A Year at FEE

Liberty
February 2003

by Mark Skousen

Is the sun setting on the world’s oldest freedom organization?

The Foundation for Economic Education (FEE) is often called “America’s oldest freedom organization.” It predates the Institute for Humane Studies, the Cato Institute, and the Libertarian Party; its monthly magazine The Freeman (now Ideas on Liberty), was published for years before Reason or Liberty began publication. FEE was founded in 1946 by Leonard Read, a libertarian businessman and prolific writer most famous for his book Anything That’s Peaceful and his essay “I, Pencil.” For almost 60 years, the Foundation has been located in a 35-room mansion on a five-acre estate in Irvington-on-Hudson, just 20 miles north of Manhattan. Through its books, student seminars, and The Freeman, FEE has been associated with some of the biggest names in the freedom movement: Ayn Rand, Ludwig von Mises, Henry Hazlitt, and Milton Friedman, among others. Even Ronald Reagan, John Wayne, and Lawrence Welk wrote letters of support to Read. (Go to www.FEE.org for a delightful color photograph of Ronald Reagan reading The Freeman, while his wife, Nancy, rests on his shoulder.)

Yet since the passing of its founder in 1983, FEE has fallen into obscurity while the Cato Institute, the Heritage Foundation, and Hillsdale College have become household names. It has struggled to survive financially and The Freeman has dropped to only 5,000 paid subscribers. A series of presidents, including Hans Sennholz and Donald Boudreaux (now chairman of the economics department at George Mason University), worked hard to resurrect the glory years of FEE. Their efforts were valiant. But despite these valiant efforts, when I became president of FEE in August, 2001, many of my friends in politics and finance had never heard of it.

So now it was my turn to take on the challenge of resurrecting FEE. I thought my background had prepared me well. I hold a Ph.D. in economics from George Washington University. I’ve been a professor of economics and finance at Rollins College for 16 years. I’ve edited a very successful investment newsletter and spoken on economics and liberty to a wide variety of audiences. Having written over a dozen books, including three textbooks, The Structure of Production, Economic Logic, and The Making of Modern Economics, I felt it was time to focus my efforts on spreading the word.

And I had a long experience with FEE. I have been an avid reader of The Freeman since the 60s, a columnist since 1994, and a financial supporter of FEE. I knew Leonard Read and have lectured at the FEE mansion many times over the past two decades. FEE published my Ph.D. dissertation, Economics of a Pure Gold Standard, in 1988 and a pamphlet, What Every Investor Should Know About Austrian Economics and the Hard Money Movement, in 1995. For many years, I have recommended FEE in my investment newsletter, Forecasts & Strategies as the one organization worthy of a tax-deductible contribution. Most importantly, economic education has always been as much my passion as the world of investing.

So when Gary North, a longtime FEE supporter, urged me to apply for the job as president in early 2001, I jumped at the opportunity. When the FEE board approved my name, our family suddenly dropped our easygoing lifestyle in Florida and moved to New York, with less than a month’s notice.

Attract Attention!

FEE has fallen into obscurity while the Cato Institute, the Heritage Foundation, and Hillsdale College have become household names.

I immediately went to work to restore the glory days of FEE, telling the board that my plan was to think big and make FEE a household name. I read everything I could about FEE, including Leonard Read’s private diaries and essays. My wife, Jo Ann, and I worked twelve-hour days, including weekends, to turn a candlestick (Leonard Read’s favorite symbol of liberty) into a lighthouse. I paid my respects to Andrew Carnegie, the legendary financier buried a few miles away in Sleepy Hollow Cemetery, by following his advice to “attract attention.” The first thing I did upon arriving was to replace the 50-year-old sign at the Broadway entrance with an impressive new sign. Here are some of the other FEE accomplishments in my first year:

• We acquired Laissez Faire Books, the largest distributor of books on liberty in the world.

• We created the annual Leonard E. Read Book Award for Excellence in Economic Education.

• We publicized FEE by obtaining complimentary exhibit booths at the Money Shows and other major investment conferences around the country.

• We created the James U. Blanchard III Memorial Scholarship Fund to finance scholarships for needy international students to attend FEE seminars. We raised over $60,000 in our first year and eight international students were recipients of the Blanchard scholarships this summer.

• We updated our primary website, www.FEE.org, and created a daily news service, www.FEEnews.org, with Ron Holland as editor. He did a terrific job and FEE won an award for this new daily news service. This past summer, FEE.org was averaging 30,000 new visitors each month — not “hits,” visitors.

• We dramatically expanded our high school and college outreach program, with Dinesh D’Souza serving as our spokesman on college campuses, and Greg Rehmke expanding his debate program into the homeschool arena.

• We invited Nobel Prize economist Milton Friedman to write an article for Ideas on Liberty (a first).

The FEE National Convention: First Time on Nationwide TV

Perhaps our greatest achievement was the FEE National Convention (“FEE Fest”) at Las Vegas in early May. It put FEE on the map and people are still talking about it. We attracted nearly 900 paid attendees, 100 exhibitors, and 80 speakers (including Ben Stein, Charles Murray, Ron Paul, Nathaniel Branden, and Dinesh D’Souza). FEE Fest was co-sponsored by Reason Foundation, Heritage Foundation, Young America’s Foundation, Institute for Humane Studies, Leadership Institute, Goldwater Institute, Liberty magazine, and dozens of other freedom organizations. Our seminar director, Tami Holland, put together this program in only four months and Kim Githler, president of the Money Show, was able to negotiate a contract with Bally’s/Paris Resort Hotels without requiring a minimum deposit (thus minimizing our risk). We made some money — $14,000 — on the convention, but more importantly, we made FEE visible for the first time in decades, and introduced hundreds of people to free-market economics in the course of three wonderful days. “I feel an electricity that I have not felt in many years among libertarian gatherings,” commented Nathaniel Branden. We received extremely favorable comments from attendees, and even today people write us to ask when the next FEE convention will be.

As a result of the convention, FEE appeared on nationwide television for the first time when C-SPAN Book TV taped speeches by Dinesh D’Souza, Harry Browne, Michael Ledeen, Charles Murray, Tom DiLorenzo, and me. C-SPAN Book TV broadcast these speeches from the FEE convention repeatedly from May until November. C-SPAN was so impressed with the FEE convention that they wanted to bring two crews to the next one.

