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The Idea Channel.
Jim, you know, with the growth
of government in our society
and people demanding more
government, I think it's kind
of an interesting idea to
think about what is the
legitimate role of government
in a free society. Have you
ever given that any thought?
Oh, I've given that a lot
thought and I agree,
fundamentally, with you that
we don't think nearly enough
about it, especially the
general public doesn't think
enough about it. As you know,
I'm not one of those anarchic
capitalists who sort of thinks
that there is no role for
government. In one sense, I'm
a philosophical anarchist, but
on the other hand, I think
government is absolutely
necessary, but it is necessary
in a limited way. I go along
very much, I think, with sort
of James Madison's view that
the role of government, in
particular the central
government, is to sort of
provide the parameters within
which we play the economic or
political game. That's the
reason I, of course, stress
this emphasis on the
constitutional rules. We need
to have a fairly fixed stable
structure of law and property
and contract and plus a few
other governmental functions,
but all those are kind of
parametric functions within
which we play. And the real
problem of this century and
earlier has been the idea that
somehow government can go
beyond that and manipulate and
control and manage not only
the economy, but all other
aspects of our life. Or
whatever suits the will of a
majority. Exactly. Which
really stands in the face of
what the Founding Fathers
thought and when they said,
well we're going to limit the
government to do certain
things and that's expressed in
the Articles of the
Constitution. And I'm at a
loss to try to understand, how
did Congress escape these
limitations that were
originally imposed on them?
Now, I think that is a
fascinating question and I
don't know that we have any
answers... more or less, as
you know people have tried to
explain why this happened.
There were some watershed
events...of course, we fought
a bloody civil war and that
removed the threat of
secession. As long as states
could threaten secession as a
potential possibility- that
automatically sort of puts a
check on the central
government. And once that was
gone- then the sort of general
philosophy in the last part of
the last century and the early
years of this century was for
limited government. You
remember Grover Cleveland
vetoed a bill to provide seed
corn to the Midwest farmers
because the federal government
couldn't do that, that's very
unconstitutional. And by the
way, these questions never
come up in congress today.
We're never asked the
question, "Well, is this
constitutional?" They just say
"Well, can we get a vote on
it?" Exactly. And we find as
you are suggesting, that the
10th Amendment is virtually
meaningless nowadays. I try to
think of one thing. I would
imagine that a lawyer might be
disbarred for bringing up the
9th or 10th Amendment.
Absolutely... absolutely. And
you don't find amongst the
legal scholars anybody, except
Richard Epstein, who even
talks about those kinds of
problems anymore. But then we
got this sort of progressive
movement around the turn of
the century and then that was
finally put in play in the
debacle that we went through
in the New Deal of where they
were just searching around for
everything. As Jonathan
Hughes, an economic historian
once said "the main thing that
you needed was to invent new
ways to spend money." We've
got this whole threshold leap,
and we've been living with
that ever since. And then
Robert Higgs... he points out
that one of the problems is
that wars increase the role of
government, and maybe
rightfully so in the context
of war, but you never get back
to where you are, where you
were before. It's a ratchet
effect, exactly. And we got
away from calling what I like
to think of as a kind of a
constitutional attitude, that
is, the public doesn't
understand that government in
its limited role and certainly
the politicians themselves
don't understand it and
somehow or another we've
slipped into this fallacy of
thinking that democracy
properly means majority rule,
but if you take that
literally, majority rule means
majority rule, which means the
minority is going to get
screwed as they have
throughout our history, but
now it's becoming, as you
said, it's becoming much more
blatant. That's right and I
think that American people
don't realize that there is
nothing necessarily sacrosanct
about majority rule. Indeed it
can be tyranny as it is
pointed out in the Federalist
papers. And majority rule can
simply boil down to meaning
equality and servitude, as
it's beginning to mean today.
