The Let-Alone Principle
( Originally Published Early 1900's )
MOST questions of governmental policy cluster around one central maxim, founded on what is sometimes called the let-alone principle. This maxim was enunciated by the Physiocrates, a school of French economists and philosophers which arose early in the last century. Its familiar form was, Laissez-aller, laissez faire; which may be freely paraphrased, " Let things take their own course." It was directed against the system, which was then almost universal, of governmental interference with the freedom of intercourse between nations and individuals. It opened up a new line of thought, founded on the consideration that the individual man was a being better able to take care of himself, in bargaining with his fellow-men, than any government was to take care of him. We have to consider what the maxim means, on what grounds it rests, to what limitations it is subjected, and what are its relations to the progress of society.
Since the maxim is directed against interference of government with the individual, we must begin by considering the relations of these two parties. We may consider government in this case as the instrument for the combined action of society at large. Thus the relation of the individual to government means his relation to society; that is, to all his fellow-men. In this connection we must remember that society can be nothing more than an aggregate of individuals, and can have no interests separate from the interests of individuals. It would be a contradiction in terms to talk about a society which was wealthy and prosperous while its individual members were poor and starving.
We may consider the maxim as expressing either a policy or a principle. Considered as a policy it claims that governnnent should not interfere with the rights of individuals, or bodies of individuals, to direct their industry into such channels as they may deem best, and to make such contracts with their fellow-men as they may deem mutually advantageous. The principle or law embodied in the policy is that non-interference on the part of the government is best for the progress of society, so far at least as the operations of its wealth-producing powers are concerned. These two views of the maxim are practically equivalent, because it is only on grounds of general good that government can be required to abstain from interfering, and thus the principle and the policy necessarily go together.
Economic Significance of Laissez faire. Like all other very general principles in social science, the let-alone principle may have a very wide range of meanings and applications. In order to treat it definitely it is necessary to distinguish between these applications, and to find in what its economic significance consists. Taken in its widest possible range, it is sometimes interpreted as meaning that every man should always be at liberty to do as he pleases. But it is evidently impossible that be should enjoy this liberty. He might want to fly, but he cannot do it. His liberty is necessarily limited by the conditions which surround him.
The first class of limitations are those imposed by the physical necessities of the case. Two men cannot exist in the same place at the same time. They cannot eat the same loaf of bread. Practically a man cannot wholly rid himself of the society of his fellows.
Yet further limitations are imposed by the mutual and equal rights of men. One man cannot be allowed to assault another, however much he might like to do it. The sufferer from a contagious disease will be quarantined or isolated by his fellow-men. One man is not going to allow his neighbor to erect an inflammable house adjoining his own, or to suffer nitro-glycerine to be stored in his cellar.
Again, there are certain generally recognized necessities of society which lead governments to demand certain duties from their citizens. Of these the most important is the payment of the taxes necessary to the public support. In most countries this includes a contribution to the education of the rising generation. In case of war every male citizen may be required to bear arms against the enemies of his country.
The above three limitations upon the let-alone principle have little relation to economic questions. The burning question of the day, in applying economic principles to governmental policy, is whether any economic advantage can be gained by government interference with the liberty of the individual. If we strictly limit our question in this way, we shall exclude some questions which the economist often discusses. One of these is that of limiting the employment of children in factories. Legislation to effect this object has been opposed by economists. If the purpose of the legislation had been the increase of wealth, the ground taken by the economist might have been sound. As a matter of fact, however, the purpose was the general good of society in the future, which is not a purely economic question, and therefore cannot be treated from a purely economic point of view. Owing to the confusion which often arises from not keeping in sight the distinction here indicated, we shall define it precisely :
An economic question is one whose issue concerns only wealth and its enjoyment, including the power of each individual to gain the maximum amount of gratification from his labor. When other subjects are involved in the question, it ceases to be a purely economic one, and therefore an answer founded solely on economic considerations may not be conclusive.
We may continue our examination of the principle by correcting a misapprehension concerning it. It is very commonly considered as a policy invented by the economists, and of doubtful applicability; sometimes, indeed, as a mere abstraction to which it is impossible to give a definite shape.
On the contrary, the maxim merely expresses a fundamental law on which civilized society is organized, and one which, under certain limitations to be hereafter considered, is obeyed in most of the internal relations of all civilized communities. In practice every civilized community allows each of its members to engage in any occupation he chooses, and to make any bar-gains with his fellow-men which he deems just, so long as he does not interfere with their equal rights. It is on this basis of individual freedom that the whole fabric of modern society is erected. All that the economists did was to state and point out the principle, and to claim for it a wider range than had formerly been allowed it.
