A Modern Pyramid

Christopher Mayer, a loan officer at a Maryland bank, is studying for his MBA at the University of Maryland. In Anything That’s Peaceful, first published in 1964, Leonard Read took aim at U.S. efforts to put a man on the moon.^[1] He was right on target. His powerful comments have tremendous relevance today in light of the government’s aim to build an international space station. The project is expected to cost more than one hundred billion dollars over its lifetime. In discussing the moon project, Read wrote: “What its ultimate, useful purpose is I cannot imagine. But putting aside personal prejudices against this multibillion dollar project, it is obvious that it would not, at this time, emerge from the free market.” Read also took note of all the specialized labor, machines, time, and money being poured into the project. Those workers supported themselves with money provided by the government. However, that income was not earned in the normal sense. In the market, wages are earned by providing a service or good that others are willing to pay for. Ultimately, wages are money that entrepreneurs advance to workers now in exchange for a greater amount generated later from the sale of the product. Of course, entrepreneurs make mistakes, and it may turn out that the product is sold for less than anticipated. A loss is a signal that an entrepreneur must either redirect his resources to a good more highly valued by consumers or he will continue to suffer losses and be driven from business. His resources would then fall into more capable hands and be more efficiently deployed (or left idle).

No Response to Consumers

As Read pointed out, exploring the moon “is not bound into the economy by mutual consent as reflected by willing exchanges in a free market; it is bound into the economy by the exertion of governmental force or coercion.” The efforts of NASA are possible because the government forcibly collects taxes from it citizens. Read coined a term to refer to work that would not be supported by the free market: “To the extent that government intervenes in free action to that extent is unnatural specialization brought into play.” (Emphasis added.) The harm of unnatural specialization can be seen through Read’s example of policing. Most everyone agrees that it is the government’s role to keep the peace, to ensure and protect individual freedom and property, and to forcibly restrain fraud, violence, and other similar crimes. However, citizens must be vigilant about government’s role even here, lest that worthy goal be corrupted. Employing too many police officers and soldiers places a drain on the economic system. What if everyone were forced to become a police officer or soldier? We can easily see the folly of such a scheme. Too many takers, not enough producers. Garet Garrett, a wonderful writer with a gift for symbolism, surely must have agreed with Read. He would have called exploring the moon or building an international space station a “pyramid.” In his essay “The Anatomy of a Bubble,” first published in 1932, Garrett used the imagery of the pyramid to denote a dead asset, an unproductive expenditure of human labor.^[2] The pyramids were built through the power of the pharaoh, who wished to build a monument in honor of himself. Garrett wrote that “it is believed that on the Cheops alone 100,000 men were employed for 20 years. And when it was finished, all Egypt had to show for 600,000,000 days of human labor was a frozen asset. . . . People could not consume what their own labor had produced. That is to say, they could not eat a pyramid, or wear it, or live in it, or make any use of it whatever. Not even Pharaoh could sell it, rent it or liquidate it.” Had they not been forced to build the pyramids, the laborers might have improved Egyptian agriculture, built homes, and made clothing and other goods that their fellows would have enjoyed and willingly paid for. They might have developed and expanded trade. They might have invented innovative products. As Garrett said, they could have insured “Egyptian civilization a longer competitive life.” Instead, they made a large pile of bricks. Once spent, the labor, capital, and time were gone forever. The Egyptians could not unmake the pyramid.

A Pyramid in Space

What’s the difference between the Pharaoh’s pyramid and our government’s intent to build a space station? The money spent on the station can’t be unspent. It is gone forever. And what will we have for our efforts? We cannot eat the station, we cannot wear it, live in it, rent it, or likely liquidate it. The station is a modern pyramid. Advocates of the space station say it will provide important benefits. But the promises are vague, even if chock full of noble-sounding humanitarian goals that seem beyond reproach. They begin with the mission “to enable long-term exploration of space and provide benefits to the people of Earth.” They include promises “to accelerate breakthroughs in technology,” “to maintain U.S. leadership in space,” and “to inspire our children.” NASA also claims that “every dollar spent on space programs returns at least $2 in direct and indirect benefits.” Nowhere is this claim substantiated. In fact, NASA’s Web site (www.nasa.gov) never mentions costs. If every dollar yielded two dollars in benefits, why isn’t this a private initiative? That kind of return would attract big-time money, money that would make Bill Gates blush. The reason is that individuals in society have other things they would rather do with the money. Ludwig von Mises wrote in Human Action that “A project P is unprofitable when and because consumers prefer the satisfaction expected from the realization of some other projects to the satisfaction expected from the realization of P.” As Mises pointed out, many fail to recognize the fact that all action involves tradeoffs. Projects have a cost because factors of production are scarce. The money to subsidize a project must come at the expense of the taxpayer and the sacrifice of other wants. The concept of a pyramid is a useful symbol for any number of government projects. Because of Garrett’s analysis, I will never look on the pyramids with admiration and amazement. I will see only that they are the product of a tyrant and a symbol of the wasted effort emblematic of other public works projects. I’ll wonder what the Egyptians would have built in their stead had they been free. And I’ll have similar thoughts every time I read about the space station.

Notes

1. Leonard E. Read, Anything That’s Peaceful (Irvington-on-Hudson, N.Y.: The Foundation for Economic Education, 1998 [1964]).
2. Garrett’s essay was reprinted in Where the Money Grows and Anatomy of a Bubble (New York: John Wiley & Sons, Inc., 1997).