Arts & Letters
Movies
John Hospers
Testament
Testament begins, much like Ordinary People, with some happy incidents in the life of a "typical" California family—husband (William Devane), wife (Jane Alexander), and three children. Suddenly, without warning, comes news that the entire East Coast has been wiped out by nuclear blasts, and then San Francisco and Los Angeles. The small town in central California in which the scene is set remains, for the moment, relatively unscathed.
At first nothing much happens; school and work go on as before, except that there is no transportation and food must be rationed. But over a year's stretch of time the effects of fallout gradually accumulate: Many die of radiation sickness, including two of the family's three children. Soon there are no more physicians available, nor any electricity or fuel. No attempts to make contact with the outside world are successful. Increasingly people fall ill and die.
Jane Alexander, in a remarkably sensitive performance, tries to hold her dwindling family together amidst incidents such as friends stealing from each other. But in the end there is nothing, and we know that all will soon give up their struggle for life.
Everything is underplayed, as it was in a similar doomsday film, On the Beach. We are often left to infer what tragic events have occurred rather than being shown them. But the story is more remarkable for what it is about than for the way it is handled—not that the latter is inept or insensitive, only that it is not remarkable.
We are not told from what nation the blasts came, or whether there was retaliation—none of this seems to matter. (Apparently there were no follow-up blasts.) Nor are any solutions suggested. The film, though it will be used by "freeze" advocates (both unilateral and bilateral) to bolster their position, is just as compatible with a policy of deterrence to prevent such catastrophes as the film depicts. We are simply shown (with how much accuracy it is difficult to determine) what the aftereffects of a nuclear blast are, and then left to draw our own conclusions. It is doubtful that any conclusion already arrived at will be altered by seeing this film.
Tomorrow
A modest film likely to be lost in the scuffle is Tomorrow, based on William Faulkner's short story. Not since the remarkable but unremarked film of the 1950s Intruder in the Dust has a Faulkner story been so sensitively brought to the screen. Robert Duvall, in the title role as the Mississippi dirt-farmer whose exterior is so impassive that he never seems to have any emotions at all, is remarkable in an authentic and beautifully controlled performance. To see the repressed emotions inside him well up as he takes in a strange girl, assists at the birth of her child, and raises the child as his own when the girl dies, is a revelation to the viewer.
Tomorrow is filmed, as it should be, in black and white, but the black seems (whether deliberately or not) to be washed out and faded. Moreover, the film is primarily a mood piece, and there is so little action—or rather it is so slow in developing—that most audiences, not attuned to the sensitive portrayal of character, will tend to lose patience with it. But the fault is theirs, not the film's.
L'Etoile du Nord
L'Etoile du Nord is a little gem of a picture. It is framed around a murder mystery—but it is actually not much of a mystery, nor is there much suspense. The charm of the picture lies in the subtle interactions of the various characters: the middle-aged woman (Simone Signoret), moral, respectable, devoted to her husband, yet drawn strangely to the man who comes to her boarding house; the man (Philippe Noiret), who affects in different ways the lives of everyone there; the woman's two daughters, one a street trollop and the other, under-age, secretly sleeping with the house boarders; and finally the motley crew of boarders. Each of them is nicely individualized. Simone Signoret and Philippe Noiret give beautifully restrained performances in the main roles.
There is very little high drama and few dramatic confrontation scenes. Everything is understated, but the fine shades of characterization come out more effectively than in most American films. It is all done with minimal cues, which in most American pictures are either absent or so grossly overdone as to be too obvious. Though not pretentious, this is a study in human nature that rings true, and the combination of character and situation make it thoroughly enjoyable to see.
John Hospers is the author of Understanding the Arts. He teaches philosophy at the University of Southern California and is the editor of the Monist.
Books
Inflating Taxation
Tom Bethell
Is Inflation Ending? Are You Ready?, by A. Gary Shilling and Kiril Sokoloff, New York: McGraw-Hill, 1983, 256 pp., $17.95.