The most common argument against this view is this : In early and primitive forms of society, when population is sparse, governments weak, and each man under the necessity of protecting himself, the principle may well apply. But as civilization develops, and population becomes denser, the relations of the individual to society become so intimate that he has to give up more and more of his natural rights, until he has so few left that it is not worth while to consider them.
This argument is founded on a complete misapprehension of the facts of the case. The let-alone principle, as a principle, is quite modern; and as a policy it is almost entirely a growth of modern times. Until within two centuries there *as no wide-spread idea of the individual having any rights simply as a human being. He was born a citizen of some country, or a subject of some king, and was allowed such rights at home as law or custom sanctioned. But if he left his country, it was only as civilization advanced that any rights at all were conceded him.
One illustration will make this plain. Today a person with money enough to pay his way can travel around the world, coming into contact with thousands of men without meeting any one to challenge him, or to demand whence he comes, whither he goes, or why he is not attending. to his affairs at home. Two or three thousand years ago he could not have travelled through Europe without being threatened at every step with robbery, imprisonment, slavery, or death.
The fact is that although, with the progress of society, government has within its sphere grown more powerful and efficient, this sphere has not been greatly enlarged. But the sphere of individual activity has greatly enlarged, and with the spread of knowledge the individual has become better able to maintain his rights against society, and governments are be-coming less and less able to manage him. Let us look, for ex ample, at such great public works of antiquity as the pyramids of Egypt, and think how large a proportion of the laboring energies of the nation which erected these structures- could be commanded by its ruler. We shall then see that although civilized governments of the present day could undertake works equally great, they could not command the same proportion of the labor-power of the people. The labor-power of the nation has increased many-fold, but the proportion of that power which government can command has diminished in a nearly equal degree.
The Grounds of the Let-alone Maxim. These grounds are briefly as follows :
I. The Ground of Right. In the conscience of every civilized man there is a feeling that he has the exclusive right to the use of his own faculties, and that society at large, that is, his fellow-men, should not interfere with his actions so long as he does not interfere with theirs. The recognition of this right in each individual carries with it the right of any two or more individuals to make such bargains as they may deem best for their interests. For example, if a farmer deems it to his advantage to borrow money from a capitalist at twelve per cent interest, and government comes in with a law that no one shall loan money at a higher rate than six per cent, thus compelling the farmer to go without the money, and the capitalist to seek some less profitable investment, this is an interference with the natural rights of both parties to make their own bargains.
It may be objected to this claim of right that after all it amounts to nothing, because it is of no practical use for one to claim a right which he cannot persuade or force others to respect. The reply to this is that we may call it a power as well as a right. As a matter of fact the civilized man can and does enforce the right we have described in nearly all the every-day relations of life. As a general rule the adult man can and does use his faculties as he pleases, so long as he refrains from interference with the rights of other men to use their faculties as they please. The only cases in question are therefore exceptional ones, and the maxim then amounts to the assertion that government, or society at large, if we choose so to consider it, has no right to exercise and claim a power in cases which are exceptional, and where the exercise of the power is merely vexatious.
II. As a matter of policy, the let-alone principle is supported on the ground that the processes of production and distribution are conducted in the most advantageous manner when left to the management of individuals, each of whom seeks only his own interest. If a railway is to be built, self-interest will prompt its projectors to make it connect those points and follow that line where it is most wanted, because there people will pay highest for its use. If the public want an article, that fact will stimulate its manufacture. If the makers charge too much for it, other makers will compete and thus lower the price. The prices of any class of goods are highest where the goods are most wanted, and lowest where they are least wanted. Thus the self-interest which prompts traders to buy in the cheapest and sell in the dearest market prompts them to do what is best to satisfy the wants of the public. If an enterprise does not pay its projectors, that fact shows that it does not confer upon the public a benefit sufficient to compensate for the capital and labor bestowed upon it. In general, since no man is required to do anything which is not to his advantage, no bargains will be made except such as, in the judgment of the parties, will benefit both.
Criticism and Defence of the Let-alone Policy. If we consider the preceding argument as valid in its widest and most unrestricted application, we shall see that it rests upon two tacit assumptions, namely :
1. That things are to be considered good in proportion to the desire of people to have them. In other words, government need have no other standard to decide whether an end is good for society than the willingness of men to labor for the attainment of that end.
2. That individuals are the best judges of what is for their own interests.
Examination shows that there are, or may be, many exceptions to each of these premises.
