Back in 1997, George Soros, a multibillionaire stock and commodities speculator, wrote an essay titled "The Capitalist Threat" (The Atlantic Monthly, February1997. The essential substance of this essay is the claim that the main contemporary threat to a free society is a fully free society--i.e., a society of laissez-faire capitalism. It is a claim that has grown more prominent in the years since his article first appeared.

The obviously self-contradictory nature of this claim may have escaped Soros because he does not use the term "free society," but the ambiguous expression "open society." Yet is clear that insofar as the "open society" is to be considered as something desirable, it represents a free society, as when Soros writes: "The Declaration of Independence may be taken as a pretty good approximation of the principles of an open society...."

Soros presents two lines of argument to try to prove his claim. The first can be described as epistemological; the second, as economic.

Soros's Epistemological Argument

In his epistemological argument, Soros claims that there is an essential common denominator between laissez-faire capitalism and communism and Nazism. He writes: "Although laissez-faire doctrines do not contradict the principles of the open society the way Marxism-Leninism or Nazi ideas of racial purity did, all these doctrines have an important feature in common: they all try to justify their claim to ultimate truth with an appeal to science." Soros has already announced the principle that: "Since the ultimate truth is beyond the reach of humankind, these ideologies [ideologies that claim to possess it] have to resort to oppression in order to impose their vision on society."

Soros appears to understand that "fascism and communism... both relied on the power of the state to repress the freedom of the individual." Since laissez-faire capitalism constitutes the absolute freedom of the individual from the state in all areas of life other than the initiation of physical force, it may, indeed, seem nothing less than amazing that he places it in the same category as those doctrines. In sharpest contrast to the present system of massive government intervention, under laissez-faire capitalism the activities of the state are confined to the protection of the individual against acts of aggression, such as, for example, murder, robbery, rape, and fraud, and attack by foreign aggressor governments. The state does not go beyond this strictly limited function. It does not intrude in people's economic activities; nor does it intrude in their beliefs, sex lives, or any other aspect of their lives.

Perhaps because he is somewhat embarrassed by the nature of his claim about laissez-faire capitalism, Soros tries more than once to soften it. In addition to the modest, nonessential, qualification quoted above, in introducing the alleged important feature in common," he writes: "I want to emphasize, however, that I am not putting laissez-faire capitalism in the same category as Nazism or communism. Totalitarian ideologies deliberately seek to destroy the open society; laissez-faire policies may endanger it, but only inadvertently." Yet just two sentences later, he declares, "Nevertheless, because communism and even socialism have been thoroughly discredited, I consider the threat from the laissez-faire side more potent today than the threat from totalitarian ideologies." In this sentence, Soros very clearly does once again put laissez-faire capitalism in the same category as Nazism and communism, however much he may deny doing so. For the mere discrediting of communism and socialism is not sufficient to make laissez-faire capitalism into a greater threat than totalitarian ideologies unless there is something comparably evil about it. To take an analogy from the field of health, the development of cures or preventives for heart disease and cancer could result in another life-threatening illness, such as stroke, being elevated to the status of the major medical threat to human life. But this would be the case only because stroke is extremely damaging and life threatening in the first place.

As to the alleged evil that laissez-faire capitalism is supposed to share with communism and Nazism, namely, its claim to "ultimate truth," Soros appears to be unaware of the fact that communism and Nazism were philosophically incompatible with claims to truth of any kind, ultimate or otherwise. Both rested on variants of the doctrine of determinism and denied the universal validity of the laws of logic. According to Marxism, an individual's ideas were not the result of his consideration of matters of true or false, but were automatically determined by his membership in an economic class and reflected the economic interests of that class. Thus, proletarians allegedly had one set of ideas based on alleged proletarian logic and the alleged class interests of proletarians, and their class enemies, the bourgeoisie, allegedly had another set of ideas based on alleged bourgeois logic and the alleged class interests of the bourgeoisie. According to Nazism, the "interests" and "logics" were along the lines of racial membership rather than membership in an economic class. Thus, the Nazis held that the ideas of an Aryan were based on "Aryan logic" and the interests of the Aryan Race, while the ideas of their enemies, such as the Jews, were based on "Jewish logic" and the interests of the Jewish Race.

