This speech was given before students, professors, trustees, and others at an awards dinner April 4, 2002.

Free-market economics, of which the Austrian School is the preeminent exponent, asserts that every government intervention in the market generates consequences that are deleterious for prosperity and human liberty. However much such interventions may assist one group in the short run, everyone is made worse off in the long run. Government intervention destabilizes economic life in artificial ways, and ultimately does not work to bring about the results that its exponents claim to desire. 

Rather than dwelling on the theoretical apparatus that demonstrates this, I would give some examples of how this works, based on recent issues you may have read about in the news, and draw some broad lessons from them. 

Let us begin with the economic recovery. The headlines of the business pages have been trumpeting its arrival now for months. How do the experts decide when recession has turned to recovery? By looking at the data, which come in packages labeled in various ways: the GDP, the leading indicators, the unemployment rate, industrial production, housing starts, commercial borrowings, office vacancy rates, and a host of others. If these tend in the negative direction, we are said to be entering a recession. If they move in a positive direction, it is said that we are recovering. 

 This past Sunday was Earth Day. Founded in 1970, the annual event is now celebrated by some 500 million people in 175 countries. Although the friends of the planet might disagree on what they’re for – some care most about the quality of the air we breathe, some want to preserve endangered species, and some extremists wish human beings would leave the scene altogether – they all know what they’re against: capitalism.

Whether the alleged solutions are taxes on gasoline, fines for smokestack pollution, or stepped up enforcement of fishing quotas, the common thread is that free individuals cannot be entrusted to make wise decisions with their private property. Benevolent politicians (taking their cue from the environmentalist experts, of course) must use the power of the government to alter people’s behavior.

The following is excerpted from 'The Anti-Capitalistic Mentality'.

Critics level two charges against capitalism: First, they say, that the possession of a motor car, a television set, and a refrigera­tor does not make a man happy. Secondly, they add that there are still people who own none of these gadg­ets. Both propositions are correct, but they do not cast blame upon the capitalistic system of social cooperation.

People do not toil and trouble in order to attain perfect hap­piness, but in order to remove as much as possible some felt un­easiness and thus to become happier than they were before. A man who buys a television set thereby gives evi­dence to the ef­fect that he thinks that the possession of this contrivance will in­crease his well-being and make him more content than he was without it. If it were otherwise, he would not have bought it. The task of the doctor is not to make the patient happy, but to remove his pain and to put him in better shape for the pursuit of the main concern of every living being, the fight against all fac­tors pernicious to his life and ease.

As election time nears, we are bombarded with political ads and speeches by candidates telling us their great plans for running the country. At the end of the recent presidential debate, for example, the Democratic nominee recited a litany of supposed cures for nearly everything that ails us, beginning each sentence with the phrase “I have a plan…”

The problem is that government is not supposed to plan our lives or run the country; we are supposed to be free. That our public discourse strays so far from this principle is an unhappy sign of our times. Those who believe in limited constitutional government should worry every time a politician says, “I have a plan.”

So far in this book, we have developed a theory of liberty and property rights, and have outlined the legal code that would be necessary to defend those rights. What of government, the State? What is its proper role, if any?

Most people, including most political theorists, believe that once one concedes the importance, or even the vital necessity, of some particular activity of the State – such as the provision of a legal code – that one has ipso facto conceded the necessity of the State itself.

The State indeed performs many important and necessary functions: from provision of law to the supply of police and fire fighters, to building and maintaining the streets, to delivery of the mail. But this in no way demonstrates that only the State can perform such functions, or, indeed, that it performs them even passably well.

Suppose, for example, that there are many competing cantaloupe stores in a particular neighborhood. One of the cantaloupe dealers, Smith, then uses violence to drive all of his competitors out of the neighborhood; he has thereby employed violence to establish a coerced monopoly over the sale of cantaloupes in a given territorial area.

A major problem with discussions of the necessity of government is the fact that all such discussions necessarily take place within a context of centuries of State existence and State rule – rule to which the public has become habituated. The wry coupling of the twin certainties in the popular motto "death and taxes" demonstrates that the public has resigned itself to the existence of the State as an evil but inescapable force of nature to which there is no alternative.

