavy digging in the ground. Naturally people tended to avoid this.It was easier to invoke the political means of letting the State do it by taxing all and subsidizing a few. The British, looking back on their own Glorious Revolution of 1688, often theorized that a pact accounted for the origin of the State. Nock said no.

Tracing back in every instance he could find, he could discover no pact. In all cases the State had come into being when a stronger group appropri ated the production of a weaker for their own transfer purposes. Nock is no evangelist; he doesn't talk about rackets. But the best to be hoped for in his thinking is to hold government to a limited racket somewhere this side of Commu nism and Fascism. Until he encountered the opinions of Ralph Adams Cram, who thought that perhaps one in 40 individuals was actually human, Nock considered that as long as there was available free land indi vidual progress was possible. He himself would settle for amenities-good food, good theater and opera, and so on. Asked when and where he would have preferred to live, he said France between 1810 and 1885. Brussels and Belgium seemed in the Twenties and Thirties to be the closest approximation of the historic France he favored. So he was always gravitating back to Brussels.

How, in a period of collectivist drift, had he formed his opinions? There is a clear line of pro gression in his autobiographical Memoirs of a Superfluous Man. He had studied Greek and Latin with his father. I find it hard to believe he picked up the Greek alphabet so easily.But there it was. Jefferson had a well-founded theory that where the State could do something for you, it could also do something to you. It was with this in mind that Nock and the Neilsons of the Swift meat-packing fortune started the Freeman as the proclaimed conservator of the idea of volun tarism. The Nation and the New Republic held 356 THE FREEMAN • SEPTEMBER 1991 the field for liberal compromise. The Freeman would not be liberal; it would be radical. It lasted four years. Nock'sidea was to hire good people and let them make their own assignments. A young editor (it must have been Suzanne LaFol lete, though Nock doesn't name her) took hold, passing along some of Nock's hints and sugges tions. Nock's main test of an article's acceptability was that it should be· coherent and written in impeccable, 24-carat prose. Lewis Mumford and Van Wyck Brooks, both socialists,were welcomed on esthetic grounds.

Nock was like a doctor who knows that nature can be counted on every time to do most of the healing. Russian General Kutusov who made such good use of space and time had the same idea. "Snoring as a Fine Art" is the title essay in a posthumously published book that takes off from the publication of Caulaincourt's memoirs of Napoleon's 1812 campaign in Russia. Kutusov knew that Napoleon could win on any battlefield by his superior tactical knowledge. So he calculat edly snored and slept whenever there was any sug gestion of a direct confrontation with the French army. When Napoleon could do nothing with his occupation of Moscow because nobody remained in town to speak to him, he could only think of going home. This was no surprise to Kutusov, nor to Nock in retrospect. Nock approved of any economy of means. He happened to be visiting in Pennsylvania among the Amish in the early New Deal period. Rex Tugwell and Henry Wallace were agitated by the supposed need to give state support to agricul ture. But the Amish knew nothing about agricul tural depression. The aim of the Amish farmer was to work his own land with the help of his children to raise enough food to feed his own family. If there was any surplus it could be sold for cash. Nock noticed that the whole Amish community was rich where other farming areas were poor.

There were things that Nock could barely stomach. He tells about a community that permit ted a man to be burned alive. The killing was a frightful crime. It could only have happened in wretched steel-making country where there was, to quote Nock, "an upper class materialized, a middle class vulgarized, a lower class brutalized." Nock can't stay with vulgarity or with brutality very long. He had been well brought up, living at first in Brooklyn on heights that overlooked low er New York, and later moving with his family to lumber country in Michigan. Here Nock's theory about what should be vouchsafed to the reader by way of biography breaks down. We don't know what Nock's father did in lower Manhattan or why he went to lumber country. We miss the con nections that took Nock to a school in Illinois that gave him some insight into the difference between educating the "educable" in the "grand old fortifying curriculum" of the classics and shunting the run-of-the-mill students into train ing for special tasks. All we know about connec tions is that Nock found Thomas Jefferson's idea of picking one out of 20 or more for special edu cable attention to be a good thing.

Amenity became the key concept of Nock in his post-Freeman days. One of the most fascinat ing sections in The State of the Union is about Nock's trip through "a little-visited European country" which, with tongue in cheek, he calls "Amenia." Amenia is "a very beautiful land," with inhabitants who are "uncommonly amiable and gracious to strangers." There is a good deal of illiteracy in Amenia, but plenty of bookstores. The Amenians, says Nock, have only the vaguest notion of "creating a market" for anything, including literature. They have not even learned the art of "sophisticating" their products. The sta ples, nonetheless, are fine. The railroads are cheap and safe. Amenia is well off for natural resources, and there is enough gold to go around, "so why not let it lie awhile" in the ground? Does Amenia lack enterprise? Nock noticed that it was short on "economism," by which he means the insistence that if you make a thing well, you must go on making it whether the demand is there or not. If it is not there, advertising pressure willcreate it.