I. Great numbers of people desire, and are willing to pay for, things which are injurious both to themselves and their posterity; quack medicines and intoxicating liquors, for example. In such cases it cannot be concluded by any single principle that government should not interfere with the liberty of the individual. As another example, children may, with pecunairy advantage to their parents, be employed in a way which will injure their health and cripple their mental and physical development. It is clear that we have here a good case for governmental interference.
To consider the subject in a general way, it is a universally accepted principle that the main duty of government is to re-strain individuals from infringing upon the rights and liberties of their fellow-men. We may extend this principle by saying that it may, also be the duty of government to restrain the individual from acts injurious to the morals of his fellows or to the general good of posterity.
II. It is not true that the individual always knows what is best for his own interests. This is markedly the case with the laboring classes, whose opportunities for learning what places offer them the best means of living are very restricted, and whose intellectual inability to judge what public action will promote their happiness leads them to form combinations injurious to themselves. They are liable to be led into making disadvantageous contracts with employers who are able to overreach them. Hence several of the best governments, including that of England, pass laws restricting the freedom of contract between various classes of laborers and their employers.
6. Limitations on the Preceding Criticisms. The preceding criticisms show that the let-alone principle cannot be regarded as a necessary and universal truth, like a theorem of geometry. But they are insufficient to prove the principle entirely in-valid. Consider first the case in which the government is asked to restrain the individual from doing what would be harmful to himself or his family. To establish a case for remedial legislation, it is not sufficient to show merely that individuals use their liberty to their own injury. Two other propositions must also be established :
Firstly. That the individual can be really restrained, or the evil he does himself be prevented, by the action of law.
Secondly. That in executing the proposed law other evils equally great will not follow.
For example, in considering legislation to prevent the evil of drunkenness, we must first ascertain whether such laws really do prevent the drunkard from getting liquor, or, failing in this, whether they save young men from being led into temptation. Then we must consider the rights of those who have legitimate uses for alcoholic liquors, and compare the wrong done them by prohibitory laws with the benefit done society by preventing drunkenness.
In answer to the second criticism, the question is not whether each person is a perfect judge of what is best for his own interests, but whether Congress, or society at large, acting in any way, is, practically, a better judge than he is. Now, leaving out exceptional cases, whatever we may say of the imperfect judgment of the individual, it is certain that no legislative power is a better judge of what is for his good than he is himself. No public body can so well judge whether an enterprise will pay as the men who are to succeed or fail with it.
There is a reason stronger than any yet given why men are better judges of their practical affairs than legislative bodies can be, which we have already hinted at in treating of scientific method. It is an observed fact that when a man of good understanding and fair business capacity enters upon any operations or projects in which his own personal interests are involved, lie maintains throughout a clear conception of what those interests are, and of the effect upon them of each cause which may come into play. It is equally an observed fact that when such a man studies the public interests, this power of seeing the effect of each cause upon those interests fails him. The reason of the failure is not so much a mistake in estimating the effect of the cause as the want of a clear idea what the public interests really are. The interests of fifty millions of people form an aggregate so complex that they cannot be grasped by the mind without a considerable power of abstraction ; that is, the power of drop-ping out of consideration all nonessential conditions of the problem, while keeping a firm grasp on all that is essential. Now, this power is not universally possessed by men, and is much rarer among men of action, who control public affairs, than it is among scholars.
7. Limits of Application of the Let-alone Principle. —The Keep-out Policy. This world in which we are placed is not, so far as we have discovered, constructed upon a system so simple that we can frame any universal laws for the conduct of mankind. We must therefore expect to find limits to the application of all principles. As we have hitherto defined and discussed the let-alone principle, it means only that governments ought not to interfere with the freedom of each individual to employ his own faculties in his own way, and to engage in such enterprises as he may choose, so long as he does not interfere with the equal rights of others. It does not deny to governments the same right as the individual to enter into business enterprises, subject to the same restrictions as individuals. But it is often extended so as to include the doctrine that the functions of society should be absolutely confined to the protection of the citizen against wrong, and that government should not engage in any business enterprise whatever, not even in establishing post-offices and carrying the mails.
It is essential that the student of the subject should clearly understand the difference between this proposition and that of laissez faire. The one claims that the government should not stop the citizen from acting; the other that it should not act itself. For the sake of clearness we shall call the latter the keep-out principle, because it requires that government should keep out of certain fields of action.
Illustrations. When government undertakes to carry letters, it violates the keep-out principle. But it does not violate the let-alone principle so long as the business pays fer itself and no additional tax is necessary to carry it on. When the law prohibits any one else from carrying letters, then it violates the let-alone principle.