To answer the coy question in the title of their book, Gary Shilling and Kiril Sokoloff respond that, yes, inflation is ending…probably. I think they are right (probably), for reasons I have discussed in REASON (Viewpoint, May and August 1983). Nevertheless, there is much to disagree with in this book. Explorers may come out at the right place, but it does not follow that their map reading was impeccable en route.
The authors' main point, really, is that the principal cause of inflation is government spending. This is controversial, but in a very broad sense it is at least approximately true. Further, the authors are right to suggest that the electorate would like to bring spending under control; are fed up with politicians; think "balancing the budget" means cutting spending, not raising taxes; don't think government solutions work any more; and collectively are more worried about inflation than about unemployment.
(This last point was reaffirmed by Margaret Thatcher's impressive reelection in Britain last June in the face of high unemployment, at a time of declining inflation. The news media have been particularly remiss in trying to convince us that unemployment is more threatening to incumbent politicians than it really is.)
All these things I can assent to. Nevertheless, there is a stubborn, contradictory fact, which logically should have played havoc with the Shilling-Sokoloff thesis. President Reagan, elected to bring government under control, has not really succeeded at all. Government spending as a percentage of the gross national product (GNP) is now 25 percent, up from 22.5 percent when he was elected. In 1981 federal spending for fiscal '84 was projected at $758 billion. Now, two years later, we can see that it is going to be $100 billion higher than that, even though inflation has declined in the interim. Also, reductions in income tax rates have been offset at all income levels by bracket creep and Social Security tax hikes. A massive Social Security tax increase is taking effect on January 1.
In the face of this, anyone who believes, as the authors do, that "we can at least look forward to a reduction in the government's share of the economic pie as the private sector grows faster than government spending" is an optimist. Nevertheless, inflation has come down and may stay down. Why? An important reason, as the authors say, is that lenders were fooled by inflation for quite a while but are no longer. They now demand and receive a rate of interest that is higher than inflation. Real interest rates, the authors add, "will be kept high by uncertainty on the part of lenders.…When a structural shift like this takes place, it takes some time to change it." True. And high real interest will prevent the inflation bird from getting off the ground.
Now, what about government spending? The crucial variable is not the magnitude of resources successfully captured by the government but the magnitude of general discouragement accompanying such capture. The authors never quite seem to grasp this. Government spending does not provide us with a true reading of the burden of government, although on average it may often reflect it. Very high tax rates, as in Bangladesh, can collect low revenues, and such governments can falsely appear to be imposing a small burden on the economy.
The authors write: "The federal government transferred purchasing power from the private sector to itself by putting excess demand in the economy, which was manifested by inflation. Then Washington paid for this rising spending by squeezing out of the private sector the expanded tax revenues that resulted from inflation."
I would have rewritten this: "The federal government transfers purchasing power from the private sector to itself by threatening to put people in jail if they don't pay up. If the government then tries to take too much money, people get discouraged and stop working. Fewer things are made, and those that are made cost more. Furthermore, if you believe Keynes's 'balanced-budget-multiplier' argument, you can also say that the transfer of resources from rich people's savings accounts to poor people's checking accounts increases aggregate demand—which can be inflationary."
In short, it is high taxation that is inflationary, not (necessarily) high government spending. This has been well illustrated in the United States in the past three years. Spending has gone way up but taxation has not. Inflation has come down. Those who are curious about the future course of inflation should keep their eye on the Senate Finance Committee and the House Ways and Means Committee, where tax bills originate, not on the appropriations committees. It is the main weakness of this book that the authors fail to take note of the connection between inflation and taxation. They may think that government spending is a good approximation of, or "proxy" for, taxation, but that is incorrect. A country could have fairly high government spending, paid for by a combination of borrowing and low marginal tax rates, without any inflation.