Obviously, the alleged science of Marxism is without any rational basis. Along with, and underlying, its doctrines of polylogism and class warfare is the labor theory of value carried to the point of utter absurdity, including the notion that the value of labor itself is determined by the quantity of labor required to produce it--i.e., by the quantity of labor required to produce the wage earner's minimum subsistence. It is on this nonsensical basis that Marxism develops the substance of its claim that profits are based on the exploitation of labor and that the impoverishment of the masses grows progressively worse under capitalism.

So too any alleged scientific basis of Nazism is without rational foundation. This is the case not only because of Nazism's polylogism and doctrine of irreconcilable racial and national conflicts, and its viewing the human race from the perspective of an animal breeder, but also because of its socialism (effected through price and wage controls) and accompanying claims to be able to practice national economic planning, which would require the direction of the economic system by nothing less than an omniscient deity. (Nazism, it should never be forgotten stands for Nazional Sozialismus.)

Soros seems to be unaware of almost all of the serious, fundamental criticisms to be made of Marxism and Nazism. In fact, beyond his negative reference to doctrines of racial purity, the only other thing he says on the subject is, "One of Popper's accomplishments was to show that a theory like Marxism does not qualify as science"--as though Popper, rather than von Mises and Böhm-Bawerk had demonstrated this. (Karl Popper is Soros's main philosophical influence.)
Soros appears almost entirely lacking in familiarity with procapitalist, antisocialist economic theory and political philosophy subsequent to Adam Smith and David Ricardo. The closest he comes to displaying any such familiarity is his characterization of F.A. Hayek as "one of the apostles of laissez-faire," which, unfortunately, is mistaken, inasmuch as Hayek was an advocate of major aspects of the welfare state, such as social security. Nowhere does Soros give evidence of having read anything by Ludwig von Mises or Ayn Rand, by far the two most important advocates of laissez-faire capitalism in the twentieth century. His lack of knowledge concerning the subject of his essay is made further evident in his attempt to deny the scientific basis of laissez-faire capitalism, which he correctly recognizes as economic theory. He writes: "One cannot simply equate market economics with Marxist economics." But in his very next sentence, he does so equate it: "Yet laissez-faire ideology, I contend, is just as much a perversion of supposedly scientific verities as Marxism-Leninism is."

His basis for this outlandish claim is his assumption that what underlies the laissez-faire ideology is economic theory insofar as it is based on the doctrine of pure competition and perfect knowledge--a doctrine that the leading advocates of laissez-faire capitalism not only do not hold, but regard as utterly nonsensical. For example, a leading conclusion of the doctrine of pure competition is that rivalry is the opposite of competition. (For a full exposition and critique of this doctrine, see my book Capitalism, pp. 425-437.)

He also argues the fallaciousness of treating states of equilibrium as really existing, which, he claims, is essential to economics as a science. He is not aware of the fact that at least as early as 1940, von Mises demonstrated that economics does not at all depend on the actual existence of such states--that they are merely tools of thought, helpful in understanding the way things would develop in the absence of further changes in the basic data of the market, which changes are in fact incessant.

Closely connected with this, Soros claims that economic theory is invalidated by the fact that mistakes made in financial markets, which are supposed to discount the future, can themselves contribute to changing the future. It does not occur to him that economic theory provides the means of understanding the effects of such mistakes (mistakes which it shows, incidentally, are the result of government-sponsored credit expansion, when they are made on a large scale). For example, as the result of such mistakes, the wealth and income of various investors will be different. The size of various industries may be different. The result will be some prices that are higher and other prices that are lower, depending on whether the effect of the mistakes has been to increase the demand or decrease the supply of the good in question, or to decrease the demand or increase the supply of the good in question. In essence, Soros attempts to dispose of the scientific basis of laissez-faire capitalism by breaking down open doors and refuting strawmen.

