Click here to purchase EconoPower

“Have You Read Any Good Economics Books Lately?” asks the online blog, FAN.

Apparently, author Lance Winslow has! And his selection is none other than yours-truly’s EconoPower: How a New Generation of Economists Is Transforming the World.

A quick excerpt:

“This book demonstrates how everything we see, buy, own, do and dream of is indeed governed by economics. Our decisions, our religions, or politics, is all about economics. Education, science, history, law and finance, he shows evidence of the reality that economics is the way we do, whether it is about the individual, the leaders, societal changes or the movement of America at a national level. Even more interesting is the fact as the author shows that the US is exporting these ideas, the same ideas initiated by Adam Smith.”

Click here to read the entire review.

Or, pick up your own copy of EconoPower today!

An excerpt of The Compleated Autobiography by Benjamin Franklin, where Franklin tells the “real” story of Thanksgiving. Read a blurb below, and then see the entire article on Human Events Online. Happy Thanksgiving!

Click here to purchase The Compleated Autobiography by Benjamin Franklin (edited and compiled by Mark Skousen)

“At length, when it was proposed in the Assembly to proclaim another fast, a farmer of plain sense rose and remark’d that the inconveniences they suffer’d, and concerning which they had so often weary’d heaven with their complaints, were not so great as they might have expected, and were diminishing every day as the colony strengthen’d; that the earth began to reward their labour and furnish liberally for their subsistence; that their seas and rivers were full of fish, the air sweet, the climate healthy, and above all, they were in the full enjoyment of liberty, civil and religious….”

Read the entire article here.

For more information on the book David McCullough calls “ingenious and inspired,” click here.

Mark Skousen’s important perspectives on economics, finance, investing and the economy regularly make appearances on the web and in the news. Check out the following links!

EZCorp (EZPW): Pawnbroker Profits
TheStockAdvisors.com
featuring Mark Skousen
October 21, 2008

Gray Lady Down
Vital Signs Blog
featuring Mark Skousen
October 31, 2008

It’s Official: NYT is Junk
Human Events Online
by Mark Skousen
October 28, 2008

Real Estate Investments Versus Stock Investments
Investment U
by Mark Skousen
October 17, 2008

Market Milestones to Watch for in the Months to Come
By Keith Fitz-Gerald
Investment Director
Money Morning/The Money Map Report
Excerpt:
As my friend, economist Mark Skousen, recently noted, “every one of the major wars involving America occurred during one party rule: World War I, World War II, Korea, Vietnam and Iraq.”

Click here to purchase EconoPower

As part of an online book club, EconoPower: How a New Generation of Economists Is Transforming the World, Mark Skousen’s latest book on economics, has received a terrific review, through a video on YouTube!

Check out the video!

I came back a day early from my 2-week China trip (see www.markskousen.com) to speak at the First Day Issue Ceremony for the four new Ben Franklin commemorative stamps in Philadelphia on April 7.  The ceremony was sponsored by the U. S. Postal Office at the National Constitution Center, and was quite an event, attracting hundreds of collectors and spectators.  I helped “Ben Franklin” (Ralph Archibald) officially unveil the stamps.

Afterwards, my wife Jo Ann and I participated in the first ever Franklin Family Reunion that weekend.  It was a grand affair with over 220 Franklin descendants from all over the country, including quite a few of my relatives.  (I’m a 6th generation grandson of Franklin.)  I was the after-dinner speaker at the Saturday night banquet, overlooking Independence Hall.

Here are my remarks at the First Day Issue Ceremony, which created a stir among postal officials.

BEN FRANKLIN ON STAMPS

My remarks at the First-Day-of-Issue Ceremony for the Benjamin Franklin Commemorative Stamps, Friday, April 7, 2006, National Constitutional Center, Philadelphia, Pennsylvania

By Mark Skousen

After Benjamin Franklin died in 1790, John Adams wrote Benjamin Rush a letter in which he described his worst nightmare:  “The history of our revolution will be one continued lie from one end to the other.  The essence of the whole will be that Dr. Franklin’s electric rod smote the earth and out sprang General Washington.  Then Franklin electrified him, and thence forward those two conducted the policy, negotiations, legislations, and war.”

