Can Capitalism Survive?
By Benjamin A. Rogge
One of the signs of advancing age in the American college professor is a tendency for him to write less and publish more. This seeming paradox is easily explained by the phenomenon of
Collected Works, that is, by what on television would be described as reruns. As in television, no great public outcry is needed to bring forth the reruns; a question from his wife, a polite suggestion from a colleague, and the cut-and-paste operation is under way.I have put together here what I believe to be the best of the rather meager output of my professional career up to this point. For reasons (mostly financial) that always seemed adequate at the moment, I have been more of a speechmaker than a writer. Thus, you will find that many of the pieces in this collection are but speeches put down on paper…. [From the Foreword]
First Pub. Date
Indianapolis, IN: Liberty Fund, Inc. Liberty Fund, Inc.
The text of this edition is under copyright. Picture of Benjamin Rogge: file photo, courtesy of Liberty Fund, Inc.
- Part I, Introduction
- Part I, Chapter 1, Can Capitalism Survive
- Part II, Introduction
- Part II, Chapter 1, The Case for Economic Freedom
- Part II, Chapter 2, The Libertarian Philosophy
- Part II, Chapter 3, Who is to Blame
- Part II, Chapter 4, Paradise in Posey County
- Part III, Introduction
- Part III, Chapter 1, Adam Smith, 1776-1976
- Part III, Chapter 2, Christian Economics: Myth or Reality
- Part III, Chapter 3, College Economics: Is It Subversive of Capitalism
- Part IV, Introduction
- Part IV, Chapter 1, Profits
- Part IV, Chapter 2, The Businessman
- Part V, Introduction
- Part V, Chapter 1, The Labor Monopoly
- Part VI, Introduction
- Part VI, Chapter 1, The Long-Run Economic Outlook
- Part VI, Chapter 2, Alleged Causes of Inflation, Corporate Monopolies
- Part VII, Introduction
- Part VII, Chapter 1, The Problems of Cities
- Part VIII, Introduction
- Part VIII, Chapter 1, Financing Higher Education in the United States
- Part VIII, Chapter 2, The Promise of the College
- Part IX, Introduction
- Part IX, Chapter 1, The Businessman and the Defense of Capitalism
- Part IX, Chapter 2, Reflections on the Election of 1964
- Part IX, Chapter 3, The Foundation for Economic Education, Success or Failure
The Problems of Cities
Part VII, Chapter 1
In the paragraphs to follow you will find me critical of most of the work now being done on the nature of the urban crisis and equally critical of the public policies proposed to ease that crisis. To compound my sin, I offer no alternative scheme by which the New Jerusalem can be erected on the shores of the Hudson or Lake Michigan or Lake Erie. I intend to argue that no one even knows how to
define the New Urban Jerusalem, let alone
One Man’s Atlantis
Environment for Man: The Next Fifty Years, sponsored by the American Institute of Planners:
If we had the technology and the economy—both said to be imminent—to build an ideal environment, what kind would we build? What could environment contribute to a “good” day? Do we know how to define and work toward “Optimum Environment with Man as the Measure”? To date neither optimum nor environment has been defined, nor have we made an adequate beginning at measuring man.
And we must somehow learn to allow for subjective human values.*65
Sick Cities: Psychology and Pathology, we find the following:
Saturday Evening Post in an editorial in 1961 called sprawl “perhaps our cruelest misuse of land since our soil mining days. Urban sprawl,” it went on to state, “is not the growth of cities. Instead, the cities are disintegrating and spreading the pieces over miles and miles of countryside.”
Robert Moses, responsible for so many of Gotham’s public achievements in the present century, takes the opposite point of view in an article in the
Atlantic Monthly: “The prosperous suburbanite,” he says, “is as proud of his ranch home as the owner of the most gracious villa of Tuscany. The little identical suburban boxes of average people, which differ only in color and planting, represent a measure of success unheard of by hundreds of millions on other continents.”
per se unacceptable to those who see
any unplanned outcome as less than optimal. In other words, any characteristic of the urban environment that, like Topsy, “just grew” stands condemned by its very origins.
The Death and Life of Great American Cities, by Jane Jacobs.
People gathered in concentrations of big-city size and density can be felt to be an automatic—if necessary—evil. This is a common assumption: that human beings are charming in small numbers and noxious in large numbers. Given this point of view, it follows that concentrations of people should be physically minimized in every way: by thinning down the numbers themselves insofar as this is possible, and beyond that by aiming at illusions of suburban lawns and small-town placidity. It follows that the exuberant variety inherent in great numbers of people, tightly concentrated, should be played down, hidden, hammered into a semblance of the thinner, more tractable variety or the outright homogeneity often represented in thinner populations.
