Philosophy and Methodology: Recent Episodes
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Philosophy and Methodology includes the nature of economic knowledge and the proper method for economic inquiry.
Many conservatives, in trying to steer the USA away from "wokeism," fail to understand that their “national greatness” schemes are just as harmful.
Original Article: ""National Greatness" Is Not the Appropriate Response to "Wokeism""
In contrast to the imaginary way that mainstream economists present value, Austrian economists properly use ordinal rankings to determine value.
Original Article: "How People Determine the Value of a Good"
Professor Quinn Slobodian believes that free markets must lead to tyrannical worker exploitation, and socialism is the only solution. In truth, market competition is the answer.
Original Article: "Cracked-Up Slobodian"
David Gordon take a critical look at Markus Gabriel's Moral Progress in Dark Times, and although he finds parts that are disturbing, he also discovers important areas of agreement.
Original Article: "Outside the Universe?"
Featuring Mark Thornton, David Gordon, Jeffrey Herbener, Peter Klein, Sandy Klein, Jonathan Newman, and Joseph Salerno.
Recorded at the Mises Institute in Auburn, Alabama, on July 28, 2023.
Download lecture slides at Mises.org/MU23_PPT_24.
Recorded at the Mises Institute in Auburn, Alabama, on 26 July 2023.
Menger discovered much more than the principle of marginal utility—he created an entire system of economics based on subjective value and individual choice.
Download lecture slides at Mises.org/MU23_PPT_03.
Recorded at the Mises Institute in Auburn, Alabama, on 24 July 2022.
Includes an introduction by Joe Salerno. Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2023.
Patrick Deneen writes that the nonaggression principle promotes a liberalism that is harmful to society, as evidenced by John Stuart Mill's idea of the tyranny of public opinion.
Original Article: "Misreading Mill"
Like so many others in the "national greatness" movement, Christopher Buskirk understands some of the problems the country faces but fails to grasp the solutions.
Original Article: "Don’t Get on the Nationalist Bus"
Noam Chomsky's latest offering—a series of interviews—presents the best (and worst) of one of America's premier public intellectuals.
Original Article: "There's No Place like Noam"
Every day, more and more Americans are awakening to the reality that the institutions in control of this nation are failing them. From violence in the streets, inflation in our stores, increasing tyranny and censorship, and absolute buffoonery on public display in halls of political power. The ruling class is getting richer while most of us suffer, and new generations are becoming increasingly warped by the dangerous ideologies of the left.
Recorded at The Depot Craft Brewery & Distillery in Reno, Nevada on May 20th, 2023.
Austrian economics is defined by its adherence to the a priori methodology, not empiricism. That places it at odds with mainstream economics, which stresses the methodology of positivism.
Original Article: "Austrian Economists and Empiricism"
Philosopher Susan Neiman may be a leftist, but she recognizes the dangers of woke progressivism.
Original Article: "Wisdom from a Yenta"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Some economists have tried to apply psychology to economic analysis, but psychology is not what drives economic activity.
Original Article: "Understanding the Difference between Praxeology and Psychology"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Karl Marx may have been a philosopher or just someone with an opinion. He was not, however, an economist.
Original Article: "Karl Marx Was Not an Economist"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Teaching high schoolers economics means teaching Austrian principles.
Original Article: "The Balfour Declaration"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Progressivism is collectivist, anti-individual, and ultimately destroys civilization itself. Austrian economics stands against this force.
Original Article: "Austrian Economics Stands against the Collectivism of Progressive Thought"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The roots of Austrian economics go back to the great theologian Thomas Aquinas, whose view of what constitutes a good was a prototype of Menger's pathbreaking theory of the good.
Original Article: "Defining a Good: The Intersection of St. Thomas Aquinas and Carl Menger"
This Audio Mises Wire is generously sponsored by Christopher Condon.
While socialists posit socialism as a humane and ethical system, it is anything but that. Mises understood its brutality long before socialism gripped the world.
Original Article: "How Marxism Abuses Ethics and Science to Deceive Its Followers"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It’s impossible to simply declare nationalism itself to be good or bad. Its goodness or badness depends primarily on its effect on existing regimes and state institutions.
Original Article: "Is Nationalism a Good Thing? It Depends."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Featuring Mark Thornton, David Gordon, Jeffrey Herbener, Peter Klein, Jonathan Newman, Shawn Ritenour, and Joseph Salerno. Recorded at the Mises Institute in Auburn, Alabama, on 29 July 2022.
Menger discovered much more than the principle of marginal utility—he created an entire system of economics based on subjective value and individual choice.
Download lecture slides at Mises.org/MU22_PPT_01.
Recorded at the Mises Institute in Auburn, Alabama, on 25 July 2022.
What is libertarian law and how does it function? Ludwig von Mises answered some of those questions and helped chart a path to achieving such a state of affairs.
Original Article: "Libertarian Law by Democratic Means: A Method for Conflict Resolution"
This Audio Mises Wire is generously sponsored by Christopher Condon.
It is hard to explain through evolution how we know any necessary truths. Does this give us reason to abandon necessary truth? Nozick thinks so.
Original Article: "Nozick on Morality and Evolution"
This Audio Mises Wire is generously sponsored by Christopher Condon.
The Keynesians running our economic life may be reassured that the Fed cannot fail in a technical sense, but the public should be appalled.
Original Article: "The Fed Cannot Go Bankrupt; However, It Can Bankrupt the Country"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Once wealthy Argentina has suffered under one interventionist regime after another for nearly a century. What are the prospects for changing things for the better?
Original Article: "Argentina's Difficult Political Landscape and Libertarian Prospects for Change"
This Audio Mises Wire is generously sponsored by Christopher Condon.
More than sixty years after being "liberated" by Fidel Castro and communism, Cuba has become a large slave state where people enjoy little freedom.
Original Article: "More than Sixty Years after "Liberation," Cuba Is a Communist Slave State"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Indian tribe sovereignty has long been a much neglected, yet important, tool in decentralizing and limiting government power in the US.
Original Article: "SCOTUS Attacked Indian Tribe Sovereignty in Castro-Huerta, and That's a Bad Thing."
This Audio Mises Wire is generously sponsored by Christopher Condon.
Since the overturning of Roe v. Wade, pundits on the Left have demanded even more centralization of government. But federalism is the best way forward.
Original Article: "Federalism, Not Centralization, Is the Way out of the Current Conflicts"
This Audio Mises Wire is generously sponsored by Christopher Condon.
People often speak of the Constitution with reverence, as though it were infallible. However, the Constitution was a centralizing document that cast aside the decentralization of the Articles of Confederation.
Original Article: "Is the Constitution a Centralizing or Decentralizing Document?"
This Audio Mises Wire is generously sponsored by Christopher Condon.
"Repealing the twentieth century" sounds like madness to many. Yet the progressivism that came from that century will be the death knell of civilization if not stopped.
Original Article: "Civil Society and Counterrevolution against Progressivism"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Jordan Peterson is turning his eye toward Austrian economics. Unlike the many conservatives who see free market advocacy as some sort of "dangerous fundamentalism," Peterson seems to get it.
Original Article: "Jordan Peterson on Austrian Economics: Free Markets Are 'Profoundly Equitable'"
This Audio Mises Wire is generously sponsored by Christopher Condon.
Recorded at the 2022 Austrian Economics Research Conference hosted at the Mises Institute in Auburn, Alabama, March 18–19, 2022.
The Lou Church Memorial Lecture, sponsored by The Lou Church Foundation. Includes audience question and answer period.
The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.
Sometimes people—even other economists—are incredulous that the Austrians deny the possibility of interpersonal utility comparisons.
Original Article: "Why Austrians Stress Ordinal Utility"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
James Buchanan thought the state was a voluntary institution. Murray Rothbard, on the other hand, understood the reality of state violence and coercion.
Original Article: "Murray Rothbard versus the Public Choice School"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Isn’t a principle of nonaggression against others another way of stating the self-ownership principle? "Not necessarily," says the insightful philosopher Chandran Kukathas.
Original Article: "Is Self-Ownership Necessary?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Some slippery slope arguments are a case of bad reasoning, but those presented by Mises and Hayek are not among them.
Original Article: "Slippery Slope Arguments and Tyranny"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
In my article last week, I talked about Michael Huemer’s notion of “false fallacies.” These are often listed in logic books as bad arguments, but some of them, Huemer suggests, are actually good arguments, at least if suitably modified.
This week, I’d like to talk about another false fallacy, one that Huemer doesn’t include on his list. This is the “slippery slope” fallacy, and at least one version of it really is a case of bad reasoning. Here is a good account of it:
In a slippery slope argument, a course of action is rejected because, with little or no evidence, one insists that it will lead to a chain reaction resulting in an undesirable end or ends. The slippery slope involves an acceptance of a succession of events without direct evidence that this course of events will happen.
Example:…. Today late for ten minutes, tomorrow late for an hour, and then someday you will simply cease to show up.
I’d like to suggest that two arguments resembling slippery slopes are actually good arguments, though they aren’t always dispositive. The first of these is this: “If you have already accepted policy A on certain grounds, then you can’t reasonably object to policy B, which is supported on the same grounds as policy A.” Here is an example that is especially important for us today. In his notorious decision in Buck v. Bell (1927), Justice Oliver Wendell Holmes upheld a compulsory sterilization law, ending his opinion with the famous line: “Three generations of imbeciles are enough.” He supports his ruling with the version of the slippery slope I’m now talking about. He says that if we accept conscription, and also compulsory vaccination as a health measure, we should accept sterilization as well.
Here is the relevant passage from his opinion:
We have seen more than once that the public welfare may call upon the best citizens for their lives. It would be strange if it could not call upon those who already sap the strength of the State for these lesser sacrifices, often not felt to be such by those concerned, in order to prevent our being swamped with incompetence. It is better for all the world if, instead of waiting to execute degenerate offspring for crime or to let them starve for their imbecility, society can prevent those who are manifestly unfit from continuing their kind. The principle that sustains compulsory vaccination is broad enough to cover cutting the Fallopian tubes. Jacobson v. Massachusetts, 197 U. S. 11. Three generations of imbeciles are enough.
Someone in favor of compulsory vaccination and the draft might try to find some way in which sterilization is more of an infringement of rights than the other two measures, but he will have a tough time of it. The true lesson of Holmes’s opinion is that if we reject the draft and sterilization, as most people nowadays do, we should reject compulsory vaccination as well. Rights shouldn’t be lightly cast aside once it is alleged that the public is in danger, all the more so if, as in the corona-19 situation that now confronts us, the efficacy of the remedy is, to say the least, controversial. I pass over in silence the vexed issue of whether emergencies ever justify what would otherwise be rights violations, but clearly, this is an area where we ought to be on our guard.
Another example of the “good” slippery slope argument occurs in Lord Keynes’s letter to Friedrich Hayek about The Road to Serfdom. In the book, Hayek warns that central planning can lead to the destruction of liberty but himself allows a number of welfare state measures, including old age pensions and a minimum income. Keynes says in response:
I come finally to what is really my only serious criticism of the book. You admit here and there that it is a question of knowing where to draw the line. You agree that the line has to be drawn somewhere [between free enterprise and planning], and that the logical extreme is not possible. But you give us no guidance whatever as to where to draw it. In a sense this is shirking the practical issue. It is true that you and I would probably draw it in different places. I should guess that according to my ideas you greatly underestimate the practicability of the middle course. But as soon as you admit that the extreme is not possible, and that a line has to be drawn, you are, on your own argument, done for since you are trying to persuade us that as soon as one moves an inch in the planned direction you are necessarily launched on the slippery path which will lead you in due course over the precipice.
Hayek has some possible responses here. He might say that even if you can’t draw an exact line, you can tell within a reasonable approximation when you have reached the danger zone, just as you can see when someone is bald without knowing the exact number of hairs on someone’s head (if there is such a number) that allows him still to be called “bald.” But even if this response has some merit, we can see that Hayek is in trouble. A defender of the free market should learn from Keynes’s letter not to make concessions to antimarket measures.
I’d like to turn to the other sort of quasi–slippery slope argument that can be accepted. This argument has the form “If you follow policy A aiming to achieve goal G, you will find that A will fail to achieve G. If you still want to achieve G, you will then have to try to eliminate the obstacles that block A from getting to G. But doing this won’t work either, and if you continue the process, you will wind up where you really don’t want to be, or, at any rate, where you shouldn’t want to be.”
A classic example of this argument is Ludwig von Mises’s analysis of price control. If planners who want to make milk available to poor people cheaply impose price controls, the result will be a shortage of milk: sellers will tend to withdraw from the market, and demand for milk will increase. If the government imposes more controls in order to lower costs for sellers of milk, these will fail also, and, if the process continues, we will soon get government control of the entire economy. In contrast to the bad slippery slope argument, the continued bad consequences aren’t posited without evidence. Mises’s point is that the situation that led the planners to act will recur, and he has reasons for saying this.
If someone were to argue that good slippery slope arguments should be rejected because accepting them makes you susceptible to bad slippery slopes, that would itself be a bad slippery slope argument. I trust my readers will not make this mistake, though the febrile imaginations of a few people who comment on my posts should not be underestimated.
