Human beings have had two fundamental ways of associating with each other: conflict or cooperation. Both methods have run through all recorded human history, as well as long before human beings left intelligible residues of their actions to be deciphered by those who came after them. Group conflicts have seemed to have a variety of causes: religious, political, linguistic, or racial, as well as the desire for physical possession of things. All of these have been inseparable from death and destruction.
At the same time, human beings have also peacefully cooperated with each other. They have sought bases of agreement and collaboration for mutual purposes and benefits that have spared or reduced the occurrence of violence and the use of force in human relations. Rather than death and destruction, peaceful cooperation can bring forth prosperity and harmony among people.
It should not be too surprising that economists turned their attention to understanding and analyzing both the reasons for and the institutions facilitating either conflict or cooperation. One of these in the early part of the twentieth century was Thomas Nixon Carver. If mentioned at all nowadays, Carver is remembered as one of the early formulators of the marginal productivity theory of the determination of relative income shares in a competitive market system, outlined in his book The Distribution of Wealth (1904).
From Iowa farm boy to Harvard professor
Thomas Nixon Carver was born into an Iowa farming family in 1865 and never went to high school. However, he applied and was accepted to Wesleyan College, although his education was constantly interrupted by responsibilities on the family farm. He completed his undergraduate degree at the University of Southern California after his father decided to move the family out west to start another farm.
Wanting to pursue an academic career, Carver entered the graduate program at Johns Hopkins University and completed his doctoral degree at Cornell University. After graduation he taught both economics and sociology at Oberlin College in Ohio. In 1902, he was appointed to a chair in political economy at Harvard University in Boston, a position he held until his retirement in 1932.
Carver wrote a series of economic textbooks, including The Principles of Political Economy (1919) and The Principles of National Economy (1921), focusing on the core concepts of economics as a means of drawing a variety of policy implications from the perspective of desiring to create and increase the economic well-being of the country. In other words, like Adam Smith, he attempted to enable the student or interested reader to understand the nature and causes of the wealth of nations. In this sense, Carver may be categorized as a national liberal. He was concerned with the economic and ethical well-being of the United States, but he saw no inherent conflict between the economic well-being of the United States and other countries. He believed that one’s own country’s well-being was bettered by opportunities for gains from trade with potential trading partners. The better off they were economically, the greater the gains from trade resulting from exchange with those in other lands.
A liberal though not a laissez-faire market economist
Carver had been influenced by the writings of Herbert Spencer as a young man, and he adopted not only Spencer’s philosophy of individualism and free association but also Spencer’s emphasis on social evolution from simple to complex social orders and the transformation from the “militant” society of war and plunder to that of “industrial” society based on contract and individualism rather than the tyranny of the collective. The unique characteristics of the American social and economic landscape, highlighting the reality and potential of the free “industrial” society, were emphasized by him in The Present Economic Revolution in the United States (1926) and This Economic World, and How It May Be Improved (1928).
He was not as laissez-faire in his economic philosophy as Herbert Spencer had been, especially on the issue of restrictions on immigration of the unskilled, whose numbers, Carver feared, constantly put undue downward pressure on the wages of American citizens. Some “progressive” critics have highlighted his views on immigration and the similar negative effects from the unskilled and uneducated excessively increasing the domestic population from irresponsible early marriage before the parents had the market income to appropriately support a family at a decent standard of living on their own.
They have attempted to tar him as a racist and a xenophobe. No doubt the rhetoric and turn of phrases he sometimes used ring uncomfortably on the modern ear, given the greater sensitivity in today’s use of language. No doubt he was influenced by some of the now out-of-date sociological views of the early twentieth century, but there is little or nothing to suggest that Carver believed that racial or ethnic minorities should be selected for “special treatment.” Indeed, Carver was adamant in various places in his writings that to treat certain people in such discriminatory ways based on race or religion or language was inconsistent with the spirit of American liberty for all and contradicted the principles of the U.S. Constitution. The desirable goal was assimilation of those coming to America into a common culture of liberty and individualism.
Other classical liberals may challenge his views on immigration restrictions and early marriage in terms of their effects on wages and the labor supply based on the general principles of the freedom of movement and association; in fact, Carver called for an open debate on these topics rather than any presumed dogmatic position. It would be wrong to conclude that he was a “racist” in that he wanted to restrict the immigration of unskilled labor from Europe just as much as from other parts of the world.
