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