Arts & Letters

MOVIES

John Hospers

Silkwood

It's not supposed to matter aesthetically whether the book you're reading or the film you're seeing is a true story—just concentrate on it and consider its merits and demerits as a work of art.

Viewed in in this way, Silkwood is over-long, has numerous dead spaces, and isn't even particularly interesting except for the exceptional acting of Meryl Streep, Cher, and Kurt Russell. What makes people come to see it is that it's based on an actual event. The film is a kind of glossed-up documentary. And since real names of persons, places, and companies are mentioned, one seems entitled to infer that the story is true.

To what extent it is true is, however, a matter of hot dispute. According to the Los Angeles Weekly, the film exhibits cowardice in not presenting an all-out indictment of the Kerr-McGee Co. for purposely contaminating Karen Silkwood with plutonium and then killing her in a car "accident" to prevent her from testifying against the firm. But according to syndicated columnist Nick Thimmesch, "The fact is that Silkwood's crash was thoroughly investigated by all manner of authorities right up to the U.S. Congress. The conclusion was that there was no foul play, that it was a classic single-car driver-ran-off-the-road accident. Silkwood was under the influence of drugs at the time of the accident. Her autopsy revealed that she had .35 milligrams of methaqualone (per 100 milliliters of blood) in her blood…and 49.53 more mg. in her stomach. She had overdosed for months, and her physician had to confiscate drugs from her. Just two weeks before the fatal accident, she was injured when her car ran off the road in the same fashion."

As director Mike Nichols indicates onscreen at the end, nobody knows what really happened, but he does say that a posthumous blood test showed the presence of methaqualone in her. Perhaps he stayed neutral in order to avoid a lawsuit. Nevertheless, all the hints planted throughout the film are slanted against Kerr-McGee. The undertaker says that all the corpses from Kerr-McGee "look dead before they're dead"; Silkwood reads from a report that "there is no safe level of plutonium"; and a lab technician admits to her that he falsifies the X-rays that show whether or not there is any structural defect in the products he delivers to the breeder reactors in Hanford, Washington (which, if true, could have catastrophic effects).

But is it true? Silkwood, according to the film, had been preparing documents against the company on this, but in fact no documents were ever found. What is the truth of the matter? These, rather than puzzles about the film itself, are questions that linger in the audience's mind as they leave the theater. There are doubtless persons alive who do know, but since the viewer does not, the effect of the film is, to say the least, unsettling.

Even more unsettling, however, is the suspicion that readers and viewers are being made fools of in the whole affair. Though there has been very little attention to it in the press, a distinguished physicist, Prof. Bernard Cohen, has offered "to inhale, on TV, 1,000 particles of plutonium of any size that can be suspended in air, or to eat as much plutonium as any prominent critic will eat caffeine" (Petr Beckmann, Access to Energy, February 1984). Why has his offer never been accepted, nor even publicized? (According to Beckmann, Cohen "is being silenced and censored, not by the government, but by the media moguls whose mouths pay tribute to the freedom of the press even as their hands strangle it.") And if Cohen is right about plutonium, what happens to Silkwood's case?

The Right Stuff

Though more than three hours long, The Right Stuff is absorbing cinematic fare from beginning to end. It's a good old-fashioned type of film, full of courage and heroism and conquest over nature (not, for a change, over other people). It is, on the whole, a true story, beginning with the breaking of the sound barrier and ending with Gordon Cooper's orbiting around the earth. It includes in its scope John Glenn's first venture into space, but not the astronauts' trip to the moon.

Except for a few scenes containing gutter language, which are quite gratuitous, this film could have been made in the 1950s. (This is not a put-down but a compliment, since the general tenor of films was much more positive and upbeat then than now.) There is a contagious spirit of camaraderie developed among the astronauts. There is also their total dedication to their enterprise, a dedication that is most striking in John Glenn (portrayed by Ed Harris) and the lone flier (portrayed by Sam Shepherd) who, Gary Cooper style, shuns publicity but repeatedly risks his life in a plane to conquer new boundaries of the unknown. The result is that one emerges feeling good about the world and about man's hopes and dreams—not so much a feeling of patriotism as of unabashed admiration of courage and tenacity and idealism.

Though the film is long, it's difficult to think of scenes that should have been cut; it all hangs together. The only slightly jarring notes are the somewhat absurd caricatures of the military and of Lyndon Johnson as a craven publicity-seeker. But the shots of the flights, both in planes and in space capsules, are quite thrilling. There are fine atmospheric touches as well, such as Australian aborigines lighting fires to celebrate Glenn's orbiting the earth miles above their heads, even though it is something of which they have no conception.