Critic of New Deal collectivism and the war economy
Carver moved back to southern California after leaving Harvard and came to know Leonard E. Read, (the future founder of the Foundation for Economic Education), who was then working for the Los Angeles Chamber of Commerce. In fact, according to former FEE resident scholar Ed Opitz, it was Carver who introduced Leonard Read to the writings of the nineteenth-century French liberal economist Frederic Bastiat when they met in southern California in the 1930s.
Though retired, Carver continued to write on the political-economic issues confronting the United States stemming from Franklin D. Roosevelt’s New Deal programs during the Great Depression. His books on these issues, including What Must We Do to Save Our Economic System (1935), How Can There be Full Employment After the War? (1945), and The Economics of Freedom 1948), all criticized the expansion of the government’s command and control of economic affairs before and during the Second World War. He forcefully argued that Roosevelt’s policies were anathema to the preservation of personal freedom, economic liberty, and limited government in the United States. Indeed, he said, they were the opposite of the American tradition.
All of man’s “conflicts” arise from inescapable scarcity
Carver was one of the American economists thoroughly imbued with the ideas of the marginalist, subjective-value revolution of the late nineteenth century that had begun with such economists as those of the Austrian School, especially Carl Menger and Eugen von Böhm-Bawerk. He saw in the logic of marginal decision-making the analytical key to understanding individual conduct and the workings of much of the social order.
This included an analysis of the origins and forms of human conflict and cooperation. His most detailed study of this is found in his Essays on Social Justice (1915) and Human Relations: An Introduction to Sociology (1923), though he uses and applies it in various forms in many of his later writings.
If all that men wanted were in sufficient quantities and qualities to satisfy more than all their conceivable uses for them, no human wants would go unfulfilled, and no conflicts could ever arise. After all, in such a material utopia, nothing would be foregone or done without due to its unavailability, and no disputes could ever arise among people, since one person having or using more of any one thing would not result in some other individual having to do without or with less than what was desired.
But in the world in which we live, Carver explained, individuals find themselves in conflict with three things: nature, themselves, and with others. Man is in conflict with nature because nature does not provide most things in the amounts or the qualities needed to satisfy his needs, whether it be food, clothing, or protection from the elements. To have more, man must work to extract greater amounts than nature provides. He must plant and harvest crops, he must hunt for wild game to have for food and materials to cover his body, and he must construct forms of shelter to protect himself from animals and from the rain, heat, and the cold.
Scarcity forces man to make choices
This scarcity of material goods puts man in conflict with himself. Since he cannot have all that he wants from nature without effort, and given the limits to his own abilities and only so many hours in the day, he must now decide in what directions to assign his labor, skills, and time. To have more of some things extracted from nature, he must give up, forego, delay, or permanently renounce the opportunities to fulfill or better satisfy other desired ends and purposes.
Conflict is therefore inseparable from the human condition, even for that hypothetical Robinson Crusoe alone on his island. He fights with a niggardly nature to obtain more of what it can surrender through his appropriately applied labor and effort, and he battles with himself to decide what he is willing to give up to obtain (marginal) amounts of other things that he wants. Shall he not work at all and live off what he can pick off the trees by simply lifting up his hand? Or shall he incur the cost of physical and mental effort to clear a field, plant a crop, and bring it to harvest?
Will he devote time, imagination, and effort to make the tools — the capital equipment — to cut down a tree, hollow out its truck to carve out a canoe, and shape the paddle, along with pulling down the tree vines to construct a net, so he may fish more successfully in terms of quantity and variety of catch? In weighing these decisions, Carver also pointed out, man had to consider the element of time and his willingness to forego satisfaction and benefits in the present in order to provide more satisfaction and benefits in the future.
The individual, Carver argued, must find within himself a “balance” to solve his battle with nature and the conflict in his own mind concerning how to apply his means to obtain his desired ends at the margins of choice. But the human conflict does not stop there. The world in which we each live is populated with other human beings, each of whom finds himself in the same dilemma of conflict with nature and within himself.
Destruction or production as answers to conflict among men
The inescapable scarcity of means to serve human ends also means that humans find themselves in conflict with each other, since more of the scarce things of the world obtained and used by one individual or group of individuals limits the amounts available for others. For primitive man, those scarce things included the waterhole, the wild animals to hunt for food and clothing, and the limited fruits and vegetables nature provides for simple picking. Explained Carver:
We talk and argue interminably about proper adjustment of antagonistic interests of various kinds, all of which, it must be remembered, grow out of the initial fact of scarcity — the fact that there are not as many things as people want…. In this antagonism of interests, growing out of scarcity, the institutions of property, of the family, and of the state, all have their common origin…. By the Militant form of conflict is meant any form in which one’s success depends on one’s power to destroy, to harm, or to inflict pain or injury [on others]…. In order to succeed in this form of conflict, one must develop one’s powers to destroy.”