Absolutely... I think we need
to somehow get back to our,
what you might call, our
constitutional understanding
or constitutional roots. But I
don't see much movement in
that direction. And what is
strange, especially in the
modern setting, is that the
United States seems to be
going in the opposite
direction from the rest of the
world. Our American domestic
politics now, seems to me, to
be informed by an attitude
that reflects no influence
whatsoever of the greater
revolutions that have happened
in this decade... absolutely
no influence. So, that's hard
to understand, it's hard to
understand. Yes, as a matter
of fact when you hear during
the last several elections,
when you hear presidents
talking about or people asking
presidential candidates
"What's your economic plan?" I
find that rather amazing
because the bosses in Eastern
Europe had economic plans and
the Soviet Union had economic
plans and China and Cuba and
North Korea. And if you ask
"What's a common
characteristic of all these
economic plans?" They've been
failures. They've led to lower
standards of living and lower
human rights protections. And
low and behold, we have
Americans asking for the same
thing. You're absolutely
right. And I'm at somewhat of
a loss just as to what is the
solution. Some years ago, I'm
sure you remember we were on a
committee, Lou Euler's
National Tax Limitation
Committee, and we were writing
the Constitutional Amendment
to limit spending. Now, of
course, actually it passed the
senate, but it did not make it
through the house, it didn't
even come in for a vote. Do
you continue to see some kind
of limit on federal spending
as a percentage of the GNP as
one of the means to get us
back to a more constitutional
form of government? I
certainly think that's one
possibility. Another one
that's a little bit less
sweeping than that is, of
course it was involved in that
same movement, is the movement
to get a balanced budget
amendment to the
Constitution... that has
passed the senate. It has
almost passed the house. It's
still a movement, 32 states
have put in resolutions as you
know. There is still a good
deal of momentum of that,
although it sort of went out
in the middle of the 80s when
the Graham Rudman legislation
went in which sort of
legislated that, and of
course, that was abandoned as
we could've predicted. There
may be some resurgence of that
movement especially as the
deficit doesn't get resolved,
but something like that needs
to be done, whether or not
you're ever going to get it or
not is another problem.
Getting constitutional
amendments put in is a very
difficult thing to accomplish.
I have been encouraged.... in
one sense, I suspect both of
us would agree that almost
anything that seems to capture
the public imagination which
would have the impact of
limiting the dominance of the
central government would be
desirable, and in one sense we
sort of have to jump on the
bandwagon of anything that
seems to capture the public
imagination and in that sense,
the movement in the late 80s
and 90s for term limits seems
to be that in which is
gathering a lot of focus, a
lot of attention. So, maybe
that's going to take the play
away from the specific
spending limits or balanced
budget requirements. It may
well be that we're moving in
the direction of imposing
spending limits which would
indirectly, more or less, have
the same effect. Well, tell me
something, I've never been
that enthusiastic about term
limitation. My argument has
always been, well if you have
term limitation, the rascals
are going to do what they're
going to do anyway, but just
much faster with their own
limitations. But however I can
be convinced of some benefits
in the form of reducing the
power of some of the
committees and that might be a
very, very, important aspect,
but I don't fully see the
benefit of term limitation and
I'd be willing to- Well
considerate it an isolation. I
agree with you, I don't see
term limitation as a be-all,
end-all to solve these
problems. Again, it does seem
to me that term limitation,
for some reason, and again
this is mysterious, it does
seem to me that it has the
potentiality of capturing the
imagination of the people
behind it. Whereas some of
these other things, even
though they may be simple to
you and I, they're complicated
to people out there. But term
limitations, you throw the
rascals out or you only allow
them so long in. Now, the
direct impact of term
limitations, as you suggest,
might not be nearly as much as
we would hope they might be.
But on the other hand, I think
to remove or reduce the power
of these incumbent barons in
the congress is very
important. I think to get Tom
Foley and Rostenkowski and
others like that out is a very
important aspect of the whole
thing and just the sort of
threat of that coming has
already had some impact, I
think. But, one of the, say
for me, term limitation or
focus on term limitation, yes
you're right that it kind of
focuses on the public mind
and is very simple in
understanding, might have
additional benefits, but term
limitation in and of itself it
seems to ignore the basic
problem and the basic problem
I see or at least one of the
basic problems is that
congressman and senators, for
the most part, are doing
precisely what their
constituents elect them to do.
