If you’re under 50 you probably don’t remember when telephone “numbers” weren’t all numbers. From the 1920s until the mid-1960s most phone “numbers” began with two letters corresponding to certain digits on a common telephone dial. KL7-1234, for example, was read as “Klondike 7-1234.”

My family’s number was TI3-8597. The letters were meant to honor a man I never knew of or appreciated until long after the switch to all digits—Samuel J. Tilden. He deserves to be much better remembered as something other than part of a defunct phone number. A strong case can be made that he was, as the subtitle of a recent book by screenwriter Nikki Oldaker suggests, “The Real 19th President.”

Tilden was born nearly two centuries ago on February 9, 1814, in New Lebanon, New York. After studies at Yale and New York University, he became a successful lawyer, a shrewd investor, a wealthy man, and a promising politician in the Democratic Party. A crusader against the corruption of the infamous Tammany Hall political machine in New York City, Tilden was catapulted from the New York state assembly to the governorship in 1874. From that perch he quickly earned a national following and gained the Democratic Party’s nomination for president in 1876.

No Democrat had occupied the White House since James Buchanan passed the office to Abraham Lincoln in 1861. Fifteen years later the country was ready for a change. Tilden comfortably beat Ohio Republican Rutherford B. Hayes in the popular vote, 51 to 47.9 percent, but a nasty political battle resulted in a dubious deal. Behind closed doors Hayes was awarded enough disputed votes in the Electoral College to edge Tilden there by one vote. In exchange the Republicans agreed to withdraw federal troops from the South and end Reconstruction. Tilden remains one of only four presidential candidates in U.S. history to win the popular vote but lose the Electoral tally—the others being Andrew Jackson (1824), Grover Cleveland (1888), and Al Gore (2000).

Tilden was known for assessing policy options according to right and wrong versus the typical political (and Machiavellian) rule of what can get you elected and reelected. “Successful wrong never appears so triumphant as on the very eve of its fall,” he once said. “We must believe in the right and in the future. A great and noble nation will not sever its political from its moral life.”

Hayes turned out to be a clean and decent one-term president, but Tilden just might have shined as one of our best. I’ve come to admire him because he was rigorously committed to all the right things: limited government, sound money, free trade, and low taxes—which is to say that he’d have a hard time getting to first base today, particularly within his own party. Most 21st-century libertarians would be very comfortable with the 1876 Democratic Party platform on which Tilden ran.

Money. The big money questions of the 1870s were 1) what to do with the hundreds of millions of paper dollars (“greenbacks”) issued during the Civil War; and 2) whether to subsidize and re-monetize silver as a means of inflating the currency. Tilden and the Democrats were the country’s leading advocates of fulfilling the original promise to redeem greenbacks in gold and in opposing subsidies for silver. As advocates of sound money they had no interest in monetary expansion to goose the economy and help debtors because they believed it was fundamentally dishonest.

“Reform is necessary,” asserted the Tilden platform, “to establish a sound currency, restore the public credit, and maintain the national honor. We denounce the failure for all these eleven years of peace to make good the promise of the legal tender notes (the greenbacks), which are a changing standard of value in the hands of the people, and the non-payment of which is a disregard of the plighted faith of the nation.” Taking direct aim at the Republicans, it went on to declare: “We denounce the financial imbecility and immorality of that party which . . . has made no advance towards resumption—no preparation for resumption—but instead has obstructed resumption by wasting our resources and exhausting all our surplus income.”

Tariffs: Taxes on imported goods were the primary source of federal revenue for most of the nineteenth century. Since Lincoln, the Republican Party stood for high tariffs not just for the revenue but also for the “protection” of domestic industries. The free-trade Democrats saw protectionism for what it really is: an attack on consumers for the benefit of producers with political connections. The Tilden platform’s critique of it is as relevant today as it was in 1876:

We denounce the present tariff, levied upon nearly four thousand articles, as a masterpiece of injustice, inequality, and false pretence. It yields a dwindling, not a yearly rising, revenue. It has impoverished many industries to subsidize a few. It prohibits imports that might purchase the products of American labor. It has degraded American commerce from the first to an inferior rank on the high seas. It has cut down the sales of American manufactures at home and abroad, and depleted the returns of American agriculture—an industry followed by half our people. It costs the people five times more than it produces to the treasury, obstructs the processes of production, and wastes the fruits of labor. It promotes fraud, fosters smuggling, enriches dishonest officials, and bankrupts honest merchants. We demand that all custom-house taxation shall be only for revenue.

Government spending: Virtual one-party (Republican) dominance since 1865 had produced huge increases in federal expenditures, largely for pork-barrel projects. Tilden denounced the spending explosion, and his people inserted strong language against it in the 1876 platform: “Since the peace, the people have paid to their tax-gatherers more than thrice the sum of the national debt, and more than twice that sum for the federal government alone. We demand a rigorous frugality in every department, and from every officer of the government.” The Tilden Democrats were squarely in the tradition of their Jefferson-Jackson forebears and light-years apart from their Democratic descendants of today. It was a tradition that would continue through the last great Democratic president, Grover Cleveland, only to be thoroughly forsaken by the next (and arguably the worst) Democratic president, Woodrow Wilson.

On many other vital issues of the day Tilden and the Democrats staked out the moral high ground. They opposed an imperialistic foreign policy and favored Civil Service reform to minimize political patronage and corruption. Because they respected the rights and sovereignty of free individuals, they fought against sumptuary laws to regulate personal behavior. They denounced the use of government power to advantage one group over another. And they pushed to treat the southern states once again as equal partners in the Union.

Today dozens of streets, townships, libraries, and schools from Wichita Falls, Texas, to Washington, D.C., bear the Tilden name. A statue of him and his home, both in New York City, still stand. But otherwise, sadly, the memory of this man who stood for liberty and should have been president is fading as surely as my old phone number.

Foundation for Economic Education, październik 2011

“Gym Now Stresses Cooperation, Not Competition,” blared a headline in the New York Times a decade ago. The story was about an elementary school where “confrontational” games, team sports, and elimination rounds were changed or scrapped so that differences between students’ athletic abilities would be minimized.

Perhaps this is fine for grade-school gym class, but it would make for rather boring Olympic games. And were it imposed on production and trade, it would condemn millions to poverty and early death. Let’s review some fundamental principles.

In economics competition is not the antithesis of cooperation; rather, it is one of its highest and most beneficial forms. That may seem counterintuitive. Doesn’t competition necessitate rivalrous or even “dog-eat-dog” behavior? Don’t some competitors lose?

In my view, competition in the marketplace means nothing less than striving for excellence in the service of others for self-benefit. In other words, sellers cooperate with consumers by catering to their needs and preferences.

Many people think that competition is directly related to the number of sellers in a market: The more sellers there are, or the smaller the share of the market any one of them has, the more competitive the market. But competition can be just as fierce between two or three rivals as it can be among 10 or 20.

Moreover, market share is a slippery notion. Almost any market can be defined narrowly enough to make someone look like a monopolist instead of a competitor. I have a 100 percent share of the market for articles by Lawrence Reed, for example. I have a far smaller share of the market for articles generally.

Not so long ago, XM and Sirius were the only two satellite-radio providers in the United States. For a year and a half the federal government prevented the two from merging, fearing that a harmful monopoly would result. Economists argued that XM and Sirius were competing not only with each other but as two of many companies in a huge media marketplace that includes free radio, iPods and other MP3 players, Internet radio stations, cable radio services, and even cell phones—all of which, along with likely new technologies, would continue to compete even after the merger. Ultimately, economic reasoning prevailed and the merger was allowed.

