The Government Against the Economy [Kindle Edition]

George Reisman (Author), William Simon (Foreword)

Book Description

Originally published in 1979, and later incorporated into the author’s magnum opus, Capitalism: A Treatise on Economics as Chapters 6-8, this is a powerful and convincing book which explains the essential principles of free-market price theory along with leading applications of those principles. Again and again, it illustrates the economic coordination of a free economy by contrasting it with the chaos produced by price controls and, as the ultimate culmination of price controls, socialism.

Written for the intelligent layman who may have no previous knowledge of basic economic theory, this book not only shows where government policy went wrong in imposing price controls, it also shows how free-market prices are essential to the success of our economic system in producing for the benefit of everyone. Included are explanations of: how a free market would progressively reduce the cost of energy, along with that of all other goods; why the Arab oil embargo would not have been a threat to a free economy; how price controls actually raise prices; how partial price controls lead to universal price controls; how universal price controls represent de facto socialism; why Nazi Germany was a socialist country; and why socialism, rather than representing any kind of genuine economic planning, is in fact chaotic and necessarily tyrannical.

For those who want to understand how a free-market economy really works and how price controls and socialism create chaos and poverty, this book is mandatory reading.

Here is what two of the most famous advocates of the free market have said about this book:

“Every commentator on current affairs who is not a fully trained economist ought to read this book if he wants to talk sense. I know no other place where the crucial issues are explained as clearly and convincingly as in this book.” - F. A. Hayek, Nobel Laureate, in Economics for 1975

“This is one of the most powerful and convincing books I know. Its explanations are brilliantly clear; its analyses are lethal; it is uncompromising. Readers who come to it without any previous knowledge of basic economic theory will find it a luminous introduction. If any book can slow down the economic destructionism of our age, this could be it.” - Henry Hazlitt, Economist, Author, former Newsweek columnist and New York Times financial editor

Editorial Reviews

From the Back Cover

"Every commentator on current affairs who is not a fully trained
economist ought to read this book if he wants to talk sense. I
know no other place where the crucial issues are explained as
clearly and convincingly as in this book."

- F. A. Hayek, Nobel Laureate
in Economics for 1975


"Every principle set forth is fully illustrated by means of true-to-life
examples and is in turn used to explain recent economic
history. The reader may very well finish this book with a radically
different understanding of such events as the oil and natural gas
crises, chronic power failures, and the decline of rental housing
in places like New York City. I hope Professor Reisman's book
will succeed in reaching a large audience."

- William E. Simon, former
Secretary of the Treasury,
Author of A Time for Truth


"This is one of the most powerful and convincing books I know.
Its explanations are brilliantly clear; its analyses are lethal; it is
uncompromising. Readers who come to it without any previous
knowledge of basic economic theory will find it a luminous
introduction. If any book can slow down the economic destructionism
of our age, this could be it."

- Henry Hazlitt, Economist, Author,
former Newsweek columnist and New
York Times financial editor

About the Author

George Reisman, Ph.D., is Emeritus Professor of Economics at Pepperdine University's Graziadio School of Business and Management in Los Angeles and is a Senior Fellow at the Goldwater Institute. He lives in Laguna Hills, California with his wife Edith Packer, an attorney and clinical psychologist. His web site is http:\capitalism.net and his blog is georgereisman.com/blog.

Product Details

• File Size: 557 KB
• Print Length: 225 pages
• Publisher: TJS Books, Laguna Hills, California (August 20, 2012)
• Sold by: Amazon Digital Services, Inc.
• Language: English
• ASIN: B0090QQH3E
• Text-to-Speech: Enabled
• X-Ray: Not Enabled
• Lending: Enabled
• Amazon Best Sellers Rank: #416,810 Paid in Kindle Store (See Top 100 Paid in Kindle Store)

Most Helpful Customer Reviews

3 of 3 people found the following review helpful

5.0 out of 5 stars How not to fight inflation September 9, 2012

By Per-Olof Samuelsson

Format:Kindle Edition

(I wrote this review in 1980, but I think it is worth re-publishing now with the advent of the Kindle version of the book.)

In all probability, the least intelligent and most destructive method of fighting inflation is price and wage controls.

And at the same time it is the incomparably most popular method.