As an added benefit of the convention, FEE acquired two new prestigious toll-free numbers, 1-800-USA-1776 and 1-888-USA-1776. These numbers — previously owned by the U.S. Bicentennial Commission — were valued by an independent media consultant conservatively at $400,000. The toll-free numbers were donated by Terry Easton, a telecommunications expert who attended the FEE convention and was so impressed with the “new” FEE that he offered to help FEE financially in many other ways.

FEE Summer Seminars: “You Changed My Life”

The FEE convention also led to the doubling of student/teacher seminars. We sold out all of our student seminars this past summer and even had to add an additional seminar because of higher demand. Over 175 students attended. One major supporter who attended the FEE convention was so pleased that he more than doubled the number of scholarships he awarded to FEE summer seminars.

In addition, we made money on all our seminars this summer (a first). We cut costs by using staffers and trustees to teach. My wife, Jo Ann, and the staff prepared 3,200 meals in the FEE kitchen, thus saving thousands of dollars. But the best part was the response of the students. (One student wrote me, “I will be forever grateful to FEE for making this life-changing event possible. It was one of the most enjoyable and productive weeks in my life.”) Of all the things we did in 2002, the student seminars were the most rewarding.

My Most Controversial Decision: Inviting Rudy Giuliani to Speak

Every year FEE plans a fall dinner in October for trustees and supporters. My goal was to put FEE on a national pedestal, so I invited the #1 speaker in America, former mayor Rudy Giuliani, to be the keynote speaker. I didn’t think this choice would be out of character, since past speakers have included Lady Margaret Thatcher, Bill O’Reilly, and Paul Gigot (new editorial page editor of The Wall Street Journal). Although not a libertarian, Giuliani had almost singlehandedly transformed the world’s most powerful city from a stifling, dirty, dangerous metropolis into a thriving, safe, and clean city. Giuliani proudly points to the recommendations of the Manhattan Institute, a free-market think tank, as having influenced his decision to cut taxes, privatize, and deregulate the city’s economy. And few questioned his leadership during the terrible days after the terrorist attacks in September, 2001. I probably would not have moved to New York if Giuliani hadn’t been mayor, because the New York of ten years ago simply wasn’t safe or inviting.

In my mind, the biggest risk was financial — Giuliani gets a high honorarium and we had reserved the big ballroom at the New York Hilton. My goal was to attract the largest gathering of freedom lovers in New York history and to let them know that FEE was the place to learn more. Kim Githler again came to our aid by co-sponsoring the event and negotiating excellent terms with the Hilton. The chances of getting Giuliani were slim, however, since he turns down nine out of every ten requests. But everything fell into place when Giuliani accepted my invitation. And John Stossel of ABC News graciously agreed to be Master of Ceremonies for the event. Talk about a one-two punch! I quickly arranged pledges from supporters to buy patron tables to cover the cost of Giuliani’s honorarium, and Tami Holland went to work selling tickets. Everything was set for a spectacular extravaganza that would elevate FEE to national prominence.

However, I failed to take into account one thing — the extreme reaction of some libertarians around the country to my choice of Rudy Giuliani as a speaker at a FEE event. Many were outraged that I would select a “fascist” and a “thug” who “represents everything inimical to what FEE stands for,” to quote some of the more colorful lines from libertarians on the Internet. I was attracting attention, all right, but not the kind I was expecting. I countered by explaining that the Liberty Banquet was not an endorsement of Giuliani’s political record, but an outreach program. We wanted the general public to become familiar with FEE as the best source of sound economics, and what better way to attract the public than to invite America’s hero after Sept.11? Thousands of investors and business people didn’t know FEE from Adam, but they knew Giuliani, and by coming to a banquet with America’s mayor as speaker, they would be introduced to a powerful new organization that could change their lives forever.

The only way we are going to make a difference in this world is if we reach out to people who don’t yet agree with us. Sound economics is too important to leave only to libertarians! Henry Grady Weaver wrote in a FEE pamphlet: “I [already] believe in free enterprise. Explain it to those who don’t, not to me.” Amen!

I didn’t think choosing Rudy Giuliani to speak would be out of character, since past speakers have included Lady Margaret Thatcher, Bill O’Reilly, and Paul Gigot.

It didn’t seem to matter that John Stossel, a true libertarian hero, was willing to appear on stage with Giuliani, or that Giuliani had done wonders to restore the value of life, liberty, and property (the libertarian trinity) in the city of New York. I was amazed how closed-minded my libertarian friends were to Giuliani’s positive contributions. “It’s like inviting the devil to church,” accused John Pugsley. My response: “I already did that when I invited Doug Casey to speak at the FEE National Convention on Sunday, May 5.” Many Christian libertarians, including me, were offended by Doug’s attack on Christianity, but I was willing to listen to his opinions. I wish libertarians could be more tolerant and open-minded, more willing to have a dialogue with those whose views differ from their own. As Ben Stein, our keynote speaker at the FEE convention, said, “It’s funny how libertarians are so controlling.” (I was criticized for inviting Ben Stein, too, because he wasn’t a pure libertarian.)

Ironically, another organization, Washington Policy Center, dedicated to “advancing limited government and free markets,” promoted their own banquet in Seattle two weeks before ours. The keynote speaker? Rudy Giuliani. They had over 850 attendees in a very successful outreach program.

Mission Aborted!

It was during this ongoing debate over Giuliani that I received a startling telephone call from the chairman of the FEE board. He said the executive committee had met and decided to ask for my resignation. He did not go into details, aside from saying the board did not share my grand vision for FEE. He cancelled the Liberty Banquet and all future FEE national conventions.

I must admit that this move was the most shocking and disappointing event I’ve ever experienced in the freedom movement, and it came at a time when FEE was on the verge of once again making a real impact. Over the past ten years my wife and I had put our hearts and souls, as well as a good deal of money and reputation, into FEE and then it ended like this! It seemed unfair to us and destructive to FEE’s future. I have no doubt that the board members are good people and well-intentioned supporters of liberty. They volunteer their time, donate funds, and attend board meetings without compensation. Several board members were quite supportive of my presidency and wrote letters on my behalf. But I did not want to cause further controversy by fighting a divided board, so I agreed to resign. I still feel a great sadness about this.