If we can measure the influence of Franklin and Washington by the number of postage stamps issued with their image, John Adams greatest fear has come true.  Since July 1847, when the United States issued its first postage stamp (with Franklin on it), Franklin and Washington have appeared on more stamps than any other Americans.  And in a recent poll sponsored by AOL and the Discovery Channel, Washington (#4) and Franklin (#5) were ranked among the five greatest Americans.

Even more disconcerting, there may be more truth than lie to Adams’ bad dream.  Recent histories, and my own work in completing Franklin’s Autobiography, reveal that Franklin, like Washington, was indispensable in achieving American independence and Constitutional government, and some have contended that Franklin should be added as a “co father” of the nation.  Washington indeed was instrumental in winning the war at home, but Franklin played an essential role in winning the war abroad.  Without massive military and financial aid from France, it is clear that Washington and the American Army could not have defeated the British at Yorktown, and the war might have dragged on indefinitely.  And there is little doubt that Franklin almost singlehandedly engineered the fundraising efforts in France.  He accomplished this mighty achievement while in his seventies, a tribute to senior citizens everywhere.

The U. S. Postal Service has rightly highlighted Franklin for his numerous contributions to his country. Lately I’ve enjoyed collecting rare Franklin stamps, and I am especially impressed with the 1947 commemorative stamp, featuring Franklin and Washington together on the 100th anniversary of the first postage stamp.  The year 1947 happens to be the year I was born.

If Franklin were here today, he would no doubt say that it pleases his vanity that he appears on the largest denominated banknote, the $100 bill, and that the banknote is a fiat paper currency.  For Franklin here in Philadelphia was an early advocate of paper money inflation beyond specie to stimulate trade and employment, though he learned during the American revolution that “there are limits beyond which the quantity [of paper money] may be hurtful.”  But Franklin was also an advocate of frugality and economy in government (“a virtuous and industrious people may be cheaply governed”).  He would no doubt be concerned about today’s high cost of living, and note with interest how the fae value of the Franklin series has increased gradually from the half-cent stamp in the late 19th century to today’s 39 cent first class stamp.  My only suggestion to the U. S. Postal Service is that in the next Franklin issue, you consider reducing the face value by a penny.  For a penny earned by the Post Office could be a penny saved by the taxpayer.

Fifty years ago, on the 250th anniversary of Franklin’s birth, the Post Office issued a striking stamp — a 3 cent issue — depicting an elder Franklin, assisted by youth, in his famous kite and key experiment.  It reminded me of Turgot’s quote, “He stole the Lightning from the Heavens and the Sceptre from Tyrants.”

As a representative of the Franklin descendants, I’d like to thank the U. S. Postal Service for its latest honor, four remarkable Franklin commemorative stamps honoring him as a printer, scientist, statesman, and postmaster.  In the book, The 100: The 100 Most Influential Persons in the World, Franklin is identified as “the most versatile genius of all ages,” and one could add a hundred more accomplishments and interests of Franklin.  For one thing, he was founder of American business.

And so I end my remarks with one of Franklin’s most notable quotes, “If you would not be forgotten, as soon as you are dead and rotten, either write things worth reading, or do things worth the writing.”  Naturally, Franklin did both.

Be free.

Mark Skousen is the compiler and editor of The Compleated Autobiography by Benjamin Franklin (Regnery, 2006).

Were the giants of the Gilded Age — John D. Rockefeller, Andrew Carnegie, Jay Gould, and J.P. Morgan — pious frauds who exploited and bilked the public on their way to achieving their ill-gotten millions? Or were they bold innovators and noble capitalists who established America as the richest, most productive country on the planet? Read the article below!