Some economists are good at political philosophy as well. Mises and Rothbard of course come to mind, but the good philosophers aren’t confined to Austrian school economists. Amartya Sen and Kenneth Arrow know what they are talking about when it comes to philosophy, agree with them or not. But some eminent economists don’t, and, judging by Nicholas Wapshott’s new book, Samuelson Friedman (Norton, 2021), the most famous American economist of the twentieth century, Paul Samuelson, was not a philosophical giant. The book is a study of the Newsweek columns of Samuelson and Milton Friedman, and Samuelson doesn’t appear to have thought through philosophical issues very deeply. Friedman does much better, but I’m going to be talking only about Samuelson.
One of the clichés of anti–free market thought is the claim that human rights are more important than property rights. This is nonsense; property rights are rights of human beings to property. Samuelson accepts an extreme version of this cliché:
“The rights of property shrink as the rights of man expand,” he wrote. While some suffered because the government intervened in the market, an unfettered market had winners and losers, too, he argued. While the free market suggested that everyone was free to buy what they wanted, there was such a thing as rationing by price, which put many items well beyond the reach of those without the means. The children of those who could not afford good education, for instance, were deprived by the market setting too high a price. The “freedom” of individuals provided by the market was therefore only notional. (p. 80)
Samuelson has confused two different things. Suppose I would like to visit Paris but can’t afford an airplane ticket. I’m unable to do what I want, but no one is using force against me, or threatening to use force, to prevent me from going to Paris. I can’t go because I am unable to meet the price that the owner of the airplane has set for the use of its services. The situation would be quite different if I bought a ticket and government agents forcibly removed me from the plane. Samuelson could counter in this way: the distinction between being unable to do something because doing it requires the consent of someone else, which he declines to give, and to be forcibly prevented from doing something isn’t important. Nevertheless, there is a distinction, and Samuelson for the most part ignores it.
Indeed he soon makes even clearer that he doesn’t understand the distinction. “Samuelson saw prices merely as a means of rationing scarce goods…. Indeed, the deliberate raising and lowering of prices was often a means of guiding human behavior rather than following it. Throwing Friedman’s words back at him, Samuelson wrote, ‘libertarians fail to realize that the price system is, and ought to be, a method of coercion’” (p. 80).
There are, though, some indications that he acknowledges the distinction, but just doesn’t see why coercion, as libertarians understand it, is bad. “And even if ‘coercion’ were the right word, Samuelson believed such compulsion to be way down the list of important issues for economists to be concerned about. ‘The notion that any form of coercion whatever is in itself so evil a thing as to outweigh all other evils is to set up freedom as a monstrous shibboleth,’ he wrote” (p. 86).
In other words, Samuelson is saying that if the state coerces you to make an exchange with someone or taxes you, this isn’t much of a problem. And why not? In an incredible passage, Samuelson gives us his answer. If you exercise your right to freedom, you are coercing those who want you to do things that you refuse to do. “‘My privacy is your loneliness,’ he wrote. ‘My freedom to have privacy is your lack of freedom to have company. Your freedom to “discriminate” is the denial of my freedom to “participate”’” (p. 86).
This passage enables us to resolve a seeming contradiction in what Samuelson says. He first says that there really isn’t a distinction between government coercion and the “coercion” of the price system but then seems to acknowledge there is a distinction, only to dismiss it as not important. The “reconciliation” is that Samuelson takes exercises of freedom to be in conflict with one another in a way that necessarily involves coercion. When he seems to admit a distinction between freedom and coercion, this is merely a slip on his part. He hasn’t thought through consistently his rejection of the distinction.
He falls into another confusion. He conflates freedom with anarchy, taken as the absence of rules. ‘’‘The modern city is crowded. Individualism and anarchy will lead to friction. We now have to coordinate and cooperate,’ Samuelson wrote” (p. 86). He several times gives the example of traffic lights at a crossroads restricting individual freedom. He does not see that if the owner of a road sets rules for its use, this does not coerce people who prefer to ignore these rules.
It will come as no surprise that he likes taxes. “It is not possible for individuals to cut themselves off from society, he argued, and the price of belonging to society was the obligation to pay for common services through taxation…. Taxation, which was an example of how the state coerced free individuals, was to Samuelson the means for a good citizen to pay his debt to society” (p. 85). How we contracted this debt to society he does not bother to explain. Why is more required than individuals who freely associate with one another? Where does “society” come in apart from this? Samuelson does not tell us.
As you would expect, “Samuelson preferred the democratic process over the market. It was fairer, kinder, more civilized” (pp. 87–88). Those who disagree are enemies of civilization who need to be coerced to pay their debt to society. Such is the wisdom of Paul Samuelson.
The philosopher Michael Huemer is usually favorable to the free market, and he is also a strong defender of anarchism. Although I disagree with some of the arguments in his defense of anarchism, The Problem of Political Authority, it is an excellent book.
In a recent blog post, he surprisingly suggests that taxation may in some cases be justified. He offers two examples, Pigouvian taxes on negative externalities and Georgist land taxes. In what follows, I’ll concentrate on the first of these.
He offers the following argument for Pigouvian taxes (named for the Cambridge economist A.C. Pigou).
Sometimes, people do stuff that harms other people, and the people who are harmed don’t consent to the harm. I.e., people “produce negative externalities”, as the economists say….
Example: Pollution. Whenever you drive your car, you release a little bit of pollution into the air, which imposes a tiny expected harm on a huge number of other people and animals, including future generations. I bet you don’t get their consent, either.
On some absolute deontological views, you always need consent before imposing (certain kinds of) harm on others. But that’s impractical. You can’t get the consent of everyone in the world, including the future generations who will be affected by your pollution. So we’d have to say either
(a) “You can’t pollute at all.” This requires shutting down modern civilization. Or
(b) “Pollution isn’t the right kind of harm” (it’s not aggressive, people don’t have rights against pollution, or something like that). But this would mean that it would be fine to completely destroy the atmosphere with pollution (if someone had the ability to do that).
(a) and (b) are both bad. We shouldn’t completely prohibit all pollution, nor should we take no action at all against pollution. While complete destruction of the atmosphere may not be on the table (yet), we would surely have too much pollution if we didn’t do anything at all to polluters.
This point of course applies to other kinds of externalities. If people get to impose negative externalities for free, there will be too many negative externalities. Lots of activities will get done that impose greater total costs than their total benefits. And almost everyone is going to lose out overall from all the negative externalities.
Solution: Pigouvian taxes. These are taxes on externality-producing activities. They’re supposed to be set so that the tax is about equal to the amount of external harm produced by the activity. This deters people from doing the activity, if and only if the total cost created by it exceeds the total benefit. Example: A carbon tax that would approximate to the amount of harm caused by greenhouse gas emissions. This would deter the least economically valuable carbon-emitting activities, while still allowing the most valuable ones.
Huemer now asks, How does this argument justify taxation?
Wait—you can see what the utilitarian rationale is for Pigouvian taxes, but why isn’t it still theft (even if a beneficial theft)? My thinking is that the person creating the negative externality actually owes compensation for doing so. Extracting owed compensation from someone isn’t theft. So this form of taxation isn’t theft. But note that the government would be obligated to use the money collected to actually compensate the people who are harmed by the taxed activity.
I do not think that this argument succeeds. Huemer mentions “absolute deontological” views, which hold that you must get someone’s consent before harming them and suggests this has unacceptable consequences as regards pollution. I don’t deny that’s a possible view, but a more common deontological position is that you can’t violate someone’s rights without his consent. Not every harm counts as a rights violation, at least if you characterize “harming” as “making worse off.” For example, if you are hired for a job that I wanted and would have gotten had you not been chosen, you have harmed me but haven’t violated my rights.
If you adopt the more common deontological position, then the problem Huemer raises does not come up. Pollution from your car requires consent only from those whose rights would be violated by what you do. But hasn’t Huemer already considered and rejected this response? He says that if you hold pollution isn’t aggressive and doesn’t violate rights, then you would have to accept that it would be all right for someone to destroy the atmosphere, if he could do so.
Huemer has wrongly taken for granted an all-or-nothing position, a common failing among libertarians. Either any amount of pollution violates deontological constraints, or none does. But why assume this? The scope of property rights is to an extent conventional within a society, and it is irrational to delimit property rights in either of the ways Huemer indicates. In a classic paper, “Law, Property Rights, and Air Pollution,” Murray Rothbard shows how pollution problems have been dealt with in the common law. Surely this is a better rights-based approach to pollution than either of the views based on rights that Huemer mentions.
Suppose that we adopt the view of pollution rights I suggest. Should we then say that it’s all right for someone to pollute, so long as he compensates those whose rights he violates? That seems wrong; in general, you aren’t at liberty to violate someone’s rights so long as you make him no worse off than before your rights violation. The rights holder usually can demand more than this or refuse consent altogether to the rights violation.
As I mentioned, Huemer has another case in which taxation might be justified. He says,
I think Henry George may be right. Henry George thought that (a) everyone is entitled to the value that they themselves produce, but (b) they’re not entitled in the same way to value produced by nature. If you happen to be the first person to claim some valuable natural object, that doesn’t really give you a greater claim to its value than other people who arrived later.
So when you build a building on some land, you should own the value that you added via your labor. But you don’t have any special claim to the value that the land had prior to your arrival. Instead, George thought, everyone should get an equal portion of the value of all land & natural resources. (We can simplify this to just “land”, since natural resources are generally part of the land.)
Huemer goes on to indicate that a land tax on the “intrinsic value” of the land, paid to those who aren’t using it, can be seen as a form of compensation to the nonusers. I’m not going discuss this further, as the initial Georgist starting point is implausible and Huemer hasn’t argued for it. In the view I take to be correct, which I haven’t argued for either, you initially acquire physical resources, not “value.” The value of what you acquire depends on the preferences of people in society but isn’t itself an acquisition. Further, on Huemer’s assumption that you don’t own the intrinsic value of the land, why does “society” own it in a way that requires compensation for what has been “taken” by the land user?
Huemer’s ingenious arguments leave us where we started: taxation is theft.
Critics of Austrian economics often say that praxeology lacks rigor. Praxeologists rely on imprecise verbal logic that is difficult to assess. Instead, modern neoclassical economics is to a large extent couched in mathematics. The definitions and axioms of the model used are stated exactly, and then theorems can be proved to follow from them. Isn’t the Austrian school behind the times in not availing itself of the modern tools that mathematics provides?
Austrians respond to this that verbal reasoning can be as exact as mathematical, and that there are advantages to avoiding mathematics in economic theory. In particular, the functional equations of mathematics are inadequate to express causal relations. As Murray Rothbard notes,
Mathematics rests on equations, which portray mutual relationships between two or more “functions.” Of themselves, of course, such mathematical procedures are unimportant, since they do not establish causal relationships. They are of the greatest importance in physics, for example, because that science deals with certain observed regularities of motion by particles of matter that we must regard as unmotivated. These particles move according to certain precisely observable, exact, quantitative laws. Mathematics is indispensable in formulating the laws among these variables and in formulating theoretical explanations for the observed phenomena. In human action, the situation is entirely different, if not diametrically opposite. Whereas in physics, causal relations can only be assumed hypothetically and later approximately verified by referring to precise observable regularities, in praxeology we know the causal force at work. This causal force is human action, motivated, purposeful behavior, directed at certain ends. (Man, Economy, and State, with Power and Market, pp. 323–24)
I’d like to offer support for the first of these contentions, that verbal logic can be as exact as mathematics, from a surprising source. Paul Samuelson was a strong critic of Austrian economics; he said, for example, that Austrian “demonstrated preference” is trivial. Further, he is the economist mainly responsible for making mainstream economics mathematical. But in “Economic Theory and Mathematics—An Appraisal” (American Economic Review, 1952), he says: “In principle, mathematics cannot be worse than prose in economic theory; in principle, it certainly cannot be better than prose. For in deepest logic … the two media are strictly identical.”
An article by one of the greatest living mathematicians, Terence Tao, also supports Rothbard’s views, though I hasten to add that I do not know whether Tao has any opinion about the use of mathematics in economics. The article is called “Taking Advantage of the English Language.”
In the article, Tao says:
Mathematical notation is a wonderfully useful tool, and it can be exciting to learn for the first time the meaning of mysterious and arcane symbols such as , , , , etc. However, just because you can write statements in purely mathematical notation doesn’t mean that you necessarily should. In many cases, it is in fact far more informative and readable to use liberal amounts of plain English; if used correctly and thoughtfully, the English language can communicate to the reader on many more levels than a mathematical expression, without sacrificing any precision or rigour. In particular, by subtly modulating the emphasis of one’s text, one can convey valuable contextual cues as to how a statement interacts with the rest of one’s argument.
An example should serve to illustrate this point. Suppose for instance that P and Q are properties that can apply to mathematical objects x and y. The mathematical statement
,
which asserts that x satisfies P and y satisfies Q, is a well-formed and precise mathematical statement. But there are many possible ways one could express that mathematical statement in English, for instance:
P(x) and Q(y) are both true.
P(x) is true. Also, Q(y) is true.
P(x) is true. Furthermore, Q(y) is true.
P(x) is true. Therefore, Q(y) is true….
From the viewpoint of formal mathematical logic, each of these English statements is logically equivalent to the mathematical sentence . However, each of the above English statements also provides additional useful and informative cues for the reader regarding the relative importance, non-triviality, and causal relationship of the component statements P(x) and Q(y), or of the component symbols P, x, Q, and y. For instance, in some of these sentences P(x) and Q(y) are given equal importance (being complementary or somehow in opposition to each other), whereas in others P(x) is only an auxiliary statement whose only purpose is to derive Q(y) (or vice versa), and in yet others, P(x) and Q(y) are deemed to be analogous, even if one is not formally deducible from the other. In some sentences, it is the objects x and y which are indicated to be the primary actors; in other sentences, it is the properties P and Q; and in yet other sentences, it is the combined statements P(x) and Q(y) which are the most central.
