CHAPTER LV

THE LIMITS OF STATE INTERFERENCE

"There ought to be a law against it!" is a statement that we hear on every hand nowadays, regarding almost anything that the speaker does not happen to like. So long as this statement merely expresses the speaker's opinion that something or other ought not to be, or so long as it is merely an expression of his disapproval of something that is taking place, it does no harm; but when it is taken literally by voters and lawmakers they are likely to attempt to regulate a multitude of things by law which would be better left unregulated. To say, however, that a thing would be better left unregulated is not the same as saying that it is right or that it is working satisfactorily. It may merely mean that more harm will be done in trying to regulate it than the thing would do if it were left unregulated.

Some control necessary. It was shown in Chapter V that some degree of government control over individual conduct is necessary, first, because of certain conflicts of interest among individuals and, second, because of the incompetence of certain defective individuals or individuals of low mentality to look after their own interests. No economist has ever questioned the necessity of some government control over the activities of individuals. How far the state should go in its regulation and control of individual conduct is a matter upon which there is a wide difference of opinion. One school has inclined toward a restriction of government control to a few of the most important cases, leaving the individual of mature years and sound mind to find his own place in the economic system and to make his own economic adjustment to his fellows on the basis of voluntary agreement or free contract. Other schools advocate a general extension of the authority and control of the govern

ment over more and more of the affairs of individuals, gradually enlarging the field wherein things are done under the system of authority and obedience and narrowing down the field wherein they are done by voluntary agreement among free citizens. The term laissez-faire is sometimes applied to the former school, implying that its followers believe in the "let go" or "let alone" policy of government. Various names are applied to the other schools, depending upon how far they propose to extend the field of authority and obedience or to restrict the field of voluntary agreement or free contract.

The laissez-faire school. We shall consider, first, the laissezfaire school and the underlying assumptions on which its policy must be based. There has been much misapprehension on this subject and not a little misstatement. A recent book, "Economics for the General Reader," by Henry Clay, states four assumptions as underlying the laissez-faire policy: (1) that of rational self-interest, or "that individuals in their economic relations can be relied on to pursue their own interest, and that their action will be rational and informed"; (2) that competition leads to the survival of the fittest, or "that competition in industry will result in the survival of the socially fittest"; (3) that wealth will ordinarily be the result of social service, or "that as a rule private wealth or property will be acquired only by service"; and (4) that market values and social values are identical, or "that market values correspond roughly with social values and are an adequate indicator of need for production to follow."

It may be true that there have been advocates of a laissezfaire policy who have made some or all of these assumptions. If one believed that government was omniscient and omnipotent and could without difficulty and without cost, either in the form of money, man power, or irritation, control human conduct in any way it saw to be wise, then the best reason one could give for government's keeping its hands off, or letting things alone, would be that things were working well enough

1 Pp. 370-371. New York, 1919.

anyway and could not be improved even by such an ideally perfect government. If anyone saw anything going wrong or anyone doing that which was socially inexpedient, and if he understood that an all-wise and all-powerful government could, without cost or disadvantage of any kind, compel the individual to do that which was expedient, he could not reasonably do other than ask that the government act in the matter and correct the evil. If, for example, he were convinced that on the whole the cigarette or jazz music did slightly more harm than good, or that, if it could be eliminated without cost or disadvantage in any form, more good than harm would result from its loss, and if he believed that the government could eliminate it without harm or disadvantage of any kind, he would, as a good economist, demand that the government act in the matter and eliminate it. But if he believes that the government is not able to do any such thing without a great deal of cost, in the form of money, man power, irritation, or something else, it is an entirely different story. In the case of a vice that is not very destructive it might do more harm to try to repress it than to let it flourish; only in the case of a very destructive vice would it do more harm to allow it to flourish than the government would be likely to do in trying to repress it.

Politics no better than business. With such a view of government one may believe in a laissez-faire policy without making any of the assumptions mentioned by Clay. It would be quite as near the truth to paraphrase the charges against the laissez-faire theorists by charging the advocates of government interference and regulation with assuming (1) that voters are dominated by rational self-interest or that individuals in their political relations can be relied on to vote for their own interest, and that their voting will be rational and informed; (2) that political competition, or politics, will result in the election of the socially fittest; (3) that public office and political power will ordinarily be the result of social service, or that as a rule public office and political power will be acquired only by service; and (4) that political values (that is, power to get votes)

and social values are identical, or "that political values correspond roughly with social values and are an adequate indicator of need for production to follow."

At the end of the chapter on Protectionism it was shown that men, if left to themselves to buy and sell what they like, will frequently develop market valuations or prices which are not true indexes of social utility; but doubt was expressed as to whether politics was capable of correcting these evils except in extreme cases. A man may have a rather poor opinion of the average individual in business and his ability to pursue his own interest on the market, but if he has a still poorer opinion of the same average individual in politics and his ability to pursue either his own or the public's interest at the polls, he will very consistently prefer not to have average citizens in politics interfering too much with average citizens in business. Again, he might be exceedingly pessimistic as to the results of economic competition, believing that rascality and predation frequently succeed as against honesty and production; but if he is still more pessimistic as to the results of political competition, believing that rascality and predation succeed even more frequently in politics than in business, he will consistently regard unregulated economic competition as less evil than wholesale government interference. Again, he may believe that property and wealth frequently accrue to men who have not earned them by any corresponding social service; but if he believes that government offices and political power and influence still more frequently go to men who have not earned them by any corresponding social service, he may consistently prefer the results of economic competition to those of control by politics or by those who manage to get elected to office by political methods. Finally, he may see very clearly that market values and social values are frequently far apart; that many things of little real worth sell on the market at a high price and others of great worth at a low price; but if he sees equally clearly that ideas of no social value frequently have high value as vote-getters, and others of high social value have no value

at all as vote-getters, he may very consistently consider market values as a less unsafe guide to production than political values. The question is not how much confidence one has in the wisdom or disinterestedness of the people but whether he thinks the people show greater average wisdom in their economic than in their political activities, or vice versa. The believer in a laissez-faire policy may believe merely that men generally show more wisdom or less unwisdom in their business dealings or economic activities than in their political activities, whereas the believer in a general policy of regulation must believe that men show more wisdom or less unwisdom in their political than in their business activities.

The case of free speech. The question of freedom of speech will serve as an example. It would be absurd to charge the advocate of freedom of speech with assuming that everyone who talks will talk intelligently or that his talk will be "rational and informed"; that competition in speech (that is, discussion) will always or generally result in the survival of the fittest ideas; or that talk that results in the greatest profit to the talker will ordinarily be the most useful to the community; etc. He may believe none of these things: he may be convinced that a great deal of foolishness results from freedom of speech, that infinite harm is done by some talkers who mislead the people. I doubt whether he could seriously contend that false or misleading talk or teaching does less harm than predatory business, and yet he may be a firm believer in free speech merely because he thinks that attempts by the government to interfere with it result in even greater harm. The argument may not be convincing to him when he is told that the government represents the people and that the people will vote for those officers who suppress certain talkers and against those officers who let them talk. He may not believe that the people voted wisely when they elected these official censors or refused to elect officers who would not act as censors. He may believe that the result of the people's votes in such cases will be worse than any that