Looking back, I made lots of mistakes as president, things I would do differently if I had the benefit of hind-sight. I would have worked more closely with the board and spent more time raising money. I probably tried to do too much too soon. But I think we did some things right and, in large measure, fulfilled the mandate I was given.

When I became FEE’s president, the organization was coming off a difficult year financially and charitable giving was plummeting across the country. I am pleased that in the six months before I was asked to resign, FEE’s revenues were up 30% and contributions were up 20%. And I am proud of the FEE convention and the student seminars.

When I was asked for my resignation, it was the most shocking and disappointing event I’ve ever experienced in the freedom movement, and it came at a time when FEE was on the verge of once again making a real impact.

After the executive committee cancelled the fall dinner, I was worried about the financial burden the cancellation of the Liberty Banquet would put on FEE, since it would still have the expense of honoring Giuliani’s contract while returning the patron table donations. So with the help of my publisher, Tom Phillips, and Kim Githler of the Money Show, we resurrected the Liberty Banquet and it went off on schedule Oct. 25 at the New York Hilton. It had lost momentum after the initial cancellation and a three-week delay in sending out the major promotions, but we still managed to attract 250 paid attendees. Rudy Giuliani was the perfect gentleman and quite a few libertarians gave him a standing ovation.

Jo Ann and I have appreciated the many letters and emails of support we have received during this difficult period. I continue to teach on college campuses, write my investment letter, speak at conferences, and author books. Instead of writing a column for Ideas on Liberty, I am now a contributor to Liberty magazine. I have my free time back but, to paraphrase John Maynard Keynes, I’d rather be the slave of some great cause.

Whither FEE?

Jo Ann and I will persevere, but what about America’s oldest freedom organization? An aggressive new FEE is unlikely under the current board. The new toll-free numbers have been returned to Terry Easton (upon his request), the daily news service is dormant, and the Blanchard Scholarship Fund is looking for a new home. There’s talk among a few board members of selling the FEE mansion and distributing the assets of FEE to other freedom organizations. Such an action would be most unfortunate. As one FEE supporter wrote, “it would be a crime to discontinue FEE since it was the first free-market foundation preaching in the wilderness to the business community which was then plagued with Keynes’ dogmas.”

FEE deserves to survive and prosper. Many organizations do a fine job of lobbying in Washington, researching public policies, supporting important libertarian scholarship, and fighting the enemies of freedom. But only one organization is dedicated solely to educating students, teachers, businesspeople, and citizens on the principles of free markets and sound money. And, if there’s anything the world needs desperately, it’s a strong dose of sound economics and an enthusiastic FEE. Jo Ann and I sincerely hope FEE can regain its influence.

When the Founding Fathers signed the Constitution of the United States in 1787, Benjamin Franklin, looking toward the half-sun carved on the back of the president’s chair, observed, “I have often in the course of the session, looked at that [chair] behind the president without being able to tell whether it was rising or setting. But now at length I have the happiness to know that it is a rising and not a setting sun.”

In a similar vein, as I was leaving FEE at the end of my presidency, I stood before the large portrait of Leonard E. Read located above the mantel in the living room of the FEE mansion and wondered whether Len was smiling or sad. I think that, for a year at least, he was smiling.

A Year of Miracles — 1776

Personal Snapshots
Forecasts & Strategies
August 2002

“The cause of America is in great measure the cause of all mankind.”

— Tom Paine, Common Sense (1776)

A Year of Miracles

Like most Americans, I’ve always been fascinated by the events of 1776. It was a year of earth-shattering events that transformed forever the Western world.

It is, of course, the year the American colonies broke off relations with the Mother Country, declared political independence from monarchy, and established the words of Thomas Jefferson that “all men are born equal” and endowed with certain “inalienable rights.”

It is the year that Adam Smith’s monumental Wealth of Nations was published, a powerful declaration of economic independence. Smith proclaimed the establishment of a “system of natural liberty” and the “invisible hand” doctrine that private enterprise would benefit the public wealth.

It is the year the eminent British historian Edward Gibbon published the first volume of his classic history, The Decline and Fall of the Roman Empire. It was considered a scandalous book because it blamed the decline and fall of Rome after it adopted Christianity as its state religion. Through his review of the Roman world, Gibbon emphasized the principles of “liberty, virtue and courage.”

Last but not least, 1776 is the year Thomas Paine’s Common Sense was printed, and Paine, more than any other revolutionary figure, symbolized the Age of Enlightenment. Paine’s philosophy encompassed the entire compass of liberty. He was a radical who advanced democratic emancipation, individual rights, religious tolerance and competitive capitalism.

Just as Adam Smith, Thomas Jefferson, Edward Gibbon and Tom Paine were radicals of their day, so the Foundation for Economic Education and its supporters are the radicals of our day, supporting maximum political, economic and religious freedom.

 

The Origin of the 21-Gun Salute

Personal Snapshots
Forecasts & Strategies
July 2002

“Is anybody there? Does anybody care? Does anyone see what I see?”

— George Washington, 1776

The 21-gun salute is considered the highest expression of honor and respect, given to recognize the presence or the passing of a great military hero or political leader. What is the origin of the 21-gun salute? In ancient times, warships fired seven-gun salutes based on the lucky number seven. Seven is also an important biblical number — e.g., God rested on the seventh day.

In 1810, the War Department of the United States defined the “national salute” as equal to the number of states in the Union, at the time 17. This salute was fired by all U.S. military installations at 1 p.m. (later at noon) on Independence Day. Today 50 guns are fired when the president visits a military installation, or when a president or ex-president dies.

In 1842, the presidential salute was formally established at 21 guns. Why 21? Some say it is a multiple of three based on another significant biblical number. At Independence Hall in Philadelphia, tour guides report that the 21-gun salute reflects the founding of our country. Independence was declared on July 4, 1776. If you add up the numbers 1 + 7 + 7 + 6, what do you get? 21! In Las Vegas, “21” is a lucky number. Not only does it represent winning at Blackjack, but if you add the 1 and the 6 in 1776, you get 777, the lucky winning combination in slot machines. And my friend Bert Dohmen, a financial technical analyst, noted that “21” is a Fibonacci number, a number that is found often in nature (the numbers in a Fibonacci sequence are 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, … where you add the previous number to get the next Fibonacci number). Fibonacci numbers are used frequently by mathematicians and technical analysts on Wall Street.