On the other hand, the authors are correct to say that it is simplistic merely to blame inflation on "the money supply." It is true that a rise in the money supply will accompany inflation, but this rise is almost always the response to some other, prior problem that was the true cause of the inflation. The increase in the money supply is thus a kind of lubricant, oiling an economy whose gears are not meshing properly. Our position today, as the authors point out in different words, is that this monetary lubricant can no longer be rationally applied to the machine, because after so much use it now has perverse effects that merely exacerbate the original problem. It is no longer possible to push interest rates down (except for very short periods) by turning on the monetary spigots.
There are many other good things in this book, which I would recommend to all students of inflation, one of the great problems of our time. Nevertheless, the problems of government spending and taxation do need to be differentiated.
Contributing Editor Tom Bethell also writes for National Review and Washington Monthly.
Jeremiah or False Prophet?
Jane M. Orient
Algeny, by Jeremy Rifkin, New York: Viking Press, 1983, 541 pp., $14.75.
The founder of the Moral Majority, the president of Reconstructionist Rabbinical College, many Catholic bishops, and the president of the National Council of Churches have all endorsed political gadfly Jeremy Rifkin's proposal to clamp down on biotechnology research: "Resolved, that efforts to engineer specific genetic traits into the germline of the human species should not be attempted." Algeny, the far-reaching moral and ecological argument behind this limited statement, should be required reading for all clerics.
Algeny is analogous to alchemy. Alchemy harnessed fire, enabling man to transform nature. Algeny applies cybernetics, allowing humankind to manipulate even living beings for its own purposes. Biotechnology marks a watershed as dramatic as the Industrial Revolution in which, according to Rifkin, organisms will be visualized as mere programs, "desacralized" along with the inanimate universe.
In Rifkin's view, to justify biotechnology as the next natural stage in evolution is to repeat Darwin's error of creating a model that simply rationalizes the evils of society. Darwin allegedly imposed his vision of competitive forces in England on the ecology of the Galapagos Islands. Rifkin attributes the acceptance of Darwinism to the eagerness of laissez-faire capitalists to certify their own morality, rather than to scientific evidence. In his murky theorizing about the origin of species, Rifkin postulates that species are "inviolate," thereby flaunting his ignorance of bacteriophage and other viruses, from which we learned about the transfer of genetic material from one species to another.
Although Rifkin's attack on evolution may appeal to fundamentalists, he has no more in common with creationists than evolutionists do. The Biblical story and the tree of life sketched by evolutionists both have the human species at the pinnacle, with nature organized hierarchically. Rifkin, however, believes that "all of life begins…[in] the place…where there are no hierarchies, no pecking orders, only relationships and mutual dependencies." Rifkin does like one idea from the book of Genesis—man must not try to become godlike by eating the fruit of the Tree of Knowledge. However, he sees in knowledge only the evil, not the good.
Like many who oppose research in biotechnology, Rifkin cites a parallel with the discovery of the atom's secrets. In his earlier book, Entropy, he explained persuasively why nuclear power is needed to support current population levels, while rejecting it all the same. Rifkin forgets that we don't need nuclear energy to level cities: Genghis Khan, the Roman legions, and the Royal Air Force did just as much damage as the Hiroshima bomb, though with greater human effort. Similarly, we don't need genetic engineering to have eugenics. Plato, Campanella, and Hitler were ignorant of gene sequencing. Their schemes required only an omnipotent government.
We do, however, need biotechnology to help feed the world, to develop bacteria capable of detoxifying wastes, and to manufacture monoclonal antibodies or superior vaccines. But all of these activities, like livestock breeding in Darwin's day, are profitable, not sacrificial.
Implying that he favors diversity and democracy, Rifkin raises the specter of an evil power engineering the human race, eliminating "undesirable" traits like problematic behavior. Someone who undertakes to advise Congress, as Rifkin has set out to do, ought to understand the difference between curing sickle cell anemia (an excruciatingly painful, hereditary disease caused by the substitution of a single amino acid in a single protein) and influencing complex characteristics like behavior. The still-speculative ability to do the first by no means guarantees the feasibility of the second. Nevertheless, Rifkin is willing to sacrifice the victims of genetic diseases, lest we risk extinction due to a germline that is too perfect; at the same time, he is supposedly opposed to "physical perpetuation at all costs." In seeking to halt advances in knowledge, not just specific applications of technology, what kind of government must Rifkin really support? Even the Spanish Inquisition failed to prevent the discoveries of Galileo and Columbus.