The film is less a documentary than a celebration of heroic deeds, and it is done with élan, a strong sense of humor, and an underlying reverence. Most films today are made for the 15–25 age crowd who are their chief patrons; but The Right Stuffs audience consists mostly of adults who remember the events depicted. But if the kids stay away, it's their loss: this film is the right stuff for an enjoyable evening's entertainment, even a bit of inspiration.

Danton

The time is 1794, when the French Revolution has deteriorated to the Reign of Terror. Robespierre, architect of the Revolution, has become a virtual dictator, and now he sees his task as eliminating those revolutionists who disagree with his methods. First among them is Danton (Gerard Depardieu), a popular orator who believes in moderation and in keeping the Revolution true to its original course. But Robespierre believes that Danton, given free play, will destroy the Revolution (presumably by diverting allegiance from Robespierre himself) and orders him arrested and guillotined. Even so, he is ambivalent. "I face a dilemma," he says to his housemaid. "If I keep Danton alive, the Revolution is finished; if I kill him, the Revolution is also finished." (In the end, though not in the film, Robespierre also becomes a victim of the Revolution.)

The film is a searing indictment of political power misused. "Fearing the return of tyrants, they've become tyrants," says Danton. "We now have a tyranny worse than the monarchy." When Robespierre instructs the judge at Danton's trial, he tells him to find Danton guilty and justify it afterwards. The judge says, "You don't want a judge, you want an executioner!" and Robespierre agrees: "We send you the enemies of the Republic; your job is to destroy them." When Danton is on trial, he is asked whether he believes he is above the law and therefore a dangerous enemy of the people. He replies resoundingly, "The people have only one dangerous enemy, the government!"

At the beginning of Danton, a little boy is reciting for Robespierre the Articles of the Revolution. As a final irony, the movie ends with the same boy reciting the same articles, with Robespierre realizing that every one of the ideals they set forth has been betrayed.

Poland's director Andrzej Wajda may have intended this film as a parable on the current Polish situation (with Danton as Walesa and Robespierre as Jaruzelski), but actually the theme is a universal one: the rise of men to political power and the repeated use of this power as an instrument of evil. It dramatizes this theme with relentless driving energy. This film, together with La Nuit de Varennes, also about the French Revolution, are among the most powerful movies that made it to the theaters in 1983.

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

Battle for the Brain Machine

John McCarthy

The Fifth Generation: Artificial Intelligence and Japan's Computer Challenge to the World, by Edward Feigenbaum and Pamela McCorduck, Reading, Mass.: Addison-Wesley, 288 pp., $15.55.

Japan has replaced the Soviet Union as the world's second-place industrial power. (Look at the globe and be impressed.) However, many people, Japanese included, consider that this success has relied too much on imported science and technology—too much for the respect of the rest of the world, too much for Japanese self-respect, and too much for the technological independence needed for Japan to continue to advance at previous rates. The Fifth Generation Project is one Japanese attempt to break out of the habit of copying and to generate Japan's own share of scientific and technological innovations.

The idea is that the 1990s should see a new "fifth" generation of computers, based on "knowledge information processing" rather than "data processing." "Knowledge information processing" is a vague concept that promises important advances in the direction of artificial intelligence but is noncommittal about specific performance. Edward Feigenbaum and Pamela McCorduck describe this project in The Fifth Generation: Artificial Intelligence and Japan's Computer Challenge to the World. The authors predict that the project will meet its goals with substantial success and argue that the United States will fall behind in computing unless we make a similar coherent effort.

The Fifth Generation Project (ICOT is the Japanese acronym) is the brainchild of Kazuhiro Fuchi, of the Japanese government's Electro-Technical Laboratory. ICOT, while supported by industry and government, is an independent institution. Fuchi has borrowed from the leading Japanese computer companies about 40 engineers and computer scientists, all under age 35, for periods of three years. Thus the organization and management of the project is as innovative as one could ask. With only 40 people, the project is so far a tiny part of the total Japanese computer effort, but it is scheduled to grow in subsequent phases.

The project is planned to take about 10 years, during which time participants will design computers based on "logic programming," an invention of Alain Colmerauer of the University of Marseilles in France and Robert Kowalski of Imperial College in London, and implemented in a computer programming language called Prolog. They want to use additional ideas of "dataflow" developed at MIT and to make machines consisting of many processors working in parallel. As a result of this, some Japanese university scientists consider that the project still has too much tendency to look to the West for scientific ideas.