Thus we see that English sentences can be considerably more expressive than their formal mathematical counterparts, while still retaining the precision and rigour that mathematical exposition demands. By using such humble English words as "also", "but", "since", etc., a sentence conveys not only its semantic content, but also how it is going to fit in with the rest of one’s argument (or in the wider theory of the subject), giving the reader more insight as to the overall structure of that argument. The paper may become slightly longer because of this, but this is a small price to pay for readability (which is not the same as brevity!) …
Finally, there is one situation in which it does make sense to use the terse language of mathematical notation rather than a more leisurely English equivalent, and that is when you are performing a tedious and standard formal computation. In those cases, the reader should already know in general terms what is going to happen (especially if you flag the computation as being standard beforehand), and will only be distracted by superfluous explanation or digression.
The situation in which Tao says it is appropriate to use mathematical notion is one that does not apply to Austrian economics, which does not involve formal computations. To the contrary, in Austrian theory, the praxeologist is trying to understand each step of the deductions from the action axiom. (See my “Praxeology and Mathematical Logic” for more details on this point.)
Featuring Lucas Engelhardt, David Gordon, Jeffrey Herbener, Peter Klein, Jonathan Newman, Ritenour, and Joseph Salerno. Recorded at the Mises Institute in Auburn, Alabama, on 23 July 2021.
Menger discovered much more than the principle of marginal utility—he created an entire system of economics based on subjective value and individual choice.
Download lecture slides at Mises.org/MU21_PPT_01.
Recorded at the Mises Institute in Auburn, Alabama, on 19 July 2021.
The cognitive dissonance of American academia and journalism is on full display in this survey.
Original Article: "There's a New "Study" Showing 26% of Americans Are Right-Wing Authoritarians. There's Nothing Scientific about It."
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Bob concludes his series on areas where he’s changed his mind. This episode covers the economics of climate change, fractional reserve banking, the US gold standard, his notorious inflation bets, Nelson Nash’s Infinite Banking Concept, and the God of the Bible.
Mentioned in the Episode and Other Links of Interest: Bob’s chapter on the gold standardMises’ plan to put the USD back on goldBob’s blog post, “Why I Know There Is a God"Bob’s full interview on the Free Born podcastThe Foundation of IBC video seriesThe documentary, “This Is Nelson Nash.” For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on Apple Podcasts, Google Podcasts, Stitcher, Spotify, and via RSS.
Professor Roberta Modugno joins the show to finish our look at Rothbard's seminal treatise on normative libertarianism, The Ethics of Liberty. Dr. Modugno elaborates on Rothbard's disagreements with Mises regarding ethical justifications for a free society, and defends his uncompromising views on the nature of the state.
Mentioned in the Episode and Other Links of Interest: Rothbard's The Ethics of LibertyDr. Modugno's Rothbard vs. The PhilosophersDr. Modugno's "How I Discovered Murray Rothbard"
Mises.org editor Ryan McMaken joins the show to tackle some of the toughest and most controversial chapters of Rothbard's groundbreaking treatise The Ethics of Liberty. McMaken and Jeff Deist cover abortion, the rights of children, defamation, and all the "what-ifs" contained in lifeboat situations. They also move into part III of the book, where Rothbard pulls no punches concerning the nature of the state, its internal contradictions, its anarchic relationship to other states, and its inescapable role as predator and parasite. This is a can't-miss episode for anyone who questions the role of government in society.
Mentioned in the Episode and Other Links of Interest: Rothbard's The Ethics of LibertyJeff Deist: "A Tort Law Approach to Fight Big Tech?"Ryan McMaken: How Defamation Suits are Used to Stifle Free Speech
Mises: "The experience with which the sciences of human action have to deal is always an experience of complex phenomena. No laboratory experiments can be performed with regard to human action."
Original Article: "Why Economic Models Can't Provide a Realistic Picture of Human Behavior"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
ABSTRACT: Isaiah Berlin made the distinction between negative liberty and positive liberty. Since then, prominent contemporary philosophers including Charles Taylor and Martha Nussbaum have declared negative liberty insufficient or incoherent. This is a critique of those declarations, which have been unduly accepted to a large extent. The critique primarily focuses on Taylor, who made the most direct and complete argument against negative liberty. His argument is shown to be ineffective. And further, his conception of positive liberty is shown to be incoherent.
Keywords: negative liberty, positive liberty, isaiah berlin, martha nussbaum, charles taylor
Stuart Doyle (stuartdoyle1@gmail.com) is in the US Marine Corps and holds a M.S. degree in criminology from the University of Pennsylvania.
Many conceptions of freedom have been formulated over the centuries. As Isaiah Berlin (1969, 4) pointed out, there are two basic contrasting categories into which most of these conceptions may be seen to fit: theories of negative liberty and theories of positive liberty. Negative theories define freedom exclusively in terms of the independence of the individual from interference by others. Lockean theories are prominent examples. In contrast, the positive theories contend that freedom resides at least in part in collective control over common life toward some positive goal. Theories descending from Rousseau exemplify this category.
In the decades since negative and positive liberty were clearly delineated, the most lauded contemporary philosophers, such as Charles Taylor and Martha Nussbaum, have categorically denounced all concepts of negative liberty. In an essay titled, “What’s Wrong with Negative Liberty,” Taylor argues that a negative definition of freedom cannot be adequate and that we should understand freedom as a positive ability to fulfil our purposes. Nussbaum has not dedicated an entire writing to the topic per se, but in her book Creating Capabilities she declares the idea of negative liberty to be “incoherent” (Nussbaum 2011, 65). Though she does not form an argument in support of this claim, I bring it up only to emphasize a blind spot needing attention. Denouncing negative liberty seems to have become so fashionable that when it is done in a work of philosophy apparently no substantiating argument is needed. This is a strange state of affairs considering that the best arguments which have been made against negative liberty are severely defective. I see Taylor’s essay as the most prominent example. So, my goal here is to show that Taylor’s conception of freedom is incoherent. After we briefly observe the conspicuous absence of Nussbaum’s argument, I will address Taylor’s argument, which seems to have made philosophers comfortable in dismissing negative liberty out of hand.
Nussbaum writes:
Fundamental rights are only words unless and until they are made real by government action. The very idea of “negative liberty,” often heard in this connection, is an incoherent idea: all liberties are positive, meaning liberties to do or to be something; and all require the inhibition of interference by others. This is a point that must be emphasized particularly in the United States, where people sometimes imagine that government does its job best when it is inactive. (Nussbaum 2011, 65)
After this claim about negative liberty being incoherent, the passage reads with the cadence of justification, as if the next clause gave reason to believe the claim, but it does not. It merely endorses the antithesis: positive liberty. We are supposed to just see the incoherence of negative liberty once it has been gestured at. But counterexamples come too easily for that. From the Bill of Rights: “The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated… Excessive bail shall not be required, nor excessive fines imposed, nor cruel and unusual punishments inflicted” (U.S. Const., amend. IV and VIII). It would take significant rhetorical writhing to rephrase these as positive freedoms. Rather than freedom from search and seizure, would it be freedom to privacy? How does one “do” privacy except by simply not being searched? Maybe one could construct a satisfactory positive reformulation of these freedoms, but it would certainly be ugly and inelegant compared to the easy coherence of the negative formulations.
So a quick bit of examination shows that on a topic of monumental importance, Nussbaum has made a strong assertion, which is not self-evident and is not justified by any subsequent reasoning. But, to my knowledge, this has been widely accepted as exemplary work in philosophy. Maybe certain arguments against negative liberty have silently become consensus, so that we can all now just assume that negative liberty is wrong. But such a consensus would be premature. The arguments against negative liberty have not been so effective. I will now show that the vanguard essay attacking negative liberty, Taylor’s “What’s Wrong with Negative Liberty,” fails completely.
Taylor’s argument is as follows. We care more about some freedoms than we do about other freedoms. For example, we care about freedom of religion more than we care about the freedom we lose at a traffic light. And there must be some reason that different freedoms have different importance. According to Taylor, freedoms get their differing importance from the differing importance of the purposes they serve (Taylor 1979, 217). Thus purpose is said to be inexorably tied to freedom. And purposes are positive things, which we can fail to fulfill, even if the government does not set up any obstacles that would hold us back from their fulfillment. Taylor writes of how internal obstacles such as our own baser desires or fears can prevent us from fulfilling our important purposes (ibid., 215). Since those purposes are supposedly necessarily tied to freedom itself, our own baser desires and fears make us unfree when they foil the fulfilment of our important purposes. And so, by Taylor’s reckoning, freedom necessarily entails positively overcoming our own baser desires and fears and fulfilling our important positive purposes. Like Nussbaum’s assertion, Taylor’s claim is not merely that some positive liberties should exist, but that no negative liberty can ever coherently exist. Taylor opens the possibility that a government which is supposed to guarantee freedom may be required to structure society in a certain way that would enable us to positively fulfill our purposes. But he leaves this application an open question.
Taylor’s argument goes wrong in its crude taxonomy of freedoms. He contrasts the nature of the freedom we lose at traffic lights to the nature of freedom of religion (Taylor 1979, 218). He means to show that the two kinds of freedom differ in quality, nor merely in quantity. He needs to establish the notion that there are differing inherent levels of importance in freedoms in order to establish the notion that freedoms vary in qualitative kind, which he needs in order to argue that the different freedoms serve different positive purposes. Some freedoms do seem more important than others. But in order to establish difference in quality, Taylor must rule out difference in quantity as the relevant variable. To do this, he compares crude counts of freedom. He says that many people only practice their religion once per week, while many people lose freedom at red lights multiple times per day. Thus by Taylor’s count, traffic lights are a quantitatively greater loss of freedom than the loss of religious freedom. But since our care is greater for loss of religious freedom, the difference must be qualitative, not quantitative, by Taylor’s reasoning.
This crude accounting fails to notice that freedom of religion is a collection of many freedoms. Religion can be totalizing. Imagine a country which required us all to be Amish. This would entail loss of freedom of transportation, communication, hairstyle, clothing style, profession, education, and artistic expression, to name a few. All of these freedoms would be lost at all hours of every day. Most religions even require that certain types of thought be practiced or avoided at all times. Likewise, a mirrored loss of many freedoms is suffered by those who very much wish to be Amish where it is prohibited. By looking just a little more closely at the rough bucket of classification called “religion,” Taylor’s analysis starts to crumble; loss of religious freedom entails a much greater sheer quantity of lost freedom than does the imposition of multiple daily stoplights. Even the agnostic or the casual practitioner who attends worship once per week or less fears the loss of religious freedom because of the potential for totalization. Freedom of religion has at times been thought not so important; communist revolutions sometimes preceded with a popular lack of concern for freedom of religion. From the later stages of such cases, many of us have gained an appreciation of the potential for totalization when freedom of religion is lost. These days, many of our judgments are affected by fears of potential totalization, as they should be. Freedom of religion always includes a huge quantity of freedoms for some people, and its loss always includes the potential loss of a huge quantity of freedoms for everyone.
So, to make a more valid comparison between freedom of religion and traffic light freedom we should imagine a quantitatively totalizing traffic light. Suppose you had to wait for a red light to change before you took each step, or before you moved any part of your body in any direction at all. And suppose that rather than thirty seconds, the light could remain red for an hour, or a day. It is easy to imagine a red light that would make Taylor beg to give up his freedom of religion if he could just be free of waiting at the red light. Simple quantity changes everything. If red lights were a category that we knew to have realistic potential for quantitative totalization, we could easily care more about freedom from red lights than we care about freedom of religion.
This means that Taylor has not ruled out quantity as the important variable in his example as he needed to. He has not given us any reason to believe that different freedoms get their legitimacy from different purposes, and so he has not made an effective argument for positive purposes being intrinsic to freedom. Not only does Taylor’s argument fail, but the positive freedom which he goes on to describe is incoherent.
I mentioned that Taylor focuses on how our freedom could supposedly be foiled by our own baser desires and fears. His conception of positive freedom describes the times when we overcome those undesirable desires: we have more important and less important desires. For Taylor, to be free means that we must act in accordance with our more important desires. He says that “we can speak of freedom or its absence without strain” in this sense (Taylor 1979, 221). But normally acting in accordance with one’s more important desires is called discipline or will power. And when labeled as such, it seems normal to say that freedom means being free to exercise discipline or not. We can certainly “speak of freedom or its absence without strain” in this sense too. But Taylor’s view of freedom necessarily entails not being free to exercise or not exercise discipline. There seems to be a contradiction, but it gets worse. Taylor’s positive freedom demands that we always act righteously. He at first seems to allow leeway by individualizing our important purposes and desires; each person’s self-actualization may be different. But Taylor needs to show that some of our desires are more significant than others. And once he has elevated our significant desires to the status of “import-attributing” (Taylor 1979, 226), he cannot allow the individual to be trusted with deciding which of his desires are important, for he could easily get it wrong. As an example of getting it wrong, Taylor offers the case of Charles Manson, who had long-term desires and purposes which imparted a sensation of importance. He had a sense of fundamental purpose (Taylor 1979, 227). Clearly, Taylor and I agree that Manson’s sense of purpose was wrong. But for Taylor this implies that Manson was not free, because he could not act in accordance with his true significant purpose. And Taylor’s point here is that, for all we know, any one of us could be like Manson: incorrect about our true significant purposes. So none of us are to be the arbiter of our own right purpose. The standard of rightness must necessarily be external to the individual if Taylor’s point is to mean anything at all. So, in order to be free at any moment, we must act righteously, as determined by some externally imposed standard. This turns freedom into its opposite; freedom cannot mean strict compulsion to act in a prescribed way.
