TWELVE

FREE MARKETS AND FREE SPEECH

(1987)

I am not accustomed to speaking to lawyers or putative lawyers, but we do have at least one thing in common. Economics and law are, I understand, almost the only two professions that have the characteristic that the supply creates its own demand.

I was told that my function is to put the symposium about the First Amendment in a broader context. I shall try to do that by considering two major issues: first, how free speech, press, and assembly fit into the broader context of a free society and, second, the case for a free society. The label I like to use to refer to the views I shall express is liberalism, by which I mean real honest-to-God liberalism, not the fake version that goes by that name these days. I mean nineteenth-century liberalism. These days, nineteenth-century liberals have felt compelled to refer to themselves as libertarians or conservatives, even when those names are thoroughly inappropriate. Professor Schumpeter put it best when he wrote, “[a]s a supreme, if unintended, compliment, the enemies of the system of private enterprise have thought it wise to appropriate its label.”[1]

Let me start by asking a question that I discussed a number of years ago: Do free men make free markets, or do free markets make free men? That sounds like a play on words, like a purely semantic question, but it is not at all. There is some connection both ways. But there is little doubt in my mind that the connection from free markets to free men is much stronger than the connection from free men to free markets. The framers of our Constitution, the founders of our country—George Washington, James ­Madison, Thomas Jefferson, Alexander Hamilton—were free men, and as free men they made a society that developed as a free society. But if you had asked Lenin and Trotsky, you would have found that they too regarded themselves as free men; but by no means did they make a free society. Much more important, intellectuals generally regard themselves as free men and invariably favor freedom for themselves. Many—perhaps most—of them, however, favor introducing collectivism into society in every other area. Alexander Hamilton is a good example. His Report on Manufactures gave lip service throughout to Adam Smith, yet the report was really devoted to undermining a basic component of a free society, namely, free trade.[2] It favored the enactment of tariffs and other restrictions on trade. It fostered a step toward collectivism. Although Hamilton was certainly a free man, in Report on Manufactures he was not working for a free society. That has generally been true of most intellectuals.

Free societies have emerged in considerable part as a result of accident, not of intellectual ideas. Though intellectual ideas have played an important role, it is hard to regard them as the prime movers. For example, something that had nothing to do with ideas was a major factor enabling the United States society to be as free as it has been: the panic of 1837. Those of you who have studied American history know that in the 1820s and 1830s there was a great outburst of governmental involvement in industrial, manufacturing, and other enterprises. Many states built and operated canals. Illinois, Indiana, and other states set up government banking systems. No ideological objections prevented widespread intervention by government—primarily state rather than federal—into economic activity and economic projects. Fortunately (in retrospect, though the people did not like it at the time), there was a great financial panic in 1837 in which most government enterprises went bust. That gave state socialism, to give it its modern label, a bad name and, in my opinion, had a major impact on the future development of the United States. I believe that it had more to do with the government staying out of business than did the laissez-faire philosophy represented by The Wealth of Nations, even though The Wealth of Nations provided the intellectual justification for the course that the United States largely followed.[3]

This seems to be true in Great Britain, where the philosophy developed and where Adam Smith wrote The Wealth of Nations in 1776. It took seventy years before the so-called corn laws were repealed[4] (as you know, corn referred to all manner of grain). The campaign for eliminating tariffs on corn, which persisted for decades and ultimately led to the repeal of the corn laws, had as its major theme the idea that a group of grasping, selfish landowners were exploiting the ordinary people. The repeal of the tariffs on corn established free trade as a basic principle of British economic policy. Without restrictions on international trade, it is extremely difficult to prevent free competition at home. Indeed, freedom of competition in international trade is the most important single measure that can be taken to promote and preserve a free market economy.

It is no accident that, in the twentieth century, Britain reimposed tariffs and other restrictions on trade as it moved away from a primarily private-enterprise economy toward a socialist, collectivist economy. Such restrictions were an early component of what has become the modern welfare state.

There is a direct connection between free markets on the one hand and free speech on the other. That is part of the story of free markets making free men. Interferences with markets constitute and produce interferences with free speech. Let me give some specific examples.