Making parallel machines based on logic programming is a straight-forward engineering task, and there is little doubt that this part of the project will succeed. The grander goal of shifting the center of gravity of computer use to the intelligent processing of knowledge is more doubtful as a 10-year effort. The level of intelligence to be achieved is ill-defined. The applications also are ill-defined. Some of the goals, such as common-sense knowledge and reasoning ability, require fundamental scientific discoveries that cannot be scheduled in advance.

My own scientific field is making computer programs with common sense, and when I visited ICOT, I asked who was working on the problem. It was disappointing to learn that the answer was "no one." This is a subject to which the Japanese have made few contributions, and it is a research subject probably not suited to people borrowed from computer companies for three years. Therefore, one can't be optimistic that this important part of the project goals will be achieved in the time set.

The Fifth Generation Project was announced at a time when the Western industrial countries were ready for another bout of alarmist claims; the journalists have tired of the "energy crisis"—not that it has been solved. Even apart from the recession, industrial productivity has stagnated; it has actually declined in industries heavily affected by environmental and safety innovations. Meanwhile, Japan has taken the lead in automobile production and in some other industries.

At the same time, artificial-intelligence research was getting a new round of publicity that seems to go in a seven-year cycle. For a while every editor wants a story on artificial intelligence and the free-lancers oblige, and then suddenly the editors get tired of it. This round of publicity has more new facts behind it than before, because expert systems are beginning to achieve practical results, that is, results for which companies will pay money.

Therefore, the Fifth Generation Project has received enormous publicity. Western computer scientists have taken it as an occasion for spurring on their colleagues and their governments, using apocalyptic language that suggests that there is a battle to the death—only one computer industry can survive, theirs or ours. Either we solve all the problems of artificial intelligence right away or they walk all over us.

Edward Feigenbaum is the leader of one of the major groups that has pioneered expert systems with programs applicable to chemistry and medicine. He is also one of the American computer scientists with extensive Japanese contacts and extensive interaction with the Fifth Generation Project. Pamela McCorduck is a science writer with a previous book, Machines Who Think, about the history of artificial-intelligence research.

The Fifth Generation contains much interesting description of the Japanese project and American work in related areas. However, Feigenbaum and McCorduck concentrate on two main points. First, knowledge engineering will dominate computing by the 1990s. Second, America is in deep trouble if we don't organize a systematic effort to compete with the Japanese in this area.

While knowledge engineering will increase in importance, many of its goals will require fundamental scientific advances that cannot be scheduled to a fixed time frame. Unfortunately, even in the United States and Britain, the hope of quick applications has lured too many students away from basic research. Moreover, our industrial system has serious weaknesses, some of which the Japanese have avoided. For example, if we were to match their 40-engineer project according to output of our educational system, our project would have 20 engineers and 20 lawyers.

The authors are properly cautious about what kind of an American project is called for. It simply cannot be an Apollo-style project, because that depended on having a rather precise plan in the beginning that could be seen all the way to the end and did not depend on new scientific discoveries. Activities that were part of the plan were pushed, and everything that was not part of it was ruthlessly trimmed. This would be disastrous when it is impossible to predict what research will be relevant to the goal.

Moreover, if it is correct that good new ideas are more likely to be decisive in this field at this time than systematic work on existing ideas, we will make the most progress if there is money to support unsolicited proposals. The researcher should propose goals and the funders should decide how he and his project compare with the competition.

A unified government-initiated plan imposed on industry has great potential for disaster. The group with the best political skills might get its ideas adopted. We should remember that present-day integrated circuits are based on an approach rejected for government support in 1960. Until recently, the federal government has provided virtually the only source of funding for basic research in computer technology. However, the establishment of industry-supported basic research through consortia like the Microelectronics and Computer Technology Corporation, set up in Austin, Texas, under the leadership of Admiral Bobby Inman, represents a welcome trend—one that enhances the chances of making the innovations required.

John McCarthy developed the computer language Lisp, invented computer timesharing, and founded Stanford University's Artificial Intelligence Laboratory, where he works.

Muddled Musings About War and Peace

Eric Mack

Justice and War in the Nuclear Age, edited by Philip F. Lawler, New York: University Press of America, 119 pp., $15.95/$5.95.

The American Catholic bishops' Pastoral Letter on War and Peace is a work of major intellectual confusion. The letter's major argument is that: (1) there are no morally significant differences between possible strategies for nuclear defense; (2) some strategies, for example, those that involve direct, massive, nuclear destruction of an aggressor's civilian population, are grossly immoral; and (3) therefore, all possible strategies for nuclear defense are grossly immoral.

On the basis of this argument, the bishops should have called for unilateral nuclear disarmament. However, in a profound albeit understandable failure of will, they "conditionally" accepted our currently structured strategic forces as a basis from which—somehow, someday—mutual disarmament might be achieved. But in refusing to allow any significant moral distinctions between types of strategic policies, the bishops open themselves to the stark choice between tacit surrender to the Soviet Union and surrender of their own principles. When so confronted they decided to surrender their principles—of course only in a strictly conditional way.

