5.3 The Social Diseconomies of Scale, Part II - Professional Feudalism

The complexities of modern civilization are increasingly leading to human resource specialization which has given rise to professional feudalism. The preceding chapter dealt with industrial feudalism and the ways in which control of the means of industrial production can be used to subvert the free market and steal from the other members of American society ( by obtaining a higher return than would exist in a free market). The rise of industrialization makes human labor a smaller component in the total production of national wealth. However the increasing specialization of labor reduces competition and enhances the opportunity for professional feudal theft through the control of human labor.

Fundamentally professional feudalism is the control of the supply of labor to inflate its return above free market value. Three approaches are used to accomplish this objective: 1) high entry costs 2) direct entry controls and 3) required procedures that inefficiently use human resources. The political power structures that engage in professional feudalism for the prosperity of their members perpetrate theft on the rest of American society.

Professional feudalism completely pervades American society. Virtually every profession or interest has been successful in instituting some practice that distorts the free market for their benefit. Attempting to remove every such feudal practice would be hopelessly idealistic and unnecessary because many of these practices are not significant impediments to the free market. However there are a great many major instances of professional feudalism that are having a serious impact on American prosperity. In most cases the political power structures who are perpetuating these feudal thefts also provide valuable benefits. As stated before the fault is not with these organizations or with the people in them. Political power structures are by definition directed at promoting the prosperity of their members. The American people are responsible for controlling theft by political power structures in our society. The widespread existence of professional feudalism in America is simply evidence of our failure to meet that social responsibility.

Government is the facilitator of professional feudalism just like all other forms of feudal theft in society. Government makes the rules that direct social behavior. The absence of rules to restrict feudal theft and in many instances the existence of rules that promote feudal theft are further evidence that government is not responsive to the interests of the American people. Therefore as stated in the Declaration of Independence, it is the right (and duty ) of the American people to alter the system. As previously discussed, the failure of American citizens to financially support the political process has forced our representatives to prostitute themselves to special interests to obtain financing for reelection. While I am hopeful that reforms can make the representative process more responsive to the interests of American society for normal daily operations, I feel more democratic participation of the American people is needed to resolve the major issues facing our society.

The pervasive nature of professional feudalism in American society could easily justify an entire book. My purpose here is simply to highlight several key examples. The following text briefly discusses these examples, their impact on American society and then presents recommendations for improvement. Hopefully this assessment will act as a catalyst for additional discussion, recommendations and popular action to reduce the intolerable level of professional feudal theft in America.


The accounting profession is an example of a combination of industrial and professional feudalism that constrains the earnings of many accounting professionals below free market value. The CPA license is the control mechanism for the accounting profession. The CPA is socially justified as a mechanism to ensure that those individuals who perform accounting services for the public are professionally qualified. However an opinion voiced by some who have taken the CPA exam (and passed) is that the exam is not a good discriminator of accounting ability, but merely an exercise in memorization. Whether or not this position is justified, the record shows that only a small percentage of college graduates in accounting go on to become CPAs. Therefore the CPA functions as an effective means to control the supply of accounting professionals allowed to work independently. Control of the supply of accountants able to work independently reduces the earnings of the vast majority of accounting professionals without CPAs and inflates the earnings of both companies that employ accounting professionals (industrial feudalism) and those individuals who have CPAs (professional feudalism).

Society places no professional requirements on individuals who perform accounting services as employees. While most companies hire individuals with a college degree in accounting to perform their accounting work, employers are free to hire anyone they wish to perform any accounting or bookkeeping functions as employees. This freedom extends even to very small businesses whose owners are not accountants and therefore not in a position to professionally judge the competence of those who do their accounting work.

Experience indicates that this completely unrestrained free market for employee accounting services works most of the time. For the most part employers are smart enough to evaluate prospective accounting personnel based on their education and experience. However there are enough problems that if government was really interested in the public interest, there would be some minimal credentials for employee accounting services. The absence on any requirements on employee accounting personnel exposes the hypocrisy of the system. Employers don't want any restrictions on who they can use to perform accounting work (which might raise their costs for accounting labor). However they enthusiastically support restrictions that prevent college graduate accountants from working independently without first obtaining a very demanding CPA license. This complete freedom for employers coupled with serious market restrictions on accountants creates a nice little system of industrial feudalism which enriches industry at the expense of Americans who work in accounting.

The growth of corporate accounting bureaucracies is part of the price America is paying for feudal control of the accounting profession. Since accountants can not earn free market wages for performing accounting services, the path to prosperity for bright accountants is to become a manager of those providing accounting services. However managers require empires to manage and empires require justification. The multitude of accounting procedures in most American corporations provides an ever expanding justification for more accounting services and more accounting managers to supervise these services. Like all corporate bureaucracies, the accounting bureaucracies are difficult to control because they are directed at promoting the prosperity of those they serve. The previous recommendations to downsize corporations and to provide tax incentives for subcontract work will help constrain the explosive growth of make work financial activities in corporate America. However the success of these recommendations will be greatly enhanced by expanded self-employment opportunities for accounting professionals.

CPA firms exist both to provide independent auditing services to all sizes of businesses and to provide accounting services to small and medium sized companies and individuals who do not require full time accounting support. These firms must be run by a CPA although the work can be performed by accounting professionals without a CPA license. In fact there are no professional requirements placed on the individuals performing the work as long as the work is performed under the authority and hopefully under the direction of the CPA. The CPA firms serve as apprenticeship programs for the CPA, since audit experience is required to obtain a CPA license. Unfortunately this monopoly over the ability to perform audits and therefore provide audit experience gives CPA firms powerful control over their employees wishing to become CPAs. Not surprisingly this control is often used to depress the wages of the employees of CPA firms and inflate the return paid to the CPA partners. Again the fault is not with the people, but with a system of feudal control that allows some to steal from others.

The CPA is an example of the "single level credential" abuse that also supports professional feudal theft in the medical, legal and educational professions. The CPA should be retained as a top level qualification for accounting professionals performing audits. However college graduate accountants should after a few years experience be allowed to routinely become licensed to perform non-audit accounting services for the public.