It is unintelligent because it represents an attempt to lower the temperature of the economy by manipulating the thermometer. It is destructive because it destroys the price mechanism, the only reliable source of information about the relation of supply and demand on a free market.

And it is popular because neither the politicians nor the public at large understand what inflation is and what causes it, what a free market is and how it functions, what the actual results are of price and wage controls. If there is any general opinion at all, it seems to be that the money supply in the economy increases because prices and wages rise (the "spiral" theory). This of course is the exact opposite of the truth, a total reversal of cause and effect.

Fortunately, there is now a book available which explains these matters in a manner clear and intelligible even to the layman, and which also makes good and interesting reading: "The Government Against the Economy" by George Reisman. (Reisman is an American economist who has studied under the late Ludwig von Mises and who, philosophically, is a disciple of Ayn Rand.)

The most striking feature of Reisman's book is its rare combination of being an excellent introductory textbook on the market economy and at the same time an impassioned pamphlet in defense of that economy, without ever losing neither its intellectual nor its polemical stringency. Reisman accomplishes this feat through the pedagogical structure of his book: he starts out by describing how the free pricing process on a free, unhampered market creates harmony and progress, and how it acts to close the gaps in income and wealth between different people and groups of people rather than widen them. (This of course is quite contrary to the claims of capitalism's backbiters.) The free market makes possible a constant progress in which everyone, not only a select few, can have a share.

Only after having laid this foundation does Reisman proceed to show the destructive effects of price controls. The primary, fundamental effect (the one that explains all the others) is that controls create shortages: goods which are not allowed to rise in price as the market demands simply disappear from the market. (And non-existent goods evidently are of no use to anyone, no matter how cheap they are!)

The odds, however, are that the politicians won't solve the problem thus created by abolishing the harmful controls, but by expanding them and eventually make them all-embracing. But an economy where all prices are controlled is a socialist economy. And consequently the last few chapters of the book deal with socialism, with the chaos and tyranny prevailing in socialist societies.

One might say (to make a literary association) that Reisman leads us from the "Paradiso" of capitalism, through the "Purgatorio" of a mixed economy, down to the "Inferno" of socialism (hopefully with the result that we, in real life, will make the opposite journey).

All this may sound theoretical, and I have of course just presented the bare skeleton of Reisman's reasoning. But his book does not lack "flesh" in the form of practical examples and applications. Most of this are taken from the oil crisis. Reisman shows that it is not the American oil companies or even the Arab sheikhs who are ultimately responsible for the US oil crisis, but the US government, which, by its controls and "guidelines", has prevented the market (i.e. the citizens) from responding rationally to the Arab oil embargo. Without price controls, Reisman contends, the oil embargo would have made a dent in the US economy. With controls, the embargo has all but destroyed the economy.

Controlling prices is tantamount to making it illegal for people to act rationally - and the results cannot be other than disastrous. This, in a nutshell, is the message.

But if inflation is the result of an uncontrolled expansion of the money supply, wouldn't the solution be to control it according to Milton Friedman's monetarist prescriptions? Reisman takes this up in a short epilogue, where he rejects monetarism and advocates a 100% gold standard. The subject deserves a more extensive discussion (maybe a volume of its own? ) - but Reisman's arguments are clear and, as far as I can see, quite sound. (The big problem is not that the money supply is uncontrolled, but that it is controlled by the government.)

The book has a foreword by former US Treasury Secretary William Simon, and is warmly recommended by F.A. Hayek and Henry Hazlitt, a recommendation with which I most heartily agree.

$ $ $

"The Government Against the Economy" was also favorably reviewed in two Objectivist publications, and I take the liberty of giving a couple of short quotes from them:

"'The Government against the Economy' offers the rare sight of a powerful and original mind in full control of his subject. It establishes George Reisman as an economic thinker of the first rank." - Harry Binswanger ("The Objectivist Forum", vol. 1, no 2, April 1980.)

"This book is [...] totally untainted by the twentieth century "economics" that has produced our current state of affairs. It is a book written by the type of person that, in my judgment, Ayn Rand has referred to as a 'new intellectual', which is why the book can offer us the kind of fundamental guidance we need if we are to avoid the chaos and tyranny of a socialist future." - John Ridpath ("The Intellectual Activist", vol. 1 no 7, January 1980.)

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