Governments don’t have to decree competition; all they have to do is prevent and punish force, violence, deception, and breach of contract. Enterprising individuals will compete because it is in their financial interest to do so, even if they’d prefer not to.

Competition spurs creativity and innovation and prods producers to cut costs. You wouldn’t think of stopping a horse race in the middle and complaining that one of the horses was ahead. The same should be true of free markets, where the race never ends and competitors enter and leave continuously.

Theoretically, there are two kinds of monopoly: coercive and efficiency. A coercive monopoly results from a government grant of exclusive privilege. Government, in effect, must take sides in the market to give birth to a coercive monopoly. It must make it difficult, costly, or impossible for anyone but the favored firm to do business. The U.S. Postal Service is an example. By law no one else can deliver first-class mail.

In other cases the government may not ban competition outright but simply bestow privileges, immunities, or subsidies on one or more firms while imposing costly requirements on all others. Regardless of the method, a firm that enjoys a coercive monopoly is in a position to harm consumers and get away with it.

An efficiency monopoly, by contrast, earns a high share of a market because it does the best job. It receives no special favors from the law. Others are free to compete and, if consumers so will it, to grow as big as the “monopoly.” Indeed, an efficiency monopoly is not much of a monopoly at all in the traditional sense. It doesn’t restrict output, raise prices, and stifle innovation; it actually sells more and more by pleasing customers and attracting new ones while improving both product and service.

An efficiency monopoly has no legal power to compel people to deal with it or to protect itself from the consequences of its unethical practices. An efficiency monopoly that turns its back on the very performance which produced its success would be, in effect, posting a sign that reads, “COMPETITORS WANTED.”

Antitrust Law

Where does antitrust law come into all this? From its very inception in 1890, antitrust has been plagued by vagaries, false premises, and a stagnant conception of dynamic markets.

The Sherman Antitrust Act of 1890 put the government on record as officially favoring competition and opposing monopoly without ever coming close to any solid definition of either term. It simply made it a criminal offense to “monopolize” or “attempt to monopolize” a market without ever saying what kind of actions qualified.

The first lawsuit the government filed ended disastrously for the Justice Department: The Supreme Court ruled in 1895 that the American Sugar Refining Company was not guilty of becoming a monopolist when it merged with the E. C. Knight Company. The evidence suggested that the merged companies would have made for a very strange monopoly indeed—one that substantially increased output and greatly cut prices to consumers.

In The Antitrust Religion (Cato, 2007), Edwin S. Rockefeller explains how the self-serving legal community invented sinister-sounding terms for quite natural phenomena and at the same time enjoys a feeling of self-righteousness in “protecting” the public from those evils. Such terms include “reciprocity” (“I won’t buy from you unless you buy from me”); “exclusive dealing” (“I won’t sell to you if you buy from anyone else”); and “bundling” (“Even though you only want Chapter One, you have to buy the whole book.”) Another work I strongly recommend on this subject is a classic by economist D. T. Armentano, The Myths of Antitrust.

In a free market unencumbered by anticompetitive intrusions from government, these factors ensure that no firm in the long run, regardless of size, can charge and get any price it wants:

Free entry of newcomers to the field, whether they be two guys in their garage or a giant firm that sees an opportunity to expand into a new product line.

• Foreign competition. As long as government doesn’t hamper international trade, this is always a potent force.
• Competition of substitutes. People are often able to substitute a product different from yet similar to the monopolist’s.
• Competition of all goods for the consumer’s dollar. Every business competes with every other business for consumers’ limited dollars.

Bottom line: Consider competition in a free market not as a static phenomenon but rather as a dynamic, never-ending leapfrog process in which the leader today can be the follower tomorrow.

“Gym Now Stresses Cooperation, Not Competition,” blared a headline in the New York Times a decade ago. The story was about an elementary school where “confrontational” games, team sports, and elimination rounds were changed or scrapped so that differences between students’ athletic abilities would be minimized.

Perhaps this is fine for grade-school gym class, but it would make for rather boring Olympic games. And were it imposed on production and trade, it would condemn millions to poverty and early death. Let’s review some fundamental principles.

In economics competition is not the antithesis of cooperation; rather, it is one of its highest and most beneficial forms. That may seem counterintuitive. Doesn’t competition necessitate rivalrous or even “dog-eat-dog” behavior? Don’t some competitors lose?

In my view, competition in the marketplace means nothing less than striving for excellence in the service of others for self-benefit. In other words, sellers cooperate with consumers by catering to their needs and preferences.

Many people think that competition is directly related to the number of sellers in a market: The more sellers there are, or the smaller the share of the market any one of them has, the more competitive the market. But competition can be just as fierce between two or three rivals as it can be among 10 or 20.

Moreover, market share is a slippery notion. Almost any market can be defined narrowly enough to make someone look like a monopolist instead of a competitor. I have a 100 percent share of the market for articles by Lawrence Reed, for example. I have a far smaller share of the market for articles generally.

Not so long ago, XM and Sirius were the only two satellite-radio providers in the United States. For a year and a half the federal government prevented the two from merging, fearing that a harmful monopoly would result. Economists argued that XM and Sirius were competing not only with each other but as two of many companies in a huge media marketplace that includes free radio, iPods and other MP3 players, Internet radio stations, cable radio services, and even cell phones—all of which, along with likely new technologies, would continue to compete even after the merger. Ultimately, economic reasoning prevailed and the merger was allowed.

Governments don’t have to decree competition; all they have to do is prevent and punish force, violence, deception, and breach of contract. Enterprising individuals will compete because it is in their financial interest to do so, even if they’d prefer not to.

Competition spurs creativity and innovation and prods producers to cut costs. You wouldn’t think of stopping a horse race in the middle and complaining that one of the horses was ahead. The same should be true of free markets, where the race never ends and competitors enter and leave continuously.

Theoretically, there are two kinds of monopoly: coercive and efficiency. A coercive monopoly results from a government grant of exclusive privilege. Government, in effect, must take sides in the market to give birth to a coercive monopoly. It must make it difficult, costly, or impossible for anyone but the favored firm to do business. The U.S. Postal Service is an example. By law no one else can deliver first-class mail.

In other cases the government may not ban competition outright but simply bestow privileges, immunities, or subsidies on one or more firms while imposing costly requirements on all others. Regardless of the method, a firm that enjoys a coercive monopoly is in a position to harm consumers and get away with it.

An efficiency monopoly, by contrast, earns a high share of a market because it does the best job. It receives no special favors from the law. Others are free to compete and, if consumers so will it, to grow as big as the “monopoly.” Indeed, an efficiency monopoly is not much of a monopoly at all in the traditional sense. It doesn’t restrict output, raise prices, and stifle innovation; it actually sells more and more by pleasing customers and attracting new ones while improving both product and service.

An efficiency monopoly has no legal power to compel people to deal with it or to protect itself from the consequences of its unethical practices. An efficiency monopoly that turns its back on the very performance which produced its success would be, in effect, posting a sign that reads, “COMPETITORS WANTED.”

Antitrust Law

Where does antitrust law come into all this? From its very inception in 1890, antitrust has been plagued by vagaries, false premises, and a stagnant conception of dynamic markets.

The Sherman Antitrust Act of 1890 put the government on record as officially favoring competition and opposing monopoly without ever coming close to any solid definition of either term. It simply made it a criminal offense to “monopolize” or “attempt to monopolize” a market without ever saying what kind of actions qualified.