Review

“The Tycoons: How Andrew Carnegie, John D. Rockefeller, Jay Gould, and J.P. Morgan Invented the American Supereconomy,” by Charles R. Morris. Times Books, 2005, 382 pages.

Liberty Magazine

Review by Mark Skousen

Were the giants of the Gilded Age — John D. Rockefeller, Andrew Carnegie, Jay Gould, and J.P. Morgan — pious frauds who exploited and bilked the public on their way to achieving their ill-gotten millions? Or were they bold innovators and noble capitalists who established America as the richest, most productive country on the planet?

Was Balzac onto something when he claimed that “behind every great fortune is a crime”? Or was Carnegie more accurate when he observed that “great inequality and concentration of business are essential for the future progress of the race”?

In the past, historians have taken positions at opposite poles in this debate in American history, when railroads, oil, and steel transformed the world economy. On the one hand are the muckraker Ida Tarbell and Marxist historian Matthew Josephson. Ida Tarbell’s “History of Standard Oil Company,” based on her famous 19-part series that ran in McClure’s Magazine from 1901 to 1903, is an expose of John D. Rockefeller. She has since been honored as one of the first female journalists, with the U.S. Post Office issuing a stamp in 2002. Her book hastened the breakup of Standard Oil in 1911. “They had never played fair, and that ruined their greatness for me,” she wrote. Since then, her historical accuracy has been challenged.

Charles Morris concludes, “The great power of Tarbell’s prose conceals the holes in her argument.” (p. 86) The railroad rebates Rockefeller engineered, which she described as “secret, unjust and illegal” were in fact neither secret, nor illegal, nor unjust. “There was no law against rebates, on either the federal or state level, and they were standard practice among all carriers,” states Morris. (88) Despite complaints at the time, the Cleveland refiners who were pressured to sell to Rockefeller were offered a fair price, and those who accepted Standard Oil stock became quite wealthy.

Matthew Josephson’s classic work, “The Robber Barons,” was published in 1934, during the depths of the Great Depression. It is still in print, and widely considered “the classic account” of the captains of industry. Josephson’s bias is apparent in his frequent citations of Thorstein Veblen, Charles A. Beard, and Karl Marx. Although written in an entertaining style, his history is cleverly prejudiced against the creators of industry. Witness its highlighting of their peculiar personal habits (for example, he claims that Rockefeller had a “queer habit of talking to his pillow”) and their misdeeds and deceptions, while it religiously avoids references to their positive contributions. In his chapter on J.P. Morgan, Josephson emphasizes Morgan’s imperial wizardry at 23 Wall Street, where he conspired to monopolize and unify the transportation business of Vanderbilt, Gould, Huntington, and Hill, and create the world’s first billion-dollar company, U.S. Steel. Yet he conveniently leaves out any mention of Morgan’s twice saving the U.S. Treasury from the gold drains and near bankruptcy of the 1890s, and his role as quasi-central banker in restoring order during the Panic of 1907. These omissions are a fatal flaw.

On the other extreme is Burt W. Folsom Jr.’s “Myth of the Robber Barons.” Folsom teaches history at Hillsdale College and lectures regularly at student conferences sponsored by Young America’s Foundation, which also published his book. He is in the vanguard of a revisionist movement reevaluating the genius of the barons of industry. Countering the standard textbook view that Commodore Vanderbilt’s actions in the steamboat business were “immoral and in restraint of trade,” he portrays Vanderbilt as an entrepreneur with “superior skills” in driving down prices and offering better services than his competitors. Unlike his rivals, Vanderbilt accomplished this feat without resorting to government subsidies. In his chapter on Rockefeller, Folsom shows how the oil magnate repeatedly slashed the price of oil and constantly expanded production, “refining oil for the poor man.” He paid fair prices in buying out his competitors, and paid his employees higher than market wages. “Standard Oil was rarely hurt by strikes or labor unrest,” states Folsom.