Nor could the bishops formulate a consistent attitude toward just-war theory. This is a particular body of moral reasoning—about the nature of legitimate war and the scope of permissible action in the course of legitimate war—that has largely been developed by esteemed Catholic philosophers and theologians. At the core of this doctrine is the idea that while defensive acts that directly attack innocent bystanders are unjustifiable, defensive acts directed at aggressive forces can be justified even if innocent bystanders are injured or killed as a side effect of such targeted counterattacks. Just-war theory is, therefore, potentially embarrassing to the bishops, precisely because it is largely devoted to drawing moral distinctions between different types of defensive strategies and thus points to a rejection of the first premise of the bishops' major argument.

The bishops handled this confrontation with their own moral tradition no better than their choice between two forms of surrender. Sometimes they insisted that it was just-war theory itself that showed them that all possible strategies for nuclear defense were impermissible. And, at least as often, they held that the existence of nuclear weapons had made any appeal to this theory absurd.

The collection of essays in Justice and War in the Nuclear Age was issued by the American Catholic Committee out of a concern "about the misinterpretation of Catholic teachings," especially by the drafters of the Pastoral Letter. I share the committee's concern. For I think that substantial portions of just-war theory are correct and that, particularly from the bishops, this doctrine deserves a far more informed and respectful treatment than it received. Nevertheless, I can only conclude that on the whole Justice and War is an intellectual and moral disaster.

The essential message of the three central moral-theological essays in this collection is twofold. First, what motivates the "peace bishops" and their sympathizers is a single-minded fear of earthly annihilation. And second, we should not be worried about mere earthly annihilation since what is important, after all, is the life hereafter. Robert Reilly tells us that the real struggle is between the people of God (or their godly aspect) and those who bow to the grotesque doctrine that no "task is higher than the attainment of happiness on earth." James Schall tells us, "We are beings meant for eternal life, and this world is to end—whether consumed by some passing planetoid, some cooling sun, or by some mistake of nuclear fission, or by some act of man, perhaps even one man." John J. O'Connor provides the biblical passage: "The burden of our trial is light enough, and earns us an eternal weight of glory beyond all comparison. We do not fix our gaze on what is seen but on what is unseen. What is seen is transitory; what is unseen lasts forever… when the earthly tent in which we dwell is destroyed we have a dwelling in the heavens to last forever…" (2 Cor.). Although, at times, the authors suggest that at least under certain conditions earthly existence may have some instrumental value for God's plan for man, far more vivid to them is the infinite glory available to us after the apocalypse.

Don't get me wrong. These authors are surely correct that a Christian perspective on the value of earthly existence does argue against bearing great costs for the sake of mere earthly survival. But this is because this perspective argues against bearing great costs for the sake of any earthly goal—even the authors' undefined goals of freedom and justice.

Where the authors are more directly mistaken is in their charge that anyone deviating from their premises will be committed to a policy of physical survival at any cost. The authors' problem here is their collective inability to understand any distinctions among nontheologically based ethical systems. They repeatedly, unfoundedly, and incoherently charge any humanistic ethic with necessarily being (somehow all at the same time!) materialist, hedonist, nihilist, and bare survivalist. Indeed, the authors of these central essays make no attempt at intellectually challenging their opponents. Essentially all that we get is name-calling and pronouncements of guilt by doctrinal association—the latter often based on egregious scholarship. None of the authors seems able even to state coherently the Catholic just-war theory.

Justice and War does contain two worthwhile essays, one on the assumptions of arms-control negotiations, the other on the possibility of active nonnuclear strategic defense. The former essay, by Thomas Payne, argues that arms-control negotiations are only productive when the negotiating powers already accede to one another's spheres of power and that this condition is not currently satisfied between the United States and the Soviet Union.

The latter essay, by Angelo Codevilla, includes the book's most sensible just-war response to the arguments of the "peace bishops." In this essay, "Justice, War and Active Defense," Codevilla properly denounces all intentional attacks on centers of population and all variants of Mutual Assured Destruction that require each superpower to offer its civilians as hostages to the other. Codevilla calls for the development of an active missile or space-laser defense that will sufficiently protect our counterattack weaponry so that no Soviet first strike will be rational. The bulk of the essay is devoted to documenting the technological feasibility of such a nonnuclear strategic defense.