Nock expressed the hope that the "civilized Amenia" of 10 years hence "will be as charming and captivating" as the Amenia "which I have had the good fortune to visit."We have been privileged to followNock in a grand spoof. But it is the key to his amenity-loving character. D BIONOMICS:THE INEVITABILITY OF CAPITALISM by Michael Rothschild Henry Holt and Company, 115 W. 18th Street, New York, NY 10011-1990- 423 pages- $24.95cloth Reviewedby RaymondJ. Keating I t is quite rare to discover a book that sheds new light on the workings of the economy. To actually explain the dynamics of any economic system is no easy task. In fact, most professional economists fail miserably at this endeavor. Michael Rothschild, however, has registered some success with Bionomics.In a tome-long analogy with biology and the ecosystem, he explores the processes of economic change and growth. Rothschild argues that capitalism, much like an ecosystem, is a naturally occurring phenomenon.

The capitalist system is the "way in which econom ic activityspontaneously organizes itself." Market based economics didn't spring forth from the minds of bureaucrats and lawmakers. But socialis tic systems, being conceived and guided by bureaucrats, inevitably stagnate, wither, and die. As evidenced by the ongoing changes in Eastern Europe, survival requires that the natural process of capitalism prevail in the end. Rothschild observes, "The immutable, natural forces of eco nomic evolution are too powerful to be stifled per manently." In both the ecosystem and the economic system, information and innovation are critical. Roth schild declares at the very outset: "In the biologic environment, genetic information, recorded in the DNA molecule, is the basis of all life. In the eco nomic environment, technological information, captured in books, blueprints, scientific journals, databases, and the know-how of millions of indi viduals,is the ultimate source of all economic life."

This theme is carried forward throughout the book. The incentives and opportunities presented by the capitalist system are impetuses to innovation and entrepreneurship, i.e., to "using new knowl edge to create value." Rothschild's emphasis on such creativity iswell-placed, and he issues caveats against such incentive-destroying policies as high taxes on income and profits. Innovation and entrepreneurship are, after all, the true driving forces in any economy. As Rothschild explains, "Innovative ideas become the new methods and OTHER BOOKS 357 new equipment that push back the limits of pro ductivity.A firm's efficiencyis constrained only by its technology,and its technology is limited only by its members' ability to work together as an intelli gent, creative organization." Both production and innovation have clear par allels in the biological environment. Rothschild explains the analogous production processes: "The entire global economy is comprised of work cells and organizations engaged in the interdepen dent production and exchange of products ....

Encoded information is developed or preserved in DNA or blueprints. Copies are shipped to ribo somes or assembly sites. After raw materials are prepared, components are reassembled in new configurations. In a series of finishing steps, these objects are packaged into desirable products. From protein to microprocessor, the essentials of organic and economic production are the same." As for innovation and change, the analogy con tinues: "Rapid change happens at the edge, when a group of organisms becomes isolated from its main population. And it happens when a frustrat ed inventor grows tired of being told no, goes off by himself or with a few associates, and mutates the existing technology into something absolutely astonishing." How many times has one read about such occurrences in high-tech industries for exam pIe? Rothschild gives us several examples of the innovative process that at first glance might seem mundane but turn out to be quite intriguing, including the development of the grocery store, the efficiency gains made on egg farms, as well as the death of a stultifying "corpocracy" at Walt Disney.

Bionomicsalso illustrates why central planners and mathematical economists continually fail to understand and communicate how an economy works. Rothschild points out that "[t]he punctuat ed equilibrium of unexpected, erratic change across an immense variety of technologies is terri bly frustrating for those who want to plan and con trol the economy. The intrinsic unpredictability of technological evolution makes a mockery of every effort to plan the future. Just as random events reshape the natural environment and cause genet ic mutations that set off bursts of speciation, serendipitous discoveries launch new industries." The central planner's efforts are forever destined to be barren of any success due to the natural and inherent dynamism of the economic world.

358 THE FREEMAN • SEPTEMBER 1991 The same can be said of efforts made by the mathematical economist. Rothschild observes that the mathematical models of the economy are constrained by "a given quantity of resources, a stable population, and a fixed state of technolo gy." Solutions are only derived if input and output factors remain unrealistically constant. Rothschild aptly describes the current state of the economics profession: "Unable to explain the awesome complexities of real economic life as experienced by workers and business people, where history matters and change is constant but largely unpredictable, Western economists have barricaded themselves inside their obtuse mathe matical models." Until economists throw off the shackles of mathematics and econometrics, as Rothschild makes clear, their ability to describe the workings of an economy will continue to deteriorate. This will become increasingly apparent as economic change and innovation accelerate. If they wish to remain pertinent, economists must eventually rec ognize that they cannot account for a dynamic, natural economy with static analysis. The eco nomics profession can no longer ignore human action and the processes of innovation.

