POLISCI145 Readings

Clark – Political Economy: A Comparative Approach (Intro, Ch. 1–2, 16)

Political economy studies how differing systems organize production and power, revealing that freedom, justice, and prosperity depend on the quality of a society’s institutions.

Hazlitt – “The Lesson,” “The Broken Window,” “The Blessings of Destruction,” “The Lesson Restated.”

Sound economics looks beyond immediate effects to long-term consequences for all. In “The Lesson,” → policies must be judged by unseen as well as seen outcomes. “The Broken Window” → destruction doesn’t create wealth but merely diverts resources from productive uses. “The Blessings of Destruction” → war and disaster waste capital instead of enriching nations. Finally, “The Lesson Restated” → true prosperity arises from production, saving, and free exchange—not government spending or artificial demand.

Salsman – “Yes, Follow the Science – in Every Field.”

Following science means applying reason and evidence freely, not politically; genuine science thrives only under liberty and capitalism, not government control.

Salsman – “Tripartite Governance: A Guidepost for Proper Policymaking.”

Salsman’s main argument is that good governance depends on balancing business, government, and civil society, with each fulfilling its proper role to preserve freedom and prosperity.

Gorodnichenko – “Culture, Institutions, the Wealth of Nations.”

Gorodnichenko and Roland argue that culture — specifically the degree of individualism — is an independent and powerful driver of economic growth, shaping how societies innovate, coordinate, and evolve economically over time

Read – “I, Pencil: My Family Tree.”

Millions of individuals spontaneously cooperate to produce a pencil without central direction, illustrating the free market's "Invisible Hand" and voluntary exchange.

Scharf – “The Enlightenment & Economic Development.”

Scharf attributes Europe's post-18th century economic growth to Enlightenment-era cultural shifts—individualism, rationality, scientific progress, and social-contract-based states. Conversely, he links Africa's postcolonial stagnation to a collectivist culture and a lack of these Enlightenment values.

Bastiat – “Exchange.”

Bastiat argues exchange is society's fundamental harmonizing principle, enabling specialization, boosting productivity, and uniting human interests through voluntary cooperation.

North – “Institutions.”

Douglass North's "Institutions" (1991) argues that institutions (formal rules and informal norms) fundamentally determine economic performance by shaping incentives, influencing transaction/production costs, and conditioning economic growth, stagnation, or decline.

Stroup – “Economic Freedom, Democracy & the Quality of Life.”

Stroup contends that economic freedom, with its emphasis on personal choice, voluntary exchange, and secure property rights, enhances social welfare more effectively than political democracy

Clark – “Education & Culture: Four Views.”

Education and culture shape how societies balance freedom, equality, and moral order, with different ideologies—liberal, conservative, social democratic, and radical—defining that balance in distinct ways.

Locke – “On Property.”

Locke argues that private property originates from labor: individuals gain ownership over parts of the common world by mixing their labor with it, so long as they leave “enough and as good” for others.

Say – “Of the Right of Property.”

Say argues that the right of property—the secure ownership of what one produces or acquires lawfully—is the moral and economic foundation of all social prosperity

Marx – “Proletarians and Communists.”

Marx and Engels advocate for communism to abolish bourgeois private property, ending class exploitation and transforming capitalist society into one with collective ownership, class equality, and human freedom.

Hardin – “The Tragedy of the Commons.”

Collective resources cannot be managed by individual good will or technology alone. Survival and sustainability depend on limiting individual freedoms through shared moral and institutional discipline.

Schmidtz – “The Institution of Property.”

The institution of private property is morally justified because it transforms negative-sum commons into positive-sum systems that preserve and multiply resources for future generations.

Salsman – “Say’s Law versus Keynesian Economics.”

Say’s Law—the classical principle that production is the source of demand—is fundamentally true, while Keynes’s rejection of it led to a century of economic fallacies, policy errors, and stagnation.

Smith – The Wealth of Nations (Book I, Ch. 1–3)

Division of labor, driven by the human propensity to exchange, is the main source of economic progress. Its extent, and thus productivity, is limited by market size.

Say – “Advantages & Disadvantages Resulting from the Division of Labor.”

Say posits that while the division of labor significantly boosts production, skill, and invention, it also degrades human faculties and worker independence.

Bylund – “The Firm and the Division of Labor.”

Firms arise to better coordinate specialization, allowing deeper division of labor and greater productivity than markets alone.