The first lawsuit the government filed ended disastrously for the Justice Department: The Supreme Court ruled in 1895 that the American Sugar Refining Company was not guilty of becoming a monopolist when it merged with the E. C. Knight Company. The evidence suggested that the merged companies would have made for a very strange monopoly indeed—one that substantially increased output and greatly cut prices to consumers.

In The Antitrust Religion (Cato, 2007), Edwin S. Rockefeller explains how the self-serving legal community invented sinister-sounding terms for quite natural phenomena and at the same time enjoys a feeling of self-righteousness in “protecting” the public from those evils. Such terms include “reciprocity” (“I won’t buy from you unless you buy from me”); “exclusive dealing” (“I won’t sell to you if you buy from anyone else”); and “bundling” (“Even though you only want Chapter One, you have to buy the whole book.”) Another work I strongly recommend on this subject is a classic by economist D. T. Armentano, The Myths of Antitrust.

In a free market unencumbered by anticompetitive intrusions from government, these factors ensure that no firm in the long run, regardless of size, can charge and get any price it wants:

• Free entry of newcomers to the field, whether they be two guys in their garage or a giant firm that sees an opportunity to expand into a new product line.

• Foreign competition. As long as government doesn’t hamper international trade, this is always a potent force.

• Competition of substitutes. People are often able to substitute a product different from yet similar to the monopolist’s.

• Competition of all goods for the consumer’s dollar. Every business competes with every other business for consumers’ limited dollars.

Bottom line: Consider competition in a free market not as a static phenomenon but rather as a dynamic, never-ending leapfrog process in which the leader today can be the follower tomorrow.

Here we go again.

In late February gasoline prices across America were surpassing $3 a gallon. Forecasters are advising us to expect $4 by summer, maybe higher. So be prepared for something else with it all: the broken-record rhetoric of anti-market types about “gouging.” It’ll be coming from a lot of the same people who block the drilling for oil just about anywhere and who think it’s always better to be gouged by the taxman to subsidize noneconomic “green energy” than to pay a price for gasoline that might reflect real market conditions.

Economist Thomas Sowell, speaking of big-government “liberals,” put it well when he said that asking them where wages and prices come from is “like asking six-year-olds where babies come from.” You’ll certainly never hear them admit that even at $4 a gallon, gasoline is cheaper today (in inflation-adjusted terms) than it was when President Reagan decontrolled oil 30 years ago.

If you’re expecting me to offer the economic argument for government to get out and stay out of energy markets, you’ll have to wait. There’s a moral argument that takes precedence.

Suppose someone offers to buy my house for twice what I paid for it a year ago and I refuse. It’s my house, and I really don’t want to move, but I announce that if someone wants to give me ten times what I paid, I’ll take it.

Am I “gouging” somebody? Most people would say no, but they would be hard put to explain what the difference is between my action and that of those unpopular villains who produce and sell gasoline.

It’s true that my house is private property, but so is gasoline. When it’s in the underground tank at the gas station, it’s the private property of that station until somebody else buys it. It’s not public property. It certainly doesn’t belong to people who never took a risk and invested a nickel in it—and that includes all the bellyaching demagogues who will try to further their careers by bashing wealth-creators.

If it’s wrong to sell gas at $3 or $4 a gallon, what if the owner of a gas station decided not to sell it at any price? Wouldn’t that be even more wrong? Only if one distorts the concept of private property to mean that it’s really not yours if somebody else wants it.

There are plenty of people in the world who will scoff at any defense of oil companies or gas-station owners on the basis of the “antiquated” notion of property rights. But of course those same scoffers will defend their own property without hesitation; it’s only other people’s property about which they can afford to be cavalier.

So if it’s not yours, don’t claim it. If it doesn’t belong to the politicians, don’t demand that they jigger its price. This is a moral issue; people of moral fiber should rise to the occasion and resist the temptation to steal.

Stockpiling and “Gouging”

Now a little economics, rooted in experiences of a decade ago. When news spread on September 11, 2001, of the terrorist attacks in New York and Washington, many people panicked. Not knowing whether this was the start of something much bigger, they did what seemed to make sense given the extraordinary situation—they began to “stockpile” gasoline because a world crisis could easily disrupt fuel supplies. Long lines formed at gas stations all over the nation by mid-afternoon. Demand, in other words, soared. Just like Econ 101 was supposed to teach us, prices rose.

If the crisis had indeed slashed world fuel supplies, then the initial reaction of the public would have been both smart and prescient. Buying more would have pushed up prices. As prices rose they would have encouraged people to restrict their use of gas to their most important purposes, leaving more for others.

And the higher prices would have sent a powerful signal for somebody to find new supplies quickly. This is the way a free price system works—in gasoline, coffee, or anything else.

It became apparent within a day or two that the events in New York and Washington had not produced disruptions in the flow of oil or in the production of gasoline. Then the market effectively worked its magic. People shopped elsewhere or found ways to do with less while prices were high. Folks eventually calmed down, and the lines at the gas stations evaporated. Suppliers rounded up more supplies. Prices fell. The upward spike set into motion the market forces that solved the “problem.”

Saber-Rattling and Bad Laws

Nonetheless, politicians ignorant of marketplace economics rattled their sabers and piled bad law on top of previous bad law. State officials cried foul and threatened “price gougers” with prosecution.

Ohio’s attorney general went after 27 retailers that charged $4 or more, decrying the price hikes as “unconscionable acts.” He forced the culprits to give refunds to customers and make donations to the American Red Cross or face fines of up to $25,000 per violation.

Any stations in Wisconsin that simply changed prices more than once in a 24-hour period were threatened with fines of up to $200 for each customer they “overcharged.”

In Florida, authorities declared that stations which raised prices by more than a dime a gallon were in violation of the Sunshine State’s emergency rules and could face penalties of $25,000 per day. Two weeks after the terrorist attacks, Missouri’s attorney general sent letters to 48 gasoline retailers telling them that if they had boosted prices for any grade of gas above $2.49 after September 11, they would have to pay fines of “triple any gas-gouging profits, or $750, whichever was greater, plus investigative costs of $250.”

My home was in Midland, Michigan, at the time. A woman there named Sonja Sturgeon managed Bobbie’s Point Citgo, a gas station targeted by the state’s attorney general for gouging. Sturgeon readily admitted to the local paper that the store boosted prices to $3 at about 8:30 p.m. on September 11 because she wasn’t expecting a new supply until later in the week. “The whole point of raising the prices was to send customers down the road to buy gas,” she said. “It had nothing to do with gouging the customers.”

Perhaps the attorney general would have advised Bobbie’s Point Citgo to behave as though nothing had changed in the wake of September 11. Keep prices the same or raise them no more than 10 percent. Would that have done anyone a favor? Surely, the lines would have been many blocks longer, and station after station would have run out, leaving people at the back of many lines without any hope of getting a drop.

Let’s see, which is better? Gas at $3 after a 15-minute wait, or no gas at $2 after sitting in line for an hour? This is not rocket science.

Brace yourself for another round of gasoline price hysteria. It’s going to be déjà vu all over again.

Owing to where most Americans trace their ancestry from, we tend to know more European history than the history of our immediate neighbors to the north and south, Canada and Mexico. We can name famous entrepreneurs and political leaders from across the sea but rarely one from right next door.