Jeremy Rifkin is no secular humanist. Possibly, that explains his appeal to religious leaders. Yet he is no Christian, either. Rather, he is the prophet of a new religion. "The resacralization of nature stands before us as the great mission of the coming age," he intones. We must acknowledge our debt of existence to the cosmos, by "sacrificing to the cosmos the measure of the sacrifices the cosmos made for us." Rifkin is not speaking of burnt offerings of pigeons and bullocks. "Pure sacrifice, collectively expressed and generationally sustained, has never yet occurred anywhere on earth." Even the Canaanites' sacrifices to Moloch had an ulterior motive, providing security for the future, which we must renounce. Furthermore, throwing a few babies into the maw of the idol would not suffice—Rifkin states unequivocally that a vast reduction in population is required for the "low entropy" age. The specific method is to be determined.
What apocalypse awaits us if we fail to give up the benefits of science? Our physics would hasten the heat death of the universe. As Rifkin cautions against hubris, he worries about fission reactors and forgets about stars. Our biology would make the world lonely "by stripping one living thing after another of its identity." Fulminating against Darwin's anthropomorphic "cosmology" early in the book, he ends with the immortal line, "The cosmos wails."
The plaudits of today's churchmen notwithstanding, a prophet of Israel would have recognized Rifkin as the idolater he is: "They prophesy unto you a false vision and divination, and a thing of nought, and the deceit of their heart" (Jeremiah 14:14).
Jane Orient is a medical doctor practicing in Tucson, Arizona.
Bridge to Freedom
Barbara Branden
Double Crossing, by Erika Holzer, New York: G.P. Putnam's Sons, 1983, 291 pp., $13.95.
Over the story of Double Crossing and over the lives of its protagonists looms the steel span of the Glienicker Bridge, a span that links—and divides—two worlds and three people. On one side of the bridge flicker the lights of West Berlin, beckoning between the concrete mounds of the Glienicker's watchtowers; on the other lies the gray, desolate terror of Potsdam, East Germany. On one side are hope, and freedom, and life; on the other, despair, slavery, and the bloodstains of murdered men who had dared attempt to escape their captors.
Moving inexorably toward the bridge, and toward the final confrontation that will be the climax of their lives, are: Adrienne Brenner, American, medical journalist—a woman to whom the issues of freedom and human rights blaze with a consuming intensity; her husband, Dr. Kurt Brenner, world-famous cardiac surgeon, sophisticated, opportunistic—a man terrified of the emerging secrets of his past; and Dr. Kiril Andreyev, citizen of Moscow, whose 47 years have been a single, patiently plotted, impassioned thrust toward freedom—and who will find, when he meets Adrienne Brenner, that his passion has intensified but his patience has burned itself out. It is on the Glienicker that Adrienne, Kurt, and Kiril will create the meaning of their pasts and seal their futures, as Kiril involves all three in his last desperate hope.
Erika Holzer has written a brilliantly suspenseful novel that lives and breathes her own passion for justice and the passion of totalitarian subjects everywhere for the freedom they are denied. Double Crossing is much more than a suspenseful political adventure, because it is told in intensely personal, human terms. In too many novels of East versus West, the reader feels he is reading a cops-and-robbers tale that could have been set in any place and at any historical time; but in Double Crossing, we see the souls of men and women who are free and the souls of men and women who live under terror.