Like the words "open society," the words "ultimate truth" are ambiguous. They are used by Soros as a pejorative that embraces both knowledge that is held with certainty, because it is based on fact and logic, and assertions that are arbitrarily but forcefully declared to be true without evidence or in contradiction of the evidence. It is only in this way that Soros can bring under one epistemological umbrella the scientifically supported doctrine of laissez-faire capitalism and the irrationalist doctrines of Nazism and communism. He does so, simply by using the words "ultimate truth" as a description of the claims of all three doctrines.

Soros appears to believe that rational certainty is simply impossible. This is implicit in his view that the essential element of the "open society" is recognition of human fallibility: "I envisage the open society as a society open to improvement. We start with the recognition of our own fallibility.... instead of claiming that those principles [the principles proclaimed in the Declaration of Independence] are self-evident, we ought to say that they are consistent with our fallibility... Could the recognition of our imperfect understanding serve to establish the open society as a desirable form of social organization? ... We must promote a belief in our own fallibility to the status that we normally confer on a belief in ultimate truth."

At one point, Soros even goes so far as to say: "Why does nobody have access to the ultimate truth? The answer became clear: We live in the same universe that we are trying to understand, and our perceptions can influence the events in which we participate. If our thoughts belonged to one universe and their subject matter to another, the truth might be within our grasp: we could formulate statements corresponding to the facts, and the facts would serve as reliable criteria for deciding whether the statements were true."

This statement, which suggests an element of Platonism, appears to imply that we are in a better position to acquire knowledge concerning conditions in a remote galaxy than we are to acquire knowledge concerning conditions here on earth.

In the very next paragraph, Soros claims that "There is a realm where these conditions [i.e., two universes, one for the observer, the other for the observed] prevail: natural science. But. . . in social and political affairs the participants' perceptions help to determine reality. In these situations facts do not necessarily constitute reliable criteria for judging the truth of statements." Later, he seems to argue that the so-called social sciences, such as economics, are chronically in the same position as physics in the realm of quantum mechanics, where the Heisenberg uncertainty principle is operative. He declares: "The theories of social science relate to their subject matter in a reflexive manner. That is to say, they can influence events in a way that the theories of natural science cannot. Heisenberg's famous uncertainty principle implies that the act of observation may interfere with the behavior of quantum particles; but it is the observation that creates the effect, not the uncertainty principle itself. In the social sphere, theories have the capacity to alter the subject matter to which they relate."

The truth here is that economics and every other subject whose ideas influence the world in which man lives, such as, above all, philosophy, are no different in their most basic epistemology than physics and the other natural sciences. Economics and philosophy are in a position to understand the effects of human actions on reality and to distinguish between the different effects of different human actions operating as causes. That is to say, they are able to distinguish between the world as man has made it up to now, and the world that man could make in the future if he were guided by different ideas that produced different effects.

Sound economics, for example, distinguishes between the effects of wrong ideas, such as those which result in economic stagnation, mass unemployment, inflation, price controls, and socialism, and the effects of right ideas, such as those which result in the existence of economic progress, free labor and product markets, sound money, and private ownership of the means of production, all of which preclude the effects of the corresponding wrong ideas. It is simply absurd to argue that the fact that man's own ideas and actions change the world prevents him in any way from understanding the world. He observes differences in his external conditions and differences in his beliefs and logically connects them on the basis of principles derived from a combination of experience and introspection, such as, in economics, the principle that other things being equal, individuals prefer to earn a higher income rather than a lower income and to pay lower prices rather than higher prices.

In physics and natural science in general, the only way that knowledge can be gained is precisely on the basis of man's interaction with the world, ranging from a baby's banging his spoon on the counter of his high chair to the most complex controlled laboratory experiment. Man always learns by discovering connections between his actions and their effects on the external world and by a process of generalizing from the particular to the universal.

Man's physical actions in the world do not change physical laws, nor do his economic actions change economic laws. For example, a price control that obliges suppliers to provide a good without profit or with a less-than-competitive rate of profit, is a comparable affront to natural law as a legislative demand that the producers make the good out of physically impossible materials, such as produce gasoline out of sand instead of crude oil or construct buildings out of air and water instead of steel and concrete. Economic law shows that the good will not continue to be voluntarily supplied under such a price control, just as physical law shows that it cannot physically be produced from such materials.