Clark – “Labor & Industry: Four Views.”

Labor and industry are understood differently across four ideologies: liberals see free markets and competition as empowering workers, conservatives stress duty and hierarchy, social democrats emphasize regulation and worker protection, and radicals view labor as exploited under capitalism.

Hazlitt – “The Curse of Machinery,” “Spread-the-Work Schemes,” “Saving the X Industry,” “Do Unions Really Raise Wages?,” “Enough to Buy the Product Back.”

Prosperity hinges on production and productivity, not artificial job creation or high wages. Innovation and free markets elevate living standards by reducing costs and reallocating resources. Conversely, restricting technology, dividing work, subsidizing failing industries, or imposing high wages ultimately harms everyone.

Locke – “Venditio.”

Locke: Sales are just if voluntary and honest. Sellers can charge market price, even in emergencies, as justice depends on consent, not charity. Commerce is moral through honesty and agreement, not forced generosity.

Casson & Lee – “The Origin and Development of Markets.”

Markets evolved as social institutions that reduced transaction costs and built trust, showing they are historical creations shaped by law, politics, and culture, not natural phenomena.

Persky – “Wage Slavery.”

How wage labor, despite legal freedom, diminishes true liberty by fostering economic dependence. This concept reveals the conflict between formal liberty and material autonomy, questioning if markets truly guarantee freedom.

Munger – “Euvoluntary or Not, Exchange is Just.”

Munger argues that voluntary, mutually beneficial, even if imperfect, exchanges are just. He asserts that restricting such trades disproportionately harms the poor, as market exchange, even when "not euvoluntary," still enhances both parties' welfare.

Philips – “The Free Market? No Such Thing – a Delusion of Left and Right.”

“Free market” is a myth, since all markets rely on laws, power, and regulation; what’s called “deregulation” merely shifts control rather than removing it.

Hayek – “The Use of Knowledge in Society.”

Hayek argues that decentralized knowledge, communicated via prices, allows markets to outperform centralized planning.

Munger – “What Do Prices Know That You Don’t?”

Prices contain dispersed knowledge about scarcity, value, and preferences that no individual or planner could ever know. By reflecting countless decisions, prices coordinate behavior efficiently

Rockoff – “Price Controls.”

Price controls—ceilings or floors—distort market signals, leading to shortages, surpluses, and black markets. Undermine efficiency and harm the very groups they aim to help.

Hazlitt – “How the Price System Works,” “Stabilizing Commodities,” “Government Price Fixing,” “What Rent Control Does,” “Minimum Wage Laws.”

Hazlitt asserts that free market prices are crucial for economic order. Government price controls disrupt markets, misallocate resources, and cause damage; only free prices can efficiently balance supply, demand, and employment.

Salsman – “Help Wanted: Price Gougers and Profiteers.”

"Price gouging" aids economic recovery by signaling scarcity, attracting supply, and allocating goods efficiently. He argues price controls worsen shortages and that profit motivates market freedom and demand fulfillment.

The Economist – “What Exactly is an Entrepreneur?”

Entrepreneur is someone who creates value by taking risks and combining resources in new ways, not just starting a business. Entrepreneurs drive innovation and growth by spotting opportunities others miss

Say – “Of the Profits of the Master-Agent, or Adventurer, in Industry.”

Entrepreneur earns profit by bearing risk and coordinating production, using judgment and foresight to create value.

Locke – “The Creation of Wealth” & “Egoistic Passion.”

Wealth is created through reason, productive work, and the pursuit of excellence, not luck or exploitation. “Egoistic Passion” → rational self-interest and ambition drive innovation and progress—egoism, properly understood, is the moral engine of human achievement.

Hazlitt – “The Assault on Savings” & “The Function of Profits.”

Savings and profits are essential to economic growth: savings fund investment and productivity→ profits signal where resources are most valued. Attacking either undermines progress—profits reward efficiency and innovation, and savings finance future wealth creation.

Salsman – “A Brief History of the U.S. Dollar & Its Debasement.”

Government inflation and leaving the gold standard debased the U.S. dollar, proving that sound money requires fiscal and monetary restraint.

Hazlitt – “The Mirage of Inflation.”

inflation creates only an illusion of prosperity, as rising prices distort production, erode savings, and ultimately harm the economy.