When a government issues notes to circulate as money, it violates the keep-out principle. When it requires that creditors shall accept these notes as if they were gold and silver, it violates the let-alone principle.
The establishment and support of public schools is a violation of the keep-out principle. It is also a violation of the other principle to this extent : that the money to support the schools must be raised by taxing every individual, whether he wants the school or not.
Although in the abstract all taxes are a violation of the let-alone principle, yet, if we are to adhere to this principle as closely as we can, taxation should be levied only for the needs of government. Hence when taxes are levied merely to keep people from buying particular things, or to favor one person at the expense of another, the principle is still further violated.
The same principle is violated when the law refuses to en-force any contracts into which individuals have freely entered for their own mutual benefit, and which works no injury to third parties. The case is the same when the law construes contracts differently from what the parties intended; for example, when it admits that a debt which the parties agreed should be paid in gold may be discharged by a payment in silver or paper. But it is no violation to define beforehand what shall be considered a dollar, to say that it shall mean a certain coin or a certain piece of paper, provided always that the definition is applied only to cases in which the parties understood that this was to be the meaning.
It is no violation of the let-alone principle for government to compete with individuals in any branch of trade or industry, so long as it does so without loss to itself, and hence without increase of taxation. But any such action is of course a direct violation of the keep-out principle.
Relative Applications of the two Principles. The let-alone principle is valuable as an expression of that line of policy which has made modern society what it is. But the keep-out principle does not rest on any such basis. We cannot decide a priori what governments should or should not do. We should rather say that government should undertake any business which it can undertake with advantage to the public and without doing injustice to individuals. It has been more than once questioned whether the post-office department should open the mails to anything but such mediums of information as letters and newspapers. Some maintain that it is no part of the business of that department to act as a general carrier, and that such service should be left to express companies. They would exclude little parcels of every kind from the mails on this abstract ground alone, without even inquiring whether the service could be performed with advantage both to the government and the public. Thus a great convenience to people living in remote regions would have been denied them on a mere abstraction. The correct ground to be taken was this : Government has undertaken to send conveyances with letters and papers to every part of the country, itself assuming the risk of its paying. If the additional cost of carrying miscellaneous parcels in the same conveyances is compensated by the additional revenues thus derived, then the work ought to be undertaken; but not in the opposite case.
A comprehensive view of the situation will show that there are some services which are not performed in the best manner when left entirely to private enterprise, because some of the conditions which insure good performance are wanting. This is notably the case with bank-notes, railways, and telegraphs.
Bank-notes. We have described the evils suffered by leaving banks free to issue notes at their own pleasure. This state of things was remedied only by governmental interference. Government first issued notes itself, prescribed conditions on which banks should issue notes, and prohibited the issue of any others.
Railways. On the let-alone and keep-out principles a rail-way will be built to a place by some company whenever the benefit will pay for the outlay. But as a matter of fact the benefit done by the road is always greater than the amount it can collect for its services, because it cannot charge each separate man what it pleases, but must treat all alike. Again, were the principles of universal application, then, if the road did not serve the public as well and as cheaply as it could, other capitalists would compete with additional roads. This is not always the case. The possible projectors of a second road would see that freights would be lowered and the lessened profits divided between the old and new roads. Hence, although the first road might make inordinate profits, it would not follow that a second would pay. If the second is the last built, the two may combine to keep up freights, and the public will then find itself paying profits on two roads where only one is necessary.
Telegraphs. The history of telegraph companies in this country affords an instructive example of how competition may be prevented and an artificial monopoly retained through an entire generation. The leading company long managed to keep the price of messages above the natural limit, by buying up or joining hands with every formidable competing company. The process has been a most wasteful one, because the leader has to use the excess of profits which it derived from the public in these purchases, thus making the public pay for all these companies. In consequence of the liability to this state of things it has become common for governments to take the management of railways and telegraphs into their own hands. This is especially the case with telegraphs, which are managed in connection with the post-office by all the leading governments of Europe, and that with great advantage to the public.
The strongest objection which has been urged against the Government of the United States undertaking to benefit its people in the same way is the supposed lack of wisdom with which it will manage any such business. It has become the custom for Congress to attend almost exclusively to special " interests" in shaping its policy, thus losing sight of the general public welfare. That is, if any legislation is proposed on such a subject as the tariff, the encouragement of industries, or the management of the telegraph, Congress does not investigate the subject itself with general reference to the public welfare, but invites all who are interested to present their views. Its policy is then determined by the views thus obtained.
This method is a very bad one, because the only views that can be presented are those of a few interested parties, and the more these parties can gain at the expense of the public the better they can afford to urge such a course as shall be to their advantage.