What Is the 1776 Club?

To honor our Founding Fathers and the Spirit of 1776, I’ve created the new 1776 Club. The purpose of the 1776 Club is to help deserving students learn the principles of free-market economics and the freedom philosophy in several ways: by attending seminars at FEE headquarters and other centers of liberty around the world; by attending on-campus lectures, regional seminars and international conferences; and taking accredited Internet classes in sound economics. (I’m working right now with Grantham University — www.grantham.org — to create courses in investments, economics and finance, to be announced soon.)

We chose the 1776 Club as the name of this Foundation for Economic Education (FEE) program in honor of our Founding Fathers who declared economic, political and religious independence, and thus created the freest, most prosperous nation in the world.

At the FEE Fest 2002 in Las Vegas in May, we encouraged attendees to donate any amount of money using the numbers “76” or “1776” in them, from 76 cents to $1,776. So far we have raised nearly $15,000 in the 1776 Club. Please feel free to donate any amount, such as $76, $760 or $1,776, to this good cause. If you donate $1,776 or more, you become a Founding Member of the 1776 Club. Some of the first to become Founding Members are: Andrew Westhem, president of Westhem Grant Group of La Jolla, California; Mel Adams, president of Adams Bank in Nebraska; Bert Dohmen of Dohmen Capital Management of Hawaii; Conrad Denke, president of American Production Services of Hollywood, California; and our new FEE chairman, Ed Barr.

What are the benefits of being a Founding Member of the 1776 Club? First, you receive a lifetime subscription to our monthly publication, Ideas on Liberty. Second, you receive a complimentary copy of Leonard E. Read’s classic work, Government — An Ideal Concept. And third, you receive special discounts for our annual FEE Fest and other FEE seminars throughout the year. Most importantly, you share in the joy of helping young people learn the principles of sound economics.

Throughout the month of July, we are planning to ring FEE’s Liberty Bell in honor of all those who send in donations to the 1776 Club. If you send in a donation, we will ring the bell once. If you donate $1,776 or more, we will ring the Liberty Bell 21 times in your name as a way of showing our appreciation for your patriotism and support. Send your donation to the Foundation for Economic Education, 30 South Broadway, Irvington, New York 10533, call 800/960-4FEE, ext. 209, or go to www.FEE.org.

From Poverty to Riches: Is There a Magic Elixir?

From The President’s Desk
Published in Ideas on Liberty
July 2002

by Mark Skousen

“The problem of making poor countries rich was much more difficult than we thought.”

—William Easterly, World Bank1

“If there is one formula for our success, it was that we were constantly studying how to make things work, or how to make them work better.”

—Lee Kuan Yew, former Prime Minister, Singapore2

William Easterly has spent his entire adult life working for the World Bank, living in the Third World, and helping poor countries develop into rich countries. You would think he would severely lecture the World Bank and his fellow economists about the dumb policies governments have pursued.

Instead, Easterly throws his hands in the air and offers no clues to the “elusive” quest for growth. He confirms a few economic truths, such as “incentives matter” and “government can kill growth,” but ultimately he thinks luck has as much to do with it as anything. “There are no magic elixirs,” he sighs. The almighty empirical evidence solemnly declares it. Foreign aid doesn’t work. Foreign investment doesn’t work. High savings don’t work. Investment in machinery doesn’t work. Education doesn’t work. Technology doesn’t work. Tax cuts don’t work. All have failed to live up to expectations. It’s time for the economist to be humbled: “It’s very, very hard to predict success in sports, music, and politics—as well as in economics.”3

Over the years I have witnessed a split in the economics profession. Some adhere to the view that we live in an Age of Ignorance; that we know very little about how the world economy really operates and what government policies should be pursued. They are in large measure armchair critics and doubting Thomases.4 Others believe we live in an Age of Enlightenment; that despite maddening uncertainties about the marketplace, we do know with some assurance how a freely competitive market economy works and we have learned a great deal about what governments should and should not do. It is sad commentary to see that despite his honesty, Easterly, a seasoned veteran in the war on world poverty, tends to fall into the former category. He certainly lost an opportunity to clear the air and reveal the root causes and cures of poverty.

Singapore’s Economic Miracle

Perhaps one reason Easterly’s story ends in tragedy is that he apparently spent too much time in failed economies and not enough time in successful ones. I notice that his book says almost nothing about Chile, the economic model of Latin America, or the Four Tigers—Hong Kong, Korea, Taiwan, and Singapore.

Contrast Easterly’s confused story with Lee Kuan Yew’s autobiographical account of Singapore. Lee became president of the tiny, poverty-stricken British colony after it was granted independence in 1965. In one generation, he oversaw its transformation into an Asian giant with the world’s number-one airline, best airport, busiest port of trade, and the world’s fourth-largest per capita real income.

How did this economic miracle happen?

First, Lee offered real leadership. He was a seminal figure in Asia who accomplished extraordinary things. He built an army from scratch, won over the unions, and destroyed the communists after the British left a vacuum. Despite strong opposition, he insisted on making English one of four official spoken languages, knowing it was fast becoming the language of international business. Singapore, like other Southeast Asian countries, was known for its nepotism, favoritism, and covert corruption; Lee cleaned up the courts, police, and immigration and customs offices. Today Singapore is ranked as the least corrupt country in Asia. Singapore was also dirty, so Lee began a “clean and green” campaign. Rivers, canals, and drains were cleaned up and millions of trees, palms, and shrubs were planted.

The Lee government tore down dilapidated shacks and replaced them with high-rise apartments. He imposed law and order by demanding severe sentences for murder and other crimes. Today Singapore ranks no. 1 in the world for security. To reduce traffic congestion, a huge problem in Asian cities, Singapore built an underground subway system, and imposed an electronic road-pricing program. Every vehicle has a “smart card” on its windshield, and the toll amount varies with the road used and the time of day. During rush hour, the price goes up. “Since the amount people pay now depends upon how much they use the roads, the optimum number of cars can be owned with the minimum of congestion.”5 A sound economic principle!

