Economics: Work and Prosperity
by Russell Kirk
(Pensacola: Pensacola Christian College, 1989), 398 pp.
General Comments: The late Russell Kirk was a historian, not an
economist, but this book is an excellent introduction to the principles of economics. It
is readable and short, and gives students a clear grasp of prices, costs, and the roles of
entrepreneurs and governments. The book is especially useful for its many illustrations of
economic ideas from history and literature. Kirk is a storyteller and high school students
will appreciate learning economics through stories rather than graphs. Kirks book
has not been revised since its release in 1989. The mixed rating of A-/B reflects the need
for updating the book to include the fall of communism and other developments of the
Criterion 1: Costs and Prices: How Production is Determined
The opening section on costs and prices begins a useful discussion. Kirk differentiates
between needs and wants; and he points out that some person had to work to produce
any good. People produce goods, government taxes and distributes some of the production.
Kirk describes what makes something valuable and concludes that "it is scarcity,
rather than the amount of labor required to produce a good, that usually determines the
value of any good" (p. 21).
Throughout this book, Kirk uses clear examples from history and literature to make his
points. In this section, he tells the story of the Pilgrims and how they dealt with
scarcity, labor, and production in the early 1620s. Governor Bradford at first had a
socialist economy, but food shortages resulted; then he assigned private property rights
to the pilgrims and production went up in his second season at Plymouth.
Criterion 2: Competition and Monopoly
Kirks chapter "The Good that Competition Does" is a clear and useful
analysis of competition. He makes an interesting distinction between healthy competition,
which "leads people to work hard and produce good things" and evil competition,
or "strife," which produces "deception, fierce quarrels, and war" (p.
123). Healthy competition, Kirk argues, is rooted in human nature and is what makes market
economies so prosperous. He quotes from Samuel Johnson, the British writer of the first
dictionary, that "a man is seldom more innocently occupied than when he is engaged in
making money" (p. 124) and Irving Babbitt that "There is something in the nature
of things that calls for a real victory and a real defeat. Competition is necessary to
rouse man from his native indolence, without it life loses its zest and savor."
Kirk then describes efforts inherent in any economic system to stifle competition. Even
in a market economy, as Adam Smith observed, businessmen will meet together and try to set
prices. Kirk points out that the U. S. Congress has passed antitrust laws to try to
prevent "combinations in restraint of trade." He seems to approve of this
intervention, but admits that the free market itself is an important element in preventing
Kirks analysis would benefit from specific examples. The Sherman Antitrust Act,
written in 1890, for instance, was first applied to the American Sugar Refining Company,
which bought the E. C. Knight Company and thereby controlled 98 percent of the sugar
market. The Supreme Court refused to break up American Sugar Refining because it was not
restraining tradeanyone else could have entered the sugar market. In fact, that
happened during the next 30 years and by 1927 American Sugar Refining controlled only 25
percent of the U.S. sugar market. U. S. Steel is an example of another large company that
lost business in the early 1900s because other companies, such as Bethlehem Steel, entered
the steel market and made a better product.
Criterion 3: Comparative Economic Systems
In his study of comparative economic systems, Kirk compares mixed economies (e.g., the
U. S., Taiwan, and Kenya) with command economies (e.g. China, Tanzania, and Russia). His
book was written in 1989, before the fall of the Soviet Union, but his comparisons of the
performance of market and command economies are still valid.
Kirk lists the strengths of market economies and emphasizes the creative results that
occur when millions of people compete to provide the best and cheapest goods and services
for others. The command economy has the advantage of being able to target resources for
quick results. But it has inherent inefficiencies, Kirk argues, that result when people
are not free to own property and accumulate wealth. He uses Alexander Solzhenitsyns
experiences recorded in The Gulag Archipelago to show the problems with
bureaucracies, black markets, and lack of consumer support in Russias command
economy of the 1950s.
In any future edition of this book, the author will want to describe Russia and Eastern
Europe in the 1990s, after the fall of communism.
Criterion 4: The Distribution of Income
Kirk has an interesting section on how the politics of envy affects the distribution of
income in market economies. Some people see their neighbors getting rich in business and
they envy this wealth and the possessions it can buy. Eventually, the "have
nots" and their lobbyists appeal to government for higher taxes on the
"haves." Kirk uses Holland after World War II as a historical example of the
politics of envy in action. Government taxation on wealth had so reduced the gap between
rich and poor that entrepreneurs no longer had incentives to take risks and create new
products. Kirk cites Prime Minister Andries van Agts recent efforts to stifle the
politics of envy and restore rewards to those who succeed in business.
Kirk describes the moral basis of income distribution and poverty. He recognizes that
some people are poor because of bad luck, but he stresses hard work and careful planning
as the keys to success. In a market economy, talents in different areas of life do indeed
vary, so income stratification is an inevitable result. Command (or socialist) economies,
Kirk notes, sometimes try to equalize incomes, but often with negative results. The work
ethic diminishes; shortages of goods and services plague the economy.
Criterion 5: The Role of Government
Kirk notes that the role of government often determines a nations prosperity or
poverty. All economists agree that government needs to enforce contracts and laws.
Government also provides for the national defense. Should there be any other functions of
government in a free society, Kirk asks. He reviews the changing role of government in
history from the times of Plato and Adam Smith to the late 20th Century.