5.13 RECOMMENDATION: INSTITUTE A LICENSED PUBLIC ACCOUNTANT CREDENTIAL - Institute a new accounting credential of Licensed Public Accountant. This license would require completion of a comprehensive program of college level course work in accounting ( i.e. B.S. or equivalent) plus 5 years of related work experience. The LPA license would allow an individual to perform all public accounting functions except company audits. The LPA would provide the public with assurance of professional standards since either unethical or unprofessional shortcomings could result in the suspension or revocation of the LPA license. The LPA would provide the public and small businesses with an adequate accounting credential for normal accounting work. For unusually complicated accounting problems or audits they could consult a CPA.


The medical profession is one of the clearest examples of professional feudalism in America. Medicine is both a highly skilled profession and one that literally has a life and death impact on society. The importance of health and well being to human prosperity creates an irresistible temptation to try to control the market for medical services. Medical professionals are both some of the most capable and highly educated members of American society and as individuals some of the most compassionate and altruistic. The contrast between the altruistic nature of doctors and the feudal control of the medical profession is the most dramatic such contrast I am aware of in our society. Of all the professional services, medicine is one of the most valuable and in a free market would reward its members with a generous return for their labor. However the medical profession has used its power to institute controls over the practice of medicine in American that steal from the American people through an undersupply and therefore an overpricing of medical care.

The medical profession's control of the supply of health care in America is based on the control of the license that society requires for an individual to practice medicine. In theory society through government actions should determine this licensing process. However in practice the medical profession has obtained complete control over determining who can practice medicine and the awesome political power of the American Medical Association ensures that no elected representative will seriously oppose the AMA's usurped authority. The abuse of the licensing process manifests itself both in restrictions on the number of people who can become doctors of medicine and more importantly in the requirements to practice medicine.

The academic requirements for entry to U.S. medical schools have reached the point of absurdity. While candidates for a doctorate in medicine should be selected from the top 5% to 10% of the student population, there is no excuse for requirements so severe that only the class valedictorian gets admitted to medical school. The reason of course is not the qualifications needed to become a doctor of medicine. The reason is the shortage of openings in U.S. medical schools engineered by the medical profession to control the supply of doctors and thereby inflate the cost of medical services above the free market value. This has created a situation where doctors from major European nations with medical systems every bit as advanced as ours are clamoring to practice medicine in America. However the system has also managed to thwart this attempt to restore a free market balance to the supply of medical services in America. There is one entry point through the U. S. Armed Forces that has enabled many qualified (but not superhuman) men and women to become doctors. Since many of these doctors remain in military service for their 20 year retirement, this additional supply does not begin to rectify the shortage of doctors in private practice. A logical solution to the shortage of doctors would be to allow more qualified individuals to become doctors by: 1) building more medical schools and 2) removing restraints on qualified foreign doctors. However I believe the more immediate solution is to reform the requirements to practice medicine.

The single level license to practice medicine is the primary cause of the inflated cost of medical services in America. Consider for comparison the automobile industry. Medicine deals with life and death, but you also trust your life to the mechanic who repairs your brakes and steering system. The relatively free market in the automotive industry has created dozens of job classifications. Each position requires a different degree of education and experience from the assistant mechanic who checks your oil to the Ph.D. engineer who uses computer simulation to design new cars for crashworthiness. Many of these positions either require a license or certification of special training. When the public needs automotive service, they can take their car to the individual who is properly qualified (but not overqualified) to perform the service they need. The do not call a Ph.D. engineer or scientist when they have a dead battery, they call the American Automobile Association for emergency road service. They call the AAA because the "Doctor" wouldn't make a house call and even if he did the AAA can adequately handle the job for a lot less money.

The single medical license system in America creates a great void in the delivery of medical services. When Americans have a minor medical problem such as cold or flue, their only choices are to treat themselves with a medical encyclopedia and over the counter medicines or to go to a doctor of medicine. There are no individuals with bachelors or masters degrees who are allowed to independently practice medicine. Fortunately however there are thousands of such qualified individuals in America - the registered nurses. These women and men work as serfs for doctors or hospitals because they are not allowed by law to offer their services directly to the public.

5.14 RECOMMENDATION: - ESTABLISH LICENSED MEDICAL PRACTITIONERS (LMP) - Permit registered nurses to set up private practices for providing medical services to the public. While the definition of these services needs detailed study, I believe they could include routine medical exams, vaccinations, treatment for colds and flu, treatment for minor injuries and especially home visits. The LMP would be responsible for referring patients to specialists (i.e. doctors of medicine) and would be licensed to admit patients directly to hospitals. LMPs could work directly for hospitals and perform work on their own authority or like doctors they could have their own practice and work part time in hospitals caring for their patients.

Opening the medical field to independent LMPs should go a long way toward mitigating professional feudalism in medicine. LMPs would take over most of the routine medical work thereby giving the public increased access to medical care at far less cost. Small communities currently without a doctor could easily afford a LMP. Doctors' services would be reserved for care that required their greater knowledge and training. Doctor fees would likely remain respectable in recognition of the significant value of their services. However the LMPs would substantially relieve the doctor shortage and likely bring free market pressures to bear on doctor fees. After about 10 years when the dust has settled on the introduction of LMPs, the public should reassess the need to further expand the supply of doctors.


The entire rationale for forming social power structures is the ability of individual biological power structures to work more efficiently together in a group. As discussed in previous chapters this requires a set of behaviors (or rules) that efficiently organize group activities and a command and control structure that directs these behaviors.

Social laws are powerful tools for prosperity, but they also hold the potential for abuse. In lower animals the behaviors needed for both individual and group interaction are encoded in the DNA as instinct. This process of instinctive behavior provides for consistent group action. However the consistency of instinctive behavior opens the opportunity for abuse by any power structure who can use group adherence to a behavior to its own advantage. For example over time bees evolved the behavior to swarm at the smell of smoke to preserve the hive in the event of a forest fire. Mankind uses his knowledge of this behavior to steal the bee's honey, by first filling the hive with smoke. This abuse of the "rule of law" creates a conflict in bee behavior. If they evolve with a less automatic response to fire, they will be less susceptible to theft of their honey, but more susceptible to destruction by fire. The abuse of the rule of law in human society often has a similar disruptive effect that far exceeds the value of the stolen honey.