Last May in a casual dinner conversation with Canadian libertarians in Vancouver, I named the better presidents and prime ministers, respectively, of the United States and Great Britain. It suddenly occurred to me that I couldn’t name a single Canadian counterpart.

So I asked my dinner friends, “Among Canada’s political leaders, did you ever have a Grover Cleveland or a William Ewert Gladstone, a prime minister who believed in liberty and defended it?”

One name emerged, almost in unison: Sir Wilfrid Laurier. Embarrassed by my ignorance, I had to admit I had never heard of him. Never mind that he’s the guy with the bushy hair on the Canadian five-dollar bill; I just never noticed. Now that I’ve done a little research, I’m a fan.

Laurier’s political resume is impressive: fourth-longest-serving prime minister in Canada’s history (1896–1911, the longest unbroken term of office of all 22 PMs). Forty-five years in the House of Commons, an all-time record. Longest-serving leader of any Canadian political party (almost 32 years). Across Canada to this day, he is widely regarded as one of the country’s greatest statesmen.

It’s not his tenure in government that makes Laurier an admirable figure. It’s what he stood for while he was there. He really meant it when he declared, “Canada is free and freedom is its nationality” and “Nothing will prevent me from continuing my task of preserving at all cost our civil liberty.”

A new think tank in Ottawa honors Laurier and another Canadian PM, John MacDonald, in its name: the MacDonald-Laurier Institute. Founders Brian Crowley, Jason Clemens, and Niels Veldhuis have authored a new book, The Canadian Century: Moving Out of America’s Shadow, in which they explain the political principles and institutions the great Laurier stood for: limited government, light taxes, fiscal discipline, free trade, private property, and the rule of law.

At a time when others in the British Commonwealth had begun to emulate the welfare-state policies of Bismarckian Germany, Laurier had a better idea. Crowley, Clemens, and Veldhuis write:

Laurier’s objection to such schemes, like that of his Liberal colleagues, was one of principle: when people were expected to take responsibility for themselves and their famil[ies], they made better provision for their needs and directed their productive efforts where they would do the country and themselves the greatest good. When this natural necessity to strive was diluted by an easy access to the public purse, the ever-present danger was of the enervation of the individual and the stagnation of the progress of society. “If you remove the incentives of ambition and emulation from public enterprises”—by which he meant the economic undertakings of individuals and businesses, not state enterprises—Laurier said on the subject in 1907, “you suppress progress, you condemn the community to stagnation and immobility.”

Born in Quebec in 1841, Laurier rose in popularity in spite of his expressed belief in the separation of church and state. The province’s Roman Catholic bishops urged voters to steer clear of him but he built a firm base of local support. The people appreciated his solid character and his desire for goodwill and conciliation among the disparate cultures of Canada. As prime minister he worked to keep the country together by keeping the central government small. Toleration and decentralized federalism became hallmarks of his long legacy in politics.

Relying on Markets

To help Canadians compete with the colossus to the south, Laurier hoped the country would rely on private enterprise and open markets. A key ingredient, he believed, would have to be a lower cost of government and a lower tax burden in Canada than in the United States. He made it clear, in the words of Crowley, Clemens, and Veldhuis, “that people who came to Canada from south of the border or beyond the seas would find in the Dominion a society of free men and women where everyone was expected to work hard, and where, if they did so, they would keep more of the fruits of their labours than anywhere else, including the United States of America.”

Laurier never achieved the degree of free trade his conscience supported, but against powerful opposition he pushed Canada away from high protectionist tariffs. He wanted lower duties aimed more to raise revenue than to favor certain industries or regions at the expense of others. He made progress on some other fronts as well. He proposed balanced budgets as a way to keep Canada’s debt low and manageable. His policies opened the door for an explosion of immigration. Half a million hard-working immigrants rushed to Canada during his tenure, building a strong economy and a melting pot of countless cultures in the process.

Laurier’s record was not perfect from a libertarian perspective. For example, he supported subsidies to transcontinental railroads, a major departure from his otherwise pro-enterprise, limited-government philosophy. But as twentieth-century Canadian prime ministers go, he clearly stands apart and above. My friends in Vancouver don’t believe any PM since Laurier did as much for liberty as he did.

I now keep a Canadian five-dollar bill in my wallet just for those occasions when I meet a Canadian and the conversation turns to politics. We will lament the caliber of more recent politicians on both sides of the border but at least I can now point to Laurier’s picture and say, “We can do better, and indeed, you have.”

Good economists are seldom popular with the political class. This is not unique to democratic systems; dictators like good economists even less.

Why?

As a rule, politics doesn’t educate. It obfuscates, pontificates, and prevaricates. It often seeks to advance the interests of the few at the expense of the many. It is a playground for the shortsighted and the demagogic. Economics, on the other hand, tells us a great deal about how material life can be improved through the operation of entrepreneurship and markets. It informs us that there are laws beyond those that legislatures pass, and consequences for ignoring them.

The good economist takes the discussion of economic matters to the lofty level it deserves. While others spout clever sound bites, unsubstantiated charges, and snake-oil remedies, the good economist raises his hand and calmly declares, “Wait a minute! Let’s look at the facts. Let’s separate the wheat (truth, logic, and evidence) from the chaff (nonsense, false assumptions, and panaceas).”

Last summer at the FreedomFest conference in Las Vegas I witnessed a remarkable debate on the question, “Wal-mart: Good or Bad for America?” The debaters were Al Norman, described as the “guru of the anti-Wal-Mart movement,” and Richard Vedder, Ohio University economist and coauthor with Wendell Cox of the 2007 book, The Wal-Mart Revolution: How Big Box Stores Benefit Consumers, Workers, and the Economy. The clash between Norman and Vedder couldn’t have typified better the difference between good and bad economics. Norman is no economist, but he’d be a bad one if he were. His arguments against Walmart were just as specious and superficial as those of New York Times columnist and Nobel laureate Paul Krugman, who does have the audacity to call himself an economist.

Krugman on numerous occasions has poured his vitriol on the retail giant, whom he charges with waging a “war on wages.” His diatribes were often cited a couple of years ago when the anti-Walmart drumbeat reached a fever pitch in Washington and in political campaigns around the country.

Big Box of Polarization

The Norman/Krugman critique of Walmart is little more than an anti-capitalist rant against a company that pays no more than it has to in order to attract the workers it needs and sells its wares at prices others sometimes find it difficult to compete with. Not surprisingly, demagogic politicians have used their arguments in a populist crusade for government to “do something” about Walmart.

Perhaps it was inevitable that the one company virtually all of us have patronized would become a political football. Any firm that makes its way to the top spot on the Fortune 500 list, as Walmart did for the first time in 2002, is bound to attract attention and polarize people, getting praise and admiration from some and envy and hostility from others. More than a few people have come to assume that bigness in business automatically implies a woeful trail of victims; some of those folks then make a nice career out of convincing the victims to accept their help. All too often emotion drives the debate at least as much as information does.

As an occasional patron of big-box retail stores like Walmart, I could never quite relate to many of the routine attacks on them. On each visit I park in an ample parking lot. I’m greeted by employees who smile, say hello, ask to help if I seem to need assistance, and thank me as I walk out the door. If I’m unhappy with price or service (I can’t remember the last time I was), I know I can get a quick refund and shop elsewhere. My search costs as a consumer are usually lowered by buying there, and it seems my wallet benefits as well—no doubt because competition makes big-box retailers pass on their natural economies of scale in the form of lower prices.