But it just turns out, when
you have 535 congressmen all
doing what the constituents
want it produces something
none of us likes, such as high
deficits and growing debt and
increasing government. And so,
it seems to me and at least
this is what I try to do,
that's why I call myself kind
of a pamphleteer like, is that
you have to convince the
American people at the grass
roots level about the
problems- Oh I fully share...
I fully share that... and in
that sense, the excitement
about term limitation is
misconceived. It sort of
diverts attention away from
the central problem. And the
central problem is quite
properly, as you suggest that
we don't have any way that
political leadership can
survive unless it does this
constituency interest. That
is, we're all screwing each
other as separate groups... as
you say the churning state...
back and forth- back and
forth- and we end up
everybody's worse off. Or we
become a nation of thieves.
Exactly... exactly. And we've
lost the morality, the moral
force of the Constitution that
has enabled us to become this
nation of thieves. I used to
call it a zero sum game, but
some of my colleagues have
told me that I've been overly
optimistic... it's a negative
sum game. And I think it's a
particular tragedy that we, in
America, have gone this way.
As you and I know we have a
colleague here in philosophy,
Thelma Lavine, who has done a
lot of television in
philosophy courses and so
forth. And Thelma makes the
point that among all the
countries, the nations, we
have a set of documents... we
have a set of documents that
can provide the moral
foundations, as you say, and
instead we ignore those
documents, Britain, for
example, doesn't have such a
thing... but we have the
declaration. We have the
Constitution. So, in a sense,
we're not using the capital
value that those documents
could provide in accomplishing
what you and I are talking
about. That is this sort of
philosophical understanding of
what we're about as a people.
And to see that having eroded
and see it still eroding and
then see absolutely no
understanding or no
sensibility toward that, it's
a tragedy of major proportion.
And you see it...we're not
even teaching our children
these principles in the
school, in a high school or a
junior high school's civics
class, what the Constitution
means. Matter of fact, I was
listening to a report on a
survey, it could've been done
by a Gallup poll, and they
were asking people from where,
by whence comes the statement,
from each according to their
ability and to each according
to their needs, and a large
percentage said it's in the
Bill of Rights. And then, when
we hear Americans say in terms
of the ignorance of our
Constitution, when you hear
the Americans say, well,
Reagan cut taxes or President
Clinton is going to increase
taxes, it shows that they have
little knowledge of Article I,
Section 7 and 8 of the
Constitution whereby only
congress has that authority.
It's very, very tragic and I
think a lot of it has to do
with our education system, not
even at colleges do we focus
on the constitutional
principles in a government
class where talking about
issues having to do with
redistribution as opposed to
getting down whether we- And
even in our law schools...
I've often made the comment
that the most subversive
institutions in the country
are the law schools. Even our
law schools with very, very,
few exceptions as you know,
the law students who will
become our judges, ultimately,
are taught that the
Constitution is what the
judges say it is. I mean they
just write their own values
into the Constitution. Now, to
some extent that attitude,
which was reflective of their
war in court dramatically so,
to some extent the courts,
more recently, have tried to
go back a little bit from that
sort of judicial legislation
position, but that's still,
very much a part of the
training in our law schools.
As a matter of fact, if I
might interrupt and I can add
to that by saying, I have
given lectures at two of the
nation's most prestigious law
schools. In one case, the
professor who got up to
comment on my statements at
one school, he said he told
the students that you've just
listened to the bankrupt
notions of the Lechner era.
And then another professor at
this other law school, he told
the students that you've just
heard the discredited notions
of freedom of a contract and
rule of law and this is at a
law school where there's such
contempt for the rule of law.