In closing, Rothschild's thoughts on the dramat ic nature of today's economic changes are well worth noting: "Because we lack the benefit of hindsight, we cannot fully appreciate the magni tude of the economic restructuring we are now experiencing. But our descendants willalmost cer tainly judge the 'computer-on-a-chip' to be the most economically significant technical achieve ment of the previous 500 years. The microproces sor will rank at the very pinnacle of human inven tion because-like the printing press-it slashed the cost of encoding, copying, and communicating information. And by doing so, it has brought vast areas of previously unattainable knowledge within human grasp and has made possible a staggering array of new products. Today these products are profoundly altering the capabilities of millions of work cells in every niche of the ·global economy." This was all born of the natural process known as capitalism.

Michael Rothschild's analogies to biology, evo lution (which in this reviewer's mind serves eco nomics better than it.serves human biology), and the ecosystem are vehicles, but by no means the only vehicles, that transport economic analysis into a more intriguing and realistic realm. In the traditions of the supply-side and Austrian schools, and unlike Keynesians and socialists, Bionomics emphasizes the natural human potential to create and innovate. Such a book is required reading for those who wish to gain a better understanding of how the economy works. D Mr. Keating is New' York Director of Citizens for a Sound Economy. BUREAUCRACY:WHATGOVERNMENT AGENCIESDO AND WHY mEY DO IT by James Q. Wilson BasicBooks,10E. 53rdStreet,NewYork,NY 10022•1990 433 pages•$24.95cloth Reviewedby LawrencePerson A ll bureaucracies are not created equal. If nothing else, James Q. Wilson's massive book teaches that the ways of construct ing and running a bureaucracy are almost as numerous as bureaucrats themselves. To that end, Wilson goes into a great amount of detail about how such agencies work or, more often, fail to work, and the wealth of concrete examples he has gleaned from other sources make up the most interesting portions of the book.

To show how various bureaucracies function, Wilson divides the book into six large sections (Organizations, OperatQrs, Managers, Executives, Context, and Change) that are subdivided into chapters ("CUlture," "Turf," etc.). Thus arranged, Wilson starts at the bottom of the structure (the people working in a bureaucracy, $eir beliefs, whose interests the agency serves, the circum stances they work under, and So on) and works his way to the top (Congress, the courts, and the Pres ident). At each level he deals with the problems such agencies face in pursuing their goals. One thing Wilson stresses is that, unlike private enterprises, government agencies are not driven by goals but by constraints. Because bureaucracies aren't rewarded with profits when they do some thing right, avoiding doing something wrong (by "following the rules") becomes far more impor tant than achieving results. Thus, government agencies often work ineffi ciently at moving toward what we perceive to be their objective because the constraints of public policy almost invariably givethem not one but several statutory objectives to pursue at the same time. We may see an Army procurement official's duty as to obtain the best weapons for our troops, but that same official is also required by law to "support small [and minority-owned] businesses ... buy American-made products ... rehabilitate prisoners, provide employment for the handi capped, protect the environment, and maintain 'prevailing' wage rates."

Still another problem most bureaucrats face is that they serve many masters. Congress may desire one course of action, the President another, and the courts may decree still a third. In such an atmo sphere, it is no surprise that agency executives must not only try to sort out conflicting orders and goals, but also fight to maintain the funding, power, and autonomy of their agency. As Wilson notes, "the real work of the government executive is to curry favor and placate critics." All these problems and constraints lead to orga nizations that are manifestly inefficient compared with their privatesector counterparts. Absent any signsfrom the marketplace that its methods aren't working, a government agency might persist in pursuing an unsuccessful strategy for years. As Wilson notes, "the Ford Motor Company should not have made the Edsel, but if the government had owned Ford it would still be making Edsels."

In such an atmosphere, it isn't surprising that scandal and waste are common. Indeed, given the many constraints on their behavior, it's a wonder that bureaucracies get anything done at all. Yet Wilson cites again and again how effective leader ship and strong motivation have made certain agencies (the Forest Service, the Army Corps of Engineers, the FBI) far more effective than others. Still, innovation in this arena is rare, and Wilson observes that, for good or ill, it would be almost impossible to create such elite agencies today giv en the current set of political restraints. As for solutions to the bureaucratic morass, Wilson has two: privatize as much of the work as possible, and "deregulate the bureaucracy." The first proposal won't be new to advocates of the free market. Study after study has shown that private firms are far more efficient and cost effective at supplying goods and services than government agencies, and Wilson suggests several areas where privatization might be carried forward.