Of course, anything less than a perfect system of defense per se will have to be supplemented by some counterattack capability. Otherwise an aggressor's first strike will involve no risk for the aggressor other than the expenditure of its weapons. And it is presumably Codevilla's view, in accordance with just-war theory, that the weapons by which we threaten counterattack be as precise and discriminating as possible and that they be directed only at crucial military targets. It is ironic and unfortunate that only in this anthology's most technologically oriented essay, and not at all in its moral-theological essays, does some appreciation of the force of just-war distinctions appear.

Eric Mack teaches philosophy at Tulane University and contributed a chapter on the philosophical issues concerning defense policy to the Reason Foundation book Defending a Free Society.

Moscow's Masterminds

Joseph D. Douglass, Jr.

The Grand Strategy of the Soviet Union, by Edward Luttwak, New York: St. Martin's, 233 pp., $14.95.

Those who enjoy Edward Luttwak the charger, challenger of conventional wisdom and purveyor of unique insights into troubled areas, will be disappointed by The Grand Strategy of the Soviet Union. In this book, Luttwak appears to have deliberately set out to position himself in the middle of the road. As he states in his preface, "It is in between these extremes (the Soviet Union as only defensive or as an expansionist military empire) that we must find the reality of the Soviet Union." And, position himself in the middle he does, although considerably more toward the former than the latter.

The book is mainly a series of elegant ramblings and interpretations of Soviet behavior, complete with a rich load of historical relevancies. In this, Luttwak is the master. Unfortunately, however, the book is supposed to be about Soviet grand strategy. And while there are many different views on what grand strategy is, Luttwak neither describes what he means by "grand strategy" or discusses it, nor does he treat the subject in any reasonable sense.

When one speaks of grand strategy, several concepts generally come to mind, concepts such as national goals or objectives, long-range plans, the role of war and military forces, diplomatic objectives, and so forth. But in Grand Strategy, there is no discussion of goals or war, of the Soviet concept of peace, of the politics that have governed Soviet behavior for a long time and, as they say, would continue in the event of war, or of Soviet long-range strategic plans. There is little discussion of the tools, techniques, or tactics used in support of their grand strategy or of interrelationships between strategies in various regions.

The absence of any treatment of Soviet long-range plans, especially considering the planned nature of their government, is quite disconcerting. Luttwak fails to discuss the "Long Range Plan for the Next 10-15 Years and Beyond" as described by General Major Jan Sejna in his recent book, We Will Bury You. Grand Strategy brings to mind Richard Pipes's testimony in congressional hearings in 1980 when, in referring to the National Intelligence Estimates, he explained, "My feeling is that, apart from whatever institutional problems there may be, the fundamental problem is that the people drafting these estimates do not believe that there is such a thing as a Russian or Soviet grand strategy,…" The same appears to be true of Luttwak's book.

Luttwak discusses certain regions of the world and analyzes the related Soviet strategic options. China, Europe, and the Middle East receive dominant attention. Here there are few surprises. Soviet strategy towards China is one of encirclement. Regarding Western Europe, the Soviet Union seeks to break the security nexus between the United States and Western Europe.

The main surprises are in what is not discussed. For example, Luttwak pays almost no attention to Soviet strategy towards its declared main enemy, the United States, or to Soviet strategy toward those areas of the world in which the Soviet Union greatly increased its activity in the 1960s and 1970s: Africa and Central and South America. How can this be, in a book that purports to address Soviet grand strategy?

Nor does Luttwak mention Soviet ideology, except to suggest it is no longer a critical factor, or the Soviet concept of peace or peaceful coexistence. Little reference is directed to the role of subversion, the worldwide communist movement, wars of national liberation, and the coordinated use of propaganda and intelligence (active measures). This seems to ignore an important dimension of Soviet strategy since 1917, and especially over the past three decades. The Soviet strategy of peaceful coexistence, according to Soviet sources and defectors, was given a major push by Khrushchev in 1956. It was the cornerstone of his strategy, which did not seem to change much under Brezhnev, who, according to a high-level defector, led the major activity to develop the guidelines implementing Khrushchev's strategy in the fall of 1956, extending through the spring of 1957. Other critical aspects of this strategy were the drive to achieve military superiority, beginning with nuclear weapons, and the rejuvenation of the worldwide revolutionary movement, with the Third World as the primary target. Such possibilities do not enter into Luttwak's analysis in Grand Strategy.

The Soviet drive for superiority is only regarded as a tactical shift, borne of necessity. As Luttwak explains, in the 1970s the Soviet Union found itself much more powerful and also distinctly poorer than its leaders could reasonably have predicted a decade earlier. "It was thus only natural that the goal of economic supremacy, which had become utterly unrealistic, should have given way to the pursuit of imperial power as the new dominant aim of Soviet national strategy." By "sheer chance" the recognition of their economic failure at the end of the 1960s happened to coincide with the beginning of the abrupt and phenomenal decline of the United States as a military power, which then acted to cause the Soviets to accelerate further their new military push.