I don't know how we turn that
around because the role of
lawyers is getting more and
more important. There's
getting to be, of course, as
you know, a public attitude
that's negative towards
lawyers and that's all to the
good. We have so many
lawyers... so much litigation
that lawyers, their relative
esteem in the rankings is now
pretty low compared to what it
was 30, 40 years ago. But how
we're going to get our
politics out of the hands of
the lawyers is another
question. We got far too many
lawyers in positions of
executive power, positions of
legislative power, state
legislatures; congress is
dominated by lawyers who are
trained by the law schools of
precisely the sort that you're
talking about, so it's a
major, major problem that we
face. And then, aside from
just the issues of the fact
that we've escaped the
constitutional restraints on
government- is that I don't
see the stability conditions
for a tranquil society. That
is: as government gets larger
and larger and plays a greater
role in the allocation of
resources, then people tend to
form coalitions to get their
share of that allocation on
some of the most destabilizing
characteristics, such as
regional characteristics,
religious characteristics,
racial characteristics- and
we're in the process of
creating instability in our
society. One of the rather
remarkable things that a lot
of people don't think of is
that if you ask the question
for most of our history,
people have been able to live
in a relative harmony in the
United States, people from
very, very diverse backgrounds
and religions. And one of the
reasons, I suspect, is that in
the United States for most of
our history, it did not pay to
be an Irishman, it did not pay
to be an Italian. Okay now, as
government gets larger and
larger, well then it begins to
pay to be members of various
groups and just in terms of
allocation and resource, and
this contributes to
instability in our society.
Well, I think that's very,
very important and I think it
is happening and our politics
is increasing and becoming
what I call just simply
distributional politics. I'm
fighting to get my share and
obviously I'd do better if I
joined a coalition. If I'm in
a group that is identifiable
in one or another of these
ways, not only do we place
demands on government, but we
force our elected politicians
to represent different groups.
So you exacerbate that by then
deliberately fixing up your
legislative process such that
you have a representation of
separate interests, rather
than a sort of a generalized
representation of people who
might reflect a little bit the
encompassing interest. So, I
think that's a very, very
serious aspect of our modern
politics and this emphasis on
diversity in the universities
is sort of providing a kind of
an intellectual backdrop to a
lot of that. ...Which is a
very interesting point. At
universities, the intellectual
elite have been supporters of
some of the most horrendous
phases or events in human
history. I'm very, very sure
everybody knows that, that
Adolph Hitler got a lot of his
original support from the
intellectual elite and college
students as well. I think it's
a tragedy unfolding,
particularly at our
universities. Yeah, but I
think in a sense it is a
tragedy and it's a dramatic
change in our structure, but
some of these things sometime-
and maybe we should put a
little bit of hope into this
picture, some of these things
sometimes overreach themselves
and there has been an
overreaching by some of those
groups that are pushing a lot
of that repression. And I was
just reading last week where
some of the leaders of that
movement, like Richard Rorty
and Stanley Fish and Dorita
[phonetic] who have been used
as sort of the intellectual
gurus...have now issued
statements trying to draw it
back. They realized it has
gone too far and so maybe
there are signs that the
partial derivatives at least
have changed. And then there
is another optimistic note on
it is that the universities
can be a laboratory for the
rest of society. That is that
we can try things and they'll
turn out to be utter failures
at the university, and we
might realize this mess. You
know there is another part of
the problem of the growth of
government and that has to do
with a lot of demagogy about
the sources of income which
gives rise to the political
incentives for redistribution
of income. And the demagogy
that I see is that nobody
actually says it, but they
almost say that there's a pile
of money somewhere in the
United States and the rich or
the well-off - and they're
rich because they got to that
pile first, and they took
somebody else's fair share and
so, justice requires
redistributing the income. And
I think that's a major
problem, just in terms of
thinking about these problems
and as I frequently tell
people that for the most part,
there's some exceptions. Those
who have money, those who are
wealthy, they became so, at
least in a free society, by
pleasing their fellow man, by
serving their fellow man. And
you hear the statement that,
well those who are wealthy
they should give something
back to society. I think that
is nonsense. They've already
given something. Now it's the
social parasites, the thieves,
that should give something
back because they've taken and
they haven't given anything
and so I spend, at least when
I go around the country
lecturing, I spend a lot of
time talking about the
demagogy, about the sources of
income. That's very, very
important. I think that's very
important and it's very
difficult and, I think, a lot
of us don't understand how
difficult it is for an
ordinary person to keep from
being attracted by that kind
of view because I can
appreciate that view because I
came out of that view. I
started out from a popular,
very strong populous family,
populous background in which
the Wall Street barons were,
in fact, stealing from all the
rest of us and so we want to
get the money away from those
bastards, that was our sort of
attitude I came up with. And
you sort of naturally come
into the view and this is
where, I think, those of us
who teach economics and a lot
of economists, anyway, we get
attracted by the complexities
of the economic ideas and fool
around on the blackboard and
computers and so forth. We
don't sort of spend enough
time teaching the public or
the students we get that they're
elementary points that you're
making here, the very, very
elementary points, in order to
have income, somebody has got
to produce the income. It's as
if it is out there. You say
it's out there to be picked up
and the people happen to find,
they get it and therefore we
should share it. If we can get
that very simple point across,
we would've long since made
more than our contribution,
but it's very difficult to do.