We can easily say that Charles Manson was wrong in his desires and perceived purpose. And we can agree that each of us has certain purposes we should try to fulfil. But these evaluations are just not part of freedom. I have not ruled out that a government could be right in instituting some kind of promotion of righteous virtue, which would promote the fulfilment of good purposes. But this would likely be a tradeoff with a loss of freedom. Desirable values can conflict in such tradeoffs. When conflicting values such as freedom and righteousness are mashed together into a single concept, the conflict becomes a self-conflicting incoherence, like Taylor’s positive freedom. Being free includes being free to act in a less than perfectly righteous, honorable, or self-actualizing way. Otherwise, freedom entails a single, extrinsically prescribed course of action, which is a nonsensical idea of freedom. Taylor’s conception of positive freedom contradicts itself, and his argument against negative freedom fails. If this is the kind of position on offer from the critics of negative liberty, then assertions such as Nussbaum’s are wildly unfounded. This is a simple critique, without any full theory offered as an alternative, but it is an absolutely necessary step toward identifying or constructing a better theory of freedom.
ABSTRACT: In this article the nature of private property rights in Nigeria is analyzed and a case is made for basing property rights in natural rights libertarian political philosophy. The issues of land and natural resource ownership and control in Nigeria are analyzed from a Rothbardian point of view. A Rothbardian framework of property ownership options is proposed and used. It is shown that neglect in the protection of property and the frequent abuse of property rights by the Nigerian government is the major reason for poverty in the country. Hence, using examples, a case is made for the reduction and possible elimination of government intervention in the ownership and control of land and natural resources within the Nigerian polity.
Keywords: nigeria, property rights, natural rights, political philosophy, murray rothbard, natural resources
Tam Alex (talex@africanliberty.org) is a senior fellow at African Liberty and the cofounder of the Nigerian Libertarian Project (NLP). He also publishes Nigeopolis, an online magazine dedicated to advocating for the absolute right of Nigerians to life, liberty, and property.
INTRODUCTION In Nigeria, the presence of government intervention and regulation is an everyday fact of life. Although there is a general belief that it is the government’s responsibility to provide food, water, shelter, education, and many other things, it provides none of those things in the quantity or quality demanded (Olayiwola, Adeleye, and Ogunshakin 2005; Bello-Schunemann and Porter 2017; and Ukanwah 2018). Public schools are decrepit, roads are in bad condition and in many parts of the country are nonexistent, government hospitals and clinics are littered with the macabre, and city waste systems are cesspools of diseases waiting to inflict the next epidemic on the people (Efe 2013). In short, the Nigerian government provides hardly anything of value to increase the standard of living of its people.
Not only does the government not provide public services to the people, but it also heavily regulates and restricts the market economy. Whenever people try to provide these basic services themselves, heavy licensing fees, high taxes, and embargoes are placed on them. To even use a car radio, in some states, one needs a radio permit.Andrella Teroso, “Radio and Television Licence Fees in Lagos,” Legit, June 7, 2016, https://www.legit.ng/1173790-radio-television-licence-fees-lagos.html.
Price controls of commodities such as electricity and petroleum products are common. This leads to shortages in those products for the people (Ogunleye 2017; Petroleum Act 1969, 2004). Although estimates show that the demand for electricity in the country is over 290,000 megawatts, installed capacity is about twelve thousand megawatts and less than 50 percent of this capacity has ever been available (Sambo 2008; Power Africa 2018). Government oil refineries are not operational, hence Nigeria, though one of the world’s largest producers of oil, is still very dependent on the importation of refined petroleum products.
Even with all this, Nigerians are resilient and have taken their destinies into their own hands by providing many of these goods and services for themselves. They generally do this by staying away from the heavily regulated and unfair formal economy. In some cases, at the risk of their lives and freedom, they participate in dangerous black markets, just to improve their standard of living.
Today Nigerians provide themselves with septic tanks, for disposal of human waste; water boreholes, for their running water needs, and power generators, to provide the electricity needed for comfort and economic activities. Where feasible, especially within their local communities, Nigerians have even built their own roads and gutters.
In this article, property rights in Nigeria are analyzed in the natural rights libertarian tradition as propounded by economist and libertarian political philosopher Murray Rothbard ([1973] 2006). It is shown that the reason why Nigeria has been called the poverty capital of the world is the government’s lack of protection of Nigerians’ private property. If the Nigerian government respected the rights of its citizens to the material resources they have “mixed” their labor with and their right to transfer their property titles by exchange to whomever they wish, the Nigerian people would not be in poverty. Hence, it is argued that people’s right to property should be recognized and immune from government depredation.
POVERTY AND THE NIGERIAN ECONOMY In 2014 Nigeria became the largest economy in Africa after the Nigerian National Bureau of Statistics (NBS) announced that it had, through a process called “rebasing,” changed how it calculated the country’s gross domestic product (GDP). This process of rebasing led to an 89 percent increase in the country’s GDP (Awojobi, Ayakpat, and Adisa 2014). Overnight, Nigeria became the twenty-first largest economy in the world but nothing fundamentally changed about the economic situation in the country. One journalist called it “a miracle borne of statistics” (U. Friedman 2014). A former US ambassador to Nigeria called it a “a matter of politics and not economics” (Campbell 2014).
A 2018 World Poverty Clock report showed that Nigeria had the most people in extreme poverty (World Data Lab 2019). With almost 90 million people in poverty, in 2018 Nigeria was also called the poverty capital of the world (Kazeem 2018).
A Poverty Work Program report by the World Bank (2016) on Nigeria stated, “Although it is one of the most rapidly growing economies in the Sub-Saharan African region, Nigeria is struggling to translate the growth into quick poverty reduction.” The report gave three causes for this unresponsiveness: it blamed the rise in population, the unresponsiveness of employment to growth, and widening inequality.
This article argues that the rise of poverty in Nigeria, even with an average economic growth rate of 6.8 percent over the last decade (Ajakaiye et al. 2016), is due to a weak adherence to private property rights. In Nigeria, the government forcibly displaces entire communities in land-grab exercises, blatantly disregarding the property rights of its citizens and leaving thousands of people homeless in some cases. Hence, the reasons given by the World Bank (2016) study do not get to the heart of the problem and do not really help anyone understand the reasons behind the failure of so-called economic growth in Nigeria to relieve its poverty.
NATURAL RIGHTS LIBERTARIANISM Economist and political philosopher Murray Rothbard stipulates that the libertarian creed rests on the “nonaggression axiom.” Aggression he defined as “the initiation of the use or threat of physical violence against the person or property of anyone else.” Hence, it is synonymous to invasion. Rothbard showed that for people to engage and realize their full potential they need to be able to lead a life free from aggression. That is, they must be able to use their lives and property however they see fit (Rothbard [1973] 2006). This axiom is arrived at through the theory of natural law, on which libertarianism rests.
Natural law theory rests on the insight that we live in a world of more than one—in fact, a vast number—of entities, and that each entity has distinct and specific properties, a distinct “nature,” which can be investigated by man’s reason, by his sense perception and mental faculties. Copper has a distinct nature and behaves in a certain way, and so do iron, salt, etc. The species man, therefore, has a specifiable nature, as does the world around him and the ways of interaction between them.
To put it with undue brevity, the activity of each inorganic and organic entity is determined by its own nature and by the nature of the other entities with which it comes in contact. Specifically, while the behavior of plants and at least the lower animals is determined by their biological nature or perhaps by their “instincts,” the nature of man is such that each individual person must, in order to act, choose his own ends and employ his own means in order to attain them. Possessing no automatic instincts, each man must learn about himself and the world, use his mind to select values, learn about cause and effect, and act purposively to maintain himself and advance his life. Since men can think, feel, evaluate, and act only as individuals, it becomes vitally necessary for each man’s survival and prosperity that he be free to learn, choose, develop his faculties, and act upon his knowledge and values. This is the necessary path of human nature; to interfere with and cripple this process by using violence goes profoundly against what is necessary by man’s nature for his life and prosperity. Violent interference with a man’s learning and choices is therefore profoundly “antihuman”; it violates the natural law of man’s needs. (Rothbard [1973] 2006, 32–33)
Rothbard summarizes the natural rights foundation of the libertarian creed as follows:
(1) the absolute right of every man to the ownership of his own body [i.e., self-ownership]; (2) the equally absolute right to own and therefore to control the material resources he has found and transformed; and (3) therefore, the absolute right to exchange or give away the ownership to such titles to whoever is willing to exchange or receive them. (Rothbard [1973] 2006, 85)
For the right to self-ownership, there is, in general, little contention on who should own a person’s self—that person.Though most people would endorse the principle of self-ownership, in practice the state forcibly drafts people into the military and/or for jury duty. This is arguably a violation of self-ownership. However, serious contention arises over control and ownership of the resources found in nature. Human beings are born into their environment and they must use the means (land, labor, and capital) which they find in their environment to attain their ends (Rothbard [1962, 1970] 2009). These “means” must be owned and controlled by some person or some entity. Rothbard ([1973] 2006) presents three possible scenarios for the right to self-ownership and the right to own the land and resources found in it:
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The original transformer of the resource or land from the original state it was left in by nature or God, or the person who brought it into production by mixing his labor with the land should own and control it.
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Another person or group of persons should own and control the land or resource that has already been transformed or brought into production by the original transformer.
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Everyone in the world has a quota or equal share in the land or resources—this is the communal solution.
In this article, these scenarios will be referred to as Rothbard’s options for ownership of property and the terms option one, option two, and option three will be used to refer to Rothbard’s options.
As Rothbard shows, option three is impossible in practice. Take the example of Nigeria’s oil reserves. Can any one of Nigeria’s 200 million citizens take their share of their country’s natural gas resources and sell it at will? No. Therefore option three becomes option two. A small handful of people will own and control the land and resources in the country. Where is the justice in this? What gives them the right to take ownership and control the fruit of someone else’s labor, if indeed they did not bring the resources or land into production? In fact, option two is what the members of the Nigerian government have implemented. And this is one of the main problems preventing economic development in Nigeria. The only just alternative to the current system is option one.
PROPERTY RIGHTS IN NIGERIA Property is the lifeblood of a society. And private property is the only known way to ensure the successful allocation of resources within an economy, or otherwise stated, to ensure that everyone gets what they demand in quantity and quality with little or no shortages or wastage.
Nigeria’s 1978 Land Use Act grants ownership of all land “comprised in the territory of each State in the Federation” to the government. The urban areas are to be under the control and management of the state governors—except those vested in the federal government or its agencies—and non-urban areas are to be managed by the local governments. All land is to be held in “trust and administered for the use and common benefit of all Nigerians.”
Ordinary Nigerians can only gain access to the land through a certificate of occupancy (C of O), given by the governor. The governors of the states have the power to give land to whomever they see fit and can decide what a specific plot land should be used for. Although, in general, Nigerians own their persons, as slavery is a crime under the 1999 Constitution of the Federal Republic of Nigeria, they cannot claim unequivocal ownership over the land they live on, which they may have gotten through purchase, homesteading, or as a gift.
Based on the libertarian theory of property, the Nigerian government is not respecting Nigerians’ fundamental right to their property by stipulating that it owns and controls all Nigerian land. They violate property rights further by stating that Nigerians can only use the land by acquiring a “statutory right of occupancy” as granted by a state governor or local government chairpersons for a tenure of ninety-nine years.Land Use Act (1978). Hence, Nigerians are not truly free, since they cannot fully own or transfer the fruits of their labor in land.
If anyone homesteads unused land in Nigeria, they must register that land with the necessary authorities. However, in many cases, a piece of unused land may not yet be designated for use, which is the government’s prerogative. Hence, if someone goes to an unused piece of land, clears the bush, builds a fence, and erects buildings, in essence homesteads this piece of land, the government can take that land away sometime in the future if that area has been designated for something else, such as a business district. Such a person would be evicted without compensation (Agboola and Jinadu 1997). This has happened so many times. The government has destroyed the wealth accumulated by many Nigerans who invested their labor in the land and resources they found, creating value for themselves in the process (Agboola and Jinadu 1997).
People only have the power to create and protect wealth when they have inviolable rights to property, which as we shall see, is an extension of their persons. Rothbard describes it this way:
A man … can acquire “wealth”—a stock of useful capital or consumer goods—either by “producing” it himself, or by selling to its producer some other product in exchange. The exchange process reduces logically back to original production. Such production is a process by which a man “mixes his labor with the soil”—finding and transforming land resources or, in such cases as a teacher or writer, by producing and selling one’s own labor services directly. Put another way: since all production of capital goods reduces ultimately back to the original factors of land and labor, all production reduces back either to labor services or to finding new and virgin land and putting it into production by means of labor energy. A man may also obtain wealth voluntarily in another way: through gifts. (Rothbard 1998, 37)
Without private property, especially in the means of production—like land—it is difficult to efficiently allocate scarce resources. Without it, no exchange can happen, and without exchange, people cannot place a value on the property to be exchanged, hence monetary prices on property cannot be established; and without a price system, effective allocation of scarce resources is impossible. Without the allocation of scarce resources to the parts of the economy that need them the most, waste and shortages arise, plunging people into untold suffering (Mises [1920] 1990). By severely limiting rights to property ownership, the Nigerian government robs its people of the opportunity to build and access an efficient system of resource allocation.