Compare the tycoons of the nineteenth century in the United States with the tycoons of today. With few exceptions, today’s tycoons are not very colorful; they wear three-button suits and go to Washington to get the best deal they can from the government. They rarely speak out against any government program. The tycoons of the nineteenth century, when government played a much smaller role, when spending by the federal government amounted to 3 percent of the national income instead of the 30 percent it does now, were much more outspoken. They were characters, and they did not hesitate to express themselves.

No major businessman today in our country has freedom of speech. He would not dare to speak freely. Let me illustrate with a couple of recent quotations from the Wall Street Journal. The first is from an editorial of February 26, 1986.

It is not clear that any federal regulatory agency has more power to intimidate the people it regulates than the Food and Drug Administration. As a consequence few active medical researchers in the United States will publicly criticize the FDA bureaucracy. Earlier this week a small California pharmaceutical company was the latest to learn how high the cost can be for having the temerity to take public issue with this agency.[5]

The next day, in a discussion of small artificial hearts intended to be used for women and an FDA ruling prohibiting their use (incidentally, a clear case of sex discrimination): “‘It’s crazy and bizarre that we’ve gotten into this circumstance with this regulatory agency making medical decisions,’ said one of the heart surgeons, adding, ‘I don’t know if I want to be quoted on that because I have to live with those guys.’”[6]

A few years ago, after the Arab cartel was established and the price of oil shot up, the government both enforced price controls on oil and introduced a complex system of allocations and entitlements involving extensive government regulation of the oil industry. I received at that time a letter from an executive vice president of an oil and gas association, who, needless to say, did not want his name used publicly. He wrote: “As you know, the real issue more so than the price per cubic foot is the continuation of the First Amendment to the Constitution. With increasing regulation, as Big Brother looks closer over our shoulders, we grow timid about speaking out for truths and our beliefs against falsehoods and wrongdoings. Fear of IRS audits, bureaucratic strangulation, and government harassment is a powerful weapon against ­freedom of speech.”

Another one of my favorite examples of what I regard as an extraordinary infringement on freedom of speech has to do with the selling of United States savings bonds. The situation is not so bad today as it was about five or ten years ago, when inflation was sharply on the rise and when anyone who bought a United States savings bond was certain to end up after twenty-five years with less purchasing power than he had given up in buying it; I used to call the promotion of United States savings bonds the biggest bucket-shop operation in American history. Yet almost every bank in the United States included in one or more of its monthly statements a brochure urging the depositors to buy United States savings bonds to benefit themselves and to promote the country’s welfare.

Moreover, both then and now, a full-page advertisement by a committee of businessmen appears each year in all the major newspapers of the country, an advertisement that contains pictures of the president of this company and the president of that company and that urges people to buy United States savings bonds. Some time ago, I asked a lot of bank presidents and other persons on the businessmen’s committee, “Would you advise a customer or friend of yours to put any of his money in US savings bonds?” They invariably answered, “Of course not, it’s a terrible investment.” “Why then,” I asked, “do you send out the misleading advertising that’s provided to you by the Treasury Department? Why do you serve on the committee?” The answer was always the same: “The Treasury and the Federal Reserve wouldn’t like it if I didn’t.”

Do those gentlemen have freedom of speech? Did any of those bankers have freedom of speech? You may say, “They just didn’t have any guts. They could have made speeches about the fraud that was being perpetrated upon the American public in asking them to buy savings bonds paying interest rates of 4 or 5 percent when inflation was at the rate of 8 or 9 percent.” And perhaps some did. Making such a speech, however, would have imposed a very heavy cost. There is nothing wrong in there being some cost in engaging in free speech—there is no free lunch, and there is no free free speech. But the cost ought to be reasonable, not excessive. And it is excessive.

“Well,” you may say, “what is disturbing about such restraints? They affect businessmen only, and it doesn’t matter whether businessmen have free speech.” That may not be your attitude, but I assure you it would be the attitude of those in many places, including many—perhaps most—faculty clubs and common rooms of universities. The restraints on freedom of speech are not limited to business. Look at academics. Consider medical people, engaging in research funded by grants from the National Institutes of Health. I am sure that some among them privately question whether that is an appropriate way to spend the taxpayers’ money. But how many members of a medical school faculty, even those who have received no research grants, would regard it as consistent with their future professional career to come out publicly against government subsidization of research in medicine?

