Money and Markets: Essays in Honor of Leland B. Yeager

234 Laurence S. Mossdominant nation not trading with another ethnic nation perform the eliminationistfunction of keeping the smaller Gypsy population essentially segregated from thedominant non-Gypsy population (Schelling 1978: 137–66). The overall size of thetotal population (Gypsy plus non-Gypsy) may be expanding, while the Gypsycohort within the expanding aggregate can be declining. Indeed, the dominantmajority of the population may be prospering at the expense of a downtroddenminority.Hayek’s attention to macroeconomic aggregates and the nation as an “administrativeregion” may have had the unintended effect in his writings of camouflagingthe stark reality of eliminationist prejudice as the members of one ethnic groupbattles or adopts norms and customs that have the (unintended) effect of marginalizingthe members of another ethnic group. When we direct our attention to thenation as a collection of ethnic groups and races, we see that aggregative measuresof regional success mostly disguise the cruelty of the certain types of “abstract rules”on which Hayek placed so much emphasis in his last book (Hayek 1988).As Yeager advises, Hayek’s “empirical-evolutionist outlook” and his remarkableclaim that “institutions and practices may sometimes evolve to be more serviceablethan consciously contrived ones” is not enough to allow us to rule out the need forreforming those institutions and practices when they come into conflict with othernorms that we hold more dearly (Yeager 2001: 9). Surely a distinction must bemade between the historic origins of rules and norms and the evaluation of thosenorms and how these norms have brought about certain consequences. Perhaps nobetter example of this distinction is clearer than the custom of foot-binding inChina among upper-income classes. Traveling merchants wanted to have a failsafeway of keeping their women from wandering too far from the family home. Bydeforming a little girl’s feet through binding and bandaging so they would emergeas truncated stumps by her adolescent years, the merchants were assured of thepurity of any offspring she might someday produce. Dr. Sun Yat-sen finally bannedthe custom in the early twentieth century, and many civil libertarians feel that thisexample of state intervention may have produced more good than harm. And sowe conclude that the LIPD is not a reliable guide to economic welfare, especiallywhen it camouflages institutions and practices that promote eliminationistobjectives and/or cruelty to particular cohorts of the population.And what of Marshall’s claim that parasitic ethnic groups are incapable of independentgreatness and must live off the success of a greater group? Did Marshall laythe groundwork for the campaigns of banishment or extermination of these“parasitic races”? While it is difficult to discern Marshall’s considered opinion fromthe brief textual remarks we cited earlier, Marshall knew how the actual exchangebetween an Armenian money-changer and a non-Armenian borrower is economicallybeneficial to both parties at the time the exchange is carried out.Similarly, the hard labor undertaken by the Chinese immigrants on the westernAmerican railroads (such as the legendary Central Pacific railroad) did contributein a positive way to the development of the transportation infrastructure thatwould help make the non-Chinese population wealthier. 12 Clearly, any law thatwould eliminate, minimize, or banish the “parasitic” money-changers and the