Contrary to Soros, it is precisely man's ability to be rationally certain that is essential to the freedom of the individual. The reliability of reason underlies the value of reason and, in so doing, it underlies the distinctive value of Man, whose fundamental distinguishing characteristic is, of course, his possession of reason. And since reason is possessed by the individual human being, the reliability of reason is what establishes both the value and the competence of the individual human being. The value and competence of the individual is the foundation of his possession of individual rights. It is symbolized by the rattlesnake flag of the American Revolution, with its warning to arbitrary government: "Don't Tread on Me"--because, as a rational being I am a being of the highest value and competence and a force to be reckoned with when my rights are violated. The principle that the government must respect the rights of the individual is, of course, what underlies the individual's freedom from the government.

The fact that reason enables Man to know truth reliably--with certainty--is what establishes freedom as the ally of reason. Because reason gives Man the power to understand truth, truth needs no support from the use of physical force. It has the power of reason on its side. As a leading historical example, Galileo did not need the use of force to establish the truth that the Earth revolves around the Sun. He established it by means of fact and logic. But those who wished to go on maintaining that the Sun revolves around the Earth, did need the use of physical force, because they had no other means of upholding their proposition. The rational certainty of the advocates of laissez-faire capitalism in the truth of their cause only serves to reinforce their dedication to respecting the rights and freedom of the individual that is demanded by the very nature of their ideas and program.

So much for Soros's epistemological argument against laissez-faire capitalism.

The "Open Society" Versus the Free Society

Before I turn to his economic arguments, I want to point out that the use Soros makes of the concepts of "fallibility"and "ultimate truth" are instances of an epistemological fallacy. That is, both of these concepts are secondary, derivative concepts. They both presuppose the more fundamental concept of truth--truth that is known as truth, with certainty. They would not be possible without the underlying concept of truth. Yet, at the same time, they are used by Soros to deny and negate the concept of truth.

No one would be able to recognize an instance of fallibility, that is, an instance in which he had mistakenly believed he was right but in fact was wrong, if he could not know the truth and distinguish it from error. For example, I can incorrectly add a column of figures without realizing it. In this instance I have been fallible. But the only way I can possibly identify my error is that I am able to add the column of figures correctly. Only by establishing and recognizing the correct answer, can I recognize that my previous answer was wrong. If I could not establish and recognize the correct answer, I could never know when I was wrong. There would be no standard of what constituted error, if not for the existence of truth and Man's ability to recognize it with certainty.

Soros's concept of "the open society" is another instance of the same fallacy. By means of its use, he not only commits the contradiction I described earlier of claiming that the main threat to a free society is a fully free society, but he seeks to negate the existence of all freedom. He writes that in the open society, "People must be free to think and act, subject only to limits imposed by the common interests. Where the limits are must also be determined by trial and error." (Italics mine.) Thus, he openly argues that the freedom of the individual is to be abridged out of deference to unspecified common interests, whose nature, according to him cannot even be reliably known, and that the limits to the abridgment of freedom are to be set by trial and error. The standard Soros offers for judging the process of trial and error is this:

"Unfortunately, in human affairs the facts do not provide reliable criteria of truth, yet we need some generally agreed-upon standards by which the process of trial and error can be judged. All cultures and religions offer such standards; the open society cannot do without them. The innovation in an open society is that whereas most cultures and religions regard their own values as absolute, an open society, which is aware of many cultures and religions, must regard its own shared values as a matter of debate and choice. To make the debate possible, there must be general agreement on at least one point: that the open society is a desirable form of social organization."

It follows from this statement that unless our standard for judging the process of trial and error is to be that "the open society is a desirable form of social organization," which provides no standard at all, all we are left with as providing such a standard is "cultures and religions," whose various standards and shared values are to be "a matter of debate and choice," to be decided by no known principle. What all this means is that in Soros's vision of the "open society," the freedom of the individual can be violated for any reason, if enough people can be found willing to claim that their unprovable, undefined, subjective common interests require it.

