Review of the Book

America's Economic Moralists,
A History of Rival Ethics and Economics

by Donald E. Frey

PART 2 of 2

Edward J. Dodson

[America's Economic Moralists, A History of Rival Ethics and Economics, by Donald E. Frey, published by the State University of New York Press, Albany, 2009 Reviewed by Edward J. Dodson, October 2010]

ECONOMICS AS VICTIM TO TWENTIETH-CENTURY IDEOLOGIES

This was the beginning of the Progressive era in the United States, the rise of Fabian and Christian Socialism in parts of the Old World and the more doctrinaire theories of State-Socialism embraced by Leon Trotsky and Vladimir Illich Ulyanov (Lenin). Differing only by degree, what Professor Frey concludes of this period and the major economic powers then competing rings true:

"And in the industrial society, which produced vast differences in economic power, autonomy came together with power to produce excess. By 1900, a context existed in which the Enlightenment's ethic had produced results never contemplated in the eighteenth century."

Certainly, the twentieth century began with great expectations of a world of abundance. And, despite the civil war that brought the Bolsheviks to power in Russia, followed by history's most destructive war to that point in time, by 1920 there was a sense that a new world order was emerging. Professor Frey's concern is, however, on the change in ethical values resulting from a belief that scarcity was no longer a problem, that there would now always be enough and more to meet the needs of all. We then find "economists and policymakers" defending the American System, even in the depths of the Great Depression, which they confidently declared "was abnormal, not the norm."[p.131] Within the ranks of economists, some began to question the old assumptions and saw as necessary a permanent role for government interventions, although they were not in agreement on what those interventions ought to be:

"Many economists by 1930 recommended active government intervention in the economy. The Depression stimulated new economic theories to explain why an economy that could produce more would fall into a state of unemployment and poverty."[pp. 131-132]

In his brief discussion of how the economy and individual attitudes evolved during the decade of the 1920s, Professor Frey points to the spreading sense of optimism about the future and how this affected the nation's ethical norms. Prosperity seemed to be the reward for business practices consistent with "Jesus's teachings."[p.134] Despite the evil of segregation and discrimination against African-Americans, M.J. Divine believed and taught that "prosperity was an act of individual will."[p.134] However, faith in individualism and in laissez-faire was severely challenged by events they soon experienced. Economists, notes Professor Frey, were hard-pressed to continue to argue the case that markets were self-correcting if government just let them follow their course:

"… economic theory was swinging to a position compatible with an idea of relational morality: that economics is a human invention, subject to human action, and not the inevitable working out of economic laws."[p.137]

Mainstream economists had much to think about. One of their leading lights, Irving Fisher had become famous for testifying just days before the stock market crash that: "Stock prices have reached what looks like a permanently high plateau." His analysis of the business cycle and markets, he advised bankers, indicated the prices of securities reflected sound fundamentals. In 1931, the historian Frederick Lewis Allen produced a remarkable analysis of the factors leading up to the economic crisis in his book, Only Yesterday, An Informal History of the 1920s. Allen described in detail what most economists had simply ignored: the credit-fueled land speculations that plagued the agricultural heartland, Florida, and many of the nation's expanding cities:

"The Florida boom, in fact, was only one - and by all odds the most spectacular - of a series of land and building booms during the Post-war Decade, each of which had its marked effect upon the national economy and the national life." [Allen, p.246]

Americans then elected the patrician figure, Franklin D. Roosevelt, to the Presidency. Initially, "Hoover and Roosevelt shared some views that were paradoxical, given the circumstance: for example, they each favored public-works relief projects only if such projects did not unbalance the budget."[p.137] Roosevelt soon realized the depth of the economic crisis was far too serious for tentative measures. He was getting advice from his so-called brain trust, a group that included Columbia University professors Rexford Tugwell and Raymond Moley. Moley, essentially a conservative Democrat and a lifelong admirer of Henry George, in 1952 reflected on his own ethical conflict as the New Deal became increasingly interventionist:

"I stayed around as long as I could, but in 1936 I decided that the administration was not the friend of this average American. The chasm had been widening and I was scared, because something was happening that was inimical to that forgotten man." [Henry George News, June, 1952]

Rexford Tugwell, conversely, embraced a government-directed redistribution of income to provide security to people. In Tugwell's words, quoted by Professor Frey: "…security of access to the goods of simple living, security of employment, security in ill health and old age, security of maintenance and training for their dependents."[p.139] Roosevelt's instinct was to use public funds to put people to work developing "social infrastructure (e.g., public buildings, bridges, parks) that augmented the common life of the nation."[p.140] Despite all that the Roosevelt administration orchestrated from 1933 on, the nation's systemic problems were not resolved. The economy fell back into recession in 1937, where the situation lingered until orders for munitions and other materials came in from other nations at war with one another. Economists and historians have been arguing for a half century whether the Great Depression ended only with the United States entrance into the Second World War.