Lee rejected Soviet-style central planning and domestic heavy industry, although he did target certain industries for development. He focused on a two-pronged plan to advance Singapore: First, his government encouraged domestic industry to leap over their neighbors and link up with the developed world of America, Europe, and Japan, and tried to attract their manufacturers to produce in Singapore. Second, Lee wished to create a First World oasis in the Third World by establishing top standards in security, health, education, communications, and transportation, and a government offering a stable currency, low taxes, and free trade. Singapore would become a “base camp” for multinational corporations from around the world. And, after years of effort, it worked.

Under Lee’s brilliant leadership, Singapore has advanced far beyond anyone’s dreams. Yet we cannot ignore his mistakes—his paternalistic strong-arm tactics, his interventionist targeting of industries, his forced saving programs, his denial of a free press, and his excessive punishments for certain crimes. It will be interesting to see how Singapore performs, both as a people and economy, after Lee Kuan Yew is gone. We can only hope that economic freedom will lead to political liberty.

1. William Easterly, The Elusive Quest for Growth (Cambridge, Mass.: MIT Press, 2001), p. 291.
2. Lee Kuan Yew, From Third World to First: The Singapore Story, 1965–2000 (New York: Harper Collins, 2000), p. 687.
3. Easterly, p. 208. Despite Easterly’s failure to come to any clear conclusions, his book offers an honest and often entertaining appraisal of development literature.
4. See my columns, “Is This the Age of Ignorance—or Enlightenment?,” June 1994; “European Unemployment: The Age of Ignorance, Part II,” January 1995; and “The Age of Confusion,” August 1995.
5. Lee, p. 206.

Mark Skousen is president of FEE.

A Painless Way to Triple Your Savings

From The President’s Desk
Published in Ideas on Liberty
June 2002

by Mark Skousen

“The human mind is charming in its unreasonableness, its inveterate prejudices, and its waywardness and unpredictability.”

—LIN YUTANG1

“Behavioral” finance is the hot new field in the rapidly growing “imperial” science of economics. Consider the titles of recent books on the subject: Irrational Exuberance by Robert Shiller of Yale University, who correctly warned investors that the bull market on Wall Street in 2000 was not sustainable, and Why Smart People Make Big Money Mistakes by Gary Belsky and Thomas Gilovich.

Essentially, these writers take issue with a fundamental principle of economics—the concept of “rational” predictable behavior. They argue that investors, consumers, and business people don’t always act according to the “rational economic man” standard, but instead suffer from overconfidence, overreaction, fear, greed, herding instincts, and other “animal spirits,” to use John Maynard Keynes’s term.2

Their basic thesis is that people make mistakes all the time. Too many individuals overspend and get into trouble with credit; they don’t save enough for retirement; they buy stocks at the top and sell at the bottom; they fail to prepare a will. Economic failure, stupidity, and incompetence are common to human nature. As Ludwig von Mises notes, “To make mistakes in pursuing one’s ends is a widespread human weakness.”3

Fortunately, the market has a built-in mechanism to minimize mistakes and entrepreneurial error. The market penalizes mistakes and rewards correct behavior (witness how well business responded to the Y2K threat in the late 1990s). As Israel Kirzner states, “Pure profit opportunities exist whenever error occurs.”4

But the new behavioral economists go beyond the standard market approach. They argue that new institutional measures can be introduced to minimize error and misjudgments, without involving the government.

At the American Economic Association meetings in Atlanta in January 2002, Richard Thaler of the University of Chicago presented a paper on his “SMART” savings plan, which is being tested by five corporations in the Chicago area. Thaler, author of The Winner’s Curse and a pioneer in behavioral economics, has developed a new institutional method to increase workers’ savings rates. Thaler noted that the average workers’ savings rates are painfully low. I blame the low rate on high withholding taxes, but Thaler suggested that part of the problem is the way retirement programs are administered. He convinced these corporations to adopt his plan to have their employees enroll in an “automatic” investment 401(k) plan. Most corporations treat 401(k) plans as a voluntary program and, as a result, only half choose to sign up. In Thaler’s plan, employees are automatically invested in 401(k) plans unless they choose to opt out.

Result? Instead of 49 percent signing up (as they do in a typical corporate investment plan), 86 percent participate.

Raises Invested

In addition, Thaler has participating employees automatically invest most of any pay increase in higher contributions to their 401(k) plans, so they never see their paychecks decline, even though their 401(k) plans are increasing. Consequently, employees under this SMART plan have seen their average savings rate increase from 3 to 11 percent.

Robert Shiller was a discussant at the session and rightly called Thaler’s plan “brilliant.” I agree. Having authored several investment books advocating “automatic investing” and dollar-cost-averaging plans,5 I applaud Professor Thaler for taking the concept of automatic investing to a new level. If companies everywhere adopt his plan, it could indeed revolutionize the world and lead not only to a much more secure retirement for workers but to a higher saving and investment rate. The result could be a higher economic growth and standard of living throughout the world.

Most important, Thaler’s plan is a private-sector initiative and does not require government intervention. In short, through innovative management techniques and education, individuals can solve their own financial and business problems without the help of the state.

1. Lin Yutang, The Importance of Living (New York: John Day Company, 1937), p. 57.
2. References to “animal spirits” and “waves of irrational psychology” can be found in John Maynard Keynes, The General Theory of Employment, Interest and Money (New York: Macmillan, 1973 [1936]), pp. 161–62.
3. Ludwig von Mises, Theory and History (New Haven: Yale University Press, 1957), p. 268. However, Mises refuses to call bad decisions “irrational.” He states, “Error, inefficiency, and failure must not be confused with irrationality. He who shoots wants, as a rule, to hit the mark. If he misses it, he is not ‘irrational’ he is a poor marksman.”
4. Israel M. Kirzner, “Economics and Error” in Perception, Opportunity, and Profit (Chicago: University of Chicago Press, 1979), p. 135.
5. Mark and Jo Ann Skousen, High Finance on a Low Budget (Chicago: Dearborn, 1993) and Mark Skousen’s 30-Day Plan for Financial Independence (Washington, D.C.: Regnery, 1995).