If we repress, for example, all the militant forms of conflict, the combative instincts of mankind together with the conflict of interests will cause them to compete or contest with one another in other fields…. Of the forms of economic competition, the most advantageous and least harmful is that of competitive production; production in service. Competitive production is, therefore, rivalry in the performance of service…. Of all the forms of human conflict, economic competition is the highest. In no other form of conflict does success depend so much upon production or service and so little upon destruction or deception.
In the free, peacefully competitive marketplace and system of law and individual rights of the type which Adam Smith referred to as a “system of natural liberty,” Carver said, individuals are restrained and incentivized to apply themselves in ways to better themselves by improving the circumstances of others. The goods and resources in the legally recognized possession of others may only be obtained from them by offering some alternative good, service, or resource that they value more highly than that which you are asking them to part with.
Under a system of productive competition, the reward of success in one’s own betterment comes from devising ways to produce more of what people want, in the forms and qualities they desire, and at lower costs of purchase than other peaceful and honest individuals attempting to offer the same goods and services to other members of society. This avenue of solving conflicts through production and trade cumulatively reduces the scarcities that generate the conflicts among people.
Nonetheless, it remains an unending conflict due to the fact, Carver reminded his readers, there are two counteracting influences at work: first, the fact that people’s wants for the new, the better, and the different constantly outstrips the satisfaction of our desires from existing supplies of goods and services, and second, the reality that the number of mouths to feed and wants to be fulfilled increases as the population grows.
Carver’s misplaced fears concerning immigration
The latter can arise within any country when procreation outstrips the number of those who pass away. But it also can grow due to net increases in the number of people due to immigration. Carver was not opposed to immigration, per se. His concern was that increases in certain segments of the unskilled working population would outrun the rate of growth in complementary capital formation and therefore result in lower wages relative to the other factors of production.
In retrospect, his concerns were unfounded. In 1900, the number of people in the United States was 76.3 million. In 1920, that had grown to 106 million, and now, more than 100 years later, in 2023, there are an estimated 333 million people. Since 1900, the number of immigrants to the United States has totaled about 40 to 50 million, or almost 20 percent of the population increase in the country since the beginning of the twentieth century.
In 1900, the average real income was about $9,000 a year (in 2022 dollars). Today, average real income is over $70,000, or an almost eight-fold increase in real income during this period when there was a 4.4-fold increase in the number of people. By some estimates, 56 percent of the U.S. population in 1900 lived in poverty. Currently, using the government’s somewhat biased benchmarks, poverty in the United States is said to be 14.5 percent of the population, a 75 percent decline since the beginning of the last century.
Capital formation for greater and better output, technological improvements in the use of land, resources and raw materials, and dramatic increases in skills and educational training (all of which Carver said could counterbalance increases in the unskilled population) have been more than enough to bring about the dramatic rise in the standards of living for a much larger American population than Carver could imagine. Contrary to Carver’s fears, population growth from births and immigrants have been a boon and not a burden on the American economy, especially with the complementary growth in capital and technological innovations that have raised the marginal value and real wages of workers in general, while eating away at the poverty that has been the plague of mankind for all of human history.
Political competition creates waste and reinforces prejudices
Carver was a strong proponent of the case for free markets under constitutionally limited government. Any and all growth in the size and scope of government beyond the protection of individual rights and honestly acquired and used property not only slowed down the peaceful and protective competition of the marketplace, it also shifted human conflict into an alternative unproductive and destructive direction. If market competition is reduced or repressed or regulated by government, it merely shifts the resolution of conflicts to the political arena. Explained Carver:
The more the state absorbs the enterprises now carried on by private initiative, the more will political competition displace economic competition. Political competition is a lower form…. Under such a system as this [of government control and regulation]…. We show our rivalry and our preference for ourselves by struggling more intensively than we now do for political office or preferment…. This would be an exceedingly wasteful form of competition…. When two farmers compete with one another in producing corn, more corn is likely to be grown as the result of that competition. When two candidates compete for a given office, the time they spend in campaigning is wasted — it produces nothing.