The force of habit as the cement of State rule was seen as early as the sixteenth-century writings of de la Boetie. But, logically, and to cast off the scales of habit, we must not merely compare an existing State with an unknown quantity, but begin at the social zero point, in the logical fiction of the "state of nature," and compare the relative arguments for the establishment of the State with those on behalf of a free society.

Let us assume, for example, that a sizeable number of people suddenly arrive on Earth, and that they must now consider what sort of social arrangements to live under. One person or group of persons argues as follows (i.e., the typical argument for the State): "If each of us is allowed to remain free in all aspects, and particularly if each of us is allowed to retain weapons and the right of self-defense, then we will all war against each other, and society will be wrecked. Therefore, let us turn over all of our guns and all of our ultimate decision-making power and power to define and enforce our rights to the Jones family over there. The Jones family will guard us from our predatory instincts, keep social peace, and enforce justice." Is it conceivable that any one (except perhaps the Jones family itself) would spend one moment considering this clearly absurd scheme?

If the State, then, is a vast engine of institutionalized crime and aggression, the "organization of the political means" to wealth, then this means that the State is a criminal organization, and that therefore its moral status is radically different from any of the just property-owners that we have been discussing in this volume. And this means that the moral status of contracts with the State, promises to it and by it, differs radically as well. It means, for example, that no one is morally required to obey the State (except insofar as the State simply affirms the right of just private property against aggression). For, as a criminal organization with all of its income and assets derived from the crime of taxation, the State cannot possess any just property.

This means that it cannot be unjust or immoral to fail to pay taxes to the State, to appropriate the property of the State (which is in the hands of aggressors), to refuse to obey State orders, or to break contracts with the State (since it cannot be unjust to break contracts with criminals). Morally, from the point of view of proper political philosophy, "stealing" from the State, for example, is removing property from criminal hands, is, in a sense, "homesteading" property, except that instead of homesteading unused land, the person is removing property from the criminal sector of society – a positive good.

Each state has an assumed monopoly of force over a given territorial area, the areas varying in size in accordance with different historical conditions. Foreign policy, or foreign relations, may be defined as the relationship between any particular State, A, and other States, B, C, D, and the inhabitants living under those States. In the ideal moral world, no States would exist, and hence, of course, no foreign policy could exist. Given the existence of States, however, are there, any moral principles that libertarianism can direct as criteria for foreign policy? The answer is broadly the same as in the libertarian moral criteria directed toward the "domestic policy" of States, namely to reduce the degree of coercion exercised by States over individual persons as much as possible.

Before considering inter-State actions, let us return for a moment to the pure libertarian stateless world where individuals and their hired private protection agencies strictly confine their use of violence to the defense of person and property against violence. Suppose that, in this world, Jones finds that he or his property is being aggressed against by Smith. It is legitimate, as we have seen, for Jones to repel this invasion by the use of defensive violence. But, now we must ask: is it within the right of Jones to commit aggressive violence against innocent third parties in the course of his legitimate defense against Smith? Clearly the answer must be "No." For the rule prohibiting violence against the persons or property of innocent men is absolute; it holds regardless of the subjective motives for the aggression.

In the early part of the 20th century, the main indictment of the capitalist system by its intellectual critics was the alleged pervasiveness of "monopoly." In the 1930s, mass unemployment and poverty ("one third of a nation") came to the fore. At the present time [1962], growing abundance and prosperity have greatly dimmed the poverty and unemployment theme, and the only serious "monopoly" seems to be that of labor unionism.

Let it not be thought, however, that criticism of capitalism has died. Two seemingly contradictory charges are now rife: (a) that capitalism is not "growing" fast enough, and (b) that the trouble with capitalism is that it makes us too "affluent." Excess wealth has suddenly replaced poverty as the tragic flaw of capitalism.[1]

At first sight, these latter charges appear contradictory, for capitalism is at one and the same time accused of producing too many goods, and yet of not increasing its production of goods fast enough. The contradiction seems especially glaring when the same John Kenneth Galbraith (1908-2006) critic presses both lines of attack, as is true of the leading critic of the sin of affluence, Professor Galbraith.[2]