On the other hand, people gathered in concentrations of city size and density can be considered a positive good, in the faith that they are desirable because they are the source of immense vitality, and because they do represent, in small geographic compass, a great and exuberant richness of differences and possibilities, many of these differences unique and unpredictable and all the more valuable because they are. Given this point of view, it follows that the presence of great numbers of people gathered together in cities should not only be frankly accepted as a physical fact. It follows that they should also be enjoyed as an asset and their presence celebrated.
per se for there to be constructed a universally valid, objective definition or description of the Good City. City planning is by definition, then, an exercise in either futility or coercion (or both).
is possible for a group of people of like values to agree upon a definition of the Good City and to attempt to implement that particular vision with their own monies and without coercion, and to this I offer no objection. But most True Prophets prefer to work with other people’s money, obtained by the exertions of the tax collector, and with the sheriff at their side to deal appropriately with those recalcitrant few who stand in the way of the developing New Jerusalem.
Right Rules Promote Right Outcomes
the Good City cannot be defined in terms of its own characteristics but only in terms of the correctness or incorrectness of the decision-system within which it emerges. Right rules promote right outcomes; wrong rules promote wrong outcomes.
By tracing the combined effects of individual actions, we discover that many of the institutions on which human achievements rest have arisen and are functioning without a designing and directing mind; that, as Adam Ferguson expressed it, “nations stumble upon establishments, which are indeed the result of human action but not the result of human design,”
*68 and that the spontaneous collaboration of free men often creates things which are greater than their individual minds can ever fully comprehend.
True Individualism is, of course, not anarchism, which is but another product of the rationalistic pseudo-individualism to which it is opposed. It does not deny the necessity of coercive power but wishes to limit it—to limit it to those fields where it is indispensable to prevent coercion by others and in order to reduce the total of coercion to a minimum.
The most general principle on which an individualist system is based is that it uses the universal acceptance of general principles as the means to create order in social affairs.
But if our main conclusion is that an individualist order must rest on the enforcement of abstract principles rather than on the enforcement of specific orders, this still leaves open the question of the
kind of general rules which we want.
general rules of human conduct that are morally correct and economically efficient.
Note: Unless the world is totally absurd, that which is correct in principle will also be that which works. It follows from this that those who come closest to understanding and discovering the right principles of human conduct (by whatever means, including, if you wish, revelation) will also come closest to understanding that which will work.
not to attempt to predict the specific details or even the general nature of the outcomes (in terms of urban characteristics) that might flow from the application of the suggested rules to this problem area. The reason, as Hayek has made clear, is that it is impossible to predict the nature of the outcomes of free and peaceful decision-making. Just literally, no one knows what our cities would have looked like had they developed under different rule systems than have in fact prevailed.
1. Individuals and groups shall be permitted (have the right) to enter into voluntary exchanges of goods and services on terms of their own choosing, provided that neither force nor fraud is involved.
2. Individuals and groups shall be permitted (have the right) to use properties legally under their control in any manner they choose, provided that in so doing no damage is inflicted upon the person and/or property of unwilling third parties.
3. The coercive power of government shall not be permitted (has no right) to be used for any purpose other than that of minimizing coercion in human affairs, i.e. for any purpose other than that generally described in the phrase, “law and order.”
4. The price to be charged for any good or service shall be that which emerges from the voluntary exchange process.
Rule No. 1: Freedom of Exchange
It is hardly surprising that unemployment among the unskilled increased with this rapid rise in the minimum wage. To the extent that teenagers are inexperienced, unskilled workers, they are the ones who have been priced out of the labor market by the rise in the minimum wage rate.
An American Dilemma, where he notes that Negroes have been the main sufferers from the employment effects of minimum wage laws.
*73 The distinguished modern liberal economist, Paul Samuelson, asks, “What good does it do a Negro youth to know that an employer must pay him $1.60 per hour, if the fact that he must be paid that amount is what keeps him from getting a job?”
*75 Indeed, as many have noted, the great problem of the urban young person is not overwork but a deadening, self-destroying idleness.