Though Luttwak discusses the role of the military forces, there emerge serious questions concerning the rationale behind his interpretations. For example, Soviet nuclear forces are seen in the US image, that is, as only for deterrence. For Luttwak, the principal forces (and focal point in his book) are the conventional forces. Luttwak recognizes the Soviets' huge investment in conventional forces, but he almost ignores their investment in nuclear forces as well as the role of the nuclear forces beyond Soviet-style "deterrence" and the interaction between the nuclear forces and the "conventional" force. While I would like to believe Luttwak's analysis is correct, it somehow seems to slight what could be an extremely important aspect of Soviet military and political strategy and to fail to explain the investment in nuclear-war preparations and their clearly stated doctrine.

Perhaps to throw a few plaudits to the current administration, the United States is seen since 1980 to be on the upswing, which in turn is seen as causing great consternation in Moscow. Should this and Luttwak's assessment that the Soviets have acquired new and expanding confidence in their military leaders be true, the future may indeed be fraught with danger. As Luttwak concludes, "If in the Kremlin the fatal conjunction between regime pessimism and military confidence is indeed affected, and if at the same time it is also believed that the nations of Western Europe and Japan will simply refuse to respond seriously to anything short of a direct attack, thus undermining both the capacity and the incentive of an American response, the Soviet Union will be set on the road to war—a war neither Western nor nuclear but quite possibly catastrophic all the same."

Joseph D. Douglass, Jr., is a policy analyst at IRT Corporation in McLean, Virginia.

Banking on Free Markets

Joe Cobb

The Mystery of Banking, by Murray N. Rothbard, New York: Richardson & Snyder, 286 pp., $19.95.

Murray Rothbard is one of my favorite authors. He is able to deal with some of the most complex issues in an engaging and witty style, and throughout all of his writing runs a recurring note of righteous anger at elitism, pomposity, fraud, and injustice. Although he has written on the subject many times in the past, this new book usefully restates the issues and analysis of free-market banking and monetary theory.

There is a need in this literature for books like Rothbard's Mystery of Banking. Some economists write narrowly about money and banking as simple guides to businessmen in one of the most heavily regulated fields of our economy, as if the existing laws and institutions were beyond criticism. Other writers, particularly Milton Friedman and Maxwell Newton, have recently published books challenging the monetary system, suggesting the Federal Reserve does more harm than good; but their point is that the central bankers should just manage things more efficiently. At the far extreme, of course, there are socialists and populists who seem to have no knowledge of economics or finance and believe all bankers are just "evil." None describes or advocates a fully competitive model of money and banking, as Rothbard does.

While occasionally dipping his pen in the populist inkwell, suggesting that something is "wrong" with fractional-reserve banking in general, Rothbard keeps his main argument on the target of central banking and political privilege. He presents the case for institutional reform with a sensitivity that something is rotten in our present system, while at the same time developing the economic analysis of money and banking to support his case.

The chapters about the history of bank politics in the United States and the growth of our current system—its alternative, decentralized ("free") banking—are the strongest parts of the book. Any proposals for reform will fall short of the free-market ideal without the presentation of a workable alternative to the Federal Reserve and a manipulated fiat-money system, which Rothbard supplies. Friedman and Newton, for example, would simply put the central-banking function under the secretary of Treasury, with no protections against another G. William Miller. True money and banking reform will require more than a mere cosmetic change, which is all that the "independence" of the Fed really amounts to.

Rothbard's new book, however, is not the landmark in publishing that it might have been. It is flawed by a few very slow and technical opening chapters about money. Unfortunately, Rothbard abandons his Austrian School economics analysis throughout these chapters.

The weakest chapter in The Mystery of Banking is that entitled "Deposit Banking." In his discussion here, Rothbard moves furthest from the Austrian analysis, exemplified by Ludwig von Mises, and espouses the view of the British neoclassical school (John Maynard Keynes, Milton Friedman, et al.). This starts Rothbard off on a tangential discussion about fractional-reserve deposits that detracts from his entire case against politicized central banking. His advocacy of 100 percent reserves, for example, is pure "Chicagoism," advanced in the 1930s by Henry Simons, in the 1950s by Milton Friedman, and in the 1980s by Eugene Fama.