We see those who have given in to slavery and given up, crushed by a system they cannot comprehend. We see those who embrace the system, choosing to create anguish in a vain effort to avoid suffering it. We see the brutes who willingly obey because they cannot conceptualize a different life. We see the day-by-day nightmare of life lived in a society in which even those most beloved cannot be trusted, in which even one's most private thoughts cannot be trusted. We see the gallantry of those who stand against the terror, clinging to the spirit of freedom. And, in the East-West medical conference that sets the stage for the story's final events—a conference that, like all such "exchanges," is staged for Soviet propaganda purposes—we see the treason perpetrated by free men when they appease totalitarian regimes and so strengthen the fist that hammers at human lives and hopes.
Impeccably researched, fast-moving, intricately plotted, Double Crossing (an alternate selection of the Literary Guild) is an important novel. I recommend it to all those who are concerned with liberty and to all those who seek fiction that translates the ideas of liberty into character, story, and suspense.
Barbara Branden, a former associate of the novelist-philosopher Ayn Rand, is currently writing a biography of Rand.
Water—An Impending Crisis?
Steve H. Hanke
Water Rights: Scarce Resource Allocation, Bureaucracy, and the Environment, edited by Terry L. Anderson, Cambridge, Mass.: Ballinger; San Francisco: Pacific Institute for Public Policy Research, 1983, 348 pp., $35.00/$10.95.
Water: The Nature, Uses and Future of Our Most Precious and Abused Resource, by Fred Powledge, New York: Farrar, Straus, & Giroux, 1982, 423 pp., $14.95.
We have all heard about the nation's impending water crisis. Now we have two books that address this topic. Although both volumes deal with water, they do so with dramatically different styles and substantive arguments. Powledge's book is laced with analytical nonsense, but it is well written and retains the reader's attention. By contrast, Anderson offers a technically sound anthology that is, unfortunately, more powerful than most sleeping pills.
Let's first examine the arguments. Powledge opines that we are "running out" of water because we are either polluting what we have or wasting it. "Exploiters" are the problem. Of course, private industry is on Powledge's list. He characterizes the captains of industry as being, at best, amoral on the subject of water. Powledge leads us to believe that Love Canal was a typical private vice. (Absent from his references is REASON's careful dissection of government's role in the leakage of chemicals at Love Canal, in "Love Canal: The Truth Seeps Out," by Eric Zuesse, Feb. 1981.) Moreover, he argues that "Love Canals" are found at virtually every industrial site in the country.
"Corporate agriculture" is another major exploiter. The agricultural sector is responsible not only for poisoning our water supplies with pesticides and herbicides but also for depleting our groundwater aquifers by using them to irrigate submarginal land.
"Speculators" who specialize in second homes and the creation of suburban sprawl are also encouraging the exploitation and waste of our water resources. But if you think Powledge specializes in pointing a finger at the private sector, you are wrong. He also castigates the public sector for not enforcing the environmental laws, engaging in economically wasteful and environmentally damaging pork-barrel projects, and not maintaining its leaking urban supply systems.
Powledge's solution for the water crisis is a brand of neopopulism in which the people become "educated," "aware" and "involved" in a grass-roots movement to force "good government" on the federal establishment. If this is done, we are led to believe that the federal government will not fail. Instead, it will act wisely to regulate, manage, and ration our nation's water. Not surprisingly, Powledge's diagnosis of the crisis and its cure have a familiar ring; they can be found in virtually all the popular media.
What is not so well known is the fact that the propaganda mills of the Soviet Union are busy turning out the same type of "analyses." For example, Vitaliy Kobysh's essay, "Our Blue Planet," which appeared in the March 2, 1983, edition of Moscow's Literaturnaya Gazeta, tells us:
When you live in New York and other U.S. cities, and not only U.S. cities, you become accustomed to buying pure water in the supermarket, paying a substantial price for it. Everything is simple: money for a commodity. Yet water and air, like human sympathy or smiles on the faces of a passerby or neighbor, should not, cannot be a commodity. If they are a commodity, then everything mankind has achieved with his technical revolution is not only not worth a penny but is simply pointless. But let us return to water. It is no news to anyone that many rivers, lakes and seas are turning into sewage collectors and the world's oceans are being polluted with oil, radioactive waste and toxic chemicals. In the past decade the annual volume of sewage in the world was over 450 cubic km. About 6,000 cubic km of fresh water was expended to dispose of it, which is approximately 40 percent of all the world resources from rivers' annual flow.