HOW NIGERIANS THRIVE DESPITE GOVERNMENT DEPREDATIONS Nigerians have altogether disregarded the government and have decided, as they rightly should, to take their destiny into their own hands by providing for themselves the goods and services they need to raise their standards of living. The government, in some cases, has made it illegal for Nigerians to engage in certain activities, such as owning and mining natural resources, without a permit or license. People are not able to own the natural resources discovered on their lands or the lands their ancestors have lived on for many generations. And when the people decide to engage in mining and processing natural resources on the land that is rightfully theirs according to the natural rights theory of property, the government kills, maims, or imprisons them.
In this section the status of private property rights in two key inputs of Nigeria’s economy—land and natural resources—is examined, and specifically the extent to which Nigerians have thrived despite government depredations. In some cases, they have been successful; in others they have not. I present this in a “problem” and “solution” format.
Land Rights, Ownership, and the Illegal Transfer of Wealth
Problem
Land ownership has been hotly contested in Nigeria since the nation’s conception, especially in its urban areas (Okafor and Nwike 2016). Every act, policy, or law governing the ownership and control of land in Nigeria refers to unused land—that is, land still in the way nature left it—as the property of everyone. However, it is mandated to be administered (i.e., controlled) by government officials. For this reason, Nigeria’s system of land ownership more accurately reflects Rothbard’s second option to ownership of property than it does the third, as is commonly argued.
In urban areas the eviction of indigenous communities and slum dwellers has become commonplace (Agboola and Jinadu 1997). State and federal governments kick these people off the land they mixed their labor with. The reasons given for evicting these people and demolishing their homes largely cite concerns over unsafe and unsanitary conditions due to the overcrowding characteristic of these settlements. But in the rare case that the government relocates the displaced people, they are put in locations worse than the ones from which they were removed. Their evacuated lands are then used to develop multimillion-dollar residential and commercial properties. This was the case with the Maroko settlement eviction of July 1990, which left over three hundred thousand people displaced from their homes (Agboola and Jinadu 1997). Table 1 shows some examples of displacements of people by Nigerian governments.
Table 1: Evictions of citizens by Nigerian governmentsThis is based on the exchange rate of 1 US dollar to 9 naira in 1990 according to the US Department of the Treasury Financial Management Service. The conversion rate as of 2020 is 1 US dollar to 387.93 naira.
Source: Data from Agboola and Jinadu (1997, 274). The case of the people of Otodo Gbame, a fishing community in Lagos State, provides another example of the Nigerian government’s abuse of property rights. Located on the edge of the lagoon on the Lekki Axis, this land contained homes, boats, and other community structures. These people set up communities along the coast of Lagos. By all indications, these people met the land in its natural state, and through the mixing of their labor with it, assumed ownership of the land; that is, it became their property. In 2016, the governor of Lagos State announced plans to demolish waterfront communities within the state. This led a nonprofit to help the community members get a court injunction against the demolition of their community. The Lagos State government blatantly disobeyed the injunction and went on with the decimation of the community. The powerful, wealthy, and politically connected laid claim to the land. Hence, the people had to be evicted (Adegbeye 2017).
The question is, what gives the wealthy, politically connected family the right to the land they had never brought into use? Nothing but aggression, personified in the state government. Aggression is the antithesis of the libertarian principle. Here we see that when the state claims to make ownership in land equal to everyone, they end up either taking control of it themselves or giving such control to their cronies.
Solution
Part of the solutions to poverty in developing countries is private ownership of property. Development economist P.T. Bauer, referring to developing countries, stated that “[e]mergence from poverty requires effort, firmly established private property rights, and productive investment” (Bauer 2000). When people come into ownership of land through the fruits of their labor, they can exchange it with other parties for whatever commodity they choose and be better off.
In Nigeria’s rural communities, the 1978 Land Use Act is completely ignored. In these remote areas, where property values are low, individuals commonly purchase and sell land and conduct commerce using land with little or no disturbance from the government. As Okafor and Nwike (2016, 14) point out, “the land use Act provides that ‘all lands in rural areas, be under the control and management of the Local Government, within the area of jurisdiction of which the land [is] situated,’ which implies that there will be no more open market transaction, yet this is still in practice in the area.”
But in urban communities, where the value of land is at a premium due to the concentration of population and economic activities, property rights to land are less secure. In rural areas, Nigerians enjoy a system of de facto private property ownership, because the government does not interfere with lands of lesser value. Had the Otodo Gbame community enjoyed the same absence of government interference, they could have completely changed their economic prospects by selling their land at market value to the current developers of Periwinkle Estate, the multimillion project that was built on their land. According to a report from Amnesty International, “A plot of land in the Periwinkle estate sells for between NGN45 million and NGN200 million (US$124,710–US$554,269)” (Amnesty International 2017).
Natural Resource Ownership and the Illegal Transfer of Wealth
The Nigerian physical geography is endowed with natural resources (Adeoye 2016). But why has this not turned into prosperity for the average Nigerian? Some cite the “resource curse,” (Auty 1993). Some studies have even attempted to show a relationship between a natural abundance in resources and low economic growth (Sachs and Warner 1995). One thing that the literature on the resource curse fails to point out is that in countries where private property in natural resources exists, and the rights in these resources are clear and secure, economic development has been possible and the resource curse has never been an issue.
Problem
Nigeria is a major producer of oil. Revenues from oil, mostly through joint ventures with international oil companies (IOCs) and a few local oil companies (LOCs), are a major part of the government’s revenue—41.7 percent in 2018 (BudgIT 2018). According to section 44(3) of the 1999 constitution, all natural resources within the Nigerian geographic domain are owned by the federal government:
[T]he entire property in and control of all minerals, mineral oils and natural gas in[,] under or upon any land in Nigeria or in, under or upon the territorial waters and the Exclusive Economic Zone of Nigeria shall vest in the Government of the Federation and shall be managed in such manner as may be prescribed by the National Assembly.
The government gives licenses to the IOCs and LOCs to explore and exploit petroleum resources. There are two major problems here.
First, these resources are found in communities that have been homesteaded by the people. Hence, the government, according to the libertarian theory of property, has no right to give away these people’s property. But it does, and, yet again, we see a system thought to fit Rothbard’s third option devolving into his second option.
Second, since the natural resources remains government owned, IOCs and LOCs have no incentive to consider the long-term capital value of the assets in their resource management schemes. Instead, they place heavier emphasis on short-term profits from exploiting the asset (Rothbard 2006). Also, since the land and natural resources are controlled by government officials who do not “own” the resources, it is not in their economic interest to protect the capital value of the resources either. Thus, natural gas, which is a by-product of oil production, is allowed to be flared off and wasted, polluting the air rather than being exploited as a resource (Udok and Akpan 2017).
The oil companies exploit these resources with reckless abandon, leaving environmental destruction in their wake. Meanwhile, the people, deprived of their rights to exploit or benefit from the resources found on their land, are left in environments made unlivable by oil spillage and the deposition of other petroleum waste products. Over 2 million barrels of oil were spilled between 1976 and 1996 (Ajide and Isaac 2013). And the flaring of gas in the Niger Delta, where most of the petroleum in Nigeria is exploited, has led to increased incidence of respiratory diseases like asthma and bronchitis among nearby populations (ERA and FOE 2009).
In addition to environmental degradation and disease, government misappropriation of so-called communal lands has resulted in political unrest and violent encounters between the oil companies and members of the communities affected by their activities. Militant groups within the communities have destroyed drilling and exploration assets. In fact, some especially frustrated community members have gone so far as to risk their own lives to reclaim the resources drawn from their lands. Oil poachers hack at pipelines to harvest crude oil, which they refine in makeshift refineries and then sell in domestic and in some cases foreign markets. This is extremely dangerous work. Not only must such people evade government security agents, but they must be cautious lest the waste product—gas—ignite, engulfing them all in an inferno (W. Ross 2012). In response, the Nigerian government has carried out brutal military crackdowns to suppress these uprisings. With all these dangers, the benefit of these activities still outweighs the cost, as the Niger Delta, though the country’s fountain of wealth, is one of the country’s poorest and least developed regions (Ukaga, Ukiwo, and Ibaba 2012).
Successive Nigerian governments, basing the ownership of petroleum on Rothbard’s option 3 and attempting to utilize the revenue from it to increase the standard of living for all Nigerians, have failed to reduce poverty and instead have enriched themselves and their supporters. Nigerian historian Max Siollun illustrates this trend, describing the Nigerian oil boom, which resulted from the Arab embargo in the 1970s:
The influx of petrodollars into government coffers also amplified both the Nigerian government and people’s developmental ambition…. The FMG [federal military government] proved ineffective at managing the wealth, and was unable to use it to significantly increase Nigerians’ living standards. Although the oil boom created a tiny coterie of powerful economic oligarchs and [a] patronage system amongst senior military officers, their families and their civilian associates, living conditions for the rest of the population either remained stagnant or deteriorated. This created the paradox of a rich country with poor people. Gowon [the head of state] described the problem as “want in the midst of plenty” and observed that Nigeria’s problem was not lack of money, but how to effectively spend its sudden new found wealth.
Civil perceptions that Nigeria was “rich” also made the population impatient for the oil boom wealth to trickle down to the society at large. In an attempt to distribute federal wealth to workers, the FMG in January 1975 decided to award public sector employees massive pay rises exceeding 100%….
The increased spending power of public sector workers led traders to increase their prices, fueling inflation and wiping out the economic benefits the pay rises were intended to create. Private sector workers then went on strike to demand pay rises for themselves. (Siollun 2009)
This situation has remained fundamentally unchanged. Only a handful of Nigerians, usually those with cozy relations with the government officials who control these resources, have benefited from the nation’s oil wealth. For example, between 1970 and 1999 the Nigerian government generated about $231 billion from oil, or $1,900 for every man, woman and child in that same period (M. L. Ross 2003). But according to the World Bank, most of Nigeria’s oil wealth is siphoned off by 1 percent of the population (Junger 2007). This is either done through blatant criminal activity in the form of missing oil tankers, falsified bills of ladings (B/L), and bogus contracts between international oil companies and government officials (Katsouris and Sayne 2013). A 2016 Oxfam briefing paper stated that “[c]onditions written into the contracts of international oil companies requiring them to partner with local companies have been exploited by corrupt political elites who have created shell companies to capture a slice of the rewards” (Hardoon, Ayele, and Fuentes-Nieva 2016). Here, again, Rothbard’s second option is at play.
Solution
Many environmental advocates have said that the government needs to hold the oil companies accountable for the environmental degradation they cause, as oil spillage has destroyed local fishing and farming communities (Lugard 2016). They try to separate property, human, and environmental rights. But this misses the point. Not only are environmental and human rights property rights, but when anything of value is owned by everybody, it is owned in reality by no one and will come under the control of a handful of people who are able to use the threat or force of violence to cement their control, which eventually leads to the misuse and abuse of that thing of value. Those who eventually get to control these things of value that are supposed to belong to everyone are usually those in government and those in their patronage networks.
The injustices of Nigeria’s petroleum industry reveal the inherent enmeshment of human rights, property rights, and environmental rights. While government ownership of valuable oil sources has led to poverty, waste, pollution, and disease, the application of private property to Nigeria’s petroleum industry would bring an end to these issues.
The reason why there is pollution in the air, waters, and land is that there is little private ownership of those resources (D. Friedman 1973). There is extensive pollution of the lands in oil-producing communities in the Niger Delta, because there is little private ownership of those lands. Discussing this issue more generally, economist David Friedman puts it this way:
If the pollution were done to something that belonged to someone, the owner would permit it only if the polluter were willing to pay him more than the damage done. If the polluters themselves owned the property they were polluting, it would pay them to stop if the damage they did were greater than the cost of avoiding it; few of us want to dump our garbage on our own front lawns. (D. Friedman 1973)
A good example would be the case of the Audubon Society, a private nature conservancy that purchases and manages ecologically important wildlife and wilderness preserves, such as the Paul J. Rainey Wildlife Sanctuary. The Rainey Wildlife Sanctuary is a 26,800-acre marshland which is “home for deer, armadillo, muskrat, otter, mink and more than 50,000 snow geese … also is the site of a number of oil and gas wells, and provides grazing land for private cattle herds” (Baden 1986). Why would an organization like the Audubon allow oil and gas wells on their lands? Are they not worried about environmental pollution caused by the oil and gas exploration and exploitation?
Because the land is privately owned, the owners benefit from the natural resources found on and in the land through royalty checks—over $25 million—from the oil companies that exploit the petroleum resources on the land. The oil companies have an incentive to take the utmost precaution when exploiting the resources; they have an incentive not to destroy the land, because they want to be allowed access to the oil and gas that they intend to sell. They know that if they polluted the land the Audubon would not only expel them from their property but could also sue them for damages. This is a win-win situation. Audubon and the oil companies both benefit from this relationship. The Audubon, the owners of the land, have an incentive to protect the environmental integrity of the land but also an opportunity to benefit from the economic value of the natural resources on it, and they are in full control of their property. Hence, there is no environmental pollution and there is an economic benefit for the owners of the land. All this is possible because the Rainey Wildlife Sanctuary is privately owned and the Audubon’s property rights to the Wildlife Sanctuary are secure (Baetjer 2017).