The sheer volume of Walmart’s trade alone suggests that far more people vote for Walmart with their dollars than for president or Congress. I could choose to work for Walmart myself but I don’t; if I did accept an offer to work for the company, I could quit at the drop of a hat if I felt exploited.

Even as an economist, I still learned much that I didn’t know from a 2007 book by Michael J. Hicks, The Local Economic Impact of Wal-Mart. I authored the book’s foreword, from which I’ve drawn heavily for this column. Hicks shows that Walmart’s influence on labor markets is surely less than most would expect, in part because it employs less than 1 percent of the U.S. workforce. The company receives comparatively little in the way of subsidies in spite of the misguided generosity of state and local governments that try to pick winners and losers in the marketplace.

The anti-Walmart campaigns of today are eerily reminiscent of the Luddite crusades against chain stores seven decades ago—proof of the old adage that the more things change, the more they remain the same. The 1975 law against resale-price-maintenance agreements probably gave a huge, unintended boost to big-box retailers at the same time it hurt smaller, more traditional stores. And it’s quite likely that other big-box retailers have more to fear from an efficient, aggressively competitive Walmart than do locally owned mom-and-pop shops.

But as Hicks himself explains, economics is less about a particular firm than it is about the markets in which it operates and the market forces that both propel and discipline the behavior of all firms.

Good economists know all this. Bad ones advise politicians to save us from a company millions of Americans endorse every day with their hard-earned dollars.

Corporations: Dropping Like Flies

Corporate mortality in free (or relatively free) markets is markedly high. The average person lives longer than most companies do. Competition, after all, is a dynamic, ongoing, leapfrog process whereby today’s leader can become tomorrow’s follower, or even disappear altogether. Size is hardly a guarantee of permanence. Indeed, the vast majority of the firms on the Fortune 500 list 40 years ago are no longer with us. It should be sobering to even Walmart’s most severe critics that not even their behemoth nemesis can safely behave as though markets don’t matter.

So while the Normans and the Krugmans and their political friends deliver their jeremiads, the rest of us happily choose to buy—or choose not to buy—from the object of their wrath. If justice prevails, Walmart’s fate will hinge on keeping its workers and customers happy, not its critics.

Nothing clarifies and informs quite like facts—backed up with solid evidence, emotion-free analysis, and sound, logical reasoning. That’s why bad economists are generally more popular in government than good ones.

Harry Truman once said, “The only thing new in the world is the history you don’t know.” That observation applies especially well to what tens of millions of Americans have been taught about Franklin Delano Roosevelt, the man under whom Truman served as vice president for about a month. Recent scholarship (including a highly acclaimed book, New Deal or Raw Deal, by FEE senior historian Burton Folsom) is thankfully disabusing Americans of the once-popular myth that FDR saved us from the Great Depression.

Another example is a 2004 article by two UCLA economists—Harold L. Cole and Lee E. Ohanian—in the important mainstream Journal of Political Economy. They observed that Franklin Roosevelt extended the Great Depression by seven long years. “The economy was poised for a beautiful recovery,” the authors show, “but that recovery was stalled by these misguided policies.”

In a commentary on Cole and Ohanian’s research, Loyola University economist Thomas DiLorenzo pointed out that six years after FDR took office, unemployment was almost six times the pre-Depression level. Per capita GDP, personal consumption expenditures, and net private investment were all lower in 1939 than they were in 1929.

“The fact that it has taken ‘mainstream’ neoclassical economists so long to recognize [that FDR’s policies exacerbated the disaster],” notes DiLorenzo, “is truly astounding,” but still “better late than never.”

Part of the Great FDR Myth is the notion that he won the presidency in 1932 with a mandate for central planning. My own essay on this period (“Great Myths of the Great Depression”) argued otherwise, based on the very platform and promises on which FDR ran. But until a few months ago I was unaware of a long-forgotten book that makes the case as well as any.

Hell Bent for Election was written by James P. Warburg, a banker who witnessed the 1932 election and the first two years of Roosevelt’s first term from the inside. Warburg, the son of prominent financier and Federal Reserve cofounder Paul Warburg, was no less than a high-level financial adviser to FDR himself.  Disillusioned with the President, he left the administration in 1934 and wrote his book a year later.

Warburg voted for the man who said this on March 2, 1930, as governor of New York:

The doctrine of regulation and legislation by “master minds,” in whose judgment and will all the people may gladly and quietly acquiesce, has been too glaringly apparent at Washington during these last ten years. Were it possible to find “master minds” so unselfish, so willing to decide unhesitatingly against their own personal interests or private prejudices, men almost godlike in their ability to hold the scales of justice with an even hand, such a government might be to the interests of the country; but there are none such on our political horizon, and we cannot expect a complete reversal of all the teachings of history.

What Warburg and the country actually elected in 1932 was a man whose subsequent performance looks little like the platform and promises on which he ran and a lot like those of that year’s Socialist Party candidate, Norman Thomas.

Who campaigned for a “drastic” reduction of 25 percent in federal spending, a balanced federal budget, a rollback of government intrusion into agriculture, and restoration of a sound gold currency? Roosevelt did. Who called the administration of incumbent Herbert Hoover “the greatest spending administration in peace time in all our history” and assailed it for raising taxes and tariffs? Roosevelt did. FDR’s running mate, John Nance Garner, even declared that Hoover “was leading the country down the road to socialism.”

Copying Hoover and the Socialists

It was socialist Norman Thomas, not Franklin Roosevelt, who proposed massive increases in federal spending and deficits and sweeping interventions into the private economy—and he barely mustered 2 percent of the vote. When the dust settled, Warburg shows, we got what Thomas promised, more of what Hoover had been lambasted for, and almost nothing that FDR himself had pledged. FDR employed more “master minds” to plan the economy than perhaps all previous presidents combined.

After detailing the promises and the duplicity, Warburg offered this assessment of the man who betrayed him and the country:

Much as I dislike to say so, it is my honest conviction that Mr. Roosevelt has utterly lost his sense of proportion. He sees himself as the one man who can save the country, as the one man who can “save capitalism from itself,” as the one man who knows what is good for us and what is not. He sees himself as indispensable. And when a man thinks of himself as being indispensable . . . that man is headed for trouble.

Was FDR an economic wizard? Warburg reveals nothing of the sort, observing that FDR was “undeniably and shockingly superficial about anything that relates to finance.” He was driven not by logic, facts, or humility but by “his emotional desires, predilections, and prejudices.”

“Mr. Roosevelt,” wrote Warburg, “gives me the impression that he can really believe what he wants to believe, really think what he wants to think, and really remember what he wants to remember, to a greater extent than anyone I have ever known.” Less charitable observers might diagnose the problem as “delusions of grandeur.”

“I believe that Mr. Roosevelt is so charmed with the fun of brandishing the band leader’s baton at the head of the parade, so pleased with the picture he sees of himself, that he is no longer capable of recognizing that the human power to lead is limited, that the ‘new ideas’ of leadership dished up to him by his bright young men in the Brain Trust are nothing but old ideas that have been tried before, and that one cannot uphold the social order defined in the Constitution and at the same time undermine it,” Warburg lamented.

So if Warburg was right (and I believe he was), Franklin Delano Roosevelt misled the country with his promises in 1932 and put personal ambition and power lust in charge—not a very uncommon thing as politicians go. In any event, the country got a nice little bait-and-switch deal, and the economy languished as a result.

In the world of economics and free exchange, the rule is that you get what you pay for. The 1932 election is perhaps the best example of the rule that prevails all too often in the political world: You get what you voted against.