Furthermore, Carver argued, the market is a far more “democratic” means of expressing the desires of the population and more pluralistic in not limiting the results to majoritarian outcomes, including racial and religious prejudices. As Carver wrote:
Does the average man when he votes spend his vote as intelligently as he does his dollar when he buys products or services? If he is more likely to be prejudiced in his votes than in his purchases or is more likely to vote ignorantly than he is to purchase ignorantly, one should conclude that buying is a more accurate test of merit than voting, and vice versa. Suppose that a private individual should produce and put on the market a good product which appeals to a buyer, but the producer is a member of an unpopular race or an unpopular religious body, that is, that there is a great deal of prejudice again him and his class; is this prejudice as likely to interfere with the sale of his product or his services as it is to interfere with his getting votes for a desirable position? It would seem not. To that extent, at least, buying is a less inaccurate method of determining merit than voting, that is, racial and religious prejudices are less likely to be factors in buying than in voting. If that be true, the man who succeeds in getting the money of purchasers is in this respect, at least, more likely to have earned that money than is the man who gets votes through racial and religious prejudices likely to have deserved their votes….
Anyone who will examine himself or his own experience will probably agree that he votes very unintelligently, that is to say, he knows very little about the candidates whose names appear on the ballot, and he has very inadequate methods of finding out about them…. It would seem to imply that the average man votes very unintelligently, and therefore there is little reason to expect that the individuals who get his votes have earned them or deserved them…. If that is the case, then the economic form of rivalry is superior to the political form, in that business rivalry merit wins more frequently or less infrequently than in the political form of rivalry. It is the author’s deliberate opinion that the process of buying and selling, when it is properly safeguarded [from force or fraud], is a better method of testing economic value of men than is the process of voting.
Market competition depoliticizes racial and other prejudices
Economic competition, Carver was saying, depoliticizes religious and racial prejudices far more than political competition. How many of us know or think about which church someone may go to or the color of the skin of the numerous individuals who have participated in the growing and the processing of the foods we eat, or in the manufacturing of the cloths we wear, or in the producing of the household items we purchase?
We are interested instead in the quality of the products we are interested in buying, along with the competitive attractiveness of the price at which they are offered to us. The anonymity of many market relationships in the complex system of division of labor helps remove racial and other prejudices from the potential for mutual gains from trade.
In more direct face-to-face settings of buying and selling, it may be the case that a prejudiced person may choose not to buy from or sell to someone belonging to a group against whom they are negatively biased. Or that they refuse to hire or accept employment from someone against whom they hold negative prejudices. But Carver’s point was that this forces such a biased person to confront an element of that conflict within himself. He cannot follow his prejudice against someone without incurring the cost of missing out on the opportunity to acquire a better or less expensive product, or without losing out on the chance to hire an experienced or skilled or less expensive employee that reduces his profit opportunities. In the competitive marketplace, racial and other bigotries are not costless alternatives to follow.
Market democracy and civilized man vs. the savage
In addition, compared to the political democracy, market decision-making allows for entrepreneurial opportunities without majoritarian approval.
The simple fact is that industry is more democratic without the ballot than government can possibly be made even with the ballot…. First as to the open road to talent; that has always existed industry in a higher degree than in politics. However meritorious a man may be in politics, if his opinions are in advance of those of the majority he gets no advancement. A very small and select minority may approve his work in industry and reward it. He secures his advancement as the result of this without waiting for the crude majority to approve…. It is obviously easier for an advanced person to secure the support of a small and highly intelligent minority than to transform this into a majority, which would require that much less intelligent people should be convinced…. Individuals come more nearly getting what they want from businessmen than they do from politicians and government agents.
This led Thomas Nixon Carver to the stark distinction between “civilized man” and “the savage” in his 1923 volume on Human Relations:
So long as one is pursuing the method of production or usefulness, he needs no weapon, when dealing with other good citizens, except the power to bargain freely with his fellow citizens. He can get what he wants by voluntary agreement with other free citizens. The savage, however, needs other weapons than his productive power. His weapons are of destruction, or weapons which add to his power to terrorize….
A civilized tribe is one in which the dominant element is made up of men each of whom stakes his prosperity or success on his ability to contribute to the life of others in exchange for the means of his own livelihood; the savage community is one in which the average citizen is willing to resort to terrorism to get what he wants. So long as the former class of citizens is gaining in numbers and power, the community is growing more civilized. When the latter class is gaining in numbers and power, civilization is declining.
When Thomas Nixon Carver wrote these last words exactly 100 years ago, America was still a country mostly made up of what he called “civilized” men interested in pursuing peaceful and voluntary trade for mutual betterment. Now, in 2023, America is populated far more with those he classified as “savages,” as more and more of our fellow citizens turn to the destructive and terrorizing methods of coercion and force to get what they want through the power of the state.
This article was originally published in the September 2023 edition of Future of Freedom.