The simple solution to poverty and environmental pollution in the Niger Delta, and all other places in Nigeria where other natural resources can be found, is the establishment and protection of private property in the lands and what nature has left in, on, or above them. If this occurred, IOCs and LOCs would be able to cut deals with the oil-producing local communities in the Niger Delta with little to no interference from the government. These communities would benefit directly from the billions of dollars in oil revenue, and poverty for them would be a thing of the past. For example, the IOCs and LOCs could lease the land directly from the communities and agree to pay royalties at an agreed amount. The structure of these contracts would be left to the communities and the companies. As shown above, many of these communities have traditional structures for land use and tenure that they could extend to the IOCs and LOCs during exploration rights negotiations. The IOCs and LOCs would also have an incentive to be careful as they exploit the oil resources, because they would understand that if they do not, they could be kicked off the land. These companies currently enjoy protection from the government irrespective of the damage they do to the land. They would also be incentivized to employ locals, first for unskilled and semiskilled labor and eventually, after the necessary training and education, in skilled positions. Hiring locals does not just cost less than hiring expatriates but locals also understand cultural nuances that may be difficult for expatriates to grasp.
This is Rothbard option 1 in the ownership of land.
A WAY FORWARD For the Rothbardian libertarian, calling for the abolishment of the Nigerian government would not be out of bounds. And it should not be. The Nigerian government is the entity that acquires its revenue through physical coercion through taxation or through the misappropriation of revenue from the exploitation of natural resources. It has the compulsory monopoly of force and is the ultimate decision-maker within the territorial area called Nigeria. The goal should be to create a Nigerian society in which there is no apparatus of coercion that preys on the lives and property of Nigerians.
We now know where we are and where we need to be, hence we what we need is a plan to transition from having an all-encompassing Leviathan government to having little to no government, or a government, as Henry L. Mencken put it, “which barely escapes being no government at all.” This makes the development of a strategic framework important. Rothbard (1977) thought deeply about the importance of being strategic in bringing about libertarian change, asking, “[N]ow that we know the nature of our social goal, how in the world do we get there?” He went on to quote a 1976 unpublished white paper on the Massachusetts libertarian movement to buttress his point about the importance of strategy in bringing about our goal:
[A] strategic framework may be viewed as performing a function similar to the function of the price mechanism within the economic system: the allocation of scarce resources among competing goals. In other words, strategy enables a political movement to undertake a systematic and explicit ordering of priorities which in turn enables the movement to allocate its scarce human and financial resources in the most efficient manner possible. (qtd. in Rothbard 1977, 1)
We have looked at how the Nigerian government, as a result of suppressing private property, especially for land and natural resources, has caused avoidable suffering for its citizens. To ensure the prosperity, peace, and economic development of Nigerians, a strategy is needed that involves Nigerians considering what the role of government, if it any, should be.
Building a Libertarian Movement
There is an important need to build a movement to bring about libertarian social change in Nigeria, where the tenets of liberty and private property are the order of the day. The movement would spread libertarian ideas into mainstream political discourse in Nigeria. According to Rothbard, “ideas do not spread and advance by themselves, in a social vacuum; they must be adopted and spread by people, people who must be convinced of and committed to the progress of liberty… this means that liberty can only advance by means of developing a libertarian movement” (Rothbard 1977, 2).
Once a full movement has taken root the need for a political party would potentially become inevitable. Political parties in Nigeria are fronts for acquiring power and are ideologically decrepit. Though Nigeria has a multiparty system, only two political parties dominate Nigerian politics. Thus far, the other parties have not been able to put forth a formidable third-party candidate (Kazeem 2019). Nigerians are looking for an alternative, and only a party with a consistent ideology can provide that. It is time for a libertarian party of Nigeria.
Libertarianism Is Nigerian
The Nigerian political elite could lay spurious accusations of “Western imperialism” at the feet the movement. These accusations usually claim that African, and more specifically Nigerian, cultures are collective in nature and that private property in land and natural resources is un-African, therefore un-Nigerian. This is false. Ghanaian economist George Ayittey showed that factors of production could be privately owned in many indigenous African societies and communities (Ayittey 2006). Ayittey stated:
In indigenous Africa, all the factors of production were owned by the natives or extended families, not by their rulers, the chiefs, or by tribal governments. Feudalism was not commonplace in Africa, except in Abyssinia (Ethiopia). That means, in popular language, that the means of production were privately owned. The hunting spears, fishing nets, cattle, pots, huts, farm produce, fish, textile looms, gold jewelry shops, and various tools and products were all privately owned. (Ayittey 2006, 322)
Specifically, of land and natural resources Ayittey writes:
Land was widely and erroneously regarded by the experts as “communally owned.” This confusion arose … from … improper interpretation. Whereas the American could say, “This land belongs to me”—the individual being the basic social and economic unit—the African would say, “This land belongs to us”—the “us” connoting the extended family. Unfortunately, early Europeans in Africa misinterpreted the “us” to mean the entire village or tribe…. A river “belonged to all,” but a dam across the river was private property. Once someone applied his labor to something, it became a personal property. The same attitude was extended to land. Once a family settled on an unoccupied piece of land and farmed it, it became theirs. (Ayittey 2006, 322–23)
As can be seen, once someone “mixed his labor” with the land or natural resources and transformed it from the state nature left it in, it became private property. This is in harmony with Rothbardian libertarian tradition.
An old proverb of the Yoruba people of Nigeria goes thus, “Teni n Teni, takisa n taa tan,” which could be loosely translated as, “Whatever is yours is yours; regardless, you shouldn’t despise your brother because he is at the bottom of the barrel.” Hence, while private property was important mutual aid and voluntary charity were also important. Stakeholders of the movement must consistently drive home the idea that the tenets of libertarianism are Nigerian.
Consensual Government
Finally, part of the strategic framework should involve informing the Nigerian people that without their consent the government cannot oppress them.
The nineteenth-century French economist Frédéric Bastiat stated:
It is not because men have made laws, that personality, liberty, and property exist. On the contrary, it is because personality, liberty, and property exist beforehand, that men make laws. What, then, is law? As I have said elsewhere, it is the collective organization of the individual right to lawful defense. Nature, or rather God, has bestowed upon every one of us the right to defend his person, his liberty, and his property, since these are the three constituent or preserving elements of life; elements, each of which is rendered complete by the others, and that cannot be understood without them. For what are our faculties, but the extension of our personality? And what is property, but an extension of our faculties? If every man has the right of defending, even by force, his person, his liberty, and his property, a number of men have the right to combine together to extend, to organize a common force to provide regularly for this defense. (Bastiat [1850] 2007)
Hence, the protection of life, liberty, and property should be the bare minimum that Nigerians should accept from their government. Not one that preys on those who gave it the right to exist.
This also is consistent with the writings of John Locke:
To understand political power right, and derive it from its original, we must consider, what state all men are naturally in, and that is, a state of perfect freedom to order their actions, and dispose of their possessions and persons, as they think fit, within the bounds of the law of nature, without asking leave, or depending upon the will of any other man. (Locke [1690] 1980)
Therefore, if ever the government did more than the bare minimum of protecting the life, liberty, and property of its people or became destructive to those who instituted it, it would become incumbent on the people to abolish or disregard it altogether.
CONCLUSION Nigerians are already disregarding the government in many ways. They enter the market to provide security and judicial services for themselves. They pay private security guards to protect their homes and property. They buy and sell important, but heavily regulated, commodities like petroleum products and electricity on the black market, at the risk of their lives. They avoid the overly regulated formal economy to do business. Soon the costs of doing business in black and informal markets will outweigh its benefits due to its inefficiencies in the allocation of resources. When this occurs, Nigerians will decide that enough is enough and demand admittance to the formal economy with the condition of limited government interference in it, by any means necessary. The period of militancy in the Niger Delta and the recent clamor for the secession of the southeastern part of the country are just symptoms (Akpan, Nwokah, and Andem 2018). It would be wise for the government and its officials to relent before it gets to that point.
ABSTRACT: This article wrestles with the issue of when is it justified to accept money from government. The case is made that it is indeed almost always justified to do so. But not for everyone.
Keywords: libertarianism, ethics, theft, taxation
Jonathan Gress (jonathan.gress@lpmaryland.org) is an independent scholar. Walter Block (wblock@loyno.edu) is the Harold E. Wirth Eminent Scholar Endowed Chair in Economics at Loyola University and senior fellow at the Mises Institute. The authors are grateful to a referee of this journal whose comments on an earlier draft of this paper enabled them to greatly improve it. The usual caveats of course always apply.
THE ETHICS OF TAKING GOVERNMENT MONEY It has been argued by libertarians, who else, that it is ethical for libertarians to accept government money,For example, working for government organizations for a salary, availing oneself of social security, farm subsidies, etc. on the ground that it is better for libertarians to have the money than the state.Block (1972, 2002, 2004a, 2006, 2007, 2008, 2009, 2010, 2011a, 2011b, 2011c, 2011d, 2012, 2016c); Block and Arakaky (2008); and Block and Barnett (2008). Libertarians are likely to use the money specifically to undermine state power, such as by donating to libertarian organizations. Even if libertarians do not use the money specifically to attack the state, spending on personal consumption is presumably a better use of the funds than whatever crimes the government was in the process of committing with them.
Can we extend this approach to the question of nonlibertarians using government money? After all, if it is better for libertarians to spend stolen wealth on themselves than for the state to keep that wealth for other purposes, it is better for anyone to spend that wealth on themselves than for the state to keep it. On grounds like these, one can even argue against immigration control; for instance, even if public property belongs to the taxpayers, it is better if immigrants come in and take it than if the government is allowed to keep control of it.For the case in favor of open borders, see Block (1983, [1983] 2008, 1988, 1990, 1998, 2004b, 2011e, 2011f, 2013, 2016a, 2016b, 2017, 2018); Block and Brekus (2019); Block and Callahan (2003); Deist (2018); and Gregory and Block (2007).
Of course, this approach has its limits. Benefiting from stolen wealth is legitimate for the victims of the criminal state (the taxpayers), and it may also be legitimate for nonmembers of the state who are not themselves victims (e.g., immigrants who are not taxpayers), but it surely cannot be legitimate for the criminals themselves. It is not permissible for top members of the government to spend stolen wealth on personal consumption, as they are part of the criminal apparatus itself and such spending itself constitutes a crime.
But can we be certain of this assertion? Would it be a crime if Bill Clinton spent his pension on a yacht? Or is it simply that he owes restitution as a key member of the criminal enterprise, with his spending choices being relatively immaterial to the case against him? We answer as follows. Surely, there is nothing improper about yachts, per se. To the degree that he earned the money to pay for this good properly, there can be no objection. However, to the extent that the wealth emanates from improper sources, it would not matter one whit on what he spent it; he should be compelled to at least return the stolen money to its proper owners.
To resolve such issues, we rely on ruling class analysis to distinguish the criminals from the noncriminals. In the view of Rothbard (2004):
All States are governed by a ruling class that is a minority of the population, and which subsists as a parasitic and exploitative burden upon the rest of society. Since its rule is exploitative and parasitic, the State must purchase the alliance of a group of “Court Intellectuals,” whose task is to bamboozle the public into accepting and celebrating the rule of its particular State. The Court Intellectuals have their work cut out for them. In exchange for their continuing work of apologetics and bamboozlement, the Court Intellectuals win their place as junior partners in the power, prestige, and loot extracted by the State apparatus from the deluded public. The noble task of Revisionism is to de-bamboozle: to penetrate the fog of lies and deception of the State and its Court Intellectuals, and to present to the public the true history of the motivation, the nature, and the consequences of State activity. By working past the fog of State deception to penetrate to the truth, to the reality behind the false appearances, the Revisionist works to delegitimize, to de-sanctify, the State in the eyes of the previously deceived public.For more on this, see Block (2006); Burris (2012); Domhoff (1967, 1971, 1998); Donaldson and Poynting (2007); Hoppe (1990); Hughes (1977); Kolko (1963); Mises (1978); Oppenheimer ([1914] 1975); Raico (1977); Rockwell (2001); and Rothbard (2004).
For example, a janitor cleaning the bathroom in Congress is taking government money in wages and is even performing a service for the government, but it would be a stretch to consider him part of the ruling class. His power over the criminal organization that is the state is almost nonexistent, so his responsibility for their crimes is likewise almost nonexistent. The Congressmen passing the oppressive taxes and laws who use the bathroom, on the other hand, are clearly very much part of the ruling class. The janitor is justified in taking his salary but not the Congressmen in taking theirs, unless they are libertarian heroes like Ron Paul who used their office to speak out against the evils of government and vote against every unconstitutional law or spending proposal.Block (2012); Paul (1981, 1983a, 1983b, [1984] 2004, [1987] 2007, 1990, 1991, 2000, 2002a, 2002b, 2003, 2004a, 2007, 2008a, 2008b, 2009, 2011, 2013); Paul, Haddad, and Marsh (2008); Paul and Lehrman (1982); Rangel and Paul (2006); and Upton and Paul (2005). As the Ron Paul exception shows, our ruling class analysis treats every individual differently and evaluates their membership in the ruling class based on the work they do for or against the government and its crimes.
THE ETHICS OF SPENDING GOVERNMENT MONEY If it is a virtue to take government money, as we maintain, it seems to follow that it is ethical for the government to spend money, and if it is more virtuous to take more government money rather than less, it seems to follow that it is more virtuous for the government to increase government spending than to decrease it. Of course, this conclusion seems rather paradoxical for a libertarian; libertarians normally support only decreases in public spending.