The legal profession has the responsibility of being the architect of the rule of law in human society. Throughout history the power that flows from this extremely important duty has been used for the benefit of human society. Our Declaration of Independence, Constitution and Bill of Rights are examples of use of law and legal opinion to articulate social objectives and define rules for their execution. However the power of law has also been widely used to create immoral systems of legalized theft. The legal profession usually receives the criticism for the abuse of law and often receives little praise for the positive role of law in promoting an orderly functioning society.

The blame for the many abuses of the power of law by the legal profession rests with the American people for our failure and the failure of our representative government to restrain these abuses. Lawyers and the legal profession are simply a political power structure in human society that exists primarily to promote the prosperity of its members. The task before us is to understand the abuses that exist, develop social innovations to minimize these abuses and then through the power of representative government or direct popular initiative to reform the rules of the system. The following paragraphs attempt to make a start at developing further understandings and recommendations in three key areas: 1) the criminal justice system 2) the civil justice system and 3) the legal requirement to practice law.

The criminal justice system in America has become inefficient and bureaucratic through the single minded pursuit of the ideal of justice. The statue of justice with her balance and blindfold is a powerful symbol of the fairness and equality of treatment that we want our legal system to aspire to. However all human objectives involve tradeoffs. Our obsession with justice at any cost has led to a criminal justice system with so many procedures, delays and appeals that trials can run into millions of dollars. This outrageous direct cost is amplified by the indirect cost to society caused by the inability of the criminal justice system to timely process and convict those who violate the law. The issue facing the American people is the amount of money they wish to spend to provide those accused of breaking the law with a fair trial. The men and women who run the criminal justice system are human beings whose self interest is served by making the process as complicated and costly as possible. However society's interests would be better served by imposing a budget on the legal process. Nobody wants to see an individual falsely convicted of a crime. However if the penalty for a crime is one year in jail, we shouldn't spend 10 employee years of legal resources on the trial.

5.15 RECOMMENDATION: IMPOSE BUDGETS FOR CRIMINAL JUSTICE PROCEDURES - The American people should impose budgets on criminal justice procedures. The budget should represent a reasonable expenditure of society's resources to provide a fair trial consistent with the punishment that society imposes for that particular crime. The judge would of course have discretion to exceed or underrun the budget for a given trial. However the court costs averaged over the last ten trials would have to adhere to the approved budget. The criminal justice system with the assistance of new laws or popular initiatives as required would have to revise court procedures to conduct trials within the budgeted amounts.

The rest of the world looks at the United States civil justice system with amazement and disbelief. We are the most sue happy country on earth. This situation is not the result of a larger number of socially unjust acts in our country, but of a civil justice system that financially rewards the redress of social grievances through the civil courts. More pointedly this situation is the result of a civil justice system that offers lavish financial rewards to the legal profession for the attempted redress of grievances through the civil courts. In many cases the civil suit is nothing more than legalized theft with obstetric medical malpractice and minor automobile accident suits being good examples. When a baby is born in less than perfect health, we look for someone to blame and more importantly for someone with money to pay for the costs for additional medical care. Maybe new parents should carry insurance for handicapped babies. Maybe society should provide more support to such parents, but using the civil justice system to steal from doctors and their insurance companies to provide for such care is a miscarriage of justice. Minor traffic accidents are another burden on our civil courts. While automobile accidents are a legitimate source of loss, the proliferation of automobile accident suits is driven by the potential for a financial windfall that far exceed the actual loss incurred.

The present civil justice system is a source of disunity in American society. We need a system that can provide prompt and fair adjudication of civil conflicts in society. However the present system is both too slow for prompt redress of grievances and often excessively generous in awards. While many reforms have been proposed, few have been enacted due to the power of the legal profession to block changes that reduce their feudal control over the legal system. There is no point in blaming the legal profession for pursuing their own self interest, because that's only human. Since most politicians are lawyers, reform of this political power structure will only come when the American people institute changes though popular initiative.

From my perspective there are two systematic flaws with the current civil justice system. The first flaw is in asking a jury without any professional training or experience to determine damages. This system often leads to awards based on emotion and not on a sound assessment of the actual damages. The second flaw is the "winner take all" methodology of the civil justice system which is an unfortunate carryover from criminal proceedings. In a criminal proceeding, a defendant must be judged guilty or innocent. However very few civil proceedings are completely one sided. There are either two injured parties or one of the parties often has some extenuating circumstances. Therefore the requirement to either find totally for the defendant or the plaintiff is illogical.

5.16 RECOMMENDATION: INCORPORATE PROFESSIONAL DAMAGE ASSESSMENT AND FRACTIONAL BLAME JUDGMENT IN CIVIL PROCEEDINGS The first phase of any civil proceeding would be to establish the value of the civil damages involved for both the plaintiff and the defendant. These costs would be established by court staff personnel and approved by a judge based on evidence presented by the participants. This professional assessment of damages including pain and suffering would provide a fair and consistent assessment of damages. Following this initial damage assessment phase the participants could either decide to reach an out of court settlement or to proceed with a civil trial.

The second or trial phase of any civil proceeding would be to establish fractional blame and court mandated payment of damages. By law trials for damages below a certain level would be before a judge. Jury trials would be reserved for cases with more substantial damages, but both parties could still agree to a non-jury trial. After hearing the testimony the judge or jury would assess the fractional blame of the defendant on a scale of 0% to 100%. In a jury trial the jurors would each cast a ballot in the jury room with their assessment of blame, and then discuss the results. After the discussion the jury could revote. When at least half the jury agreed that sufficient discussion had occurred to resolve differences between the jurors, a final vote would be taken, averaged and presented to the court.

The civil damages awarded by a trial would be based on the previously determined damages of the plaintiff and defendant plus their court costs and the fractional blame assessment of the court. For example, if the averaged vote of the jury (or the judge) decided that the defendant was 70 percent to blame, this would mean that the plaintiff was 30 percent to blame. In this example the defendant would be required to pay 70 percent (i.e. his assessed fractional blame) of the plaintiff's damages and the plaintiff would be required to pay 30 percent (i.e. his assessed fractional blame) of the defendant's damages. The net payment or award to each party would be the difference between these two amounts. For example assume the plaintiff's damages were $100,000 and his court costs were $20,000 for total of $120,000. Also assume the defendant had damages of $10,000 and court costs of $30,000 for a total of $40,000.