Mark Skousen is president of FEE.

Can Money Buy Happiness?

Personal Snapshots
Forecasts & Strategies
April 2002

“I’m tired of Love: I’m still more tired of Rhyme. But Money gives me pleasure all the time.” —Hilaire Belloc

I came across a very interesting book the other day called Happiness and Economics: How the Economy and Institutions Affect Human Well-Being (Princeton University Press, 2002), by Bruno S. Frey and Alois Stutzer. It’s a very academic book, with lots of graphs and mathematical regressions, but the conclusions are pretty clear: “The general result seems to be that happiness and income are indeed positively related.” In other words, money can provide many benefits—more opportunities, higher status in society, the ability to travel, enjoy better food, housing, health care and entertainment, etc.

I remember the day I discovered that I would be financially independent. It was a summer day in the 1970s when I came home and presented my wife with more than a dozen checks from a mail-order business I had started. Within a year, we had bought our first home, with 20% down, and by 1984, we had become successful enough that we could move our entire family (with four children) to the Bahamas to “retire.” The experience of becoming financially secure gave Jo Ann and me an incredible feeling of satisfaction.

The graph shows the relationship between income and happiness across nations. In general, people in poor countries are less satisfied than people in rich countries. One reason is that poor nations are often more subject to violence and uncertainty. “Countries with higher per capita incomes tend to have more stable democracies than poor countries have…. The higher the income, then the more secure human rights are, the better average health is, and the more equal the distribution of income is. Thus, human rights, health and distributional equality may seemingly make happiness rise with income.”

But the graph also indicates that more money provides diminishing returns in happiness. Subjective well-being rises with income, but once beyond a certain threshold, income has little or no effect on happiness. That’s why many wealthy people are not any happier than middle-class people. In fact, some wealthy people are downright unhappy.

Four Elements of Happiness

I once read a sermon by a church leader on the “Four Sources of Happiness.” He spoke of work, recreation, love and worship. I think he’s right. You have to find rewarding and honest employment to be happy. Unemployed people, not contributing to society or themselves, are generally unhappy. At the same time, people who spend too much time at the office and can’t relax with their family or friends at home need to learn the joy of recreation with a hobby, sports, travel or other avocation. Some of my most memorable times have been at a county softball game or a pick-up game of basketball with my kids or friends.

Love and friendship are also key elements of happiness. Everyone needs someone to confide in, to spend time with, to learn from, to reminisce with, to love and be loved. For most people, love and friendship take time and effort. You have to work at developing friendships, but the rewards are never-ending.

Finally, worship. Developing one’s spiritual side is essential to happiness. Some of my friends say they don’t need religion, but they are missing out on one of the joys of life—listening to a great sermon, singing hymns, meditating on the word of God and praying for God’s help.

In short, there’s more to life than doubling your money on a hot stock (although that, too, gives a lot of pleasure).

What’s the Big Idea, Mr. Skousen?

Personal Snapshots
Forecasts & Strategies
March 2002

“We live in a ‘knowledge economy’—either you gain new knowledge, or your business and your investments die!” — Peter Drucker, World’s #1 management guru

Peter Drucker is right. Either you grow in knowledge and opportunity, or you and your business die. Either you correctly foresee the future, or your old investment strategy fails. You must always be on the lookout for change, and how it will affect your business, your portfolio and your personal life. My, have we learned this lesson in the past year as stocks have floundered and gold has flourished.

Last month I started putting together the best minds I could think of and asked them to join me for an unprecedented “pow wow,” a three-day intensive program of ideas and strategies on economics, finance, public policy and personal philosophy for the future. Since Sept. 11, 2001, we have all recognized that we live in a much more dangerous world than we could imagine—the growing threats of terrorism, mismanagement, depression, bear markets and trade wars. What will the future bring?

Here are just a few of the experts coming to this historic event, the FEE National Convention & 30th Anniversary Celebration of Laissez Faire Books, scheduled for May 3–5 in Las Vegas:

  • Charles Murray, #1 expert on government policy and controversial author of Losing Ground and The Bell Curve, on “The Growing Power of the State in the War on Terrorism, Drugs and Illegal Aliens.”
  • Robert Poole Jr., founder of Reason magazine, on “Is Air Travel Really Safe?”
  • Gerald P. O’Driscoll Jr., senior fellow at Heritage Foundation, on “The World Map of Economic Freedom—a Startling Revelation.” (You must see this unusual world map in person to appreciate its significance.)
  • Larry Abraham, author and editor of Insider Report, on “What Every Investor Must Know about the Middle East.”
  • Gary Hoover, author of Hoover’s Vision and entrepreneur extraordinaire (creator of Bookstop and Hoovers, Inc.), “The Right Stuff: What it Takes to Succeed in the 21st Century.” Gary will lead a special panel on newly developed management techniques.
  • Ben Stein, actor and social conservative, on “Why Bashing Big Business is Big Business in Hollywood.” He will give us an inside look into the dangers and opportunities in the entertainment world.
  • Congressman Ron Paul on “Danger Ahead: The Way Congress Really Works.”
  • Mike Ketcher, editor of The Financial Privacy Report, will lead a special panel on “How to Protect Your Assets and Privacy in this New Age of Big Government.”
  • Dinesh D’Souza, author of The Virtue of Prosperity and a Hoover Senior Fellow (and FEE spokesman on campus), on “Why They Hate Us.” This is a speech you won’t want to miss.
  • Madsen Pirie, president of the Adam Smith Institute and a privatization consultant to numerous governments around the world, on “The Outlook for Global Capitalism in a Terrorist World.”
  • Louis James, editor of Free-Market.net, on “How to Spread Your Cause on the Internet.”
  • My brother, Joel Skousen, expert on geo-politics, bio-terrorism and survival techniques, “A Principled Approach to Liberty,” and “How to Survive the New World of Terrorism.”
  • Other speakers include: Richard Ebeling from Hillsdale College in Michigan, Parth Shah from India, Doug Casey from New Zealand and Manuel Ayau from Guatemala.

“Big Idea” to be Announced

Finally, I plan to take this opportunity to announce a blockbuster idea that will revolutionize the freedom movement, and maybe even stop the growth of government in its tracks. Don’t miss this opportunity to hear this “big idea” and how it will be implemented—with your help!

