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「자유와 시장」 제2권 제1호(2010.10)

The mission of free enterprise Yong J Yoon*1) My first encounter / interaction with CFE (center for free enterprise) was in 1996 when Buchanan (1986 Nobel laureate in economics) was invited by KERI/CFE. (KERI: Korean Economic Research Institute). I accompanied Buchanan and met with Gong, ByungHo; Choi, Sungno; and Sohn, Byung Doo, who were at that time members of KERI and CFE which was under KERI. I also met Min, Kyungkuk of Kangwon University who participated in the activities. This was Buchanan’s first time to visit Korea. After our visit to Korea, Buchanan and I went to Hong Kong; Hong Kong Polytechnic University invited Buchanan. The year 1996 was a special year for Hong Kong; In 1997 Hong Kong was reverting China after 99years of England’s suzerainty. For Buchanan this was his second time to visit Hong Kong. As any free market economist would be, Buchanan was keenly interested in Hong Kong and Singapore. Buchanan gave a series of activities and lectures organized by Dr. Gong and his staff at that time. They include a lecture Buchanan gave on Adam Smith at the Yonsei University. The theme of the visit was ‘the market and free * George Mason University, yyoon@gmu.edu 접수: 8/31, 수정: 9/15 게재확정: 9/29


enterprise economy’, which I believed was the perspective and vision of the modern world. At the same time I thought that the major intellectual efforts have been already done. I was sort of thinking like Fukuyama’s End of History. Classical liberalism and free-enterprise economy is the wisdom of political economy offered by the Western intellectual tradition. All that is left to do is to implement the ideas of classical liberalism by developing proper institutions. The details have to be worked out, but the direction is already set. From this perspective, it become sonly logical for socialism and communism to have failed. On the other hand, we note that the modernization process in the West followed two different directions. The free-enterprise economy is based on classical liberalism. The other direction has been socialism. Socialism touches on the themes that appeal to our heart, equality, but ignores the limitations posed by human nature upon incentives. Socialism lacks an understanding of the spontaneous order created by market processes. It took the human race a long time and many miseries for people to understand that the ignorance is the folly of the elites and elitist thinking. Thus, on this topic, I thought that there is not much for research or thought provoking issues left. But I wanted to know why an eminent scholar like Buchanan was still concerned and working on this question of market and free-enterprise economy, the CFE theme.


「자유와 시장」 제2권 제1호(2010.10)

Then, after more than a decade, I had to realize that there are still intriguing basic questions unresolved, intellectually and academically. Practical policy question is even messier with the political processes that embrace paternalism. Even after socialism is gone, it seems that small socialism will never leave us, creating a partial anarchy (violation of property and contract) in the fringe of society. It seems that we are not at the End of History. Going back to earlier centuries, the Great Britain ruled or ran the world successfully with the simple rules: free trade and rule of law. Unilateral free trade was the policy of the Great British Empire, and the rule of law simply meant equal legal treatment and keep what you earn. But America in its similar role is not doing as successfully as the Great Britain was. I was somewhat surprised by two personal discoveries. One is academic. The other is my personal experiences and knowledge of some writers and economists whom I admire. I personally have not been interested in socialism or the left ideas, though I have been curious about Karl Marx as political philosopher talking about bigger issues beyond technical economics. I did not believe in any philosophy or ideology that denies the basic good life for individuals. That is, an individual accumulates wealth by working hard and running business successfully in legitimate ways. He should be allowed, if he can afford, to lead a charming or cozy life, by inviting once in a while his friends to discuss science, literature, and the


world. I did not this will conflict with social justice. Gordon Tullock used to tell me that the Korean students or faculty members in America are all socialists; I am the exception. But when I preached my social philosophy in front of him, he said I am a reactionary. I was relatively free from the socialistic influence on college campus because my undergraduate subject was physical chemistry. Buchanan said and wrote that he was a romantic socialist until he took Frank Knight’s lecture at University of Chicago. He said that among those who finished Ph. D. program and became professional economists, most of them professors, about half of them remained socialist (social democrat) or Keynesian. The other half became and remained market economists. Buchanan mentioned that his grandfather, a one time governor of Tennessee, had a big collection of socialist literature. Evidently he read them. In six weeks of Knight’s lecture, he became a born-again economist. Buchanan gives the impression that he puts liberty ahead of anything. He may think or feel relieved that efficiency of the market is a by product of individual liberty prevailing in the society. Buchanan thinks that Adam Smith’s book The Wealth of Nations should be The Liberty and the Wealth of Nations. I would agree to him. Regarding my academic question, I used to believe that the idea of public good is well established and accepted in the economic profession. But I was shattered by


「자유와 시장」 제2권 제1호(2010.10)

reading and reading again Coase paper on the economics of lighthouses. I realize that Coase is a very different economist from Buchanan, though both are considered as conservative economists (whatever it means) who emphasize the market economy. I can simply put the differences between the two great economists and thinkers. Buchanan accepts the idea of public goods and Samuelson’s welfare economics based on public goods. But Coase does not believe in Samuelson’s public good and wanted to dismantle the welfare economics. It seems he was interested in understanding the self-regulating markets and nothing else. Now, I am going to talk about learning about economists whom I admire. I was interested in Thomas Sowell who wrote an interesting book, Conflict and Visions. There are people who want to improve the society finding injustices and inefficiencies unbearable. There are another group of people who note that the society somehow miraculously solve the problems so, the effort to change for improvement will only damage it. What I want to say is that I used to think he is a solid economist, a Milton Friedman kind of conservative thinker. But I was surprised to read about his own change of mind through his life. He is around 80 years old now, he was in the Korean war as a Marine photographer. He says that, throughout his 20s, the most influential book to him was Karl Marx’s Communist Manifesto! My God! Then, how did he change his mind?


He says that there was no book that changed his mind on political left -- not by reading Adam Smith and Friedman, or Hayek (This is my interpretation of his writing, not directly what he said.) I think such individuals are rare whose minds change by reading great classical books. The change seems to come slowly. Sowell said he learned it through time and experiences, especially the experience of seeing government at work from inside. He was sort of born again slowly. What this episode tells us is that the thinking of people standing on the left has deep roots in us and lasts long. We are all animal at the bottom and shared blood has strong attraction and passion. But such world is Samsara – a Buddhist term for the world of wandering about and busy for nothing leading nowhere. The new world, the great society of Adam Smith and Hayek, is a different world toward which we can make progress. But the vision offered by socialism is the illusion that we indulge in and make us forget about our feet rooted on earth. However, we cannot get away from this root and become high like smoking marijuana, by creating partial anarchy in the fringe of society. We are all too familiar with this. Paternalism and populism are the examples which we accept sedated. And academicians are sometimes not very effective or persuasive in revealing the true nature of small socialism. CFE has been active in exposing the illusion of small socialism and in clarifying the logic of free enterprise economy. This is


「자유와 시장」 제2권 제1호(2010.10)

why we respect CFE mission and expect that CFE will balance the intellectual tendency of social democrats in democratic society.


The mission of free enterprise economy