Trade unionism has tended to produce the following consequences on the economic position of the Negro in the American economy: (1) to reduce his access to many of the industries and trades in which trade unionism is an important factor (and particularly in the high-pay, skilled trades) through outright discrimination against nonwhites; (2) to reduce the opportunities for the Negro to move to the higher-paid skilled or supervisory positions, again through outright discrimination; and (3) to reduce generally the opportunities for the Negro to find employment in union-covered industries and trades through (a) the raising of wage rates above what the market would have brought into being, and (b) the insistence on equal pay for equal work. Admittedly, some Negroes have shared in the higher incomes associated with union pressures on employers; on balance, though, the Negro has probably been a significant loser from the growth and present strength of trade unionism in the American economy.
Welfare legislation, minimum wages, maximum work hours, and the like have minimized the economic function of the conglomerations of poor-but-willing people in our cities. Similarly, the goad of hunger has been mitigated by the rising level of welfare payments. In Newark a woman with three children lives very badly on welfare payments, but these nevertheless average somewhere around $300 to $350 per month. To live at the same level, a man with a wife and three children would have to make about $5,500 a year. For unskilled labor, that sort of money just isn’t available.
Rule No. 2: Property Rights and Control
his right to
his, B’s property. The freedom of your fist ends at my nose; the freedom to use private property ends at the property line. Spillovers from A’s actions that affect B’s use of his property are a direct violation of the right of property.
The Federal Bulldozer,*79 or the following pages from the Jane Jacobs book:
There is a wistful myth that if only we had enough money to spend—the figure is usually put at a hundred billion dollars—we could wipe out all our slums in ten years, reverse decay in the great, dull, gray belts that were yesterday’s and day-before-yesterday’s suburbs, anchor the wandering middle class and its wandering tax money, and perhaps even solve the traffic problem.
But look what we have built with the first several billions: Low-income projects that become worse centers of delinquency, vandalism and general social hopelessness than the slums they were supposed to replace. Middle-income housing projects which are truly marvels of dullness and regimentation, sealed against any buoyancy or vitality of city life. Luxury housing projects that mitigate their inanity, or try to, with a vapid vulgarity. Cultural centers that are unable to support a good bookstore. Civic centers that are avoided by everyone but bums, who have fewer choices of loitering places than others. Commercial centers that are lack-luster imitations of standardized suburban chain-store shopping. Promenades that go from no place to nowhere and have no promenaders. Expressways that eviscerate great cities. This is not the re-building of cities. This is the sacking of cities.
That such wonders may be accomplished, people who get marked with the planners’ hex signs are pushed about, expropriated, and uprooted much as if they were the subjects of a conquering power. Thousands upon thousands of small businesses are destroyed, and their proprietors ruined, with hardly a gesture at compensation. Whole communities are torn apart and sown to the winds, with a reaping of cynicism, resentment and despair that must be heard and seen to be believed.
Explicit Ownership, No Zoning
what form the remedy is to take. To the charge that this is going to “cost a great deal,” I reply that the cost is already being assessed—but it is being assessed in part against innocent third parties. The cost should be borne by the users of the goods and services involved, not by unwilling recipients of smoke, irritants, and noise.
was a commons and not the private property of any one person or group. Should a given pond of water be used for boating or for fishing or as a wild game preserve or as a focal point for home sites or as a source of a cooling agent for a generating plant? Permit private ownership of the lake and such questions are readily resolved by the simple process of competitive bidding. And if the people of the city, who want more electric power, outbid the fishermen, so be it. As such questions are now decided, a few hundred (upper-income?) fishermen and nature lovers may be able to secure the lake as a fishing reserve at no cost to themselves and even persuade the state to provide the fish as well.
Rule No. 3: Only Minimize Coercion
*82 However, time will not permit any fuller exploration of this and related topics. Suffice it to say that it is precisely the areas where the state has stepped in that problems of quality, quantity, and cost are most in evidence; those goods and services relatively untouched by the dead hand of the state are precisely the ones about which we need not be concerned.
Nonmarket Pricing of Services
There have been a number of estimates of the full social costs involved in peak-hour use of high-capacity urban freeways to and from the CBD. One such estimate is that the costs commonly exceed 11 cents per vehicle-mile. Ordinarily, the only prices for specific trips on highways that motorists confront are the gasoline taxes they pay, amounting to no more than 1 cent per vehicle-mile. So the peak-hour motorist should really be paying a price for highway use which is ten (or more) times greater than the price he usually does pay, while the peak-hour transit rider’s fare should rise by much smaller proportions.