KEYNES BREAKS WITH LAISSEZ-FAIRE, BUT NOT WITH LANDED PRIVILEGE

While economists continued to debate the wisdom of Roosevelt's New Deal (even outside the matter of constitutionality), policymakers in Britain had already decided to take action, in part on the advice of economist John Maynard Keynes. Keynes was orthodox but not doctrinaire. He did his best to convince his professional colleagues that timely government intervention could keep an economy from drifting too far out of a state of general equilibrium. As Professor Frey writes:

"Keynes viewed the conventional economics as valid within the realm of full employment; application of his theory would ensure full employment.[p.141] …That an economy in depression could be cured, as Keynes argued, made the common good a proper public obligation."[p.142]

In 1933, Keynes offered his very candid opinion of the state of the world's economies in an article published in The Yale Review ("National Self-Sufficiency," Vol. 22, no. 4, June 1933, pp. 755-769):

"[T]he new economic modes, towards which we are blundering, are, in the essence of their nature, experiments. We have no clear idea laid up in our minds beforehand of exactly what we want. We shall discover it as we move along, and we shall have to mould our material in accordance with our experience. Now for this process bold, free, and remorseless criticism is a sine qua non of ultimate success. We heed the collaboration of all the bright spirits of the age. …Let Stalin be a terrifying example to all who seek to make experiments. If not, I, at any rate, will soon be back again in my old nineteenth-century ideals, where the play of mind on mind created for us the inheritance we to-day, enriched by what our fathers procured for us, are seeking to divert to our own appropriate purposes."

What is difficult to understand about Keynes is his failure to recognize and acknowledge the fundamental importance of credit-fueled property markets as a driver of business cycles. He was living through one of history's great property market cycles, with devastating consequences.

In 1932, the philosopher John Dewey delivered a radio address in New York City, pointing listeners to Henry George's analysis of business cycles as the way out of the Depression:

"Henry George called attention to this situation over fifty years ago. The contradiction between increasing plenty, increase of potential security, and actual want and insecurity is stated in the title of his chief work, Progress and Poverty. That is what his book is about. It is a record of the fact that as the means and appliances of civilization increase, poverty and insecurity also increase. It is an explanation of why millionaires and tramps multiply together. It is a prediction of why this state of affairs will continue; it is a prediction of the plight in which the nation finds itself to-day. At the same time it is the explanation of why this condition is artificial, man-made, unnecessary, and how it can be remedied. So I suggest that as a beginning of the first steps to permanent recovery there be a nationwide revival of interest in the writings and teachings of Henry George, and that there be such an enlightenment of public opinion that our representatives in legislatures and public places he compelled to adopt the changes he urged."

With Britain still a center of political interest in the ideas of Henry George, Keynes could not simply ignore the generation of Liberals who still clamored for the taxation of land values. By the 1930s, however, the days of the Liberals were numbered as a major party in Britain. Yet, they could - and did - remind voters of what Winston Churchill had said of Britain's land tenure system while campaigning for a seat in Parliament back in 1909:

"It is quite true that the land monopoly is not the only monopoly which exists, but it is by far the greatest of monopolies -- is a perpetual monopoly, and it is the mother of all other forms of monopoly. It is quite true that unearned increments in land are not the only form of unearned or undeserved profit which individuals are able to secure; but it is the principal form of unearned increment which is derived from processes which are not merely not beneficial, but which are positively detrimental to the general public. Land, which is a necessity of human existence, which is the original source of all wealth, which is strictly limited in extent, which is fixed in geographical position -- land, I say, differs from all other forms of property in these primary and fundamental conditions."

British historian Roy Douglas described (in a paper presented at the 13th International Conference on Land Value Taxation and Free Trade, September, 1973) the events that essentially killed the momentum toward land reform in Britain:

"The General Election of 1929 set Labour again in office, although the Liberals held the balance of power. Again and again Labour's own backbenchers, and the Liberals outside, tried to goad the Government into action over land reform. At last, after infinite dithering, Snowden began to attack the land problem, through his celebrated Budget of 1931. This proposed that an immediate valuation of land be made and that the collection of taxes on the basis of that valuation should commence two years later.