Salsman – “The Production of Money Isn’t (Necessarily) the Production of Wealth.”

creating money doesn’t create real wealth—only productive work and innovation do—warning that easy money and credit expansion distort value and erode prosperity.

Salsman – “Money and Banking.”

Sound, market-based banking sustains growth and trust, while government manipulation of money and credit causes instability.

Salsman – “Why the U.S. Yield Curve Reliably Predicts Recession.”

Inverted yield curve predicts recessions because it signals tight credit and falling investor confidence, caused by monetary mismanagement and distorted interest rates.

Salsman – “The Fiscal State and Its Burden.”

Expanding fiscal state—through taxation, spending, and debt—burdens producers and undermines capitalism, warning that prosperity requires limiting government to protect wealth creation.

Salsman – “The Financial Crisis: Lessons Not Learned.”

2008 financial crisis was caused by government intervention, not free markets, and that policymakers failed to learn this, repeating errors of easy credit, bailouts, and regulation that discourage responsible risk-taking.

Aristotle – “On Justice.”

Justice means giving each their due: distinguishing distributive justice (fair division based on merit) and corrective justice (restoring balance in exchanges or wrongs), both in proportionate equality.

Feldman – “Desert & Entitlement” and “Desertist Theories of Justice.”

Desertist theories claim that a just society aligns rewards with moral or productive merit, in contrast to views that base justice on equality or need.

Buchanan – “Rules and Justice.”

Justice arises from fair, universally applied rules, not from outcomes. A society is just when its rules are chosen and followed voluntarily, ensuring equal treatment and limiting arbitrary power.

Simpson – “Wealth & Income Inequality: An Economic and Ethical Analysis.”

inequality is just when earned through productivity and consent, unjust when rooted in privilege or coercion.

Clark – “Poverty & Inequality: Four Views.”

liberals stress incentives and opportunity, conservatives emphasize personal responsibility, social democrats focus on redistribution, and radicals blame systemic exploitation.

Salsman – “Justice and Equality.”

Merit-based equality before the law, not equality of outcome. Egalitarianism punishes success and true justice rewards productivity, virtue, and voluntary exchange.

Rand – “What is Capitalism?”

Capitalism is the only moral social system because it recognizes individual rights and freedom of production and trade. Wealth and progress come from reason and self-interest, not altruism or state control.

Salsman – “The Mind-Based Etymology of Capitalism,” “Where Have All the Capitalists Gone?,” “Supposed ‘Varieties’ of Capitalism,” “Capitalism Isn’t Corporatism or Cronyism,” “Why Conservatives Won’t Defend Capitalism.”

Capitalism stems from mental creativity and voluntary exchange, not greed. True capitalists, innovators, are rare, as society mistakes capitalism for cronyism. Conservatives fail to defend it, distrusting reason and self-interest.

Clark – “The Classical Liberal Perspective.”

Classical liberalism prioritizes individual liberty, private property, free markets, and limited government, believing these foster prosperity, justice, wealth, and moral progress through freedom and voluntary exchange.

Reich – “How Capitalism is Killing Democracy.”

Modern capitalism centralizes wealth and power, leading to corporate and elite political dominance, weakened democracy, and a need for reforms to balance markets and democratic governance.

Maass – “Why Capitalism Doesn’t Work.”

Capitalism fosters inequality, crises, and exploitation due to profit motives, making socialism essential for human needs through collective ownership and planning.

Tocqueville – “What Sort of Despotism Democratic Nations Have to Fear.”

Democracies face "soft despotism" where a paternalistic state gently controls life, trading citizen freedom for comfort, eroding independence and civic virtue.

Wilson – “Socialism and Democracy.”

Democracy and socialism can coexist if socialism, through government action, champions collective welfare and equality, as true democracy might require social reform for economic and political freedom.

Mussolini & Gentile – “The Doctrine of Fascism.”

fascism rejects individualism and liberalism, exalting the state as the supreme moral authority—the individual exists only through the state.

Clark – “The Radical (Socialist) Perspective.”

Radical socialists view capitalism as exploitative and unjust, advocating for collective ownership and redistribution to achieve equality and social welfare.

Salsman – “Socialism Worked in Venezuela,” “Spring Break in Caracas,” and “Ten Varieties of Anti-Capitalism.”

Venezuela proves socialism fails, and that all forms of anti-capitalism oppose reason, profit, and freedom.