We acknowledge that our call for taking government money as a virtue sounds counterintuitive to the libertarian ear.Our referee makes this point. This, of course, is distinct from merely being just or permissible. It is permissible for Jones to take the best available course of action while it is not necessarily a virtue to do so. But we stand by this claim. Given that government is evil,Rothbard (1977) calls “the existing American State or the State per se, … a predatory gang of robbers, enslavers, and murderers. See also Chodorov (1962). the less money it has, the better. Well, ceteris paribus, the more money people take from the state, the less it will have. Doing so, then, is not merely a good course of action to take, but over the call of duty; to wit: a virtue. QED.
However, if we return to our original argument, we see that the benefit of spending government money does not lie in the spending itself but rather in the fact that statist funds are thereby diverted from even worse uses. That is, we want to put the stolen funds to the best possible use, given their dire circumstances. So while the best use of all for government funds is to return them forthwith to the taxpayers (along with appropriate compensation for the crime of theft), if this isn’t possible, it is still betterBy “better” we mean preferable from a libertarian point of view, more compatible with libertarianism. for the government to spend its money on libertarians than on nonlibertarians, or on nonlibertarian, non–ruling class members than on ruling class members.
When it comes to evaluating government spending policies, then, we do not necessarily reject or endorse the spending plans out of hand, but instead consider the alternatives. Does the spending increase necessitate a rise in taxing or borrowing? If it does, we must reject it, regardless of how noble the cause. Thus, if the government suddenly decided to spend a million dollars a year on the Mises Institute, but would have to fund this subsidy out of a new bond issue, no libertarian in good conscience could support this. On the other hand, if this subsidy were to come out of the existing budget and necessitate a spending decrease in some other area that causes more economic harm, like corn subsidies, we would favor it as the best use of the stolen funds, given the alternatives.
Extending this analysis, we oppose an increase in corn subsidies if, say, it came out of the public budget for the Libertarian Party’s election campaign, but we would support it if it reduced the budget for the DEA, whose job almost entirely consists of physically assaulting and threatening people for nonviolent drug “crimes.” If the increased subsidies had to be funded by a tax hike, on the other hand, this would clearly be incompatible with libertarian theory.We acknowledge gray areas and continuums. On this see Block and Barnett (2008).
The proviso that spending increases in certain areas be compensated by decreases in other areas is highly important. In practice, it means that libertarians must oppose mostIbid. boosts in government expenditures, simply for the reason that they do not come with any guarantee that no new taxes will be imposed, or new borrowing carried out, to pay for them. Without such an assurance, libertarians are ill advised to endorse any spending increase, even on an ostensibly praiseworthy cause like a Rothbardian economics professorship at a public university. However, once the professorship is granted, a Rothbardian economist would not be doing anything wrong by taking the position and using it to teach sound libertarian ethics and economics, simply because the likely alternative is that the government would abolish the position and use the same funds to more nefarious ends (such as a chair in Keynesian or Marxist economics).
One of the three main heroes in Rand (1957) was Ragnar Danneskjold. This character was a “pirate” (scare quotes around this word since piracy typically applies to criminals who prey on innocent ship owners). Ragnar was entirely different. He, instead, stole, or, rather, liberated money and other possessions from government ships. True, he did so in order to return funds to Hank Reardon, perhaps the fourth most important character in this magnificent novel. This brings us to a new point. Suppose Danneskjold had not used the proceeds of his “piracy” to benefit victims of government as he did. Nor, we presume, that any of these monies had been forcibly taken from him or his parents. Would his actions have then been unjust? We claim not. Nor would any other bilked taxpayer have the right to demand from him part of these funds. His reply to them would be simple: Go and liberate your own money from the state apparatus. Why should I do that for you? There are no positive rights, such as your right to take money of which I justifiably deprived the government.See fn. 1, op. cit.
So far we have discussed the ethics of public spending as it relates to spending increases; now we must apply ourselves to decreases. We have previously seen that a libertarian can support a rise in public expenditure on some items provided that it comes out of the existing budget (i.e., does not necessitate upsurges in taxes, borrowing, or inflation) and provided that the boost serves to divert state funds from other areas that are more harmful. Thus, it is better for the government to spend on libertarians than on nonlibertarians, and on ordinary people than on members of the ruling class; it is also more libertarian for the government to direct its resources on providing goods and services that do not of themselves violate the nonaggression principle rather than on violations of that principle (welfare is better than warfare).
What, now, of proposed decreases in public spending? The same principles apply, but in reverse. Thus, libertarians welcome any proposed decrease in public spending if we know it will also lead to a decrease in taxes or borrowing. If we have no reason to think that taxation will be affected, however, we might want to consider what will be done with the money. If the state is proposing to end public funding of Libertarian political campaigns in order to shore up their budget for the statist indoctrination program known as public schools, we would have good reason to balk at this and to push for keeping the current budgetary allocation. Or if they are intending to ax food stamp benefits merely in order to expand their nuclear arsenal, we would also be wary.
Just as we have a built-in bias against any proposed increased in public spending, though, on the grounds that the state rarely keeps a promise to avoid jacking up taxes or borrowing more private money, libertarians likewise incline in the direction of any reduction in public spending. The less the government spends, the more public pressure it may feel to follow this by lowering taxes. Reduced outlays on benefits and welfare have an additional benefit of making the public less dependent on the state and more likely to support further decreases in its power. In order to oppose the cut, we would have to be reasonably sure that it would have no effect on the total budget and would only lead to spending increases in more harmful areas.
CONCLUSION The standard libertarian opposition to public spending can be reconciled with the position that taking government money is not itself a crime.We do not advocate breaking the law as did Ragnar Danneskjold. Rather, our focus here is on receiving state funds through programs such as Medicare and Social Security and on being employed by the public sector. As with everything else in human action, we are faced with a choice and must decide on the better course of action given the set of options. Taking government money is not a crime in the libertarian philosophy, because it does not violate the nonaggression principle. From a utilitarian point of view, this act will do more harm to the state than not doing so. Ditto, paradoxically, for the nonlibertarian welfare queens, but not for members of the ruling class who are most likely to directly benefit the state. For a ruling class member such as George W. Bush, it would probably have been better if he had not accepted his government salary; his ability to wage war and other evil deeds would have been reduced to the extent that he would not have been able to support himself during his presidency. What about the fact that many academics vote for the government to spend money and occupy college or university positions in which they receive some of that money? Is this justified in our view? Of course not. Such scholars are in effect part of the state apparatus, or at least in league with it. Ditto for leftish movie stars who brag about donating money to the government over and above what they owe in the form of taxation. Likewise, the choice to spend government money may or may not be a crime, depending on whether it leads to more theft from taxpayers or rather to less funds available for other, worse projects.
ABSTRACT: This essay aims to introduce the Austrian community to the metaphysical principles of political life first discovered by Aristotle and subsequently clarified by Thomas Aquinas. I begin by contrasting the Aristotelian perspective on social cooperation to that of mainstream post-Cartesian political philosophy with its emphasis on willful consent. I then describe the Aristotelian notion of the common good as the metaphysical principle of political life. From the existence of a diversity of political communities, I demonstrate that that each community needs to have a political authority. I then briefly examine the political ideas of Mises and Rothbard in light of the foregoing, noting where they are compatible with and where they diverge from Aristotelian-Thomistic politics. Finally, I offer some take-home considerations showing how Aristotelian political principles can bring a fresh perspective on issues of concern to the Austrian community, namely, an opposition to the “welfare-warfare state.”
Keywords: Aristotle, metaphysics, political philosophy, austrian economics Michel Accad (draccad@draccad.com), MD, is a physician in San Francisco.
This essay aims to introduce the Austrian community to the metaphysical principles of political life first discovered by Aristotle and subsequently clarified by Thomas Aquinas. This introduction will hopefully provide the reader with an alternative framework of political philosophy which is radically different from the political liberalism of the last three hundred years yet compatible with the principles and methods on which the edifice of Austrian school economics is built. As a preamble, however, I wish to briefly highlight the points of commonality between Aristotle’s general scientific approach and that taken by the Austrians in their economic theory. As Smith (1990) and Gordon (1994) have noted, there is a strong Aristotelian influence on the development of Austrian economics that goes back to Carl Menger and that has implicitly informed the thought of Ludwig von Mises and his followers, even if Mises himself was unaware of that influence.
We can identify distinctly Aristotelian principles in the economic thought of the Austrian school. First is causal realism. The Austrians—if not explicitly, at least implicitly—seem to agree with Aristotle that there is a mind-independent reality, an extramental world accessible via the senses and intelligible to the human mind. For the Austrians, as for Aristotle, cause and effect relationships are real and discoverable through the proper use of reason. Like Aristotle, the Austrians trust in the general reliability of sense knowledge and in the conformity of reason to reality. Because of this, they have been able to elaborate an economic science in systematic fashion, starting from first principles. Such was the approach taken by Menger and later followed by Mises and Murray N. Rothbard in the establishment of Austrian economics.
Second, having no qualms about interpreting human action as teleological, the Austrian school has separated itself from the mainstream of modern philosophy and science and has been criticized for being a throwback to Scholasticism. It is easy to see why: Mises’s idea that humans act in order “to satisfy a felt uneasiness” brings to mind the Scholastic dictum that every agent acts for an end and, more generally, Aristotle’s notion that humans are self-perfecting beings actualizing their active potencies. Teleological realism is a critically important Aristotelian principle and also a foundational concept in Austrian economics.This statement must be qualified given that there is, at least in Mises’s writings, an ambivalence about teleological realism. That ambivalence will be taken up later in this essay.
Despite these points of commonality, there is an important difference between the general philosophical approach taken by Aristotle and the method of Austrian economics—at least as formalized by Mises. Mises insisted in sharply separating the study of human action and the physical sciences by the so-called methodological dualism (Mises 1998, 17). This separation makes perfect sense insofar as the physical sciences, as practiced in modern times, rest on mechanistic presuppositions which are seemingly incompatible with teleology. For Aristotle, however, such a methodological separation would seem unnecessary and counterproductive, as it uproots man from his greater cosmological context: a natural world which is also pervaded with teleology and governed by fundamental principles that also apply to human action. As we shall now see, it is in the domain of political philosophy that this divergence is most consequential.
HUMAN REASON AND SOCIAL COOPERATION A major difference between the Aristotelian or Scholastic world view, on the one hand, and the modern liberal world view, on the other, concerns the emphasis that modern philosophers typically place on man’s power of reason. In the aftermath of the mind-body dualism introduced by René Descartes, post-Cartesian political philosophers have, by and large, considered an action to be a human action if it involves the exercise of man’s rational capacities. Following Thomas Hobbes, they have tended to discount nonrational action as being merely animal and mechanistic. It is the will of man which is the prime consideration.
Modern political theories have generally focused on the willful consent of the individual as a principle of cooperation in human society: a society is human, because its individual members have consented to living together in certain ways and for certain reasons. The diversity of modern political theories, then, stems from divergences of views about what it is that the individual is (or should be) consenting to and what the reasons are that inform his consent.
For Aristotle, however, man is a unitary being. When Aristotle remarks that man is a rational animal, he does not emphasize man’s rationality at the expense of his animality even though, of course, the power of reason is man’s highest faculty and is unique to him. Human nature, for Aristotle, is at once animal and rational. So, while most modern political philosophers acknowledge that man is entirely dependent on social cooperation, man’s dependence on others is, for Aristotle, part of his nature. This means that man’s social character is as much a part of his animality as it is of his rationality.
Like other social animals, man depends on the specialized work of other members of his species to satisfy his essential needs for food, shelter, safety, the care of the young, and the maintenance of the species. Therefore, man is dependent on the division of labor in much the same way that the bee is dependent on it. Human social cooperation per se need not, in Aristotle’s view, invoke principles other than those at work in the animal kingdom.
Where man’s rationality comes into play, of course, is in regard to the particular character that the human society takes: it is because of man’s power of speech, his ability to reason about means and ends, and his capacity to make moral judgments, that human societies acquire their unique structures which are fitting for the perfection of a rational animal. Still, it is not man’s rationality that is the cause of his being a social being.
For Aristotle, the utter dependence of man on social cooperation and on the division of labor means that in a formal sense, a society of men must be prior to the individual even if, in a material sense, the individual must be prior to society. There can be no individual man without a society, and there can be no society without individual men. The coincident and mutual causality between the two is in keeping with other Aristotelian metaphysical principles, such as the mutual and coincident causality of act and potency that explains being and becoming.
Aristotle will not get distracted by mechanistic or evolutionary questions about how the world came to be that way. For some animal species, sociality is an unambiguous part of their nature. We do not ask ourselves: “How do individual ants come to form a colony?” The ant species is simply “colony forming.” Likewise, we shouldn’t bother asking ourselves how individual men and women come to form human societies. Man is a social animal. If the individual man is radically dependent on social cooperation and on the division of labor, then nature must somehow “supply” society along with man. The causal principle by which Aristotle explains such a cooperation will be clarified next.
THE ARISTOTELIAN COMMON GOOD If man’s reason is not the cause of social cooperation, what accounts for the existence of societies? As a causal realist, Aristotle will not settle for brute facts. The existence of societies must be explained, and their principles deduced through careful reasoning. Although even a modest review of Aristotelian metaphysics is clearly beyond the scope of this paper, I will attempt to introduce here some of the concepts that are relevant to political theory.