"Yet by 1931 it was too late. Economic crisis was looming. The Labour and Liberal Parties were both visibly disintegrating. The Budget was indeed forced through the Commons; but long before it could become effective the Labour Government fell, and a so-called National Government was formed. Very speedily, that Government became Conservative in all but name, and the Liberal and Labour Parties together could not muster a hundred MPs. The land valuation was first suspended, and then the legislation wholly repealed."

Remarkably, Keynes wrote very little about the role of property markets as they affected the general economy. In The General Theory of Employment, Interest, and Money, his only real treatment of land markets is in a brief discussion of the historically low financial returns to agricultural land use when mortgage interest rates are high [Keynes, pp. 241-242]. Yet, Keynes does not ignore the existence of a rentier class, whose positions as owners of property generates an income without labor. While making his case for lowering and keeping interest rates "to that point relatively to the schedule of the marginal efficiency of capital at which there is full employment," [Keynes, p.375], he predicts this "would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital. Interest to-day rewards no genuine sacrifice, any more than does the rent of land. The owner of capital can obtain interest because capital is scarce, just as the owner of land can obtain rent because land is scarce."[Keynes, p.376]

In an address (Am I a Liberal?) delivered by Keynes in 1925 to the Liberal Summer School at Cambridge, he summarized his ethical economic positions:

"Civil and Religious Liberty, the Franchise, the Irish Question, Dominion Self-Government, the Power of the House of Lords, steeply graduated Taxation of Incomes and Fortunes, the lavish use of the Public Revenues for 'Social Reform', that is to say, Social Insurance for Sickness, Unemployment and Old Age, Education, Housing and Public Health - all these causes for which the Liberal Party fought are successfully achieved or are obsolete or are the common ground of all parties alike. What remains? Some will say - the Land Question. Not I - for I believe that this question, in its traditional form, has now become, by reason of a silent change in the facts, of very slight political importance." [Essays in Persuasion, p.325]

What this "silent change in the facts" constituted Keynes did not stop to describe. This was, after all, a declaration made during a period of rising land prices, generally.

SAMUELSON ACKNOWLEDGES THAT LAND IS A DISTINCT FACTOR OF PRODUCTION

Professor Frey informs the reader that an important shift in perspective occurred when Paul Samuelson "defied the older economics by placing the new macroeconomic sections before microeconomics."[p.142] He continued to defy the theoretical work of his contemporaries by actually treating land as a distinct factor or production and briefly raised the issue of whether rent was a surplus appropriate for public collection via taxation. By the mid-1980s (when Samuelson was joined by William D. Nordhaus as co-author of his economics textbook), they offered Henry George's ideas in the context of an utopian model:

"Our ideal society finds it essential to put a rent on land as a way of maximising the total consumption available to the society. But these efficiency rents need not go to the privileged -- they can go to the state (in rents or in taxes on rents) and be distributed as a social dividend or be used to buy public goods."

They then went on to list some of the real world obstacles to adoption and implementation and never used their positions of influence to urge public officials to consider the taxation of land values as a means of stabilizing dysfunctional property markets. As Professor Frey notes, Samuelson embraced "New Deal innovations" and assigning to government the responsibility "for providing economic security."[p.145] Samuelson tackled the problem of the free rider claim on public goods and services in a 1954 paper ("The Pure Theory of Public Expenditures"), then years later described the adoption of Proposition 13 by California voters as "the most important political-economic event of 1978, perhaps even of the 1970s." For Californians, Proposition 13 turned out to be extremely important and, as reported in 1995 by University of California economics professor Mason Gaffney (from a paper delivered at the Conference on Land, Wealth, and Poverty; The Jerome Levy Institute, 3 November), devastating:

"What happens when a state radically slashes its property tax?

"Michiganders are saying they must wait and see, but there is no need for that: California can show you 17 years of experience. To read your future, just study our past. Here is what has happened since California passed Proposition 13 in 1978.