For this example the table below presents the judgment assigned to each party as a function of the jury's fractional assessment of blame.

  100%		$120,000	    $ 0	  $120,000		
   90%		$108,000	$ 4,000	  $104,000
   80%		$ 96,000	$ 8,000	  $ 88,000	
   70%		$ 84,000	$12,000	  $ 72,000
   60%		$ 72,000	$16,000	  $ 56,000
   50%		$ 60,000	$20,000	  $ 40,000
   40%		$ 48,000	$24,000	  $ 24,000
   30%		$ 36,000	$28,000	  $  8,000
   20%		$ 24,000	$32,000	  $ -8,000
   10%		$ 12,000	$36,000	  $-24,000
    0%		$ 0		$40,000	  $-40,000

A civil justice system that included professional damage assessment and fractional blame judgment would be both a fairer system in terms of awards and a much less highly leveraged system. With the current system, the attorney's skill is highly leveraged, because a small difference in presenting the case can spell the difference between getting a full award and getting nothing. With a fractional blame system the facts would tend to speak for themselves. Certainly a better attorney could obtain a somewhat higher award, but the incremental increase might not justify the additional legal fees. Similarly there would be less incentive to beat a case to death for a few extra percentage points in assigned blame. This would tend to speed up trials and also reduce legal costs. However the biggest benefit of the recommended system would be a reduction in the number of civil trials. Since the damages would be determined before the trial and a trial could no longer offer an all or nothing verdict, the cost tradeoff between going to trial and settling out of court would more strongly favor an out of court settlement that is fair to both parties.

As with medical care, the single legal license system in America creates a great void in the delivery of legal services. When Americans have a minor legal problem such as a will, or a small contract, or even a divorce or bankruptcy, their only choices are to be their own lawyer using a bookstore guide or to go to a high-priced attorney. As with medicine this practice is blatant professional feudalism whose only purpose is to restrict the supply of legal services to the American public for the enrichment of the legal profession. A Ph.D. in law may be socially justified for a criminal trial lawyer. However there is no reason why competent men and women should not be able to earn bachelor's and master's degrees in law and be able to provide a lesser range of legal services to the public.

5.17 RECOMMENDATION: LICENSE LEGAL CONSULTANTS - Universities should be permitted to offer undergraduate bachelor's and master's degrees in law. Graduates would obtain proficiency in certain aspects of the law such as wills and estate planning, contracts, patents, divorces etc. Upon graduation the holder's of such degrees would be able to apply for a license as a "Legal Consultant". This license would permit the holder to offer legal services to the public in the areas of their specialties.


The seniority system is such an important and pervasive form of professional feudal control that it deserves a separate discussion. The seniority system is simply a system of feudal control whereby the older members of society who control the system steal from the younger members of society. This statement is in no way intended to demean the value of experience. Experience means enhanced ability obtained through the educational system of life. This enhanced ability enables an experienced individual to work smarter, be more productive and therefore be more valuable. The agrarian model of a free market, "as ye sow so shall ye reap", rewards experience, but has no provision for "seniority". We expect a farmer with 20 years experience to achieve higher yields than a new farmer. However the corn doesn't care about the farmer's age, it only cares about the farmer's ability and motivation.

Seniority is often justified on the basis of need much like communism was. We reject the communist approach of "to each according to his need", because communism does not promote prosperity. Even when theoretically applied communism removes the incentive for expending anything other than minimum effort. Like all systems of theft, communism broke down as people lost respect for the system. We are guilty of the highest hypocrisy when we condemn the communist system (which nominally distributes resources based on need) while we condone the pervasive systems of seniority in America which blatantly distribute resources based not even on age, but simply on the number of years in a specific power structure.

There are many other moral justifications used to legitimize the seniority system. We hear statements like, " you have to pay your dues." Have you ever noticed that those who want you to pay your dues are also the one's who collect the dues. We hear statements like, " older workers have families with children to support". If an older worker is married and supports children, he can file a joint tax return, he can claim exemptions for his children and he can deduct the interest and property taxes on his house. These are all incentives that society provides to encourage family responsibility. We are perfectly capable of providing whatever socially beneficial incentives the American people desire. However using "family values" as a justification for seniority is simply a smoke screen for a system of feudal control and theft that has nothing to do with the social objectives it claims to support.

The areas of American society where seniority has the strongest hold namely government, industrial unions and education are the areas that lag in productivity growth. Like communism, seniority discourages both motivation and ability improvements. Younger workers have no incentive to either work harder or to improve their abilities so they can work smarter, because their rewards will come only with age. Similarly experienced workers have no incentive to work harder or to use their experience to work smarter to justify their higher return, because that return is guaranteed by their age. In the non-seniority segments of American society, those who apply for a new job and those who seek promotion in their existing job must compete on the basis of their motivation and ability. These are the only objective measures of their potential to contribute to prosperity and therefore the only rational standards for determining their return in a free market.

5.18 RECOMMENDATION : ABOLISH SENIORITY DISCRIMINATION - The laws of the United States of America should specifically prohibit any form of discrimination purely on the basis of age or number of years in a particular job or occupation. This should not be in any way construed to interfere with legitimate distinctions based on ability differences obtained through experience. However these distinctions should be based on objective measures of job performance not simply on "time in grade".


The educational system is in many respects a cornerstone of advanced civilization. Since the vast part of human ability is now taught, the operation and even the survival of human civilization depends on teaching each new generation the skills they need to produce society's prosperity. However education is also a leader in creating new knowledge and as such plays a vital role in supporting both social and technical innovations that enhance future prosperity. The vital importance of education as a tire of prosperity was discussed in chapter 4. The discussion in the following paragraphs is more narrowly focused on the ways in which the importance of education and the power that importance bestows have been used to institute a system of professional feudal control. These controls benefit those who run the system while depriving the American people of an efficiently operating educational system needed to promote American prosperity.

The teacher is the essential element in the educational process. All other educational personnel exist simply to facilitate the teacher-student interface. Unfortunately the dominance of the public school system in America created educational monopolies who could control the free market for teacher's salary. These monopolies also used supply side tactics like building teacher's colleges and offering free education contingent on several years teaching to lure young men and women into the profession. Not surprisingly this situation caused teacher's salaries to lag the compensation paid for similar skills in the free market. About a generation ago teachers began to unionize to restore a competitive negotiating position between themselves and their employers. While this effort has succeeded in elevating teachers' salaries (in many cases above a free market rate), it also institutionalized many professional feudal practices that seriously impair educational efficiency.