Ironically, Soros seems prepared to apply the same collectivist moral-political principle for abridging the freedom of the individual as the Nazis. The Nazis' principle was: "Gemeinnutz geht vor Eigennutz (The common interest comes before self-interest)." Soros's virtually identical principle is contained in the words: "Unless it is tempered by the recognition of a common interest that ought to take precedence over particular interests, our present system--which, however imperfect, qualifies as an open society--is liable to break down."

Soros's Economic Arguments

I turn now to the various economic arguments Soros puts forward against laissez-faire capitalism. Apart from those I have already considered in the course of dealing with his epistemological argument, namely those concerning "perfect competition," the absence of equilibrium, and the mistakes made in financial markets, there are four others that I can discern. These concern the alleged conflict between economic competition and social cooperation, the alleged need for the redistribution of wealth because of the existence of economic inequality, advertising and the alleged corruption of values by money, and financial crises.

Competition

The argument concerning competition is simply the entirely unsupported assertion that "Too much competition and too little cooperation can cause intolerable inequities and instability." This statement, indeed, is the immediate basis, prior to his use of the epistemological argument, that Soros gives for extending the threat to the "open society" from fascism and communism to include laissez-faire capitalism. It is introduced with the sentence, "I contend that an open society may also be threatened from the opposite direction--from excessive individualism."

Soros appears to think that the truth of his statement about competition and cooperation is self-evident. This is because, like the immense majority of contemporary intellectuals, he takes for granted that the nature of economic competition is essentially the same as that of competition in the animal kingdom, namely, the law of the jungle and survival of the fittest. In fact, in his later discussion of redistribution, he writes: "The laissez-faire argument against income redistribution invokes the doctrine of the survival of the fittest." His utter confusion on this subject is shown by the fact that in the very next sentence he appears positively to endorse the concept of survival of the fittest. He writes: "The argument [for survival of the fittest] is undercut by the fact that wealth is passed on by inheritance, and the second generation is rarely as fit as the first." The implication, of course, is that what is wrong with the principle of survival of the fittest is that it cannot be practiced sufficiently, because the heirs are not fit enough.

In the sentence after this one, however, Soros once again reverses field and declares: "In any case, there is something wrong with making the survival of the fittest a guiding principle of civilized society."

The truth is that economic competition is the very opposite of competition in the animal kingdom. First of all, it is not a competition in the grabbing off of scarce nature-given supplies, as it is in the animal kingdom. Rather, it is a competition in the positive creation of new and additional wealth. Unlike the lions in the jungle, who must compete for a limited supply of nature-given necessities, such as zebras and other game animals, which they have no power to enlarge, competition among business firms is competition in the creation of new and improved products and more efficient methods of production. For example, General Motors and Toyota do not at all compete in the grabbing off of a limited supply of nature-given automobiles from automobile herds or automobile trees. On the contrary, they compete in the development of newer, better automobiles produced by progressively more efficient methods of production. Their action, and the action of business firms in general, thus serves to enlarge the supply of products.

As the result of its basic nature, so far from being a process of survival of the fittest, economic competition is the foundation of the survival of practically everyone, including those who from a purely biological point of view are not at all very "fit." Just think of the effect of competition among pharmaceutical manufacturers, the makers of eye glasses and hearing aids, and so forth, on the sick and on people who suffer from poor eyesight or poor hearing. Think of the effect of competition among farmers and farm equipment manufacturers on the hungry. Think of the effect of the competition among of all kinds of machinery makers on the condition of all those people who would otherwise be fatigued and exhausted.

Furthermore, as Ricardo and von Mises have shown, because of the law of comparative advantage there is room for all in the competition of a capitalist society, including those whose productive abilities are modest in every respect. There is room for such people provided only that they concentrate on those areas in which the degree of their lesser capability is least, leaving the more capable people to concentrate on those areas in which the degree of their greater capability is greatest.

For example, we may assume that Bill Gates, in addition to his outstanding capability in leading and developing a major industry, is so gifted that he would be capable of doing almost any job more efficiently than anyone else could do it. Even so, Gates does not attempt even remotely to do all such jobs. Rather he concentrates on the one job in which his productive superiority is greatest. Although he might do the work of his vice presidents better and more efficiently than they, not to mention the work of his secretary and even that of the janitors at Microsoft, he does not do any of these jobs. It pays him to leave such jobs to others, because it frees his time to concentrate on his area of greatest advantage, which is running Microsoft.