It's very difficult for the
ordinary person to somehow
accept this sort of fact that
in order to generate product
or value it has to be done by
somebody and in order to do
that, in order to get rich you
have to provide something that
somebody will buy. In a way,
economics is as someone
said... as my old professor
said, Frank Knight once said
"Economics is so easy you can
learn it in a half an hour,
but it takes you a long time
to get to the point where you
can learn it." And I even go
as far in terms of simplicity,
a lot of times I don't call
when I'm out on a lecture, I
don't call dollars, dollars, I
call them certificates of
performance. Well, that's very
good. I like that. I mow your
lawn and you give me 10
certificates of performance.
This stands as evidence that
I've served my fellow man and
so, then I can go into a store
and say look, I demand what my
fellow man produces and see
here's the certificates of
performance and contrast that
morality and the morality of
that where the only way you
can have a claim on what your
fellow man produces is by
serving him. If you contrast
that to government, allocation
of resources, the government
says, look you can sit on your
butt, you can watch TV all
day, you don't have to serve
your fellow man and we will
take what he produces. And so,
I think, that there's some,
even my colleague Karen Vaughn
our colleague, Karen Vaughn,
and some others who are
spending some time talking
about the connection between
Christianity and free markets
and that there is some kind of
morality in the free market
and if you happen to be a
Christian you can accept the
free market. It's far more
consistent with the free
market principles than
socialism is consistent with
Christianity. Well there is
getting to be, as you suggest,
not only amongst our
colleagues but throughout our
profession and others, much
more interest in sort of the
connection between economics
and ethics and this sort of
thing, not necessarily a
religious base, generally
ethics... generally my own.
I've been working for the
last, almost a decade now,
very much trying to look at
the sort of economic content
of the set of Puritan virtues
and Puritan ethics and in
particular I've been working
on the work ethic and the
attitude that people work, the
attitude that people should
save, the attitude that they
should respect others'
property, this sort of thing.
The kind of general Puritan
virtues, which may or may not
have a religious Christian
base, may have a Judeo
Christian base than other
religions. But the point is
the presence of that ethic
among members of the public
has a very, very strong
economic content and that's
what gives people the notion
to go out and generate these
values and get these
certificates of performance
because if you sort of kind of
think that- well the
government owes you living-
then you're never going to get
that. And we've been
destroying those virtues, and
we've been deriding those
virtues, generally speaking.
And one of the things, as we
attack and decry these
virtues, we tend to think that
codified law can be a
substitute for these
institutions that tend to
control and moderate the
unpleasant aspects of human
behavior. And we're finding
out that it's a very, very
poor substitute. I think that
if you look at, again, one
does not necessarily have to
be a Christian, but you see in
almost every philosophy or at
least many philosophies
there's the phrase that's
expressed in Christianity, "Do
unto others as you would have
them do unto you." Well that's
a very profound statement if
you look at it from an
economic standpoint of view.