Edmund Burke, Kirk notes, said that government should not "provide for us in our
necessities," (p. 241) yet has done so to an ever-increasing degree over the course
of the 1900s. The 20th Century has witnessed the growth of government across
the globe in both market and command economies. Kirk does not explain why this is so, but
he does look at its consequences in higher taxes, increased regulation, and the decline in
individual liberty. American society, Kirk notes, has prospered in the 20th
Century, but he sees the growth of government as a potential brake on economic growth.
This text would have benefited from a stronger analysis of public goods, the free rider
problem, and externalities.
Criterion 6: Public Choice
There is no special section on public choice in this text. Since most public choice
research is relatively new, and since this text was written in 1989, Kirk may not have
thought public choice ideas were worth including in his text. None of his writing,
however, conflicts with the best available research on public choice theory.
Criterion 7: The Role of Entrepreneurs
Kirks section on the role of entrepreneurs is useful. He defines the entrepreneur
as a person with "a gift for thinking up new undertakings and getting them
accomplished." (p. 59) This definition is helpful because it emphasizes risk
and imaginationtwo interesting qualities that few people have. Kirk points
out that the entrepreneur "needs to imagine economic developments that have not yet
come to pass. . . ." (p. 165). Henry Ford, for example, imagined a low priced car in
every garage 12 years before he could produce one. Kirk gives several examples of
entrepreneurs in action. Most prominent is his discussion of E. I. duPont de Nemours, the
French immigrant to the U.S., who made gunpowder cheaply and capably in the early 1800s.
Criterion 8: Taxation
The discussion of taxes is light on specifics but strong on theory. Taxes do alter
behavior and increases in taxation often have unintended consequences. Kirk describes the
sequence of events that follows when governments levy high taxes: (1) individuals
cant save, (2) businesses cant invest (in capital goods or material goods),
(3) supplies of goods diminish, (4) incomes drop, and tax rates must be raised again.
Kirk does not discuss tax incidence or the dynamics of tax reduction. In the 1920s,
1960s, and 1980s, tax rates in the U. S. were slashed on all groups. These cuts helped
boost economic growth during these decades; also, revenue into the government sharply
increased. These empirical developments support Kirks conclusion that "it seems
unwise to expect government to perform economic functions for which sound and free
government never was designed" (p. 246).
Criterion 9: The Business Cycle
The section on the business cycle is good as far as it goes. Kirk describes historic
business cyclesespecially the Great Depression of the 1930sand how they effect
market economies. He also describes the Federal Reserve Systemits history, its
function, and its role in modern economic life. He needs to make a further point: Recent
research suggests a strong connection between the manipulations of the Fed (lowering
interest rates in the mid-1920s and raising them sharply in 1929) and the onslaught of the
Great Depression. Readers might also benefit from a description of Austrian economics and
how economist Ludwig von Mises and Nobel laureate F. A. Hayek looked at human behavior.
A more thorough discussion of the Great Depression would also give Kirk another chance
to illustrate the harm done by interest groups in the political arena. Kirk likes to show
how interest-group politics can undermine liberty. In the Great Depression, farmers,
veterans, and silver miners (just to name three) were groups that extracted special favors
from government at the expense of taxpayers.
Criterion 10: Wages, Unions, and Unemployment
Kirk strongly links wages to productivity and not to political action. He also cites
many verses in the book of Proverbs in the Bible to argue that Jews and Christians have
historically linked hard work to higher wages and economic success.
In the short section on unions, Kirk describes the role of unions, collective
bargaining, and right-to-work laws. He implies that government help to labor unions in the
U. S. (through mandatory collective bargaining) has tilted the balance of power in favor
of organized labor. The increase in prosperity in the 20th century, Kirk
argues, is not the result of organized labor, but "principally because of the
increase of skilled labor as contrasted with unskilled labor" (p. 50) Skilled labor
is more productive than unskilled labor and provides more and quicker goods and services.
Criterion 11: Trade and Tariffs
The section on tariffs is short, but is reliable as far as it goes. Tariffs restrict
free trade and results in higher prices for consumers. "Competition from
abroad," Kirk argues, "tends to keep prices low and quality high" (p. 132).
Kirk does not get into the infant industry argument, nor does he discuss the disastrous
historical consequences of high tariffs historically. The Smoot-Hawley Tariff of 1930, for
example, was the highest in U. S. history. When we refused to accept foreign imports,
other countries retaliated and refused to buy U.S. goods. The collapse of the American
auto industry, for example, in part occurred because Europeans refused to buy American
cars after 1930.
Criterion 12: Money and Banking.
Kirks section on money and banking is thorough. In explaining the origins of
money, he stresses the role of private businesses, not government. The origin of paper
money, Kirk shows, was in bills of exchange from one merchant to another.
Kirk discusses the gold standard and the more recent development of paper money under
government control. The French and American Revolutions provide Kirk with illustrations of
inflation when no backing existed for the governments paper currency.
The book has a competent discussion of the Federal Reserve system and the emergence of
a managed paper currency instead of a gold standard. Most of the discussion on the Fed
explains its function and impact, not its technical operation. The text would be more
useful if it had described how the Feds manipulation of currency affected the
business cycles in the 1930s and inflation in the 1970s.