It’s been nearly a decade since film director Ridley Scott’s Oscar-winning epic, “Gladiator” appeared in theatres to considerable acclaim in Europe and the U.S. The movie is partly fictional, but the part that rings true should serve as a reminder of some important lessons from one of history’s greatest civilizations. Modern-day Greece, with its massive, bankrupting welfare state, should pay especially close attention.

In real life, there was no Roman general Maximus (played by Russell Crowe) whom the emperor Marcus Aurelius favored over his son as his successor, but the film’s depiction of the general depravity and corruption that came to characterize the Roman empire in its latter days is accurate and, if anything, understated. Moreover, the evidence is strong that at the root of Rome’s decline was a shift in ideas and attitudes away from respect for life, property, free enterprise and representative government and toward the redistributive welfare state.

When Romans abandoned self-responsibility and self-reliance and began to vote themselves benefits, to use government to rob Peter to pay Paul, to put their hands into other people’s pockets, and to envy and covet the productive and their wealth, they set into motion Kershner’s First Law: “When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare.”

In the early days of the Roman republic, which gave way to political dictatorship with Julius Caesar’s ascendancy in 49 B.C., Roman society employed substantial elements of a market economy and a public policy that encouraged entrepreneurship. Slavery existed within Rome’s sphere of influence, but it was far more common and far more brutal in the rest of the world.

Rome made stunning progress in sanitation, transportation, the arts, public parks, banking, architecture, education, and administration. With lower taxes and lower tariffs, and more free trade and private property than anywhere else, Rome became the center of the civilized world’s wealth.

Roman roads facilitated speed of travel and communication to a degree that would not be surpassed until the development of the railroad, the steamship, and the telegraph in the nineteenth century. Roman law and justice enabled the traveler to journey throughout the empire with a considerable degree of safety.

In his captivating recent book, “Empires of Trust,” historian Thomas Madden writes, “Roman women could pursue their own interests and could even own property—a rarity in ancient societies. All in all, they were rugged and independent, much like their husbands….

It was in the home that Roman children learned the most important Roman traits of dignity (gravitas), self-control (continentia), diligence (industria), goodwill (benevolentia), loyalty and a sense of duty (pietas), candor (simplicitas) and above all, courageous manliness (virtus). There were no schools in Rome until the mid-3rd century BC and even then they were attended only by the children of the wealthiest families. For the Romans, home schooling was the norm. Although the sophisticated Greeks sniffed at such a system, the Romans proudly held to it, insisting that it suited them just fine.” Home schools, not by coincidence, don’t usually teach dependence on the state.

By the fifth century A.D., the welfare state erected by successive emperors had squandered it all. In the space of a few hundred years, explains Max Shapiro in his book, The Penniless Billionaires, “the Appian Way, where Roman legions had frequently paraded in celebration of victory, was clogged with rubble and weeds. Wild dogs roamed through the ruins of the Forum, in search of food. And the 60,000 souls who inhabited the desolate place which had once been called the Eternal City now referred to it as `the great cow pasture.’”

Modestly at first but with increasing generosity, tribunes, senators and later emperors promised the people free wheat and other staples. Julius Caesar found 320,000 persons on government grain relief in the city of Rome alone, which comprised about two million citizens.

Historian H. J. Haskell writes, “Less than a century after the Republic had faded into the autocracy of the Empire, the people had lost all taste for democratic institutions. On the death of an emperor the Senate debated the question of restoring the Republic. But the commons preferred the rule of an extravagant despot who would continue the dole and furnish them free shows. The mob outside clamored for ‘one ruler’ of the world.”

Augustus tried to reduce the free wheat program and briefly introduced a means test: “’He wrote,’ says his biographer, ‘that he was inclined to abolish forever the public distribution of grain, for the people had come to rely upon it and had ceased to till the fields; but he had not proceeded further in the matter because he was sure that, from a desire to please the people, it would be revived at one time or another.”

A financial panic gripped Rome in the year 33 A.D. The government’s response was to extend a massive amount of credit to private enterprises at zero percent interest—paid for ultimately by the degradation of the currency.

The central government also assumed the responsibility of providing the people with entertainment. Elaborate circuses and gladiator duels were staged to keep the people happy. The equivalent of a hundred million dollars per year in the city of Rome alone is one modern historian’s estimate of what was poured out on the games.

Emperor Nero, best known for his role in a devastating fire, was said by contemporary historian Gaius Suetonius in De Vitae Caesarum to have once rubbed his hands together and declared, “Let us tax and tax again! Let us see to it that no one owns anything!”

As early as 91 A.D., the government became deeply involved in regulating agriculture. To reduce the production and raise the price of wine, Emperor Domitian ordered the destruction of half the provincial vineyards.

By the second century, many cities within the empire had spent themselves deeply into debt. Beginning with the emperor Hadrian, municipalities lost their independence as the central government placed them under the jurisdiction of imperial curators. Local authority was increasingly replaced by the power of the central government.

In 274, Emperor Aurelian, wishing to provide cradle-to-grave care for the citizenry, declared the right to relief to be hereditary. Those whose parents received government benefits were entitled as a matter of right to benefits as well. Aurelian gave welfare recipients government-baked bread (instead of the old practice of giving them wheat and letting them bake their own bread) and added free salt, pork, and olive oil. Not surprisingly, the ranks of the unproductive grew fatter, and the ranks of the productive grew thinner.

In effect, the emperors were buying support with the people’s money. After all, government can give only what it first takes. The emperors, in dishing out all these goodies, were in a position to manipulate public opinion. As Alexander Hamilton observed, “Control of a man’s subsistence is control of a man’s will.”

As the old virtue of self-reliance gave way to political redistribution of income, priests, teachers, and intellectuals extolled the virtues of the almighty emperor, the provider of all things. The interests of the individual were considered a distant second to the interests of the emperor and his legions. A spiritual vacuum ensued, which was filled partly by the rise of cults and oriental religions and partly by worship of the emperor. The latter reached its zenith under Emperor Diocletian in 285. No one could approach him without prostrating himself on the ground and kissing the hem of his garment. Formerly, the proud, free citizens of Rome had refused to render such servile adoration to any of their magistrates and rulers.

Civil wars and conflict of all sorts increased as faction fought against faction to seize control of the huge state apparatus and all its public loot. Of 27 emperors or would-be emperors between 180 and 285, all but two met violent deaths.

By the time of Emperor Antoninus Pius, who ruled from 138 to 161, the Roman bureaucracy was as all-embracing as that of any in modern times. A ruthless system of taxation, requisition, and compulsory labor was administered by an army of military bureaucrats. Historian W. G. Hardy, wrote that in later Rome, “what the soldiers or the barbarians spared, the emperors took in taxes.” The middle class was wiped out.

Rome also suffered from the bane of all welfare states, inflation. The massive demands on the government to spend for everything created pressures for the multiplication of money. The Roman coin, the denarius, was cheapened and debased by one emperor after another. Once almost pure silver, the denarius by 268 was little more than a piece of junk containing only .02% silver.

Prices skyrocketed; savings and investments were eroded, and the people became angry and frustrated. Businessmen were often blamed for the rising prices. In the year 301, Emperor Diocletian imposed comprehensive wage and price controls. The death penalty awaited those who did little more than attempt to save their business by raising prices to cover their rising costs.