The seniority system discussed in the previous section is one of the primary mechanisms of professional feudalism in American education. In education seniority is not even the number of years in the profession, but simply the number of years in a particular school district. This system seriously restricts the free flow of teaching talent to respond to changes in student enrollment patterns. In the eastern U.S. where school districts are based on counties, school district seniority is bad enough, but in California where school districts are very local this system is truly absurd. The issue of merit pay for teachers goes hand in hand with the issue of seniority. In a recent California election the California Teachers Association required candidates to agree with their "no merit pay" position as a condition for CTA endorsement. The very words "No merit pay" defy every sense of moral justice. Even many government pay systems allow for in-grade promotions on the basis of merit. I would like to believe that if the members of the California Teachers Association were allowed to vote on this issue directly, they would reject this position of their union leadership.

We need to separate the issues of seniority for employment and seniority for pay. As long as we have public educational monopolies in America, employment seniority does serve as a safeguard against union busting by school districts. However temporary retention of employment seniority while we determine the proper structure of American education should not be used as an excuse to continue a purely seniority based compensation system.

The teaching credential is promoted as a means to safeguard the public interest by ensuring that only qualified personnel are allowed to teach in the public schools. However as I understand the teaching credential is not subject related. Therefore a teaching credential prevents a person who has not taken education courses from teaching, but it does not prevent a math teacher from teaching English or a history teacher from teaching physics. Many of us have had experiences such as having an English teacher teaching a computer programming course and only being one lesson ahead of the students. The ability of the system to permit such abuses makes a mockery of the safeguard of the teaching credential.

The problems of the educational system are as much caused by the industrial feudalism of the schools as they are by the professional feudalism of the teachers. Private schools function perfectly well by allowing the administration to judge the qualifications of the teaching personnel they hire without being constrained by a teaching credential. Students in private schools are free to choose which school to attend. In other words they have a free market choice among competing educational alternatives. If one school is overpriced for the services they provide, the private school student has the choice of taking his business elsewhere. Schools with competent teachers and administrators prosper while those who are less competent go out of business.

The voucher system is in my opinion an inspired social innovation. The voucher system offers the opportunity both to preserve the system of publicly funded education in America and to break down the existing public education monopoly that fosters industrial and professional feudalism in American education. The voucher provides for guaranteed public funding of elementary and secondary education in America, but does not require that the providers of educational services be government run. I believe that the issue of educational quality can best be served by having an accreditation program to ensure minimum standards and then letting the free market determine the results. Each school would be required to produce an annual report presenting course offerings, educational achievements, standard test score results, teacher summaries and other information to aid parents and students in selecting a school. To participate in the voucher program, a school would be required to accept the voucher as payment in full for all educational services. Schools would also be required to accept applicants without regard to race, creed or color. However they would be free to have admission standards based solely on ability.

5.19 RECOMMENDATION: REFORM OF FEUDAL PRACTICES IN AMERICAN EDUCATION - Institute a time phased reform of the public educational system designed to remove both industrial and professional feudal practices. For example we could start by instituting vouchers for public schools within school districts. At the same time we could allow a 10% voucher to any accredited school public or private. This voucher would increase by 10% per year to a full voucher in 10 years. We could parallel this with a transition to merit pay. Starting the first year, teacher pay would be based 10% on merit and this also would increase by 10% per year so that after 10 years pay would be completely merit based.

I must confess that as a layman I find the furor over teacher merit pay somewhat confusing. Performance appraisals seem to work relatively well in private industry even though the quality of your work is only well known to a relatively few people. However public education is a fish bowl. When I went to school and again when my children went to school, everyone knew who the better teachers were. I view public education more like professional sports where the scrutiny of public performance makes ability differences much easier to discern. Once the voucher makes schools competitive, any administrator who fails to objectively reward his better teachers will face loosing those teachers to other schools.


The formation of employee unions was a logical attempt to restore a free market competitive negotiating balance between a large company and its employees. A company is a political power structure formed to enhance the prosperity of its members namely the shareholders. Prosperity is achieved by paying the minimum amount for the inputs to production including labor. When there is a gross size imbalance between a company acting as a unit and workers acting as individuals, the workers inevitably receive less than free market wages. Payment of a free market wage for workers is in the best interest of society, because suppressed wage rates both demotivate workers from doing their best and encourage the company to inefficiently utilize labor based on an artificially low value for this component of production. The extreme example of this was the military peacetime draft which resulted in college students pealing potatoes because their labor was essentially free.

Unfortunately the competition of two large political power structures is no guarantee of a free market. In the large industrial arena when unions were weak, the workers still received less than free market wages. However when unions were strong such as in the steel and automobile industries, they were able to demand considerably higher than free market wages. While these industries controlled the U.S. domestic market for their products, such union control of wages amounted to professional feudal theft on the American public. When the steel industry was faced with foreign competition, the insistence of the steel workers' union on above free market wages resulted in the loss of many of their members' jobs to foreign companies. The U.S. automobile industry is now going through a similar crisis.

Unfortunately the positive aspects of the union movement were eroded by several negative aspects. The strongest negative was in many cases the lack of responsible leadership. The problems facing union leadership are the same problems facing our national government, namely the conflict between altruism and self interest. Many unions fell prey to tyrannical leadership more interested in their own prosperity than in the prosperity of their members. America's failure to require the same standards of democratic control for the political power structures within American society that are required of our national government is an important cause of the feudal theft that exists in our society. Several recommendations on this subject are presented in the next chapter.

The breakup of industrial trusts early in this century should have been accompanied by the breakup of industry wide unions. The phenomenon of a United Autoworkers Union as a labor monopoly is just as detrimental to the national interest as a single automobile company. Unions should have the same anti-trust provisions applied to them as are applied to companies. This would require that each company have a separate union for its workers with no collusion on wages allowed between unions. With this arrangement there would be competition between the workers at Ford and the workers at GM just like there is competition between these two companies. While there would still be labor/management competition for wages, there would also be cooperation to increase their company's market share. The downsizing of American industry recommended in the previous chapter will reduce the extent of industrial feudalism and will significantly reduce the size imbalance that gave rise to the American labor movement. Already the rapid growth of service industries characterized by small competitive companies has led to a natural decline in union membership.