However, when it comes to those agencies that largely can't be privatized because of their very OTHER BOOKS 359 nature (armies, police forces, and so on), Wilson's suggestion that we deregulate the bureaucracy might be somewhat surprising. Yet his arguments make a great deal of sense. If we look upon these remaining government agencies as a necessary evil, then in most cases the taxpayer would be bet ter off if the agencies ran efficiently, and Wilson makes a strong case for eliminating the many rules that threaten to drown government employees in a sea of paperwork. He provides several general guidelines (eliminate all but essential restraints, judge an organization by its results, and so on) that could help make remaining government agencies more effective. Bureaucracy,as befits its subject matter, is a deep and detailed book, and one probably not suited for the reader with only a casual interest in the subject. However, those who want to know the details of how bureaucracy actually works willfind it informative and rewarding; as a practical manual on making the system work from the inside it is second only to Rector and Sanera's Steeringthe Elephant [] LawrencePersonis a writerand editorin Vienna, Virginia.

THE IDEABROKERS:THINKTANKSAND THE RISE OF THE NEW POLICYELITE by James A. Smith TheFreePress,Front&BrownStreets,Riverside,NJ08375 1991 •334 pages. $24.95cloth Reviewedby WilliamH. Peterson W illiam F. Buckley Jr. said he'd rather be governed by the first thousand names in the Boston telephone directory than by the Harvard faculty. Buckley thus echoed the thought of Woodrow Wilson, himself a former professor and president of Princeton University. Said New Jersey Governor Wilson on the cam paign trail for the U.S. Presidency in 1912: "What I fear is a government of experts." Government of, by, and seemingly for experts is what we apparently have today. In spades. In all shades of opinion, and frequently at cross purposes. Franklin D. Roosevelt had his "Brain Trust," John R Kennedy his "Best and Brightest," and Ronald Reagan his ideological warriors from the Hoover Institution on the West Coast to the Heritage Foundation on the East Coast.

360 THE FREEMAN • SEPTEMBER 1991 Indeed, in this reportorial and rather ideology free write-up of think tanks, James A. Smith comes up with the first history of expert advisers in American politics, tracing the rise of what has become a semi-autonomous class of influential officials and scholar-analysts. Take the late Arthur Burns as a case in point: Rutgers and Columbia professor of economics, president of the National Bureau of Economic Research (an early think tank still going strong), president of the American Economic Association, chairman of Eisenhower's Council of Economic Advisers, Nixon's Domestic Policy Adviser, chair man of the Federal Reserve Board, Reagan's ambassador to West Germany, and amid these var ious Republican assignments, i.e., during the Kennedy, Johnson, and Carter Administrations, a distinguished senior scholar at the Washington based American Enterprise Institutea sort of safe haven for dispossessed Republican thinker officeholders-just as the Washington-based Brookings Institution has been a safe haven for dispossessed Democratic thinker-officeholders such as Alice Rivlin and Charles Schultze. Today, notes author Smith, former program officer at the Twentieth Century Fund and history professor at Smith College, and now an adjunct faculty mem ber of the New School for Social Research, there are more than 1,200 think tanks in the United States, including around 100 in Washington, D.C., alone. In addition, there are literally thousands of universityand college-based research institutes.

These organizations aim to focus much of this brain-power on national, state, and local issues. For instance, the conservative New York-based Manhattan Institute tackles, among other things, local New York City and New York State issues. The conservative Raleigh-based John Locke Foundation mainly tackles North Carolina issues. And the liberal Washington-based Institute for Policy Studies proffers government solutions to national problems such as poverty, pollution, and the homeless, adding to the war of ideas. When all these think-tank warriors are not teaching university courses or serving on expert commissions, they function as witnesses before Congressional and state legislature committees, drafters of legislation, writers of newspaper columns, commentators on national and local tele vision,ghost-writers for political figures, and polit ical gurus and pontificators in general. Which brings us back to Wilson's fear of a gov ernment of experts. For with all this brain-power, how come America is so mired in a wide range of long-term problems such as pyramiding national debt, rising teenage pregnancy, and skyrocketing crime rates? Think-tank erudition is impressive, but does it add up to wisdom and vision?

For, in the final analysis, aren't premises piv otal? James A. Smith recalls, for example, the eru dition of Richard T. Ely, an economist at Johns Hopkins University and a founder of the Ameri can Economic Association. In a draft prospectus for the AEA, Dr. Ely wrote circa 1884:"We report the State as an educational and ethical agency whose positive aid is an indispensable condition of human progress." Laissez faire is, he continued, "an inadequate explanation of the relation be tween the State and its citizens." Once again, we find, ideas have consequences. D Dr. Peterson,formerspeech-writerfor RichardNixon and senioreconomicadviserto the U.S. CommerceDepartment, is an adjunctscholarat the HeritageFoundationand the Lundy Professorof BusinessPhilosophyat CampbellUni versityin BuiesCreek, North Carolina.