It's a way to, as we
economists say, internalize
externalities without the law,
that if you really believe
that I shouldn't walk across
your lawn because I don't want
you to walk across my lawn
well, that's a very, very
effective way of internalizing
externalities, and we've lost
many of these institutions
that moderated human behavior
and much of it as a result of
government activity. I don't
think there's any doubt about
that. People can live together
much better if they have a
kind of an ethical bond in
which they kind of have mutual
respect for each other and
respect the other's
boundaries, personal
boundaries, property
boundaries, contractual
obligations and so forth. The
people in Yugoslavia, for
example, live together. The
Croats and the Serbs and the
Muslims live together fine-
and under schemes in which
they knew that they were going
to respect each other's
rights- and you only get that
terrible, terrible conflict
because they realize that if
they become a minority under a
government-dominated group of
the other side, then they're
going to have nothing left and
so, once you get politics in
it, as you already said you're
going to establish these
coalitions which are simply
going to use politics as
getting back into a war of
each against all. That is the
kind of zero or negative sum
game that modern politics
represents. Again, we must get
back somehow to a
constitutional understanding
about this. One thing that has
concerned me a lot, coming at
it with a bit of a specialty
in the fiscal side of things,
is how we did make some
progress. It seemed to me or
we reversed the general trend
of events in 1986 in terms of
our tax code. The 86 act of
legislation was rather strange
in the sense. We went away
from trying to satisfy
particular groups as
distributional politics. We
lowered the rates in exchange
for getting the base broadened
and closed up a lot of
particularized shelters,
particularized loopholes, we
got a simplified structure and
that was kind of a miracle-
political miracle so to speak-
in modern age. I've made a
prediction, I wrote a piece
about it saying that we're to
hold from public choice
perspectives. Immediately the
congress wants to get the rate
lowered and the debates wider
and we'll start raising rates
and, of course, they'll start
selling off these loopholes
again, which is precisely what
has happened. It didn't last.
They started raising rates
again and of course they're
going back selling rent. If
you satisfy me, I'll give you
a particular tax break. If you
satisfy me, I'll give you
another break. And so now the
thing has been broken apart.
So even when we have some
temporary steps, it seemed to
go back toward a generalized
understanding of these
principles of sort of
limitation or generality or
rule of law in our fiscal
structure in particular and
elsewhere. Even when we get
that, we don't allow it to
last. It's eroded. Well, I'm a
little more cynical than you
on that and I said during a
time that the reason why
Congress was broadening the
base and getting rid of
loopholes is because it didn't
have anything to sell. That is
there are too many loopholes.
They close them and then they
sell them again. [laughter] So
if you were a man from Mars
you might say, well gee this
is a deliberate act. It
doesn't represent a kind of
understanding as you're
suggesting, but that's just my
particular cynicism about
politicians. No, I don't think
we necessarily disagree very
much on that. I think that
they're always going to be
there, but why? And in one
sense you're right, that may
have been the reason that we
got that change is because
they've exhausted their
possibilities. I think that
one of the big problems that
Americans don't understand is
just the- I don't know whether
we fully understand the impact
of government on the rest of
society- the impact of
regulations, how people can
engage or lets say, special
interest groups can engage in
strategic behavior through
regulations. That is we look
at the government, the federal
government, consuming roughly
25% of the GNP. Well, that's
if we stick with just cash.
But if you look at regulations
where government makes
mandates instead of saying:
Well look, we're going to take
20 dollars out of your pocket;
we're going to make a law that
you have to give Williams 20
dollars. Or let's say tariffs
as a form of redistribution of
income- and I don't whether
Americans fully appreciate
just the increase in role of
government and the effect that
it has on their standard of
living. No, I'm sure they
don't. I mean these are
indirect and that's, of
course, the reason why you
have regulations, mandates and
in particular- have
interferences that have their
impact indirectly. Take
tariffs as an example. You can
probably never get, even in
the modern era you probably
couldn't get a particular
subsidy into a particular
industry, domestic industry
that would be overtly financed
by the tax dollars that would
be equivalent to the tariff-
because people don't
understand the simple
economics of free trade.
Again, go back to what I said
earlier, and I think this is
something to keep stressing.
Those of us who are in
economics- we ought to spend a
lot more time teaching the
simple varieties not so much
of this esoteric stuff. That's
right and I'm going to
continue to do my share of
these and I'm quite sure
you're going to continue to do
your share and we've raised a
lot of questions and we don't
have all the answers. But
perhaps as you suggest- I
would just say more power to
you. I think that you're doing
a really wonderful job in
getting some of these messages
across to the public. I've
never been very good at that,
but I certainly admire your
persuasiveness. Well, thank
you very much.
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