Folsom’s book is strangely hit and miss, probably because it was written as a series of articles, not a complete history, and his focus is on industrial giants who succeeded without state favors. His railroad chapters cover Commodore Vanderbilt and James J. Hill, but omit Jay Cooke. His banking chapter highlights Andrew Mellon, while hardly mentioning J.P. Morgan. His steel chapters focus on the Scrantons and Charles Schwab, rather than kingpin Andrew Carnegie. And despite the title of his book, Folsom never mentions Matthew Josephson, nor does he review “The Robber Barons.” Just as Josephson typically ignores the beneficial actions of the 19th century tycoons, so Folsom turns a blind eye to their shortcomings. His chapter on Carnegie Steel (under the title, “Charles Schwab and the Steel Industry”) ignores Carnegie’s flaws. Here are three cases omitted in Folsom’s book:

• In 1888 Carnegie wrote a letter to every railroad company in the United States, warning them that the new, cheaper steel process of his competitor Allegheny Bessemer was risky. He had no evidence for this accusation, but his complaint eventually forced Allegheny Bessemer to sell out to Carnegie Steel; afterwards, Carnegie adopted the new process.

• Carnegie had a policy of ruthlessly reducing costs, including wages, even while his company was making record profits. He offered bonuses and other incentives to managers, but the rank-and-file employees had to fight for every concession. Carnegie’s refusal to honor the new eight-hour workday the Carnegie Steel workers had negotiated was a major cause of the Homestead Strike of 1892, one of the worst labor strikes in U.S. history. When Carnegie ordered workers to return to the twelve-hour shift, the workers not surprisingly staged a strike, which Carnegie, through his partner Henry Clay Frick, violently suppressed.

• The dispute between Carnegie and Frick in 1899, when Carnegie tried to expel Frick from the firm and pay him only book value for his shares, would have wiped out 80 percent, or $10 million, of the fair market value of Frick’s holdings. Frick sued in court and won.*

This brings me to Charles R. Morris’ “The Tycoons,” which takes into account the latest economic research and analysis of the Gilded Age, and is not only comprehensive in its account of the major players in the early industrial age, but is evenhanded. He credits all four main characters — Carnegie, Gould, Rockefeller, and Morgan — with dogged determinism and entrepreneurial genius in expanding output, cutting prices, and “turning luxuries into necessities” (Carnegie’s description of capitalism).

As a result, America surpassed England in the late 19th century and rapidly became the dominant power in the global economy. But Morris doesn’t ignore their flaws. To Morris, Carnegie — despite his humanitarian acts — was “the most irritating” and“repellently smarmy,” a manager who issued pro-labor manifestos while he “steadily ratcheted up the demands on his workers and steadily cut their pay.” Jay Gould created the national railroad map that prevails today, but was “always financially stretched” and had “a strange streak of self destructiveness.” Morgan was the last of the great merchant bankers, engineering the first world class merger, U.S. Steel, but engaged in some questionable business dealings, and was in and out of bankruptcy for the rest of his days. Rockefeller comes off the best. “On balance,” Morris concludes, “while there were skeletons aplenty in John Rockefeller’s closet [Morris points to Rockefeller’s once lying under oath], he was not a brigand, or embezzler, or stock manipulator in the manner of the early Jay Gould.” (91) In depicting the Gilded Age’s tycoons as neither the saints of Folsom’s apology, nor the demons of Josephson’s and Tarbell’s rants, Morris himself has hit upon a fine balance.

*All three accounts are included in Les Standiford’s recent history of Carnegie Steel entitled “Meet You In Hell: Andrew Carnegie, Henry Clay Frick, and the Bitter Partnership that Transformed America.”

On this Veteran’s Day, I’m happy to announce that I’ve just been made chairman of Investment U.  Investment U is published by the Oxford Club in Baltimore and is one of the fastest growing online financial services in the world.  I’m honored to have been selected as its new chairman.  I write two columns a week–commentary on the markets, financial theories, and investment strategies.  It’s a free newsletter.  To sign up, all you have to do is give them your email address at www.investmentu.com.  Unlike other e-services, you do not have to provide them with any personal details about your life.