5.20 RECOMMENDATION: REQUIRE SINGLE COMPANY UNIONS - The social purpose of unions to restore a free market negotiating size balance between labor and management is best served by requiring labor unions to remain within company bounds.

The rise of public sector unions are a direct threat to the democratic control of American society. Unlike private sector unions where the conflict is between two political power structures, public sector unions represent a challenge to the ultimate authority of the American people. The right of people to organize and to present their position is a fundamental right in a free society. Similarly the right to strike against unfair management practices should also be protected. However no group should have the right to strike against the American people.

5.21 RECOMMENDATION: REQUIRE BINDING ARBITRATION OF PUBLIC EMPLOYEE DISPUTES BY POPULAR REFERENDUM - When public sector labor and management fail to reach an agreement on a contract, either side can request a popular referendum. Within 60 days a popular vote will be held between the proposals of management and labor. Eligible voters shall include all those that pay for that government service. The decision of the voters shall be final. Labor and management will quickly learn that the voters will react negatively if they are called on too often to settle these disputes.

Conclusion of Section 5.3 The Social Diseconomies of Scale, Part II - Professional Feudalism

5.4 The Rise of Left Wing Theft in American Society

The discussion of political theft in this book has been heavily weighted toward right wing theft by the power structures who control the means of the production of wealth in society. Throughout history right wing theft has been the dominant form of legal theft in human society because the ruling power structures were the only groups with the power to distort the rules of society in their favor. Left wing groups that did not control the means of the production of wealth were (with the sole exception of the church) non-ruling and their theft was therefore "illegal" or criminal theft.

The advent of representative democracy allowed all members of society to have a more equal voice in establishing the rules of society. Representative democracy both minimized the ability of right wing groups to legislate legalized theft and at the same time opened the door for left wing groups to promote their own systems of legalized theft. However when openly practiced and supported by a vigilant electorate, representative democracy is an effective barrier against all forms of legalized political theft. Unfortunately the corruption of representative democracy in America is weakening popular control of government and strengthening special interest control of elected representatives and the functions of government. The result has been both a resurgence of right wing theft (due to the neglect of elected representatives) and a dramatic rise in left wing theft (due to the participation of elected representatives).

While the theft of right wing political power structures still predominates, theft by left wing political power structures is potentially more significant. Right wing theft involves over rewarding certain segments of the production process by distorting the free market. This distorts the allocation of resources in society and adversely affects prosperity. However the theft of left wing power structures which has nothing to do with the production of wealth is far more blatant. This blatant nature of left wing theft makes it both more demoralizing on individual initiative and destructive to society's bond of common interest. Since left wing theft is orchestrated through government, the battles over left wing theft tend to paralyze government and impair efficient coordination of society. Finally the incidence of left wing theft (both legal and illegal) is exploding and this explosion is tearing apart the fabric of American society.

The almost continuous failure of the Democratic Party to win the Presidency since the "Great Society" days of Lyndon Johnson is not a measure of the confidence of the American people in the leadership of the Democratic candidates. The unwillingness of the American people to elect a Democratic president reflects their fear of the groups that now control the national Democratic party and the left wing political theft they fear will occur if these groups controlled the Presidency. Under these conditions a perception of administrative failure by a Republican president is required for the American people to overcome their fear of left wing theft and elect a Democratic candidate.


Although Bill Clinton has now been president for five years, prior to his election in 1992, the White House had only been occuppied by a Democratic president for four of the preceding 24 years (1968-1992) and the Congress was overwhelmingly Democratic for most of this period. As mentioned above, the legacy of the "Great Society" from the Johnson presidency was a traumatic lesson to the American people of the dangers of giving either party control of both Congress and the Presidency. During the cold war, the need for a strong "commander in chief" favored Republican presidential candidates who were perceived to be superior in this area. With the end of the Cold War, the American voters have decided in the last two congressional elections to give the Republicans a crack at running Congress. However the American voters fear of the wealthy interests that exercise strong control in the Republican party favored an independent or Democratic presidential candidate who would provide restraint against any extremist tendencies of a Republican Congress. Against this political backdrop, any Republican candidate would have had great difficulty winning the 1996 elections and Bob Dole was simply an honorable standardbearer for the Republican Party and their congressional candidates.

After this historical update let us return to the main topic of this chapter, "The Rise of Left Wing Theft in American Society".

Government has become the primary agent of legalized left wing theft in America and in many other western democracies. This has occurred through the same corruption of the processes of representative government which has promoted the expansion of right wing theft. The expansion of the federal government in the area of social welfare over the last 30 years has virtually removed the process of local popular restraint over social welfare expenditures. This reduction in popular restraint coupled with the parallel expansion of national political power structures to advocate social welfare has hopelessly tipped the balance of power in favor of government social welfare expenditures.

Government is the legitimate haven for individuals and groups seeking legal protection from theft in society. Government in an enlightened society needs to be a strong supporter of liberty and freedom from theft. However this effect must be balanced by the recognition that the fundamental basis of left wing theft is the same prosperity motivation that drives right wing theft. All people wish to be prosperous and wherever it is advantageous they form political power structures to advocate changes in society's rules to enhance their prosperity. These political power structures always present their programs under the mantel of morality and fairness. However their real objective is to obtain the maximum benefits for their members not a "fair" return based on the value of their contributions. There is nothing surprising in this advocacy approach by political power structures. What is surprising is the ability of these groups to gain almost total control of government policy in their areas of interest.

The many non-ruling groups who seek to enhance their prosperity through government action can be roughly divided into three categories: 1) lower economic groups who seek government support to reduce right wing theft of their income and who also seek left wing theft to redistribute income and wealth in society. 2) racial or other minority groups who seek government support to reduce right wing theft of their income caused by "discrimination" and who also seek to enhance their prosperity by left wing theft through preferential treatment policies 3) Special interest groups who seek to obtain the most favorable treatment for their interest even if that position is not supported by a majority of the American people. The following paragraphs briefly discuss each of the categories in reverse order.