Vitaliy Kobysh concludes that there is only one "path to man's salvation. It is paved by socialism."
Karl Marx originally told us that capitalism would lead to pauperism. Since this assertion has not stood the test of time, the socialists and interventionists have changed their tune. Now they are telling us that capitalism will lead to environmental degradation and that a good dose of socialism will provide a sure-fire cure. Of course, they fail to disclose the environmental and health conditions that exist in socialist states.
Unlike former New York Times reporter Powledge, Anderson and Company fail to attract and retain the reader's attention. However, readers willing to expend the effort will find that this group of academics has done an excellent job of analyzing the problem. They clearly demonstrate that the lack of private property rights, ill-defined rights in water, restrictions on water transfers, administrative allocation and rationing schemes, price controls, and a host of other interventionist policies guarantee that water is not allocated to its highest and best use. This economic waste reduces the value of our nation's water resources.
Moreover, these interventionist policies create incentives that must lead to a crisis:
• Water is underpriced, which means that the quantities demanded exceed the supplies offered.
• To fill this demand-supply gap, the government must use general revenues to subsidize additional private supplies or finance public works.
• As long as there are no constraints on general revenues that can be used for water development and as long as the water resources are available for development, there will be no crisis, although waste will occur.
• However, in a growing number of regions, we face either a general-revenue or water-resource constraint; hence, a water crisis.
For Anderson and his colleagues, the solution to the water crisis is to establish transferable private property rights in water resources and to remove governmental intervention. What is interesting about the analytical, property-rights, and free-market arguments presented in Water Rights is not that they are new—these ideas have been around, even in the water resources field, for a number of years—but that they have had so little impact on water-policy debates in the past. It should remind us of Frank Knight's conclusion that the teaching of economics is so ineffective that we ought to give up and allow economics departments to be abolished.
What is really needed in the water field is a book based on the concepts presented by Anderson and Company and written in Powledge's style. This could influence popular opinion in a productive way.
Perhaps we should take the spirit of Knight's reflections seriously and begin to teach what Ludwig von Mises defined as economics in a manner that allows it to influence public opinion. For no policy, regardless of its merit, can be sustained without the support of public opinion.
Steve H. Hanke is a senior fellow at the Heritage Foundation and Professor of Applied Economics at the Johns Hopkins University.
Derailing the Regulators
Peter Samuel
Railroads, Freight, and Public Policy, by Theodore E. Keeler, Washington, D.C.: Brookings Institution, 1983, 180 pp., $9.95 paper.
Railroads: Their Rise and Fall, by Herbert E. Bixler, Jaffrey Center, N.H.: Bixler, 1982, 115 pp., $7.95.
Railroads: The Free Enterprise Alternative, by Daniel L. Overbey, Westport, Conn.: Quorum Books, 1982, 225 pp., $29.95.
The Brookings Institution is supposed to be the haven of liberals during periods of Republican administration. And these liberals are supposed to decry the free market and to want to enhance the power of the state. In the case of railroads, this might mean tighter regulation or more-extensive government ownership.
But there is also a genuinely liberal (in the English, Smithian sense of the word) streak at Brookings, and Theodore Keeler's book reflects that. Railroads, Freight, and Public Policy is organized and written in scholarly boilerplate. Actually, it is an extremely good applied-economics textbook and deserves a place in libraries on regulation.
In his history of railroads, Keeler makes the noteworthy point that railroad regulation by government and the courts predates the creation of the Interstate Commerce Commission (ICC) in 1887 and derived from medieval guild thinking, which favored cartel arrangements rather than market competition. The precedent for railroad regulation had been established with turnpikes and canals. Railroad companies got various privileges such as land grants, loan guarantees, and protection from competition; in return, they were subjected to all kinds of control over prices and service.