I won’t give specific stock market advice in this column; that is reserved for Forecasts & Strategies (www.markskousen.com).  But I do offer important economic and geopolitical insights in the Investment U column.

Come join me, will you?

AEIOU, Mark Skousen

Today libertarians spend most of their time lamenting the consequences of big government. And rightly so. Today government is less a defender of freedom and more a Hobbesian leviathan that undermines prosperity. When we do talk about limited government, it is often seen solely as “a necessary evil.” Too much government and the economy chokes. Too little, and it cannot function. Is there a Golden Mean? George Washington best summarized the libertarian view: “Government is not reason; it is not eloquence; it is force! Like fire, it is a dangerous servant and a fearful master.” Read the article below

Suggestion
Liberty Magazine
The Necessary Evil
by Mark Skousen

Too much government and the economy chokes. Too little, and it cannot function. Is there a Golden Mean?

Today libertarians spend most of their time lamenting the consequences of big government. And rightly so. Today government is less a defender of freedom and more a Hobbesian leviathan that undermines prosperity. When we do talk about limited government, it is often seen solely as “a necessary evil.”1 Too much government and the economy chokes. Too little, and it cannot function. Is there a Golden Mean?

George Washington best summarized the libertarian view: “Government is not reason; it is not eloquence; it is force! Like fire, it is a dangerous servant and a fearful master.”2 So it is with some trepidation that I suggest that societies or countries may not have enough good or legitimate government. In the never-ending battle against big government, it might be well to consider what constitutes “good government” to see how far we have strayed from the proper role of the state.

Each year the Fraser Institute publishes their Economic Freedom of the World Index (see www.fraserinstitute.org), which measures five major areas of government activity in more than 100 countries: size of government, legal structure, sound money, trade, and regulation. The most surprising thing about the study, according to its author James Gwartney, a professor of economics at Florida State University, is the importance of legal structure as the key to maximum performance for an economy. “It turns out,” he told me in a recent interview, “that the legal system — the rule of law, security of property rights, an independent judiciary, and an impartial court system — is the most important function of government, and the central element of both economic freedom and a civil society, and is far more statistically significant than the other variables.”

Gwartney pointed to a number of countries that lack a decent legal system, and as a result suffer from corruption,insecure property rights, poorly enforced contracts, and inconsistent regulatory environments, particularly in Latin America, Africa, and the Middle East. “The enormous benefits of the market network — gains from trade, specialization, expansion of the market, and mass production techniques — cannot be achieved without a sound legal system.” 3

The Proper Role of the State

Milton Friedman identifies the legitimate roles of the state: “The scope of government must be limited. Its major function must be to protect our freedom both from the enemies outside our gates and from our fellow- citizens: to preserve law and order, to enforce private contracts, to foster competitive markets. Beyond this major function, government may enable us at times to accomplish jointly what we would find it more difficult or expensive to accomplish severally.” 4

Adam Smith suggests that this “system of natural liberty” will lead to a free and prosperous society. As Smith declares, “Little else is required to carry a state to the highest degree of opulence from the lowest level of barbarism, but peace, easy taxes, and a tolerable administration of justice.”5

The division between the positive and negative role of government can be represented visually. In the diagram on the next page, we have on the vertical axis “socio-economic well-being”: some general measure of the quality of life in a free and civil society. For empirical studies, economists might want to use changes in real per capita income, but this may be too confining. On the horizontal axis we have “government activity.” At point O, we have zero government, and as we move along the horizontal axis, the size and scope of government activity increase. The ultimate extreme is the totalitarian regime, which institutes “total government,” though I would hesitate to label this “100% government,” since no government can control all activity.

