The advocate of freedom may not command others to share his enthusiasm. But he should do everything in his power to correct the widespread illusion that the willing exchange of the free market is limited to materialistic considerations and neglects the “higher things of life.”
There was no science of economics nineteen hundred years ago—and it would take eighteen of the intervening centuries for someone to discover and describe the marginal utility or subjective theory of value. Yet, we know that at least one individual at that time had a sense of values seldom matched today:
For what shall it profit a man, if he shall gain the whole world, and lose his own soul?
The reference here is to two distinct kinds of value. To “gain the whole world” relates to economic gain or profit (entrepreneurial, monetary, material); to “lose his own soul” has to do with a spiritual or psychic loss.
So, there are in life two categories of satisfactions: material and mental. It is reasonable to want a comfortable house, health-giving food, adequate clothing, an automobile, and what are called the amenities. And most of us today are in no danger of ignoring this part of life. It is our mental and spiritual growth that we tend to neglect as we busy ourselves making a living and keeping up with the Joneses. Preoccupation with economic profit often deflects our attention from what might be termed psychic profit.
To illustrate these two distinct types of gain, let me relate a personal experience. An Emcee, in his introduction, alluded to “the sacrifice our speaker is making on behalf of freedom.” My response:
Mine is no sacrifice. I prefer having a hand in replacing coercive socialism with creative freedom to having a higher-paying job or even a million or a billion dollars.
Incredible as it may seem to some people, not all values are economic. In this particular instance a psychic gain outweighs an economic gain. But suppose my whole experience were devoid of any economic gain, that I am starving. Then, more than likely, the all-out pursuit of economic gain would take precedence. The choices a man makes for his own life are personal; they are based on his scale of values—his attempt to put first things first. Such a value judgment, of course, is subjective; only I—no one else—can determine what is or isn’t a gain for me. As explained in Chapter VII, there is no objective standard by which individual value of choices can be mathematically or statistically reckoned.
It should be obvious that human action may be motivated by the urge for either economic or psychic satisfactions, or by both. And even though an acting individual may not always be able to fully explain his psychic motivations to the satisfaction of others, he may nonetheless be more powerfully motivated by them than by the cold logic of economic gain. And the final entry in the calculus of the market registers simply how he acts—not why. The why is a matter of his own choice.
When the head of a family buys term or ordinary insurance to provide only for his wife and children in the event of his demise, he experiences only a psychic gain. That action can reward him only psychically, never economically. In this case he exchanges his economic gains for a psychic gain simply because he values the latter more than the former. Were this not true, he would not make the exchange. But, be it noted, this particular psychic gain, as do so many, depends on current or prior economic gains.
Each Gains from Willing Exchange
It has been said that you can’t give anything away. This appears to be incontestable, for in every willing exchange each party gains, and it matters not whether the gain is economic or psychic. No clear thinker questions the point in the economic realm: when the lady exchanges 30¢ for a can of beans, she no more “gives away” the 30¢ than the grocer “gives away” the beans. The lady in her own mind gains (a subjective judgment) as does the grocer. In the absence of such a dual judgment no willing exchange would ever be made.
Nor is the element of gain or profit altered when moving into the psychic realm. When the lady voluntarily contributes $100 to the object of her interest—be it a church, an educational institution, a family in poverty, or whatever—she experiences a psychic gain, a reward, a satisfaction that outweighs the retention of economic gains: the $100. Were this not true, she would not willingly or voluntarily make the contribution. She no more “gives away” the $100 than the 30¢. In each instance she receives in exchange something she values more than the money. Willing exchanges, at the moment they are made, are mutually gratifying and, thus, we err when we think we give something away.
The reason why so many of us, when making a contribution, pat ourselves on the back—overrate our “goodness”—is that we pay no heed to our psychic profit, as if it didn’t exist; we’re blind to it. For instance, when we contribute $10 to the Boy Scouts, we assess ourselves as all give and no take; their gain is our loss or, so we seem to think. We are, perhaps, too exclusively economically oriented. Assuredly, it was to this point that the Gospel question was directed: “For what shall it profit a man, if he shall gain the whole world?”
But the other side of the profit coin is attended by as much confusion, if not more. While there are many who are only economically oriented, who think only in materialistic terms, there are those who are too exclusively psychically oriented; they seek only psychic gain and with no attention whatsoever to whose economic gain is at stake. Their sense of pity blinds them to economic reality, and, just as certainly, to justice. In a word, there are countless American citizens today who experience psychic gain with someone else’s economic gains. Politicians are forever publicly patting themselves on the back (psychic reward) for the “good” they have done to millions of Pauls, often oblivious to the fact it is done by forcibly extorting the economic means from some Peters. Such one-sided individuals are to be found among all occupational categories—clergymen, teachers, business leaders, labor officials, and many others. This is a tragic error. The good Samaritan, I suspect, would not approve robbing Peter to gratify another’s pity for Paul. He used his own goods to aid the object of his compassion, not the goods of someone else.
But despite current confusions, a moment’s reflection reveals how barren life would be were there only economic gain, that is, were there no aspirations higher than gaining “the whole world.” And suppose the profit motive consisted solely of economic gain, bereft of psychic gain. Of course, this is an impossible concept, as meaningless as one side of a coin without the other. The motivating force, essential to man’s evolvement, springs from a wedding of the two. But we must have an awareness of the ideal partnership if we are not to run amuck!
There are, of course, many opportunities for psychic satisfactions quite apart from the economic, for instance, the kindly concern, a friendly word, the generous sentiment, the thoughtful act. Discussion of this type of psychic gain, about which there is little argument, will be omitted in order better to center attention on the type that is strictly related to the economic, the kind attended by so much confusion.