We have become a nation of organizations. Every industry, profession and public interest has its political power structure to present its members point of view to society and to push for changes in society's rules to favor its members. Many of these organizations have gained near total control over some aspect of our national life without the consent of the American people. For example the National Rifle Association ( NRA ) controls gun policy, the American Medical Association ( AMA ) controls medical procedures, the American Bar Association ( ABA ) controls the legal system, the Association of Colleges and Universities ( AC and U ) controls amateur athletics and so on seemingly forever. These national organizations are really political empires of professional feudalism.

The tendency of national organizations to follow extremist policies is a reflection of the advocacy mentality of their leaders and not a true reflection of the more pragmatic views of their members. One of the most dramatic examples of this phenomenon is the uncompromising opposition of the National Rifle Association to any attempts to control the distribution of guns in this country. The absolutely intolerable level of senseless violence in America is a consequence of the uncontrolled flood of firearms not the result of a more violent streak in the American character. When responsible members of the NRA have spoken out in favor of restrictions on automatic weapons and other sensible controls, their voices have been stilled by the NRA leadership which I want to believe is far more extremist than the majority of NRA members.

The first defense against political power abuse by national organizations is to ensure that they are responsive to their members and open to free expression. Like all political power structures, these national organizations can benefit American society through their specialized expertise. However they can also use their power to steal from the American people by biasing the rules of society in their favor.

5.22 RECOMMENDATION: FOSTER DEMOCRACY IN NATIONAL ORGANIZATIONS - All organizations would be required to permit polls of group policy paid for by the individuals wishing to conduct the poll. These polls on issues of group policy would be conducted by licensed polling companies who would poll a statistically significant random sample of the group's membership. If the poll showed more than half of the members favored a position, the governing board of the group would be required to conduct a popular vote of the entire organization. A plurality of 60% would establish the position as group policy and require the board to support that position.

While ensuring democratic processes within national organizations will help minimize extreme positions, this will not ensure that these groups act in the best interest of society. Like all political powers structures, national organizations need to be monitored by society and redirected as necessary when their policies diverge from society's interest. Therefore the previously recommended changes to democratize government decisions and improve the responsiveness of elected representative are also essential in curtailing the process of left wing theft by national special interest groups.


The record of human history is full of examples of the theft of income and wealth from minority groups by majority groups in society. The identifiable characteristic of these groups (e.g. race, religion, language) is sufficient to break the fragile bond of altruism that forms a common bond of humanity. The majority group often preaches racial superiority (e.g. the racial persecutions of the Third Reich and the justification of slavery in America) to further dehumanize the minority group. Therefore in a real sense the resulting theft is predation, because the minority group are no longer considered to be human.

The modern use of discrimination to describe theft from minority groups is I believe unfortunate. Our use of the word "discrimination" incorrectly implies a sadistic behavior directed against another person or group. Lions do not discriminate against antelope; they prey on them for food. Similarly human self-predation is intended by the thief as a self- directed behavior to promote his own prosperity. The hatred associated with human self-predation results from the dilemma of freedom and our emotional conflict between altruism (i.e. the brotherhood of man) and our individual opportunity for prosperity through theft. If we started calling racial discrimination theft and those who practice it as thieves we could force an honest confrontation of our feelings on this issue rather than hide behind the euphemism of discrimination.

Affirmative action and all other blanket class based policies of preferential treatment are simply forms of left wing theft which transfer opportunity or wealth from those who earn and deserve it to those who do not. I do not seek to deny the significant injustices that exist in our society. This book seeks to expose and then remove those injustices. However affirmative action which attempts to force equality of results rather than promoting freedom and the equality of opportunity that goes with it is simply another system of injustice. Like all forms of theft, affirmative action demotivates both those receiving preferential treatment and those denied equal opportunity.

Affirmative action is potentially a very socially destructive form of political theft because it erodes the fragile sense of altruism between identifiable groups in American society. Theft by doctors or lawyers or CEOs erodes America's sense of common interest, but it does not create group antagonism because anybody could be one of these professional thieves. However affirmative action whether based on race, religion, sex or some other characteristic creates a sense of injustice directed at the minority group in the mind of anyone who is victimized by affirmative action. If we are to preserve the altruism of American society, we must find other alternatives to promote equality of opportunity.

Remedial education programs are time proven alternatives to affirmative action. When I was growing up individuals who wished to attend one of the service academies, but who lacked a sufficiently strong high school background to qualify, attended a Prep School to improve their academic skills. While Prep School was no guarantee of college admission, those who had the inherent ability and were strongly motivated usually succeeded. There are currently many business and vocational schools in America which serve this remedial educational function.

5.23 RECOMMENDATION: SUPPORT REMEDIAL EDUCATION AS AN ALTERNATIVE TO AFFIRMATIVE ACTION - Society should both provide additional opportunities and student loans to individuals wishing to improve their educational skills to obtain employment. These programs should be strongly career directed and carefully monitored to weed out students who fail to make satisfactory progress.


Poverty is simply a condition resulting from insufficient net productive effort where net productive effort is defined as gross effort minus losses from human theft or other causes. There are many factors that can cause the condition of poverty either by reducing gross output or by increasing losses. Every human society suffers from the output loss of right wing theft that leaves middle and lower economic groups impoverished. Demotivation of effort due to misguided social systems is another important cause of poverty that affects just about every society including our own. Abundance or lack of natural resources has a strong correlation to national wealth. Likewise the availability of human ability enhancements through education and investment correlate strongly with national wealth. Finally open minded societies that promote both social and technical innovation can expect to be more prosperous.

The only way out of poverty is a job. While all the conditions discussed above influence prosperity, the fundamental requirement for material wealth is productive effort. In a free market the distribution of income is a direct function of society's democratic assessment of the distribution of productive effort. The non-uniform distribution that results even in a free market is due to the non-uniform distribution of both motivation and ability in society.

A fundamental issue for enlightened societies is what steps should be taken to modify the non-uniform free market distribution of income due to variations in productive effort among the member of society. The philosophical nature of this question is given additional impetus by the political power of members of society who find a free market distribution of income to be unacceptable. These members likely include a wide cross section of society ranging from the compassion of the more affluent members of society to the natural human envy of the less affluent members of society.