In my own field of economics it was proposed some years ago that the National Science Foundation cease giving grants in economics or at least reduce drastically the amount granted. Many of my professional colleagues in various universities issued a public letter strenuously objecting to any proposal to eliminate or reduce such grants for economic research. I wrote a column in Newsweek[7] in the form of an open letter in which I urged the abolition of the National Science Foundation altogether. I cannot say that I was popular with my fellow economists. But why was I able to express such a view at all and do so without any concern about adverse consequences? Because at the time I was a tenured professor approaching retirement. About the only people in this country today who have effective freedom of speech are tenured professors approaching retirement.

So you can see that there is a close relationship between freedom in the marketplace and freedom in other areas and that, moreover, freedom in the marketplace produces freedom elsewhere. In the marketplace transactions are fundamentally anonymous. People are cooperating with one another because both sides benefit. In the marketplace, individuals do not have the power to coerce other individuals. Anyone who refuses to do business with another because he does not like his opinions on an unrelated matter hurts himself, and primarily himself, in the process. Those are the reasons that a free marketplace is such an important element in a free society.

Rose and I entitled the final chapter of our book Free to Choose[8] “The Tide Is Turning.” The tide, with respect to ideas, has continued to turn. There is much support today for views that were regarded as beyond the pale twenty to twenty-five years ago. Those of us who were a small, beleaguered minority some thirty or thirty-five years ago no longer are in the minority.

If you look, however, not at ideas but at practice, at the nature of the world and of the United States in particular, the tide has not turned. On the contrary, the United States today is a less free society than it was thirty years ago. Government has expanded in every dimension. Government spending has gone up as a fraction of income; government taxes have gone up as a fraction of income; regulatory agencies of every kind have proliferated. Fewer people today have effective freedom of speech. Though, as intellectuals, we may emphasize freedom of speech, to the majority of people in the United States the freedom to buy what they want to buy, the freedom to live where they want to live, and the freedom to be employed as they want to be employed are at least as important as the intellectual freedom that is so important to us.

In those aspects of society, people today are less free than they were thirty or forty years ago. Indeed, this cumulative movement toward a less free society has, in my opinion, been a major reason that the tide has been turning in the intellectual area. The growth of the United States government has made its defects more apparent, as have the failures of collectivism in Russia and in every other country where it has been tried. Those events have caused a change in ideas. But that change in ideas has not yet been translated into a change in the world of practice. That battle must still be fought.

I want to turn to a very different topic. So far, I have been taking it for granted that a free society is the right kind of society, that it is the kind of society we want or ought to want. There is an obligation to try to spell out the basis for that belief. Obviously, that is a subject of immense depth, subtlety, and profundity that is beyond my competence. A few comments, however, may not be inappropriate.

A free society, I believe, is a more productive society than any other; it releases the energies of people, enables resources to be used more effectively, and enables people to have a better life. But that is not why I am in favor of a free society. I believe and hope that I would favor a free society even if it were less productive than some alternative, say, a slave society. It is fortunate that that is not the case because the only reason that there is a ghost of a chance of having something approximating a free society is that a free society is so productive. The enemies of a free society, the forces that are working against it, are so strong that the major thing, in my opinion, that prevents them from conquering is that a free society is so productive that it tends to overwhelm those other forces if given half a chance.

I favor a free society because my basic value is freedom itself. I define freedom as the absence of coercion of one person by another. To define it in a positive way, it is the freedom of individuals to engage in voluntary cooperation one with another so long as they do not affect third parties. The question is this: How do I justify that preference? How can I justify saying that people ought to be allowed to go their own way and not be interfered with by others? How can I justify letting people be free to sin? If I really knew what sin is, I could not justify it. All totalitarians, all people who have suppressed freedom, have done so because of the arrogance of their believing that they knew what sin was. The ayatollah knows what sin is, which is why women in Iran must not walk around without having their faces covered. He cannot let them be free to do otherwise because he is firmly convinced that he knows what sin is. He is the archetype of a “true believer.”