At the outset, let us not delude ourselves that the contribution of funds for the alleviation of poverty, or the furtherance of education or religion, or whatever, is without the hope of gain. There is no less hope for a gain in such an act than there is when an individual buys equities on the stock market. The hope in one case is for a psychic gain, in the other an economic gain. And we observe many instances where the yen for a profit, psychic as well as economic, becomes avaricious, blinding, irrational, nonsensible.
Giving Presupposes Owning
Confining ourselves to the kind of psychic satisfaction under discussion, it is axiomatic that such gain presupposes and rests upon economic means. Thus, any attempt to experience a psychic gain that in any way frustrates economic production and reward is self-defeating. So-called welfare programs that destroy the economic profit motive must, eventually, eliminate the possibility of psychic gains. Prior to psychic gains there must be an accumulation of economic gains. The saying, “You can’t get blood out of a turnip,” applies here: contributions are never forthcoming from pockets of poverty; noble intentions must remain no more than forlorn aspirations.
Poverty spreads in India, for instance, not because humane sentiments are lacking or welfare programs neglected, but because the way to economic gain is scarcely known. Economically, India is about as profitless as any place on earth. Psychically, it is just as unrewarding. But let us not be too harsh on India; we make our own mistakes. Our philosophers and intellectuals are no more drawing on the lessons our achievements have to teach than are their contemporaries in India.
To illustrate these confusions, let’s take two persons and a welfare problem, designed, shall we say, to cope with a brain malady that fells 1,000 persons annually. The persons, Dr. Doakes and Mr. Roe, are equals in their compassion for the afflicted ones. But here the similarity ends.
Dr. Doakes, a surgeon, has, by reason of experience, research, and skill, become the sole individual who can perform a successful operation. And, further, he has an understanding of how the free market, willing exchange economy functions in the work-a-day world.
The complications of the operation are such that Dr. Doakes can accept but one patient per month. In a word, he can save only 12 lives; 988 must perish. How is this skill of his, an extremely scarce resource, to be allocated? Who of the 1,000 shall he save? Dr. Doakes resorts to the free market method; he sets his price at that figure which will bring supply and demand into balance, let us say, $25,000!1
Mr. Roe has only his compassion to go on, or what C. S. Lewis termed “the passion of pity”; he has no surgical skills, no accumulated economic gains, and not the slightest idea of how pricing in a free market allocates scarce resources and automatically forces supply and demand toward equilibrium, alleviating poverty and distress. He accuses Dr. Doakes of being interested in saving only the John D’s in order to have an economic gain for himself. Roe’s passion for a psychic gain—the saving of the 988—is such that he will use almost any means which he, in his utter incompetency, thinks will achieve his ends, even to the imposition of a “medicare” program. This will, of course, put the 1,000 in a queue, a further burden on the single surgeon, one that will render him less able to save lives. We have here the basis of a confrontation, the kind that can get pretty mean.
Dr. Doakes tries to explain to Mr. Roe that his high price will attract hundreds of surgeons who shortly will be able to perform the operation even better and quicker than he, and, as a consequence, the price will fall to the point where eventually it will be within the reach of all. To illustrate the free market thesis, he used one of thousands of examples, the case of the ball point pen. When it first appeared on the market the price was $13.95, all the traffic would bear, as we say. This attracted all sorts of competition. Today, ball point pens, far superior to the original, are used by countless businesses all over the country as give-aways.
Confrontations of this sort would fade away were there a wider realization (1) that economic gains must precede psychic gain and (2) that economic gains are possible only in willing exchanges, the free market.
In summary, the entrepreneur who would profitably employ his talents and property is obliged to give consumers what they want as efficiently as possible. But should he choose to elevate the tastes of consumers by giving them more of what he thinks they ought to have, rather than what they think, his greater psychic gain likely would be offset by less economic gain. Which of the two types of gain does he value more? That’s the only question, assuming no coercion. His choice would seem to be strictly a matter of his own intelligence.
Now to cases: More economic profit has been made on the Holy Bible than on any other book. In our own field, the sales of Mainspring by Weaver, The Law by Bastiat, and Economics in One Lesson by Hazlitt each approach the half-million mark, and they continue to return an economic profit. But suppose that, like many excellent works, these teachings were so contrary to the common or popular point of view that their publication meant economic loss. Would this fact, by itself, warrant relegation of these books to the literary graveyard? Is the only test of appropriate human action economic gain? Were this the sole guide to correct action, then the mere utterance of an unpopular view would be taboo. Were psychic gain not also an appropriate motivation, then how could one teach a Sunday school class, or serve on the Little League Board, or loan books to inquiring students, or finance research work that may help others as much or more than one’s self, or do a thousand and one other things that are more of the heart than the pocketbook?
Peacefully and Profitably
From all of the foregoing I derive three conclusions:
First, do whatever you think is right with what is your own, so long as it’s peaceful.
Second, the profit motive—which fuels human action in the free market and functions peacefully in no other setting—operates psychically as well as economically. A psychically motivated transaction is as much “of the market” as one entered strictly for economic gains; and any “market” that accommodates but one of these motivations, and not the other, is less than a free market.
Third, while recognizing that “to gain the whole world” is not the object of life, we also may see that charity does in fact begin at home. Helping others presupposes economic self-reliance of our own. Psychic gains—in the context as previously explained—and economic gains both rest upon the use of economic resources. Human action is both psychically and economically motivated, the ultimate satisfaction from either one being affected by and at least in part dependent on the other.
The quality of being human is of the spirit as well as of the flesh! For man not to “lose his own soul” in satisfying his economic needs, requires a balanced assessment of economic and noneconomic needs—of others as well as of self. A political economy that stresses one to the exclusion of the other has both idealistic and practical shortcomings. . . .