For the latter, an extreme case—for example, the construction of a new subway line in New York City to relieve overcrowding—might require a three- or four-fold increase in the fare. For peak-hour motorists, the extreme cases are truly fantastic. For example, if peak-hour users of the proposed third tube of the Queens-Midtown Tunnel in New York, required only for rush-hour traffic, had to pay its full costs, the indicated toll would be at least $5, compared to 25 cents at present.
Thus, the highly dispersed form of residential development characteristic of most American urban areas, involving heavy auto use even for commuting to work is not necessarily independent of changeable transportation characteristics. If auto use were no longer faster, more comfortable, and cheaper, it is a fair bet that some consumers would choose other transport modes and some of these would alter their residential location choices as well.
Summary: Toward the Good City
per se for there to be created a single, objective, meaningful definition or description of the Good City. I have questioned whether it would be possible by any means whatsoever to construct such a city, even were it possible to define it in advance.
The Death and Life of Great American Cities, and it relates to the “grew-like-Topsy” evolution of a given section of the city of Boston.
Twenty years ago, when I first happened to see the North End, its buildings—town houses of different kinds and sizes converted to flats, and four- or five-story tenements built to house the flood of immigrants from Ireland, then from Eastern Europe and finally from Sicily—were badly overcrowded, and the general effect was of a district taking a terrible physical beating and certainly desperately poor.
When I saw the North End again in 1959, I was amazed at the change. Dozens and dozens of buildings had been rehabilitated. Instead of mattresses against the windows there were Venetian blinds and glimpses of fresh paint. Many of the small, converted houses now had only one or two families in them instead of the old crowded three or four. Some of the families in the tenements (as I learned later, visiting inside) had uncrowded themselves by throwing two older apartments together, and had equipped these with bathrooms, new kitchens and the like. Mingled all among the buildings for living were an incredible number of splendid food stores, as well as such enterprises as upholstery making, metal working, carpentry, food processing. The streets were alive with children playing, people shopping, people strolling, people talking.
I could not imagine where the money had come from for the rehabilitation, because it is almost impossible today to get any appreciable mortgage money in districts of American cities that are not either high-rent, or else imitations of suburbs. To find out, I went to a bar and restaurant and called a Boston planner I know.
“Why in the world are you down in the North End?” he said. “Money? Why, no money or work has gone into the North End. Nothing’s going on down there. Eventually, yes, but not yet. That’s a slum!”
“It doesn’t look like a slum to me,” I said.
“Why, that’s the worst slum in the city. It has two hundred and seventy-five dwelling units to the net acre! I hate to admit we have anything like that in Boston, but it’s a fact.”
“Do you have any other figures on it?” I asked.
“Yes, funny thing. It has among the lowest delinquency, disease, and infant mortality rates in the city. It also has the lowest ratio of rent to income in the city. Boy, are those people getting bargains. Let’s see … the child population is just about average for the city, on the nose. The death rate is low, 8.8 per thousand, against the average city rate of 11.2. The TB death rate is very low, less than 1 per ten thousand, can’t understand it, it’s lower even than Brookline’s. In the old days the North End used to be the city’s worst spot for tuberculosis, but all that has changed. Well, they must be strong people. Of course, it’s a terrible slum.”
“You should have more slums like this,” I said. “Don’t tell me there are plans to wipe this out. You ought to be down here learning as much as you can from it.”
“I know how you feel,” he said. “I often go down there myself just to walk around the streets and feel that wonderful, cheerful street life. Say, what you ought to do, you ought to come back and go down in the summer if you think it’s fun now. You’d be crazy about it in summer. But of course we have to rebuild it eventually.
We have got to get those people off the streets.”
Sick Cities: Psychology and Pathology (Baltimore: Penguin Books, 1963), p. 20.
The Death and Life of Great American Cities (New York: Vintage Books, 1961), pp. 220-21.
An Essay on the History of Civil Society, 1st ed. (1767), p. 187.
Individualism and Economic Order (Chicago: University of Chicago Press, 1948) pp. 6-8.
The Coming Aristocracy (Irvington, N.Y.: Foundation for Economic Education, 1969), pp. 142-49.
Journal of Law and Economics, V (October 1962): 103-9.
An American Dilemma (New York: Harper, 1944), p. 297.
Economics, 7th ed. (New York: McGraw-Hill, 1967), p. 377.
The Public Interest, 25 (Fall 1971): 17.
The Federal Bulldozer (Cambridge: MIT Press, 1964).
Great American Cities, pp. 4-5.
Economics and Urban Problems, (New York: Basic Books, 1970), pp. 143-4.
Economics and Urban Problems, pp. 9-10.
Great American Cities, pp. 9-10.