"The obvious direct results have been to cut public services, raise other taxes, and lose credit rating. Our school support fell from #5, nationally, to #40 in 1985 when last seen, still falling. County road maintenance is down to where my county (Riverside) is repaving its roads at an annual rate of once every 130 years. Once in 20 years is recommended here, and up north you generally need higher frequency. You can't just build infrastructure and then stop paying for it, it's a perpetual commitment. Thanks to urban sprawl, a high fraction of our population now depends on these county roads.

"In 1978 we had a surplus in Sacramento. Since then we have raised business taxes, income taxes, sales taxes and gas taxes, but go broke every June. Now our State bond rating is last among the states. One of our richest counties (Orange) has gone bankrupt; Los Angeles is on the brink of it, saving itself by closing emergency rooms and hospitals that serve as a last resort for the uninsured poor."

Samuelson never made the connection.

PREJUDICE AND FALLACIES IN ECONOMICS?

The influence of economists over public policy in the United States increased significantly after the Second World War. Harry Dexter White and John Maynard Keynes led the way at Bretton Woods. Then, the first Council of Economic Advisors was convened in 1946 to advise the Truman Administration. Yet, for the increasing number of students pursuing university degrees in economics, they were being taught subject matter divorced from how the world actually worked. Where theory was not supported by reality, the path taken by economics was to ignore reality. Professor Harry Gunnison Brown, who earned his Ph.D. in economics at Yale and wrote his dissertation under the supervision of Irving Fisher, authored the textbook, Basic Principles of Economics, while teaching at the University of Mississippi. He titled the first chapter, "Prejudice Versus Science," writing:

"Economics is concerned with the problem of 'getting a living'. It deals, therefore, with an important phase of the 'struggle for existence'. Unfortunately, this fact operates to prevent unprejudiced investigation of its laws and of the effects of various economic policies. As examination that would show the effects of various policies from which a part of the public was benefiting, to be injurious to the remainder, might not be an examination which those who were profiting by the policies in questions would desire to have made. And if such an examination were made, acceptance of its inevitable logical conclusions would probably be vigorously opposed."

All along there have been critics within the community of professional economists. Professor Frey raises yet another problem economic theorists created for themselves by narrowly defining economic progress as a "state of maximum economic efficiency"[p.148] (i.e., Pareto optimality), with Samuelson introducing a "social welfare function"[p.150] as an alternative measurement of the good. Professor Frey offers his assessment of problems with both measures, most importantly, that "[w]elfare economics decreed a hardly plausible human psychology in order to prove the efficiency of competitive markets."[p.152] What was missing from their efforts was the interdisciplinary perspective required to more fully analyze and understand human behavior. Where Professor Frey concludes "…the maximization of welfare cannot be the sole norm in judging the goodness of an economic system,"[p.153], I would substitute for "an economic system" the words: "a society's socio-political arrangements and institutions," of which an economic system is one part of the greater whole. Economists would do well to consider the tests put forward by Mortimer J. Adler to indicate the extent to which societies are organized to maximize justice. Interviewed in 1976 by Bill Moyer, Adler offered the following:

"Now these are things that are really good for every man to have, because every man needs them because these needs are inbuilt capacities. And every need is a capacity and therefore, the satisfaction of the need is the fulfillment of the capacity or the perfection of the human being. And that's what happiness is: the perfection of the human being in the course of a lifetime.

"Now, here they are. First, the goods of the body. Simple ones like health, vigor and the pleasures of sense. Everyone needs health, a certain amount of vigor, and a modicum of sensual pleasure.

"The goods of the mind. You've got a mind, able to know. Hence, it needs knowledge, understanding, a modicum of wisdom. Together with such goods of the mind's activity as skills of inquiry and the critical judgment and the arts of creative work.

"Goods of character. By the way, the first three are very difficult for a government to provide though they can provide the conditions of health, they can't provide health in fact. You have to take care of your own body.

"Goods of character. Such aspects of moral virtue as temperance and fortitude together with justice in relation to the rights of others and the goods of the community.

"The good of personal association; such as family relationships, friendships, and loves.

"The first four are largely within your power and can only be indirectly facilitated by what a government or society does. The next three are the ones -- that a government is obliged to do very specifically to facilitate your pursuit of happiness.

"Political goods; such as peace, both civil and external, and political liberty, together with the protection of individual freedom by the prevention of violence, aggression, coercion, or intimidation.

"Economic goods; such as a decent supply of the means of subsistence, living and working conditions conducive to health, medical care, opportunities for access to the pleasures of sense, the pleasures of play and esthetic pleasures, opportunities for access to the goods of the mind through educational facilities in youth and adult life, and enough free time from subsistence work, both in youth and adult life, to take full advantage of these opportunities.