Too Little vs. Too Much Government

My thesis is that as a society moves from zero government to point P, economic well-being increases to peak performance. Then, as it adopts a larger and less necessary government, its growth diminishes, and can even turn negative if government becomes too burdensome and controlling. Looking at the left side of the mountain, point O (zero government) to P (optimal government) constitutes “too little” government. For example, a nation may spend too few of its resources on personal protection, property control, and government administration. Here we see how increasing the size and scope of government activity initially leads to increased well-being, as measured by individual freedom and prosperity. Point P represents the right amount of government and the optimal amount of expenditure necessary to fulfill its legitimate functions.

This is the ideal of the minimalist state. Any point to the right of P represents too much government, when the central authority becomes a burden rather than a blessing. I’ve drawn it as a gradual downward slope, so that the more bad government a country adopts, the greater the decline in performance, even to the point X where government is so large and so intrusive that it results in the destruction of economic and social well-being, which is probably worse than the costs of anarchy.

Quantifying the Right Amount of Government

Can we quantify P, the optimal size of government? Several economists have attempted to determine the ideal level of government spending as a percentage of GDP. In the1940s, Australian economist Colin Clark said that the maximum size of government should not exceed 25% of GDP. Anything higher would hurt economic growth.6 Professor Gerald W. Scully, of the University of Texas at Dallas suggests that the tax rate ought not to exceed 23%.7 World Bank economists Vito Tanzi and Ludger Schuknecht analyzed 17 countries during the period 1870 to 1990 and concluded that public spending in newly industrialized countries should not exceed 20% and in industrialized countries not more than 30%.8 Is optimal government (point P) the same for every country?

This would make an interesting study, but I suspect that differences in culture and socio-economic circumstances suggest that some nations require more government than others. As Benjamin Franklin states, “A virtuous and laborious [industrious] people may be cheaply governed.”9 And a lazy, dishonest people must be expensively governed.

Optimistically, I would think that if all nations were featured together on the diagram above, the various points P would constitute a fairly narrow mountain range. Almost every country in the world today is to the right of Point P, and could grow faster and enjoy a higher quality of life by reducing the size and scope of government. Countries from China to Ireland to Chile have demonstrated how dramatically the economy can improve by cutting back the state. I’m sure even Hong Kong, #1 in the Fraser Institute’s study in terms of performance and freedom, could benefit from some improvements by scaling back some types of government services.

According to the latest surveys of economic freedom by the Fraser Institute and Heritage Foundation, countries on average are becoming more free, and not surprisingly, the world’s economic growth rate is rising.10 After noting that government represents 40–50% of GDP in most developed nations, Tanzi and Schuknecht conclude, “we have argued that most of the important social and economic gains can be achieved with a drastically lower level of public spending than what prevails today.”11

Two Case Studies in Little or No Government

Are there any examples of countries to the left of point P, that have too little government? The United States suffered from too little government under the Articles of Confederation, which was the basic law of the land from its adoption in 1781 until 1789, when they were replaced by the Constitution. The Articles limited the federal government to conducting foreign affairs, making treaties, declaring war, maintaining an army and navy, coining money, and establishing post offices. But it could not collect taxes, it had no control over foreign or interstate commerce, it could not force states to comply with its laws, and it was unable to payoff the massive debts incurred during the Revolutionary War. States were already putting up trade barriers, striking a serious blow to free trade, and the economy struggled. After the Constitution became law, the United States flourished because of improved government finances, protection of legal rights, and free trade among the 13 states.

A modern-day example of too little government is Somalia, located east of Ethiopia and Kenya, where life has been difficult and often dangerous without any central authority since 1991. For example, drivers pass seven checkpoints, each run by a different militia, on their way to the capital. At each of these “border crossings” all vehicles must pay an “entry fee” ranging from $3 to $300, depending on the value of goods being transported. Competing warlords vie for control of the countryside, which has frequently collapsed into civil war. Only an estimated 15% of children go to school, compared to 75% in neighboring states. However, a recent report by the World Bank indicates that an innovative private sector is flourishing in Somalia. This vindicates the Coase theorem, named for economist Ronald Coase, which argues that in the absence of government authority, the private sector will step in to provide alternative services, depending on the transaction costs.12 The central market in Bakara is thriving: all kinds of consumer goods, from bananas to AK-47s, are readily sold; mobile phones proliferate and internet cafes prosper. But with no public spending, the roads and utilities are deteriorating. Private companies have yet to appear to build roads — the transaction costs are apparently too prohibitive. Public water is limited to urban areas, and is not considered safe, but a private system extends to all parts of the country as entrepreneurs have built cement catchments, drilled private boreholes, or shipped water from public systems in the city.