Keeler argues that the regime of controls had already been established in the states, but I think he goes too far there. A case can be made that supposedly rationalist regulatory bureaucracies such as the ICC are worse in disrupting and distorting the workings of the market than are corrupt politicians and judges imbued with guild protectionist thinking and engaged in making deals for their friends. After all, it took the ICC to put major railroads out of business, thereby inflicting Amtrak and Conrail on the taxpayers. The ultimately fatal power that the ICC exercised over Penn Central was its refusal to allow the abandonment of service on some 9,000 miles of money-losing track. Rarely did the Tammany Hall types in the states go so far as to kill the goose that laid their golden eggs!
The economists' major argument for such regulation in the past has been that economies of scale are endemic to an industry like railroads and make it a "natural monopoly" such that there will, in the absence of regulation, be destructive price wars. On this theory, the bankruptcy of the smaller road will be inevitable, so monopoly will inevitably result. Though Keeler's chapter on this is not one of his best, he does conclude that any economies of scale are insufficient to support the natural-monopoly theory in most instances.
The effect of regulation is to politicize an industry and to move prices away from costs. The politically strong get their charges reduced at the expense of higher costs or worse services for others, and economic inefficiency results. Freight is carried by the wrong mode, by the less-efficient carrier. Some production that is economic does not pay because of inflated transport costs. Other production, which should not pay because it is uneconomic, pays only because of the subsidization.
The losses of real income from regulation can become enormous. Keeler puts losses to the economy from the distortions of regulation at "well over a billion dollars a year" in the 1970s. He approves of the deregulation that has occurred so far but goes further, wanting the industry to be "freed of its medieval shackles of common carrier service obligations."
Herbert Bixler's book is the most compelling reading of the three, being a great piece of pamphleteering. It has lots of anecdotes and plenty of examples and is well-written. Much of it is intriguing historical discussion of how a revolutionary technological innovation helped transform America, creating new industries and establishing new work habits and conventions (the four time zones were decided by railroad agents), but was increasingly blunted as a force for progress by politicization.
The 19th century, prior to detailed regulation, saw amazing advances in railroad technology and constant initiatives to improve service and efficiency and to lower costs. Standardization occurred where it was beneficial—standard couplers, rail gauges, clearance diagrams. Arrangements were made for coordinating through-trains and the interchange of cars and for processing waybills, so that nationwide service could be offered over many different railroads. By comparison, the railroads stagnated once detailed regulation was introduced.
In their innovative, expansive preregulation period, however, the railroad entrepreneurs became populist villains. "Robber barons" was their sobriquet. Stock frauds and corruption with politicians were so common that the verb "to railroad" came to mean the improper forcing of a privilege through the legislature. That, of course, is mixing politics with business, but was popularly taken as an argument for more politics.
In his final chapter, "What Might Have Been," Bixler suggests that in the absence of regulation we might have had high-speed passenger trains. Trains ran over 100 miles per hour in the 1890s, but if anything, train speeds have declined since then. And with adequate capitalization, modern trains and track, high speeds and service, the trains might never have lost passenger traffic the way they did to air. In the hothouse of regulation, labor unions were able to hamstring the industry with outrageous work rules and burden it with high costs. To this day, many freight trains are manned by five when one could do the job.
Innovation, adequate capitalization, reasonable costs—these might have kept business for the railroads, which has been lost apparently irrevocably to more competitive modes. Bixler hypothesizes that free railroads might by now have 150-mph passenger service and 120-mph freight service. Air travel would be less congested. Highways would be cheaper to build and more pleasant to drive on in the absence of so many long-distance trucks.
Daniel Overbey's book is the most dispensable of the three. It is pedantic and has only one idea in it—that the fixed way of railroad trackage should be owned by one entity and hired for use to other carriers who might own their own rolling stock or act in competition with other carriers, all on the same track. Railroads would be like highways, with a multiplicity of operators running over them.