"Finally, social goods; such as the quality of status and opportunity of treatment in all matters affecting the dignity of the human person.

"Now, I say, if every human being after childhood, infants, had all these goods, he is given ... if he in fact has all these goods in the course of his lifetime, he has led a good life."

There are no guarantees of a good life, of course; however, the socio-political arrangements and institutions operate to advance or thwart individual behavior as well as the cooperative instinct we possess. What has always amazed me is how the economics faculty at the University of Chicago managed over the decades to embrace so unquestionably the most narrow interpretation of "laissez-faire principles" at an institution once led by Robert M. Hutchins and where Mortimer J. Adler had such an influence for so long. Mason Gaffney (in The Corruption of Economics, 1994) describes how John D. Rockefeller provided the funding to handpick, first, a university president (William Rainey Harper), and then someone to chair the economics department (J. Laurence Laughlin) who held "rigid conservative and anti-populist views."[Gaffney, p.117]. Frank Knight, who would dominate the department for decades, arrived from Cornell in 1917. According to Mason Gaffney:

"[Knight] made no secret of his firm opposition to Henry George and ideas that might aid or comfort Georgists. …In treating rent, Knight totally fuses the individual and the social viewpoints. A cost to one firm is a cost to society: there is no aggregation problem, no fallacy of composition, and no remote possibility that 'rent' might have more than one meaning he assigned to it."[Gaffney, p.118]

Knight's influence over the Department of Economics at the University of Chicago continued until his retirement in 1952. Beyond his use of economics to defend rent-seeking landed interests, Knight argued against government intervention even to prevent monopolies from developing on the ideological basis that individual freedom is an absolute good not to be tampered with. "He was willing to risk an economic system, whose ills he clearly perceived, to protect his autonomy,"[p.158] writes Professor Frey. Yet, as Mason Gaffney concludes, the great ill of rent monopoly was an aspect of the status quo he aggressively endorsed. By this time, Milton Friedman was becoming an institution at the University of Chicago and his generation's leading monetary theorist. Friedman and the post-Knight faculty members also embraced laissez-faire policies but for reasons quite distinct from those held by Knight. As Professor Frey accurately (in my opinion) concludes:

"Prominent Chicago economists clearly took self-interest to be more than merely a scientific hypothesis; it was a highly certain statement about human nature itself."[p.154]

Apparently no one in the economics department at Chicago ever considered us to be more than economic man. Everyday observation should have revealed to George Stigler and his colleagues the fallacy of declaring that "Man is eternally a utility-maximizer," as quoted by Professor Frey. The reader cannot help but smile at Professor Frey's analogy:

"The Chicago school's cost-benefit calculation amounted to an essentially amoral calculation of gains and losses to the self, which probably was a good approximation of the way criminals think. However, the Chicago economists applied it to everyone - in effect implying that everyone is a criminal in the orientation of the soul."[p.154]

Perhaps environmental influences overwhelmed their capacity for rational thought. They were living in Chicago, after all.

Mason Gaffney is far from the only economist to challenge the objectivity of Knight and his Chicago contemporaries and successors. Professor Frey introduces readers to Amitai Etzioni, not an economist but a sociologist who after earning his Ph.D. from the University of California, Berkeley in 1958, taught for twenty years at Columbia University. He then went on to George Washington University and then the Harvard Business School. A proponent of a communitarian approach to societal organization and values, Etzioni argued that "true liberty is not autonomy, but 'requires a viable - albeit not overbearing - community'."[p.159] He found one logical inconsistency after another in the writings of Chicago School economists.

THE RESURGENCE OF ECONOMICS IN DEFENSE OF PRIVILEGE

Professor Frey titles his thirteenth chapter "Moralists of Twentieth-Century Capitalism." His subjects are Friedrich Hayek, Milton Friedman and Michael Novak. The problem with their defense of capitalism is that nowhere in the world did capitalism, in its potential form, actually exist. In their writings they forget Locke's admonition that justice requires the protection of liberty by the regulation of license. While Hayek might have had good reason to oppose central planning and to fear coercion, citizen involvement in community planning decisions enhances liberty by developing consensus. It is as though Hayek never really understood the benefits of community. "He stated," writes Professor Frey, "that competition is the only way to coordinate economic activity without government planning."[p.165] The cooperative movement proves Hayek overstates the case. As with virtually every economist discussed in this volume, Hayek was blind to the consequences of landed privilege. Further, "Hayek ignored those with no access to markets due to lack of income."[p.167] What even many households cannot afford is decent housing; and, at the bottom of the affordable housing problem is our dysfunctional land market.