Most English-speaking economists have uncritically accepted the standard definition of "the money supply" that Rothbard uses. This definition, however, establishes a frame of reference that blocks many useful areas of inquiry. The mistake is to define coin, currency, and demand deposits as all equally part of "the money supply," from which it follows, therefore, that banks "create money." On this subject, Rothbard is inconsistent; Ludwig von Mises was not. Mises, in The Theory of Money and Credit, makes the important distinction between money and "money substitutes," which banks create, like credit cards, checking accounts, and even banknotes.

By making the careful distinction between money (coin) and substitutes for coin, Mises could focus on monetary theory without getting caught in the arbitrary classifications about "the money supply" that worry statisticians. Defining "the money supply" as including any money substitutes at all is a mistake, because it confuses the discussion.

This is the essential confusion of macroeconomics. The British neoclassical school of monetary theory bases its analysis on the methodology of aggregates and averages—for example, "the money supply," "the price level," and "the purchasing power of money." Concepts like "the money supply" can only be plugged into a statistical model if you can add up the apples and oranges ("the fruit supply") and crunch some numbers. It is like a "hydraulic model" rather than an economic model. It makes no use whatsoever of the truly important tools of economics, such as marginal-utility analysis, opportunity costs, or changes in relative prices. Rothbard falls right into this macroeconomic trap with his discussion of the money supply and the purchasing power of money in his introductory chapters.

He could easily have avoided this problem of analysis if he had not started his book with a prejudice against fractional-reserve banking. He clearly understands the main line of analysis that Mises developed. For example, in the chapter "The Demand for Money" Rothbard writes:

There is another causal factor that can only lower the demand for money over time: new methods of economizing the need for cash balances. These are technological innovations like any other, and will result in a lower demand for money for each successful innovation. An example is the development of more efficient "clearing systems, " that is, institutions for the clearing of debt.…

Credit cards are not part of the money supply, but carrying them enables me to walk around with a far lower cash balance, for they provide me with the ability to borrow instantly from the credit card companies. Credit cards permit me to economize on cash.

The development of credit cards, clearing systems, and other devices to economize cash, will therefore cause the demand for money to be reduced, and prices to increase.

The acceptance of this idea—that checking accounts must be included in "the money supply," while credit cards are a factor in "money demand"—is merely a traditional distinction among English-speaking economists. Money on deposit in checking accounts is a way of economizing on currency in circulation, just as currency itself was a way of economizing on coin in circulation.

Yet, macroeconomics has its traditions, just as lawyers and accountants do. An economist could just as accurately place checking accounts with credit cards, as ways to economize on more-basic forms of money—but if he did, he would not be able to play with the econometric models of all his academic colleagues. In Rothbard's case, it would no longer make any sense to say that "banks create money" or that bank customers are "victims of fraud." Rothbard's concession to conventional macroeconomics regarding "the money supply" weakens his analysis of deposit banking.

The approach taken by Mises enabled him to apply marginal-utility analysis to money—something the British writers were unable to do—and to integrate monetary theory with the rest of economic theory. The significance of Mises's approach can be seen by remembering the last time you wanted to make a telephone call with only a dollar bill in hand, or take a taxi with only your checkbook, or even try to cash a check in a distant city. Unfortunately, Rothbard does not discuss the issues of competition in currency that follow from Mises's insights.

The degree of substitutability among various forms of "money" is an important issue in international finance—"denationalized money"—and would be important also in a domestic free-banking system. Problems with banking systems in the past have had much to do with government regulation and political manipulation, as Rothbard discusses. The famous banking panics and runs on banks in the 19th century, for example, were a major consequence of the regulations on banknotes placed by the National Bank Act and the prohibition of nationwide, interstate banking in the United States.

Rothbard concludes the book with a concrete proposal to restore gold to a central role because some kind of nonpolitical monetary base is essential for decentralized banking. His proposal for a gold standard, however, is also flawed by his incorrect analysis about "the money supply." He proposes that dollars should be convertible into gold at the rather startling rate of $1,696 per ounce. This ratio is not based on economic analysis, however, but on a simple mathematical comparison of statistics on "the money supply."

Everyone except Rothbard suggests the free market has to play a central role in defining and creating the new monetary unit. Ludwig von Mises addressed the question of how to restore a gold currency in a 1952 epilogue to Theory of Money and Credit. Economic journalist Henry Hazlitt and several other writers, including myself, Rep. Ron Paul (R–Tex.), Arthur Laffer, Lewis Lehrman, and Alan Reynolds, among others, have advanced their own proposals. Rothbard's argument may be worth debating, but it is an "all or nothing" political initiative, like most of the other proposals for remonetizing gold. When the economist attempts to become a politician, his suggestions have the proverbial snowball's chance in the House of Representatives.