The idea is feasible. Indeed, to some extent it is done now—by Amtrak! Over most of its mileage, Amtrak runs on lines owned by others.
Insofar as regulations prevent owners of tracks from hiring them out to others, or disposing of rolling stock, they should be abolished. There may be a good economic case for separate entities owning and maintaining track, and running trains, as Overbey says. It may increase competition.
But Overbey's is not necessarily a free-enterprise case. Genuine advocates of the free market do not lay down the rules about how industry should be organized. In doing that, Overbey is a planner, not a free-enterpriser.
Peter Samuel is a journalist with the Murdoch newspaper group in Washington, D.C. He taught economics in Melbourne and wrote on public policy for over 15 years for the Bulletin, Australia's leading weekly magazine, and is a frequent contributor to REASON.
Book Hints
Lynn Scarlett
While no one can ever be guaranteed a path to riches, expert investment analysts can help point the way. Where are the investment opportunities of the 80s?
In High Tech Investing (New York: Times Books, 1983, 283 pp., $17.65) Rodger Bridwell identifies money-making potential in six high-tech growth areas: mini- and microcomputers; computer-aided design and manufacturing devices; industrial and service robots; software programs; biochemical products; and ultramodern electronics. Overseas markets provide another frontier for American investors to explore.
In International Investment Opportunities (New York: William Morrow, 1983, 375 pp., $17.95) Adrian Day, an investment advisor and editor of a financial newsletter, analyzes a panorama of international investment opportunities. And a detailed account of Swiss banking and investment possibilities can be found in The Swiss System: How the Gnomes of Zurich Can Help Your Assets Grow Safely and Confidently (St. Thomas, Virgin Islands: Caribbean Overseas Enterprises, 1983, 196 pp., $29.95). The Swiss System features contributions by several leading Swiss banking and investment authorities as well as financial writers, among them Harry Browne.
For the reader interested in another area, The Metals Investment Handbook (Costa Mesa, Calif.: Common Sense Press, 1983, 171 pp., $25.00), by R.S. Taylor-Radford and John A. Pugsley, offers a well-researched review of industrial metals and their markets. On a less-exotic note, Gil Armen in Residential Real Estate (Englewood Cliffs, N.J.: Prentice-Hall, 1983, 301 pp., $9.95 paper) describes the benefits of investing in residential real estate in the 1980s and guides the reader through the investment process.
For those alarmed about all the recent talk about bank failures and their potential impact on investments, When Your Bank Fails (Princeton, N.J.: Amwell, 1983, 244 pp., $16.95), by REASON contributor Dennis Turner describes the scope and causes of current bank problems and suggests how individuals can protect themselves against a banking collapse.
Speaking of collapse, in the World Crisis in Social Security (Paris: Fondation Nationale d'Economique Politique; San Francisco: Institute for Contemporary Studies, 1982, 245 pp., $9.95 paper), edited by Jean-Jacques Rosa, various authors expose the international prevalence of the crisis faced by social security programs. Though the programs differ in details, they are confronting surprisingly similar problems.
For a look at welfare policies in general, David Green's monograph, The Welfare State: For Rich or for Poor? (London: Institute of Economic Affairs, 1982, 40 pp., distr. by Transatlantic Arts, Albuquerque, N.M., $4.75 paper) analyzes government welfare as a defective method of aiding the unfortunate.
Well-known medical journalist Harry Schwartz investigates and repudiates arguments in behalf of national health insurance in his monograph, National Health Insurance (Dallas: National Center for Policy Analysis, 1983, 56 pp., $5.00 paper). Another look at health care is provided by Clark Havighurst in his comprehensive critical assessment of regulatory policies in this field—Deregulating the Health Care Industry (Cambridge, Mass.: Ballinger, 1982, 500 pp., $37.50). Also arguing for free choice and free markets, Fred D. Miller, Jr., explores the infant formula controversy in Out of the Mouths of Babes (Bowling Green, Ohio: The Social Philosophy and Policy Center, 1983, 98 pp., $6.95 paper).