There are now 15 airline companies providing service to six international destinations, and airplane safety can be checked at foreign airports. After the public court system collapsed, disputes have been settled at the clan level by traditional systems run by elders, with the clan collecting damages. But there is still no contract law, company law, or commercial law in Somalia. Sharp inflation in 1994–96 and 2000–01 destroyed confidence in the three local currencies, and the U.S. dollar is now commonly used. Because of a lack of reliable data, neither the Fraser Institute nor the Heritage Foundation’s economic freedom indexes rank Somalia. The World Bank concludes, “The achievements of the Somali private sector form a surprisingly long list. Where the private sector has failed — the list is long here too — there is a clear role for government intervention. But most such interventions appear to be failing. Government schools are of lower quality than private schools. Subsidized power isbeing supplied not to the rural areas that need it but to urban areas, hurting a well-functioning private industry. Road tolls are not spent on roads. Judges seem more interested in grabbing power than in developing laws and courts. Conclusion: A more productive role for government would be to build on the strengths of the private sector.”13

In short, most countries could use less government, but a few countries could use more of the right kind of authority. There is an optimal size and structure of government, and when it is reached, the result is, in the words of Adam Smith, “universal opulence which extends itself to the lowest ranks of the people.”14 ��

Notes

1. Thomas Paine, “The Thomas Paine Reader” (Penguin, 1987), p. 66.

2. George Washington, “Quotations of George Washington” (Applewood Books, 2003), p. 29.

3. James Gwartney and Robert Lawson, “Economic Freedom of the World, 2004 Annual Report” (Fraser Institute, 2005), p. 35.

4. Milton Friedman, “Capitalism and Freedom” (University of Chicago Press, 1962), p. 2.

5. Quoted in Clyde E. Danhert, editor, “Adam Smith, Man of Letters and Economist” (Exposition Press, 1974), p. 218.

6. Colin Clark, “Taxmanship” (Hobart Paper 26, Institute of Economic Affairs, 1964).

7. Gerald W. Scully, “Tax Rates, Tax Revenues and Economic Growth” (National Center for Policy Analysis, 1991).

8. Vito Tanzi and Ludger Schuknecht, “Public Spending in the 20th Century: A Global Perspective” (Cambridge University Press, 2000).

9. Benjamin Franklin, letter to Charles de Weissenstein, July 1, 1778, in “The Papers of Benjamin Franklin” (Yale University Press), vol. 27, p. 4. I discovered this quotation in my research for my forthcoming book, “The Compleated Autobiography of Benjamin Franklin” (Regnery Books, 2006).

10. According to the 2005 Index of Economic Freedom published by the Heritage Foundation, “the scores of 86 countries are better, the scores of 57 are worse, and the scores of 12 are unchanged.” (p. 2).

11. Tanzi and Schuknecht, “Public Spending in the 20^th Century,” p. 34.

12. Ronald H. Coase, “The Problem of Social Cost,” The Journal of Law and Economics 3 (October 1960), reprinted in “The Firm, the Market and the Law” (University of Chicago Press, 1988), pp. 95–156.

13. For an analysis of Somalia’s ability to survive without government for over ten years, see Tatiana Nenova and Tim Harrford, “Anarchy and Invention: How Does Somalia’s Private Sector Cope Without Government?” Public Policy Journal 280 (November 2004): http://rru.worldbank.org/PublicPolicyJournal/Summary.aspx?id=280.

14. Adam Smith, “The Wealth of Nations” (Modern Library, 1965 [1776]), p. 11.