Milton Friedman's libertarianism is, by comparison, somewhat less dogmatic. His defense of corporate profit-maximizing interests ignores the fact that society has granted the privilege of incorporating to people in order to engage in business without personal liability. However, in a 1978 interview, he made the following statement: "In my opinion the least bad tax is the property tax on the unimproved value of land, the Henry George argument of many, many years ago." This is a far cry from acknowledging the rent of land to be our common fund, but it was something. On the whole, I agree with Professor Frey's conclusion that "libertarians fail to answer whether there is ever an occasion when society should uphold values other than individual freedom and in doing so place social constraints on individual freedom."[p.171] As Mortimer Adler has argued, freedom must be constrained by justice in order to secure true liberty.

Professor Frey next selects as a subject Michael Novak, "a self-characterized Catholic lay-theologian" to represent those who believe an adherence to the ethical direction contained in the Christian scriptures and doctrine are effective checks on purely self-interested behavior. He brought his perspectives to the American Enterprise Institute in 1978, where he has remained. Central to his belief system is, as succinctly stated by Professor Frey:

"Democratic capitalism restrains evil because its possesses a moral-cultural sector that continues to teach virtue."[p.173]

When Professor Frey concludes that "Novak's claim that what is wrong in economic life is corrected by the moral-cultural sector may be naïve,"[p.174] this is a statement history reveals to be far too generous. Religious hierarchies have all too often either oppressed large populations, have stood by while others have done so, or adopted strategies of accommodation to oppression to ensure institutional survival. In an article ("Religion and Economics III: The Hoary Objections to Capitalism," First Things, 20 June) written in 2007 to highlight what he saw as the real gains in the struggle to end poverty - in the United States and around the globe - Novak made his case:

"If the poor of the world are to be liberated from the shackles of poverty, it seems plain to me that they must be 'allowed into the circle of development'; join in economic solidarity with the wealthier nations; and subsequently benefit from the upward draft of liberty, trade, and closer communications. In short, globalization is patently good for the poor of the developing world. It certainly seems better for the poor than any previous alternative. That meets the test of Christian realism."

According to Novak, the poor have capitalism to thank for the opportunity to rise out of poverty. If one raises the fact that in the United States there is generational poverty concentrated in the population of minorities, his observation is that the highest concentration of poor households are female-headed, with young children being raised by one parent who is not likely to have either skills or education to obtain well-paying employment. Poor immigrants, entering at the bottom of the economic ladder make up the bulk of the remaining poor, but eventually begin to improve their economic condition. Novak does not seem to have given much thought to the idea that the earth is our common heritage; he sees no reason to treat the earth differently from what our labor (his "human capital") produces by accessing the commons. He writes (in This hemisphere of liberty: a philosophy of the Americas, 1992, p.103):

"Each nation's greatest single source of wealth is the creativity inalienably endowed in the heart and soul of every person by the Creator. It's citizens are a nation's greatest economic resource. Each has been given by God the capacity to create more in a lifetime than he or she consumes. This is the very principle of human economic progress. Without it, economic development could not occur."

Whether the source of our "capacity to create" comes to us from a conscious creator or as a result of evolution is irrelevant. What is relevant is that in order to produce the material wealth we need for survival, we must have access to the earth's resources, resources freely provided by nature but for which we are almost always required to pay another person or entity.

THE NEED FOR COUNTERVAILING POWER

For nearly fifty years, liberals in the United States looked up to John Kenneth Galbraith as a visionary proponent of an active public sector. "For Galbraith," writes Professor Frey, "the reality of abundance created the moral obligation for collective action to end want and enhance public infrastructure."[p.180]

John Rawls was also a visionary, but a visionary who gave too much credit to the haves in this world to ever consider that the basis for what they acquired or inherited came from privilege rather than production. One wonders under what circumstances the privileged of this world would ever participate in the voluntary reorganization of society. Professor Frey also introduces Arthur Okun as an economist who recognized the connection between political equality and human dignity and who accepted the redistribution of some income from the rich to the poor as a necessary moral conviction. Added to Rawls and Okun is Amartya Sen, who adds "the authority of a Nobel-prize holder to the proposition that conventional economics has promoted an inadequate morality."[p.187]