Last Chance for “Early Bird Special”

This the last month to take advantage of the “early bird special” at only $175 per person, $99 per student. After March 31, the price goes up to $225. This price includes everything: the Friday pre-conference FEE Course on Sound Money and Free Markets, the cocktail reception and speech by Ben Stein, all the sessions on Saturday and Sunday, entrance into the exhibit hall, and the Saturday night banquet & 30th anniversary celebration of Laissez Faire Books.

How You Can Change the Lives of Hundreds of Students

This is a conference for adults as well as students. If you would like to provide financial assistance to students, please buy a patron table at either the silver, gold or platinum level (call Tami Holland for specific benefits at each level; or go to the website). The FEE National Convention is sponsored by Reason Foundation, Young America’s Foundation, Hillsdale College, Heritage Foundation, Leadership Institute, and dozens of other top-ranked think tanks and colleges. See you in Las Vegas!

FEE Convention + Vegas Money Show = Big Payoff!

Personal Snapshots
Forecasts & Strategies
February 2002

“Skousen’s course on executive economics was ranked the #1 course we have ever had at the Learning Center.”— Wayne Fortun, president, Hutchinson Technology

Included in this issue is a brochure for the first FEE National Convention, which is scheduled for May 3–5, directly before the Las Vegas Money Show. I strongly urge you to attend this intellectual feast. In particular, I recommend you come early for the FEE Course on Sound Money and Free Markets, an executive economics course I teach, set for all day Friday at Bally’s in Las Vegas. This FEE course has changed people’s lives, and it could change yours. I’ve given this course before managers at Hutchinson Technology (HTCH, $22.67), and have been invited back six times! In this one-day course, you will learn:

  • How the economy really works
  • Seven popular economic myths since September 11
  • Will the Fed panic again? How to understand the mysteries of money and central banking, and how Greenspan & Co. can affect your business and your investment portfolio
  • Why Social Security and Medicare can’t work,” and why you must plan for alternatives to these government programs
  • The global battle for economic freedom and how it will affect your business and personal life

But this is only the beginning. On Friday evening, you’ll enjoy a sumptuous cocktail party and hear Ben Stein, actor, author and game show host, talk about “Why Bashing Capitalism Is Big Business in Hollywood.” Stein is one of the few social conservatives in Hollywood.

Beginning Saturday morning and running throughout the day and into half a day on Sunday, you will enjoy an unforgettable educational experience choosing from over 30 scholars in history, philosophy, economics, finance, business management and public policy. Hear Charles Murray, author of Losing Ground and The Bell Curve; Stephen Moore, president of Club for Growth and author of It’s Getting Better All the Time; and Dinesh D’Souza, author of The Virtue of Prosperity. Gary North, editor of Remnant Review, will speak on “The Most Dangerous Philosopher of Modern Times (You KANT be serious, Gary!),” and Robert Poole Jr., founder of Reason magazine, will address the question, “Can you really fly safely when the government is in charge?”

We are also planning sessions on “business strategies for libertarians and conservatives,” with Gary Hoover, founder of Hoovers, Inc., and other top CEOs who believe in the free market. There will be debates and panels.

On Saturday evening, we are planning a fantastic banquet, where we will hear from several distinguished speakers, including Nathaniel Branden, author of the classic The Psychology of Self-Esteem, as we honor Andrea Rich, who for the past 20 years managed Laissez Faire Books.

For full details, including online registration information, go to www.FEEnationalconvention.org, or call Tami Holland at 888/565-8779, or e-mail her at tholland@fee.org. You can also call FEE directly at 800/960-4FEE, ext. 209.

NOTE: This conference is now FreedomFest. See www.freedomfest.com for more information.

Announcing the First Leonard E. Read Book Award

I’m pleased to announce that Ken Schoolland, professor of economics and political science at Hawaii Pacific University, is the recipient of the first Leonard E. Read Book Award for Excellence in Economic Education for his insightful and entertaining satire, The Adventures of Jonathan Gullible: A Free Market Odyssey. The award is named after the founder of FEE. This is a very funny little book that teaches the basic principles of liberty. I urge you to buy a copy, available from Laissez Faire Books, 800/326-0996, or www.laissezfaire.org, for only $14.95 plus S&H. See why it has already been translated into 20 languages! Schoolland is a modern-day Jonathan Swift and Frederic Bastiat combined.

Schoolland will receive the award at the FEE national convention in May—$2,000 plus a 1-ounce American Eagle gold coin minted in 2001.

Here’s a Tax-Deductible Way to Honor an American Hero

December 2001
PERSONAL SNAPSHOTS
Forecasts & Strategies

by Mark Skousen

“A noble man cannot be lost in a crowd.” — Maori Saying

I just returned from my 25th appearance at the New Orleans Investment Conference. I know hundreds of you have been to this classic “granddaddy “of seminars. There’s a reason why this investment conference has lasted so long. Jim Blanchard, the founder, wanted to bring together investors who not only wanted to preserve their capital, but also cared about their country. As he used to say, “What’s the point of being a millionaire if you are on the Titanic?” His conferences always mingle solid investment advice with a hefty dose of sound money and free-market ideas. Last month we heard from Milton Friedman and John Stossel, among other giants in the freedom movement.

Jim was first and foremost a teacher (he used to teach high school in New Orleans), and he wanted his subscribers and conference attendees to know that inflation and the ups-and-downs of the economy were caused by government, not capitalism. He urged his followers to read Ayn Rand’s novels (he named one of his children Anthem!) He was one of the original goldbugs, and he devoted his entire career to the cause of liberty and sound money. In the early 1970s, he formed the National Committee to Legalize Gold. Because of Jim’s untiring efforts, in 1974 it once again became legal for Americans to own gold. Jim saw gold ownership as a fundamental human right, a hedge against government mismanagement.

Jim was also an entrepreneur who turned a $50 investment into a $115-million precious-metals coin business. He started the Blanchard group of mutual funds. He used his profits for many good causes, and his love of liberty led him to support pro-freedom forces and anti-Communist causes in Africa and Europe.

Finally, Jim overcame personal tragedy. He was nearly killed in an automobile accident at age 17 and was unable to walk. But his handicap only spurred him on. He became a powerful figure for liberty, entrepreneurship and sound money.