One justification for letting people be free to sin is that there is no merit in people’s not sinning if they are prevented from sinning by coercion. There is merit in not sinning only if people do not sin because of their own volition. I believe, however, that that is not a satisfactory answer if you really know what sin is.

In my opinion, the real case for a free society and for freedom is ignorance—we cannot be sure we are right. If I cannot persuade people by reason and argument and talk, if I cannot persuade them to agree with me, what right do I have to force them? How can I be sure that I am right? I have always been fond of a quotation that is attributed to Cromwell but that of course he meant for the benefit of others, not himself. He said, “I beseech you, in the bowels of Christ, think it possible you may be mistaken.”[9] I think that states the essence of the case for a free society.

In short, the basic virtue in a free society and the basic justification for a free society is humility, a willingness to recognize that no matter how strongly one may believe he is correct, he cannot be sure. Hence he does not have the right to force his view on someone else.

In conclusion, I want to give two examples to illustrate the relation between the different aspects of freedom that I have been talking about. Some years ago I received from an academic at a university in Pakistan a letter that read as follows: “I have been delving into the political philosophy of liberalism and individualism and have read whatever little on the subject is available in our libraries. It has been my great misfortune that your highly popular work, Capitalism and Freedom,[10] is not present in the libraries of this country. Exchange control regulations in this country prevent me from buying it from a publisher in the United States.” Now I ask you, was that a restriction of his economic freedom? Of his political freedom? Of his intellectual freedom? Can you logically make a distinction? Is our United States system of tariff protection a restriction of our economic freedom or of our intellectual freedom or of our political freedom? I think it is clearly a restriction of all.

My second example is a hypothetical example, not a real one. Every tobacco company in this country is required to put a warning label on cigarettes that states that smoking cigarettes may be harmful to your health. It is taken for granted by almost everybody that requiring such a warning label is not a violation of free speech. There is, however, little doubt in my mind, and I am sure most of you will agree with me, that far more lives have been lost in the past century as a result of Karl Marx’s Das Kapital[11] than from smoking cigarettes. Would it therefore be appropriate to require every copy of Das Kapital to carry a warning label reading, “This book may be dangerous to social and personal health?” Where is the difference? Yet is there any doubt that there would be a great outcry at that suggestion? Such a requirement would be regarded—and, I may say, rightly so—as clearly an interference with the right of people to read what they want to read and so on. I challenge you to find any significant difference. Needless to say, I am not a defender of cigarettes. I quit smoking some twenty-odd years ago because I was persuaded by the evidence I read. But I quit because I was persuaded; I do not think it is any business of the rest of you to tell me whether I ought to have quit or not.

Finally, let me summarize everything I have been saying by saying that for an effectively free society we need the First Amendment that we have but we need a parallel amendment at least as much. And that parallel amendment should read as follows: Congress shall make no laws forbidding voluntary acts between consenting adults.

Notes

1. J. Schumpeter, History of Economic Analysis 394 (1954).

2. A. Hamilton, Report on Manufactures (Philadelphia, 1791).

3. A. Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (London, 1776).

4. See 9 and 10 Vict., ch. 25 (1846) (reducing but not completely abolishing the duties on grain). All duties on grain ceased in 1869. See 32 and 33 Vict., ch. 14, § 4 (1869).

5. Wall Street Journal, Feb. 26, 1986, at 24, col. 1.

6. Wall Street Journal, Feb. 27, 1986, at 24, col. 3.

7. Friedman, “Open Letter on Grants,” Newsweek, May 18, 1981, at 99.

8. M. Friedman and R. Friedman, Free to Choose (1980).

9. Letter to the General Assembly of the Church of Scotland (Aug. 3, 1650), reprinted in J. Bartlett, Familiar Quotations 272 (15th ed., 1980).

10. M. Friedman, Capitalism and Freedom (1962).

11. K. Marx, Das Kapital (Berlin, 1867).