At the Washington, D.C., "Pre-Williamsburg" monetary conference hosted by Rep. Jack Kemp (R–N.Y.) in May 1983, economist Alan Reynolds made a trenchant point: governments may "go off the gold standard," but the people never do. The sizable imports of one-ounce gold coins in recent years are some evidence that gold is already remonetized in the private sector. Rothbard's excellent arguments in favor of free, competitive banking could so easily be applied to this growing phenomenon in the area of gold coinage that one wonders why he rejects it.

Rothbard's discussion of central banking is an important contribution to the current debate about monetary policy and banking deregulation—in spite of his lapses into conventional macroeconomic theory and a throwaway proposal to restore gold convertibility for the dollar. A stable, competitive monetary system is important, because we can't have long-term capital markets without it—and we can't have a free-market economy without long-term capital markets.

Contributing Editor Joe Cobb is a member of the professional staff of the US House of Representatives Banking Committee.

Book Hints

Lynn Scarlett

Deregulation continues to attract scholarly attention. Telecommunications in Crisis: The First Amendment, Technology, and Deregulation (Washington, D.C.: Cato Institute, 113 pp., $6.00 paper), by Edwin Diamond, Norman Sandler, and Milton Mueller, provides a timely analysis of an industry recently partially deregulated. A broader variety of regulatory reform controversies are discussed in The Political Economy of Deregulation: Interest Groups in the Regulatory Process (Washington, D.C.: American Enterprise Institute, 164 pp., $15.95/$7.95 paper), edited by Roger G. Noll and Bruce M. Owen, in which regulation is shown to be often associated with bureaucratic boondoggles. George Roche turns our attention to bureaucratic failings and the logic behind bureaucratic action in America by the Throat (Old Greenwich, Conn.: Devin-Adair, 182 pp., $14.95).

If regulations have increasingly shaped our lives in the past few decades, so, it is argued, have the media. Curtis D. MacDougall looks at one form of this influence in Superstition and the Press (Buffalo, N.Y.: Prometheus Books, 616 pp., $29.95/$16.95 paper). MacDougall documents the plethora of stories about paranormal events that appear in major American newspapers and asks whether the press, in treating claims of such phenomena without questioning their validity, perpetuates ignorance and superstition. And in Channels of Power (New York: Basic Books, 175 pp., $14.95), Austin Ranney focuses on television as a source of influence on political reality.

The American economy has finally begun to show signs of improvement, but are Reagan's supply-side economic policies responsible? The Supply-Side Solution (New York: Manhattan Institute, 289 pp., $12.95 paper), edited by Bruce Bartlett and Timothy Roth, provides a broad-ranging anthology for the layman and professional interested in evaluating the merits of the supply-side debate. Another book, From Basic Economics to Supply-Side Economics (Lanham. Md.: University Press of America, 268 pp., $10.25 paper), by M.L. Greenhut and Charles T. Stewart, Jr., evaluates supply-side economics and Reaganomics in the context of economic thought. The book is a project of the free-market Political Economy Research Institute.

Free-market advocates may be heartened to know that a number of French-language works have begun to appear in support of limited government and laissez-faire economics. One such book by Canadian economist Pierre Lemieux is particularly noteworthy, because it has been published by a major French publisher. In Du Liberalisme à l'Anarcho-capitalisme (From Classical Liberalism to Anarcho-capitalism), Lemieux traces the roots of anarcho-individualism and describes the political theory that weds free-market economics with a philosophy of individual rights and the limited state (Paris: Presses Universitaires de France, 171 pp., [available only in French], 110 FF). Two French authors, Christian Favelais and Jean-Yves Glain, analyze French government policies regulating publishing and bookselling. Those policies, assuming that books shouldn't be left to allegedly perverse market forces, have included stifling price-fixing laws that are criticized in Le Prix Fixe pour le Livre (Uniform Pricing for Books), published by the Institut Economique de Paris (160 pp., 48 FF).

Also published by the Institut Economique de Paris is a French translation of Political Economy: Reflections for Today and Tomorrow, by Ludwig von Mises. Entitled Politique Economique (111 pp., 40 FF), the translation marks the debut of a series of works designed to acquaint French readers with works of free-market scholars relatively unknown in France. Two other works published by the Institut Economique de Paris deserve mention: Frederic Bastiat's Propriété et Loi (Property and Law) reintroduces a work by this once-esteemed 19th-century French thinker who is now almost completely unknown in France (48 pp., 15.80 FF). Planification et Economie de Marche: II n'y a pas de troisième voie (Planning or Free Markets: There is No Middle Path), a pamphlet by Henri Lepage, argues in behalf of free markets and against any state economic intervention (22 pp., 15 FF).