Tragically, Jim died of a heart attack in 1999 at age 55.His family issued a formal notice with the sentence: “James U. Blanchard III was a man who accomplished much against great odds, and changed more people’s lives than he ever knew.”

How to Honor Jim’s Life: The Blanchard Scholarship Fund

Since Jim’s untimely death, I’ve often wondered how we — untold numbers of friends and followers who were inspired by Jim’s example — honor our friend ’s memory. When I became the president of the Foundation for Economic Education (FEE), I thought of a way to honor Jim ’s life: to create the James U. Blanchard III Memorial Scholarship Fund. The scholarship fund will help teach students all over the world the principles of sound money and free markets. To qualify to become a Blanchard Scholar, students will be required to write an essay on inflation, sound money, entrepreneurship, limited government and other topics Jim advocated. Once chosen, Blanchard scholars will qualify to attend a weeklong course at FEE headquarters in Irvington-on-Hudson, New York, on free-market economics. We hold several of these seminars each summer (go to www.fee.org for the current schedule). Typically, it costs about $1,000 to pay for one student at a weeklong FEE seminar, including room and board, tuition, books and materials, and airfare. But through the generous support of the Blanchard Scholarship Fund, students will be able to attend and learn about the freedom philosophy. And their lives will be changed forever.

Jim, by the way, was a strong supporter of FEE, and read regularly the monthly magazine, The Freeman (now called Ideas on Liberty). He was a friend of Leonard Read, the founder of FEE. And FEE, by the way, is one of the few free-market organizations that favors a gold standard. It’s a perfect match.

So far the response has been incredible. Friends everywhere have come forward and made contributions. Will you join us? You can make donations by check, credit card, securities or other assets. All donations to the Blanchard Fund are tax deductible through the Foundation for Economic Education, which is an IRS-approved 501(c) 3 educational organization.(Rick Rule, one of my recommended brokers, has offered at no charge to assist anyone who wishes to donate stock — him at Global Resource Investments at 800/477-7853). For more information on FEE, go to our website, www.fee.org. Send your donation to: The Foundation for Economic Education, 30 South Broadway, Irvington-on-Hudson, New York 10533. For donations by credit card, call 800/960-4FEE (4333). Be sure to designate “Blanchard Scholarship Fund,” which will be kept as a segregated account. Thank you!

P.S. Any donation above $100 will receive a complimentary one-year subscription to our flagship monthly publication, Ideas on Liberty. You’ll love it!

I Led Three Lives

November 2001
PERSONAL SNAPSHOTS
Forecasts & Strategies

by Mark Skousen

“It was a time for every man to stir.” — Thomas Paine

Westchester County, New York, where I now reside, is full of American heroes. Two are buried in Sleepy Hollow cemetery — Carnegie, the steel magnate (highlighted last month) and Samuel Gompers, the great labor leader. Another hero is Thomas Paine (1737-1809), the revolutionary writer, who owned a farm in New Rochelle. Paine is famous for writing Common Sense, the anonymous pamphlet that galvanized Americans into revolution in 1776. I read it as a teenager one summer and was overwhelmed by the candid, powerful case he made for separation from England. But there were actually three revolutions in 1776 — political revolution declared on July 4 by Thomas Jefferson’s Declaration of Independence; an economic revolution propelled by Adam Smith’s magnum opus, The Wealth of Nations (published on March 9,1776); and a cultural/religious revolution as expressed in Edward Gibbon’s best-seller, The Decline and Fall of the Roman Empire (the first volume published on February 23,1776). Thus, 1776 was a year of wonders.

The Age of Paine: A Supporter of Free Enterprise and a Hater of Taxation

Even more amazing, Tom Paine spoke out in favor of all three revolutions. In Common Sense, published on January 9,1776, he made the greatest case for political independence ever penned. “Government even in its best state is but a necessary evil; in its worst state an intolerable one …Nothing can settle so expeditiously as an open and determined declaration of independence.” He coined the name, “United States of America.” He hated the King and the privileged aristocracy that went with it. He referred to the idle nobility as “no-ability.” What mattered most to Paine was a man’s productivity, not his pedigree. Paine was also an unrepented follower of Adam Smith and laissez faire capitalism.

In The Rights of Man (1791) he defended individualism, property, business enterprise and Jeffersonian democracy. He favored a world in which political and social place would be determined by talent, merit and hard work — reliant individuals. He defended the rich and the businessman. His one villain: government. The invisible hand of merchants, manufacturers and bankers create a wholesome civil society; but the “greedy hand of government” oppressed and taxed citizens at home and waged war abroad. He was obsessed with taxation, a symbol of tyranny and corruption. Finally, Paine’s social and religious philosophy was in keeping with Gibbon’s. He favored free thought and freedom of religion, and was opposed to a state religion. He was an outspoken critic of slavery. He was cursed as an atheist and an infidel based on his sharp criticisms of the Bible in The Age of Reason (1794),but he was in fact a deist who strongly believed that “the hand of providence has …accomplished the independence of America.”

The Spirit of Paine Lives On

Some of the stirring words of Tom Paine seem modern to me. After the war on terrorism began, I thought of his words: “These are the times that try men’s souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.” Long live the spirit of Tom Paine. That spirit lives on at the Foundation for Economic Education (FEE). I urge you to subscribe to our monthly publication, Ideas on Liberty.The cost is only $30 a year for 12 issues. To subscribe, call 914/591-7230. Ideas on Liberty would also make a great holiday or birthday gift.

UPDATE

Foreign Affairs, the premier establishment journal, loves AND hates my new history, just as it goes into a second printing! The October/September issue of Foreign Affairs calls The Making of Modern Economics “both fascinating and infuriating.” On the positive side, the book is “engaging, readable, colorful and entertaining,” on the negative side, it’s “credulous, disingenuous and tendentious.” My kind of review! Love it and hate it! I ’m also happy to report that the first printing is sold out and a second printing is now available from M.E. Sharpe Publishing, 800/541-6563. Be sure to mention you are a subscriber to Forecasts &Strategies, and you pay only $49.95 for the hardback and $24.95 for the paperback, plus S&H, a considerable bargain over the retail prices.