The chaos that followed inspired the contemporary historian Lactantius to write in 314: “After the many oppressions which he put into practice had brought a general dearth upon the empire, he then set himself to regulate the prices of all vendible things. There was much bloodshed upon very slight and trifling accounts, and the people brought provisions no more to market, since they could not get a reasonable price for them; and this increased the dearth so much that at last after many had died by it, the law itself was laid aside.” Rome never recovered.

Not even the act of Emperor Constantine in granting toleration to Christians for the first time saved the decaying empire from the consequences of its disastrous economic policies. Indeed, the church was itself corrupted by joining everyone else at the public trough.

Erosion of character and culture. Self-reliance, hard work, and personal independence giving way to dependence upon the state. Soaring fiscal burdens of out-of-control entitlement programs, and politicians, oblivious to the costs, promising still more. Monumental sums for bailouts. Staggering increases in public debt. Concentration of power in the central government. A mad scramble by interest groups with endless claims on the treasury. Demagogic class warfare appeals. Ever higher taxes on the productive. Financial bankruptcy, riots in the streets, economic collapse followed by political oblivion. That was ancient Rome, and it sounds a lot like modern Greece too. The rest of Europe and the U.S. may not be far behind.

When the barbarians entered Rome in 476 and swept aside the last of the Roman emperors, Rome was a shell of its former self. The barbarians didn’t kill Rome; Romans committed economic and moral suicide.

It’s been nearly a decade since film director Ridley Scott’s Oscar-winning epic, “Gladiator” appeared in theatres to considerable acclaim in Europe and the U.S. The movie is partly fictional, but the part that rings true should serve as a reminder of some important lessons from one of history’s greatest civilizations. Modern-day Greece, with its massive, bankrupting welfare state, should pay especially close attention.

In real life, there was no Roman general Maximus (played by Russell Crowe) whom the emperor Marcus Aurelius favored over his son as his successor, but the film’s depiction of the general depravity and corruption that came to characterize the Roman empire in its latter days is accurate and, if anything, understated. Moreover, the evidence is strong that at the root of Rome’s decline was a shift in ideas and attitudes away from respect for life, property, free enterprise and representative government and toward the redistributive welfare state.

When Romans abandoned self-responsibility and self-reliance and began to vote themselves benefits, to use government to rob Peter to pay Paul, to put their hands into other people’s pockets, and to envy and covet the productive and their wealth, they set into motion Kershner’s First Law: “When a self-governing people confer upon their government the power to take from some and give to others, the process will not stop until the last bone of the last taxpayer is picked bare.”

In the early days of the Roman republic, which gave way to political dictatorship with Julius Caesar’s ascendancy in 49 B.C., Roman society employed substantial elements of a market economy and a public policy that encouraged entrepreneurship. Slavery existed within Rome’s sphere of influence, but it was far more common and far more brutal in the rest of the world.

Rome made stunning progress in sanitation, transportation, the arts, public parks, banking, architecture, education, and administration. With lower taxes and lower tariffs, and more free trade and private property than anywhere else, Rome became the center of the civilized world’s wealth.

Roman roads facilitated speed of travel and communication to a degree that would not be surpassed until the development of the railroad, the steamship, and the telegraph in the nineteenth century. Roman law and justice enabled the traveler to journey throughout the empire with a considerable degree of safety.

In his captivating recent book, “Empires of Trust,” historian Thomas Madden writes, “Roman women could pursue their own interests and could even own property—a rarity in ancient societies. All in all, they were rugged and independent, much like their husbands….

It was in the home that Roman children learned the most important Roman traits of dignity (gravitas), self-control (continentia), diligence (industria), goodwill (benevolentia), loyalty and a sense of duty (pietas), candor (simplicitas) and above all, courageous manliness (virtus). There were no schools in Rome until the mid-3rd century BC and even then they were attended only by the children of the wealthiest families. For the Romans, home schooling was the norm. Although the sophisticated Greeks sniffed at such a system, the Romans proudly held to it, insisting that it suited them just fine.” Home schools, not by coincidence, don’t usually teach dependence on the state.

By the fifth century A.D., the welfare state erected by successive emperors had squandered it all. In the space of a few hundred years, explains Max Shapiro in his book, The Penniless Billionaires, “the Appian Way, where Roman legions had frequently paraded in celebration of victory, was clogged with rubble and weeds. Wild dogs roamed through the ruins of the Forum, in search of food. And the 60,000 souls who inhabited the desolate place which had once been called the Eternal City now referred to it as `the great cow pasture.’”

Modestly at first but with increasing generosity, tribunes, senators and later emperors promised the people free wheat and other staples. Julius Caesar found 320,000 persons on government grain relief in the city of Rome alone, which comprised about two million citizens.

Historian H. J. Haskell writes, “Less than a century after the Republic had faded into the autocracy of the Empire, the people had lost all taste for democratic institutions. On the death of an emperor the Senate debated the question of restoring the Republic. But the commons preferred the rule of an extravagant despot who would continue the dole and furnish them free shows. The mob outside clamored for ‘one ruler’ of the world.”

Augustus tried to reduce the free wheat program and briefly introduced a means test: “’He wrote,’ says his biographer, ‘that he was inclined to abolish forever the public distribution of grain, for the people had come to rely upon it and had ceased to till the fields; but he had not proceeded further in the matter because he was sure that, from a desire to please the people, it would be revived at one time or another.”

A financial panic gripped Rome in the year 33 A.D. The government’s response was to extend a massive amount of credit to private enterprises at zero percent interest—paid for ultimately by the degradation of the currency.

The central government also assumed the responsibility of providing the people with entertainment. Elaborate circuses and gladiator duels were staged to keep the people happy. The equivalent of a hundred million dollars per year in the city of Rome alone is one modern historian’s estimate of what was poured out on the games.

Emperor Nero, best known for his role in a devastating fire, was said by contemporary historian Gaius Suetonius in De Vitae Caesarum to have once rubbed his hands together and declared, “Let us tax and tax again! Let us see to it that no one owns anything!”

As early as 91 A.D., the government became deeply involved in regulating agriculture. To reduce the production and raise the price of wine, Emperor Domitian ordered the destruction of half the provincial vineyards.

By the second century, many cities within the empire had spent themselves deeply into debt. Beginning with the emperor Hadrian, municipalities lost their independence as the central government placed them under the jurisdiction of imperial curators. Local authority was increasingly replaced by the power of the central government.

In 274, Emperor Aurelian, wishing to provide cradle-to-grave care for the citizenry, declared the right to relief to be hereditary. Those whose parents received government benefits were entitled as a matter of right to benefits as well. Aurelian gave welfare recipients government-baked bread (instead of the old practice of giving them wheat and letting them bake their own bread) and added free salt, pork, and olive oil. Not surprisingly, the ranks of the unproductive grew fatter, and the ranks of the productive grew thinner.

In effect, the emperors were buying support with the people’s money. After all, government can give only what it first takes. The emperors, in dishing out all these goodies, were in a position to manipulate public opinion. As Alexander Hamilton observed, “Control of a man’s subsistence is control of a man’s will.”

As the old virtue of self-reliance gave way to political redistribution of income, priests, teachers, and intellectuals extolled the virtues of the almighty emperor, the provider of all things. The interests of the individual were considered a distant second to the interests of the emperor and his legions. A spiritual vacuum ensued, which was filled partly by the rise of cults and oriental religions and partly by worship of the emperor. The latter reached its zenith under Emperor Diocletian in 285. No one could approach him without prostrating himself on the ground and kissing the hem of his garment. Formerly, the proud, free citizens of Rome had refused to render such servile adoration to any of their magistrates and rulers.