Indeed, Gates is actually outcompeted by these less capable people for the jobs that they succeed in doing. He is outcompeted even by his janitors--for the job of janitor. For example, the fact that he might be able to sweep a floor in half the time of any of his janitors, counts as nothing alongside the fact that running Microsoft enables him to earn an income that is many thousands of times greater than that of a janitor. In effect, a janitor is capable of accomplishing half the work in a given period of time, but at a cost that is thousands of times less than what Gates would have to ask in order to earn as much as he does in running Microsoft. Even though it takes the janitor twice as long to do the same job as it would take Gates to do it, he does it for vastly less money, and thus easily outcompetes Gates, and everyone else between himself and Gates, for the job of janitor.

Going still further, because Gates and numerous other productive geniuses are able to concentrate on the continuous improvement of production, it becomes possible for the janitors of the world to own such things as computers and automobiles, and practically all the other goods that make up a modern standard of living, including, of course, a growing abundance of food, clothing, and housing.

As von Mises showed, economic competition, so far from being in conflict with social cooperation, is precisely the mechanism that organizes the system of social cooperation. It organizes the social division of labor, which is the essence and core of social cooperation, by selecting the right individuals for the right jobs, in accordance with the principle of comparative advantage. At the same time, it determines to what extent which products will serve which markets, and to what extent which methods of production are used in the production of the various products. The only element of "survival of the fittest" that is present is survival of the best products and best methods of production, for the sake of the survival and well-being of all human beings.

Whoever claims that economic competition represents "survival of the fittest" in the sense of the law of the jungle, provides the clearest possible evidence of his lack of knowledge of economic science.

Economic Inequality and the Redistribution of Wealth

Such lack of knowledge, unfortunately, is equally manifest in Soros's views on economic inequality and the allegedly resulting need for the redistribution of wealth. On this subject, he writes: "Wealth does accumulate in the hands of its owners, and if there is no mechanism for redistribution, the inequities can become intolerable. `Money is like muck, not good except it be spread.' Francis Bacon was a profound economist."

Whoever holds such views is unaware of the fact that in a division-of-labor, capitalist society, privately owned wealth in the form of capital, works to the benefit of all--the nonowners as well as the owners. For example, the physical beneficiaries of the automobile factories are not the owners of those factories but the buyers of the cars. Indeed, this principle applies to all privately owned means of production that serve the market--e.g., to stores and warehouses, farms and mines, as well as to factories. The physical beneficiaries are the buyers of the products, who need not own so much as a single share of stock in the firms that produce the goods they buy. Indeed, the extent to which consumers' goods are purchased by the owners and creditors of business firms, such as stockholders and bondholders, out of profits, interest, and dividends, is quite small relative to the proportion that is purchased out of wages and salaries--on the order of about ten percent of total consumption.

Closely related to this benefit to the buyers of the products is the benefit of privately owned capital to the sellers of labor. The capital of the automobile companies, and of all other business firms, is the foundation of the demand for labor. The greater is that capital, the greater is the demand for labor and thus wage rates. Thus there is a twofold benefit that nonowners of the means of production obtain from the capital owned by others: namely, such capital is the source both of the supply of the products that they buy and of the demand for the labor that they sell.

Soros and the other redistributors are apparently thinking of privately owned means of production as though they were consumers' goods or as though they existed outside of the context of a division-of-labor society. Only if all wealth were of the character of such consumers' goods as a giant bowl of spaghetti, say, or if the means of production were not used to produce for the market, but only for the personal consumption of their owners and their families, would wealth be of no use to others "except as it be spread." In the context of a division-of-labor, capitalist society the overwhelmingly greater part of the wealth of the capitalists is in the form of means of production that serve the market. Redistributing such wealth would only serve to cause the consumption of capital and to prevent its further accumulation. These results would be profoundly against the interests of everyone, including the great mass of nonowners of the means of production.