Why these four are important to the development of economic moral thought, says Professor Frey, is that "they recognized the need for boundaries to the market - the classic tendency of relational moralists to limit markets to their significant moral functions."[p.189]

AN ECONOMIC MAN IS SOULESS

Professor Frey's fifteenth chapter is titled "An Ecumenical Consensus on Economic Ethics." Not having read the 1986 pastoral letter, Economic Justice for All, prepared by the Catholic bishops of the United States, I found the references to community refreshing. Equally significant is their view "that ownership of property never conveys absolute authority to do as one wills."[p.194] Also of interest is the brief reference to E.F. Schumacher, who held very strong views concerning the earth as our commons and described speculation in land as a curse on human civilization. Some readers may know of the lifework of Robert Swann, who spearheaded the community land trust movement in the United States and founded the E. F. Schumacher Society. Swann first met Fritz Schumacher in 1967. In his autobiography, Bob Swann describes the meeting and what then occurred:

"This came about when [Ralph] Borsodi and I visited him in London in 1967 to discuss Borsodi's plan for small-scale credit and how it could mesh with Schumacher's idea of intermediate technology. We agreed that they fit together very well and that we should keep in touch, which we did occasionally over the next few years. But at the time I was concentrating on the Community Land Trust movement, which was growing at a rapid pace, while Schumacher was preoccupied with the Intermediate Technology Development Group (ITDG), which he and George McRobie had recently founded.

"Schumacher continued writing articles for Resurgence, and I urged John Papworth to publish them in book form. This finally happened in 1973 when Harper & Row brought out Small Is Beautiful. Later that year I called Harper & Row to see how sales were progressing, only to learn that the book was languishing on the shelves. I was determined to do something about it, so I wrote Fritz to ask if he would be willing to make a one-month speaking tour to promote the book in the United States. He agreed, and with $1000 from Harper & Row, we set up a national speaking tour. The American Friends Service Committee in particular did a great job arranging meetings.

"Fritz met with Jerry Brown (then governor of California), the governor of Oregon, several senators, and even Merrill Lynch and Co. (thanks to Hazel Henderson). Fritz spoke from the perspective of a "fuel economist," as he called himself, because he was Chairman of the Coal Planning Board in England and knew a great deal about fuels, not only coal. His visit coincided with the 1973-1974 energy crisis, during which the price of oil was raised several times by the cartel known as OPEC (Organization of Petroleum Producing Countries). As a result there was great interest in the issues he was talking about, and the book began to sell like hotcakes.

"After his death, friends and co-workers set up the E. F. Schumacher Society in England, headed by Satish Kumar, who had become the editor of Resurgence when John Papworth left for Zambia. When Satish came to the United States in 1980, he asked a few of Fritz's U. S. friends to set up a Schumacher Society here. I had some concern that he might want us to simply organize lectures, as he was doing in England, but he assured me that was not the case. We would be free to follow our own path as the U. S. Schumacher Society."

PROFESSOR FREY WEIGHS IN

Much of what I have written above comes out of my own perspectives on the moral principles that ought to serve as the basis for property-related law. For me, these principles are best referred to as cooperative individualism. Professor Frey's treatment of the historical record shows clearly how marginalized were any of the political economists and economics professors who accepted the moral responsibility to challenge existing socio-political arrangements and institutions. According to the most individualist-oriented school of thought, "[m]oral discourse among [autonomous persons], from which a social consensus could emerge, would be impossible."[p.206] He is more sympathetic to those economists who embrace a relational morality that takes the common good into consideration, with government owning diverse roles, acting "on consensus reached through moral dialogue."[p.207]

Inherent in the moral dialogue referred to by Professor Frey is where the proper division exists between individual and societal responsibilities. "The two moralities disagree about boundaries around the realm of the market,"[p.209] he writes. Four centuries of investigation by political economists and social scientists (of which economics is a sub-discipline) have failed to resolve this moral dilemma.

In the midst of the current global economic crisis it is difficult to argue the case for autonomy morality. Our behavior is consistently characterized by what Locke termed license. and, license takes the form of acts that are inherently criminal and that convey economic benefit. In the end, Professor Frey offers no real solutions. He takes the side of relational morality but has little to say about what cooperative individualism identifies as our most basic need - access to the resources provided by nature.


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