Civil wars and conflict of all sorts increased as faction fought against faction to seize control of the huge state apparatus and all its public loot. Of 27 emperors or would-be emperors between 180 and 285, all but two met violent deaths.

By the time of Emperor Antoninus Pius, who ruled from 138 to 161, the Roman bureaucracy was as all-embracing as that of any in modern times. A ruthless system of taxation, requisition, and compulsory labor was administered by an army of military bureaucrats. Historian W. G. Hardy, wrote that in later Rome, “what the soldiers or the barbarians spared, the emperors took in taxes.” The middle class was wiped out.

Rome also suffered from the bane of all welfare states, inflation. The massive demands on the government to spend for everything created pressures for the multiplication of money. The Roman coin, the denarius, was cheapened and debased by one emperor after another. Once almost pure silver, the denarius by 268 was little more than a piece of junk containing only .02% silver.

Prices skyrocketed; savings and investments were eroded, and the people became angry and frustrated. Businessmen were often blamed for the rising prices. In the year 301, Emperor Diocletian imposed comprehensive wage and price controls. The death penalty awaited those who did little more than attempt to save their business by raising prices to cover their rising costs.

The chaos that followed inspired the contemporary historian Lactantius to write in 314: “After the many oppressions which he put into practice had brought a general dearth upon the empire, he then set himself to regulate the prices of all vendible things. There was much bloodshed upon very slight and trifling accounts, and the people brought provisions no more to market, since they could not get a reasonable price for them; and this increased the dearth so much that at last after many had died by it, the law itself was laid aside.” Rome never recovered.

Not even the act of Emperor Constantine in granting toleration to Christians for the first time saved the decaying empire from the consequences of its disastrous economic policies. Indeed, the church was itself corrupted by joining everyone else at the public trough.

Erosion of character and culture. Self-reliance, hard work, and personal independence giving way to dependence upon the state. Soaring fiscal burdens of out-of-control entitlement programs, and politicians, oblivious to the costs, promising still more. Monumental sums for bailouts. Staggering increases in public debt. Concentration of power in the central government. A mad scramble by interest groups with endless claims on the treasury. Demagogic class warfare appeals. Ever higher taxes on the productive. Financial bankruptcy, riots in the streets, economic collapse followed by political oblivion. That was ancient Rome, and it sounds a lot like modern Greece too. The rest of Europe and the U.S. may not be far behind.

When the barbarians entered Rome in 476 and swept aside the last of the Roman emperors, Rome was a shell of its former self. The barbarians didn’t kill Rome; Romans committed economic and moral suicide.

How does one respond to the idea that government needs to regulate monopolies? More specifically, in a free, capitalist economy, is there any time when government would intervene “for the consumer’s good”?

Unfortunately the free market has been tarred with a bad reputation as a facilitator of centralized power in the form of business monopolies. But much of the attack on free markets comes from a failure to comprehend just what a monopoly is, what constitutes “market share,” and what powerful forces free markets bring to bear in disciplining even the largest of firms when it attempts to abuse its position.

In Adam Smith’s day, monopoly referred to a firm that enjoyed some government grant ofexclusive privilege (e.g. the Navigation Acts of 1651 or the Tea Act of 1773)–the use of the power of government on behalf of one or more special, private interests, to hobble or preclude competition. One step further in this direction, of course, is an actual government monopoly itself whereby government says, “We will do this work and will forcibly shut down anyone who tries to compete with us,” as it does in first class mail delivery. Send a letter in the United States and you must use the government post office but send a package and you get to choose between lots of private alternatives. (It shouldn’t surprise anyone that the government monopoly loses money even as it pays no taxes or dividends and outlaws direct competition, whereas the private providers of other classes of mail actually make money and pay both taxes and dividends to shareholders.)

Government can forbid competition directly, or it can indirectly accomplish some degree of the same thing (intentionally or otherwise) by burdensome taxation and regulation. Taxes and regulations usually hit newcomer or smaller businesses harder than the older, bigger, or politically well-connected firms; the effect is, to some extent, to limit competition and thereby confer a degree of monopoly privilege on the existing or larger firms. Many people today are candidates to start a business, perhaps in competition with large existing companies, but they do not do so because the tax and regulatory barriers discourage them from the start.

When governments, by one method and to one degree or another, limit competition by the various means described above, the result is a coercive monopoly for those producers who benefit from the limitation of competition. This is the kind of monopoly to be concerned about because it breeds a situation where a company (or the government itself) can get away with abuse that would doom a company in a truly competitive, consumer-responsive market.

The other kind of “monopoly” some of us occasionally refer to is known as an “efficiency” monopoly. It is simply a situation where a company gets a high market share not because of any government grant of exclusive privilege, subsidy, special tax treatment, or the like, but because it simply does the best job. If such a firm ever became sloppy and complacent, it would be as if it publicly displayed a sign reading “COMPETITORS WANTED,” and that’s precisely what it would get.

A free market system provides powerful restraints against any company abusing its customers or its competitors. (It even whittles away at coercive government monopolies: by my communicating with you via e-mail or fax, I am undermining the Postal Service’s legal monopoly on first-class mail.) In a free market, the following constitute some of the ways an abusive firm is disciplined:

• Free entry–the fact that another entity (a newcomer or an existing firm that may not even currently be in the same business) will find it attractive to enter a market in which consumers are unhappy with the current major supplier.

• Competition of substitutes–the fact that for most goods, there is some reasonable substitute. Breakfast cereal is a good example.

• Foreign competition–the fact that simply opening the borders to free trade is enough to imperil the monopoly position of almost any domestic producer. Once, many considered that Detroit would dominate the automobile industry with its powerful market share forever, but Japan found a way into the market, and slowly chipped away at the American automakers’ hold on consumers worldwide.

• Competition of ALL goods for the consumer’s dollar–the fact that if I don’t like the air fares charged by the airlines, for example, I may take that disposable income and buy the washer and dryer I’ve been thinking about. In that case, United Airlines competes directly against Maytag.

I would be remiss if I did not also mention the simple matter of the “price” mechanism. Should any firm or firms establish a dominant market share of any industry, let’s say, airlines–for instance–any rise in price and profits acts as an instantaneous signal that alerts other aviation entrepreneurs to an opportunity for profit.

Of course, a tricky problem is always the question of what constitutes “market share.” I have a 100% monopoly on lectures by Lawrence Reed, but I hardly have a monopoly over “lectures on economics.”

A few years ago, the Federal Trade Commission tried to convict five ready-to-eat cereal manufacturers of what it called a “shared monopoly,” because those five firms sold 80% of the “ready-to-eat” cereal in the U.S. The trouble was, those five firms not only competed against themselves, but they also competed against anything anybody eats for breakfast! (So don’t lose any sleep over a vicious, price-gouging cereal monopoly). The point is, depending on how you define market share, you can make almost anybody look like a monopolist if you think monopoly has something to do with market share alone.

Sometimes people become concerned with how large a share of a particular market a firm has, without considering the dynamics of competition over time. But that’s a little like stopping a horse race in the middle because one horse is ahead. The race isn’t over yet and in a free market, it never is.

One accusation often made is that “monopolistic” firms use “predatory pricing” as a weapon in suffocating competition–as a “barrier to entry”–so as to maintain its preferred status. As I explain in this article, that is a highly unlikely proposition.

The bottom line is that “monopoly” in free market is a very slippery concept and competition is far more dynamic and effective over time than most attempts to regulate.