For practical purposes, I can view myself as a nonowner of means of production, in that practically all of my consumption is supported out of a salary that I earn, rather than out of profits, dividends, or interest. Despite my being a nonowner of the means of production I would lose very substantially if, for example, the government were to attempt to make me an owner of the means of production by nationalizing them and declaring every citizen thereafter to be an equal owner. Even apart from the utter economic chaos that would result from the loss of the price system that would be entailed, the effect would be that instead of having the benefit of profit-and-loss incentives and the freedoms of competition and individual initiative operating on my behalf in the activities of my suppliers, I would henceforth have only disinterested government monopolists and bureaucrats as my suppliers.

I would also lose if the government were to increase the taxes it levies on business firms--or on wealthy individuals who heavily save and invest in business firms--and distribute the proceeds to the average citizen. If, for example, the government were to raise taxes on corporate profits, or on personal incomes that would otherwise be heavily saved and invested, by, say, $100 billion a year and then distribute $1,000 a year to me and to each of 99,999,999 other nonowners of the means of production, I would lose substantially. True enough, I would gain something from the $1,000 I personally received. But I would gain virtually nothing from the $1,000 received by each of all of the other nonowners of the means of production--i.e., from the $99,999,999,000 that they collectively received. For they, like me, would almost certainly consume practically all of what they received. At the same time, I would lose greatly by the withdrawal of $100 billion from the production of the goods I buy and from the support of the demand for the labor I sell.

The withdrawal of these funds would reduce the demand both for labor and for capital goods. In reducing the demand for labor, it would cause wage rates to be less or unemployment to be greater. In reducing the demand for capital goods, while the expenditure of the recipients of the money raised the demand for consumers' goods, it would cause the demand for capital goods relative to the demand for consumers' goods to fall and thus reduce the production of capital goods relative to that of consumers' goods. This would reduce the rate at which the economic system would be able to accumulate capital goods. The further result would be a reduction in the rate at which the productivity of labor and thus real wages could be increased, for these vitally depend on the supply of capital goods per worker. These results would be reinforced by the reduction in the incentives to improve production that such taxation entails. If carried far enough, the process of redistribution results in economic stagnation and economic retrogression. It is tantamount to eating the seed corn.

So much for Soros's argument for the need for redistribution to address the allegedly intolerable situation of rich owners of means of production having too much wealth invested in the production of goods that are sold overwhelmingly to nonowners of the means of production and in supporting the demand for the labor that the nonowners of the means of production sell.

Advertising and the Alleged Corruption of Values by Money

Soros declares that "Advertising, marketing, even packaging, aim at shaping people's preferences rather than, as laissez-faire theory holds, merely responding to them. Unsure of what they stand for, people increasingly rely on money as the criterion of value. What is more expensive is considered better. The value of a work of art can be judged by the price it fetches. People deserve respect and admiration because they are rich. What used to be a medium of exchange has usurped the place of fundamental values, reversing the relationship postulated by economic theory."

Soros's statement about advertising, however widely accepted it may be, is fundamentally mistaken. True enough, the advertiser wants to induce people to buy the advertised product. But successful advertising usually requires that when the customer does buy the product, the product is such that the customer will like it, will buy it again, and will recommend it to others. Advertising of such products is almost certain to be economically worthwhile. On the other hand, advertising products that people do not like after they buy them, which they won't buy again, and which they will tell others not to buy, is almost certain to be an economic failure. In other words, the key to successful advertising is to be able to offer and advertise products that effectively meet the customer's actual needs and wants.

Soros is certainly right about many people being unsure of what they stand for. How could they be sure of anything in the face of a constant cultural drumbeat that proclaims precisely Soros's own apparent leading principle of fallibility and thus of self-doubt?

Nevertheless, however true this may be today in connection with matters such as philosophical and moral principles, it is still the case that in the area of personal material satisfactions, people almost always know very well what it is that they like and what it is that they do not like. No amount of advertising on behalf of the culinary virtues of steamed vegetables could succeed in making very many people prefer their taste to that of chocolate bars or ice cream. No amount of advertising on behalf of candles and lanterns could succeed in inducing many people to give up the use of electric light. No amount of advertising on behalf of horses or bicycles could succeed in convincing many peopl