The response of an enlightened society to the non-uniform distribution of income based on free market productivity involves two issues: 1) How much of national income should be redistributed and 2) how should this be accomplished to minimize the adverse demotivating impacts of income redistribution. Unfortunately any redistribution of income demotivates both those who are the recipients of additional income and those who must continue to create the income that is to redistributed.

The so called "poverty programs" in America suffer both from the lack of a consensus on the magnitude of income redistribution and from a lack of intelligent planning on the methods to be used. The reason for this predicament is that the redistribution of income in America is not the result of a consensus between the donors and the recipients. The redistribution of income in American society is the result of a political power struggle. This power struggle pits the lower income groups and their political allies who receive the redistributed income against substantial segments of the middle and upper income groups who must earn and then "contribute" the redistributed income.

The magnitude and extent of income redistribution programs in America have gotten totally out of hand. These so called "entitlement programs" now consume the largest share of the federal budget and threaten to literally bankrupt both federal, state and local governments. In addition to supporting a wide range of lower income groups in American society, these programs also support an ever growing welfare bureaucracy that manages the redistribution of income to the poor and provides much of the political support for the continual expansion and misdirection of the these programs. Unfortunately this bureaucracy also absorbs a disproportionately large fraction of the funds which society intended to help the poor.

The size and extent of the income redistribution programs in America preclude any resolution by the representative process other than by actual default of the government. Only the American people as a whole through popular initiative have the power and the authority to reach a consensus on this matter which is so vital to our national survival.

5.24 RECOMMENDATION - ESTABLISH A CONSENSUS ON THE PERCENTAGE OF NATIONAL INCOME TO BE REDISTRIBUTED AS A HELPING HAND CONTRIBUTION - The first order of business is to establish by national consensus the magnitude of income redistribution. Like a balanced budget amendment, this consensus would have the healing effect of ending the continual political battle between donors and recipients (or in many cases victims and thieves). This would still leave the political battles over who receives how much, but the total amount would at least be agreed on.

A work incentive program should be instituted to completely replace the current system of income subsidy payments. Any intellectually honest assessment of poverty must conclude that below average motivation is at least as great a factor as below average ability. The present income subsidy programs flaunts this reality with the predictable result that income subsidies only further demotivate the poor from productive efforts. Political pressure from labor unions and elements of the working poor have been a major reason that America chose the income subsidy route. Welfare reduces competition for low paying jobs by reducing the supply of low income labor. However as welfare rolls grow, the working poor with jobs envy those on welfare earning only slightly less. Like a black hole, welfare traps those within and its demotivating effects relentlessly pull more people in. I believe the best way to reverse this black hole of welfare is through a work incentive program. The following recommendation outlines one way such a program might work.

5.25 RECOMMENDATION: INSTITUTE A WORK INCENTIVE PROGRAM - Virtually all existing lower income assistance programs would be replaced by a work incentive program which would subsidize the hourly wage of low income workers. The chart in figure 5.-1 below illustrates how such a system might work. All Americans would compete for jobs in the labor market and workers making less than $8 per hour would receive a work incentive wage bonus. The minimum wage for employers would be reduced to $2 per hour. However those employed at the minimum $2 wage would receive a $3 per hour "helping hand" bonus paid by society for a total of $5 per hour (above the current minimum wage). This wage bonus would decrease at the rate of $0.50 for each dollar of employer paid wages so that the bonus would fall to zero for a wage of $8 per hour.

The work incentive program would be handled for most employers through their current income tax and FICA withholding program. Each employer files Form 941 returns at least monthly and most much more frequently. On the new 941 the employer would list employees' wages paid ( including the wage incentive payments to low income employees) and figure tax and FICA withholding to determine a gross tax liability. However the new 941 would have a line for the wage incentive payments as a credit. The net tax liability would be the difference between the gross tax liability and the wage incentive payments. This would be the amount of deposit due with the return. If this amount was a credit, the bank would credit the employer's account accordingly.

While industrial, commercial and government agencies would be substantial employers of wage incentive employees, increased employment opportunities by private individuals would be a key objective of this program. Since private citizens would be carrying a significant burden of the cost of the wage incentive program through their taxes, they should have the opportunity to benefit from its implementation. The present system discourages private citizen employers. Since the wages private citizens pay are not tax deductible, private citizens must earn $7.25 at a marginal tax rate of 40% so they can pay a worker minimum wage. Citizen employers also are expected to withhold FICA deductions and process W-2 forms and for many the threat of this paperwork alone is overwhelming.

Under the recommended program, the commercial banking system would handle all paperwork for subsidy workers employed by private citizens. Workers would open up a free account at any bank (but only one account). The bank would supply the worker with preprinted multipart forms showing his name and bank account. When the worker did work for a private citizen, the worker would have the citizen fill out and sign the form showing the days and hours worked, the agreed on wage rate and the total wages paid. The citizen would give the worker a check for his wages and keep a copy of the form for his records. The worker would take the check and the form to his bank for deposit. The bank would perform all the necessary payroll calculations and credit the additional incentive payment to the worker's account.

The recommended wage incentive program has many advantages over the present income subsidy approach to providing economic support for low income individuals. The present system discourages work both by offering a subsistence payment for not working and by sharply reducing that payment for any income earned. The wage incentive approach only marginally discourages promotions. A worker making $2/hr (but getting $5/hr) might refuse a promotion to a harder job making $3/hr (but paying $5.50/hr), but he could not refuse to work and still receive income. Families with wage subsidy workers would be encouraged to stay together for economic reasons compared to the present system that encourages the father to leave to allow the mother to collect welfare. This effect alone would do wonders to improve the social conditions of America's inner cities. The wage incentive program would return to the working poor a sense of dignity and control over their own lives that is missing in the welfare state bureaucracy of our present system. A wage incentive system would help reduce the flow of low income people to high cost of living urban areas and instead encourage the flow of business opportunities to more rural lower cost of living areas. Finally a wage incentive program would allow America to find more productive employment for the many people currently employed by the welfare bureaucracy. A work incentive replacement for welfare could return America to a full employment economy based on free market opportunity with "helping hand" assistance to those whose work is less productive than average. The economic and social boost of such a program could be a major factor in our nation's drive to reach an American Renaissance.

Conclusion of Section 5.4 The Rise of Left Wing Theft in American Society