The Nature of Things
In the ancient Aristotelian-Scholastic cosmology—rejected by Descartes and the Enlightenment philosophers—each existing thing has a nature, an intrinsic principle of motion, incumbent upon a thing’s essence. A cat behaves as a cat because of the cat’s nature, and likewise a rosebush and a human being. Each is a living organism, and each behaves in a certain way in accordance with its essence. Even a stone is, by nature, inclined to move “to the center” of the universe, that is, the center of the earth.It is tempting to completely discard Aristotelian cosmology as outmoded, but the reader should be mindful that Einstein’s theory of general relativity, while not endorsing the ancient cosmology, can rehabilitate the concept of natural motion in inanimate matter. This view is to be contrasted with the atomistic world view—ancient or modern—whereby material beings are mechanical. Under that framework, movement comes not from within but is imparted by external forces of nature, which move parts in a mechanical way.
Descartes famously believed that all animals are mere automatons whose purposeful movement is an illusion. He made an exception for man, whom he endowed with a separate soul that controls the purely mechanical body. This “ghost in the machine” view still pervades the popular imagination but also much of modern social and political philosophy, at least to the extent mentioned earlier: if human nature is to be considered, it is considered only in so far as it consists of willful actions. The modern political philosopher has generally remained agnostic or ambivalent about how man’s embodied rationality relates to the realm of causes and effects, which rule the rest of the natural world. And, after Charles Darwin, he may even deny that there is such a thing as a human nature, viewing man’s actions as simply the mechanical products of a mindless historical process of evolution.
The Good of Things
If we accept the ancient realist’s position that natural things are endowed with their own intrinsic nature and that such a nature is a principle of motion, causing the individual to act in certain ways, Aristotle points out that the actions of living things are intelligible precisely because they are directed toward recognizable ends.
As we noted earlier, the dictum is: every agent acts for an end. The rosebush digs roots for the end of fetching water and nutrients. It develops leaves for the end of catching sunlight. The cat snuggles in the blanket for the end of getting warm. In the Aristotelian world view, teleology pervades the natural world and is not confined to the conscious willfulness of man.
Focusing our attention on that which the agent pursues, we come to our concept of interest: the good. A good is what elicits an inclination or a desire in a subject. If a subject acts upon the inclination elicited by a good, then that good specifies the end, or final cause, of the action, i.e., “that for the sake of which” the action is done.
For a rosebush, water and minerals in the soil are goods, and the sunlight in the surrounding space is a good: the rosebush digs roots for the sake of obtaining water and minerals, and it develops green leaves for the sake of catching the surrounding sunlight. For a cat, a serving of cat food, a blanket in winter, and catnip sprinkled on a scratching pad are all goods. The cat will move toward the bowl for the sake of the food, snuggle in the blanket for the sake of its warmth, and claw at the catnip-sprinkled scratching pad for the sake of the enjoyment it provides. For man, a glass of wine with dinner, an afternoon at the sports arena, a university education, are goods. All of these goods elicit an inclination in their subject, which may be followed by an action toward the good, the end of the action.
In the Aristotelian perspective, the goodness of a good resides in the good itself, i.e., in reality. In other words, a good is not good by virtue of a subject determining it to be good but is good in itself. Again, Aristotle comes to that conclusion by observing the similarities of action between natural beings. Clearly, the water is not good for the rosebush because the rosebush deems it to be so. The rosebush is obviously mindless. Likewise, an education is not good for Lisa by virtue of Lisa determining it to be so, but it is desired by Lisa because she apprehends it and judges it to be good in itself. Of course, Lisa could be mistaken and judge as good things that are not. Still, the goodness of an object is in the object itself and is not determined by the mind of the subject.Later in this essay a distinction will be drawn between the mind-independent reality of the good and its subjective valuation by an actor.
Goods need not be material substances. As mentioned, an education is a good, health is a good, friendship is a good, etc. But, to repeat, a good considered in terms of the inclination it elicits in a subject has the character of an end, or final cause, and is a metaphysical principle of an action, i.e., one not reducible to the material aspects of reality.
Singular Goods and Common GoodsThe most authoritative contemporary treatment of the Aristotelian-Thomistic conception of the common good was provided by De Koninck (1943), and De Koninck’s work on the subject has recently been examined by Guilebeau (2016). This section draws from those two sources.
From the examples we have listed above, we can see that certain goods are proper to each nature. Catnip is a good proper to cats but not to snakes. Likewise, a university education is a proper good for humans and not for cats. Each nature, each natural kind, responds, desires, has inclinations for goods that are proper to its species.
Among proper goods, we must now distinguish singular goods from common goods. A singular good is a good that extends its goodness to only one individual member of a species. A common good, on the other hand, extends its goodness to many members of the species at once, and it is shared at once among many without exhausting itself. The inexhaustible extension to many is what philosophically defines the term “common.”
Of the examples given above, the following are singular goods: the water in the soil is a singular good for the rosebush nearby. The catnip on the scratching pad and the blanket on the bed are singular goods for the household cat. The health that I desire for myself is my singular good. If I desire health for you, then I vicariously desire a singular good for you. These singular goods extend their goodness to only one individual at a time.
Now, it is true that many of these goods may be shared by more than one individual, and perhaps even by many individuals: the water in the soil can be shared by many rosebushes; the blanket could be shared by the cat and the owner, a chocolate cake can be shared among two, three, or twelve people. Still, none of these are common goods, properly speaking, because when they extend their goodness to many, their goodness is diminished. They exhaust themselves. They are not true common goods but are instead aggregates of singular goods.
A common good—by definition—is a good that extends itself to a community without exhausting itself. It is what causes a community to be a community. It is that which inclines individuals to act as a part of a community and not simply as a multiplicity of individuals. As Aristotle says in the opening line of the Politics, “Every state is a community, and every community is established with a view to some [common] good.”
The concept of a common good is easy to grasp when it pertains to voluntary communities: the game of soccer is the common good of the Liverpool Football Club; the production and sale of bricks is the common good of the ACME Brick Company, and the teaching and dissemination of Austrian economics is the common good of the Mises Institute. It is for the sake of the game of soccer that the Liverpool FC team members are united as a team, for the sake of making and selling bricks that the owners and employees of ACME are united as a company, and for the sake of disseminating a specific economic theory that the students, faculty, and administrators of the Mises Institute are united as an institute.
The Political Common Good
In the examples of voluntary association just given, the concrete common goods that bring together the employees of the brick company, the members of the soccer team, and the students and faculty of the educational institution are self-evident and of no great philosophical interest. Precisely because the association is voluntary, the common good is apprehended by the mind of men and can be easily defined or articulated in more or less concrete terms: “making bricks,” “playing soccer,” “disseminating Austrian economics.”
In contrast, the common good of their political communityI use the general term “political community” to refer to society at large, no matter its degree of development, and will avoid using the more specific terms of “tribe,” “polis,” or “nation,” each indicative of a particular kind of political community. The term also includes so-called stateless societies, so long as it is recognized that those are not necessarily devoid of an ultimate political authority (see below). (which, as we have seen, is not established on a voluntary basis, but is formed by human nature) is not a concrete good that can be specifically described. Rather, the political common good is inferred from the existence of the political community. It is the metaphysical principle that explains the existence of the political community—if one wishes to remain faithful to the principles of causal realism.
The political common good is inferred as follows: we observe that human beings live in political communities—tribes, cities, nations—by nature (as shown in the first section above). Since only individuals act, and since each agent acts for an end, if we observe individuals acting in political communities, we infer that a good must be present to incline them to act thus. Otherwise, the community or the acts of living communally would be unintelligible and the principles of causal realism violated. That good is the principle and cause of a community being a community. It is the political common good, as understood by Aristotle, by Aquinas, and by medieval and contemporary philosophers who follow the principles of causal realism outlined by Aristotle and Aquinas.This essay focuses on the political common good, the good of the political community. Apart from the political common good, the other natural common good recognized by Aristotle and the Scholastics is the common good of the family, which, like the political community, is another natural order in the framework of human existence.
The Primacy of the Common Good over the Singular Good
We should note that the political common good is necessarily “greater” than the singular good: it is not only a good for each individual, but it is a good that inexhaustibly communicates itself to all individuals of the political community. It is a greater good because it exerts a greater effect.
De Koninck (1943) explains the greater effect of the common good as follows:
The common good is greater not because it includes the singular good of all the singulars; in that case it would not have the unity of the common good which comes from a certain kind of universality in the latter, but would merely be a collection, and only materially better than the singular good. The common good is better for each of the particulars which participate in it, insofar as it is communicable to the other particulars; communicability is the very reason for its perfection…. That does not mean that the others are the reason for the love which the common good itself merits; on the contrary, in this formal relationship it is the others which are lovable insofar as they are able to participate in this common good.
The greater effect of the common good explains why individuals can be seen to spontaneously give up their own singular goods—and even their lives—for the promotion or defense of the common good, such as the soldier who willingly enrolls in the armed forces to fight an enemy who he believes threatens his beloved country. The sacrifice of the individual for the community can only be explained if the common good elicits a greater inclination toward it as compared to the singular good.Mises’s analysis of the self-sacrifice of the individual for the country is compatible with this view: “When society’s existence is threatened, each individual must risk his best to avoid destruction. Even the prospect of perishing in the attempt can no longer deter him. For there is then no choice between either living on as one formerly lived or sacrificing oneself for one's country, for society, or for one's convictions…. War carried on pro aris et focis demands no sacrifice from the individual. One does not engage in it merely to reap benefits for others, but to preserve one's own existence” (1951, 402).
At the same time, the greater love for the common good does not subjugate the individual. In the view of Aristotle and of the Scholastics, man’s self-perfecting pursuit of goods necessarily points to an ultimate good: his happiness. All goods are, in a sense, instrumental and ordered to the pursuit of that ultimate good. As a social animal who depends on the division of labor, man’s pursuit of happiness proceeds from the pursuit of singular goods but also from the desire for, and pursuit of, the greater common good. Both the singular goods and the common good order him to his ultimate happiness and the two are not in conflict with one another.
Contrast with the Modern Understanding of the Common Good
The foregoing Aristotelian understanding of the common good as a teleological principle of social life stands in sharp contrast to the modern understanding of the term.
In modern political philosophy, the concept of the common good refers either to aggregates of singular goods or to concrete shared interests not unlike the voluntary common good of a business enterprise. This is readily seen in a recent entry in the Stanford Encyclopedia of Philosophy that defines the common good as “facilities … that the members of a community provide to all members in order to fulfill a relational obligation they all have to care for certain interests that they have in common” (emphasis mine).Stanford Encyclopedia of Philosophy, s.v. “The Common Good,” by Waheed Hussain, Feb. 26, 2018, https://plato.stanford.edu/archives/spr2018/entries/common-good/. The examples of facilities given include the road systems, public parks, police protection, courts, public schools, cultural institutions, civil liberties, clean air, and national defense.
These are clearly concrete goods (e.g., the roads) or specific interests (e.g., the right to free expression), in keeping with the idea that human political societies are formed through willful, rational cooperation. In such a framework of understanding, there is no distinction in kind between the political association and the various examples of private associations we mentioned earlier, such as the soccer team, the firm, or the educational institution. The distinction is merely one of scope, wherein the political society is a voluntary association that concerns all members of the community.
Seeing the common good as essentially an aggregate of singular goods, the modern political philosopher since Hobbes sees an inherent conflict in the social life of man: the common good compels the individual to give up something he would otherwise pursue. It places limits on the individual’s liberty and, therefore, is a paradoxical good that has the character of a necessary evil rather than a true good that orients the individual toward his flourishing. The political philosopher’s goal, then is to come up with rules of political life that minimize that conflict.
No Common Good According to Mises and Rothbard?
Before closing this section, we should note that the concept of the common good is conspicuously absent in the work of Mises and Rothbard. It does not figure in the indices of Mises’s treatises that address political questions, such as Human Action, Liberalism, or Socialism, nor does it receive any attention in the works of political theory of Murray Rothbard.
This lack of attention likely stems from the fact that economic theory may dispute the value of the common good in its modern conception. If the common good is a “set of facilities” that are shared among many and, therefore, nothing more than an aggregate of singular goods, there is no need to give it any special consideration. Its optimal distribution will be achieved by normal market processes and exchanges. Furthermore, if the common good is a set of concrete “shared interests,” the subjective theory of value would prescribe that people be allowed to sort themselves into communities of shared beliefs and values. Government intervention in the name of the common good is superfluous or worse.
Still, the concerns of Rothbard and Mises in political theory are similar to those of Hobbes and of most modern political philosophers: the minimization of conflict. Rothbard believed conflict would be minimized by the absence of government while Mises believed it could only be achieved under the coercive action of the state.“[P]eaceful human cooperation … cannot exist without a social apparatus of coercion and compulsion, i.e., without a government. The evils of violence, robbery, and murder can be prevented only by an institution that itself, whenever needed, resorts to the very methods of acting for the prevention of which it is established” (Mises 1992, 97).
MANY POLITICAL COMMUNITIES, MANY COMMON GOODS Having established that the political community exists by virtue of a political common good, and having distinguished the Aristotelian understanding of that common good from the modern liberal perspective on it, we now reflect on a fact of observation: the human race exists as a diversity of distinct political communities, not a single one. The human race is not ordered to a universal political common good. Rather, a diversity of coexisting political communities populates the world, each ordered to its own common good.
What accounts for the diversity of political common goods in human life? Here again, Aristotle would begin by looking to the animal world for the answer: there is one species of black ants but many black ant colonies. What accounts for this multiplicity? When an ant colony outgrows its anthill or when conditions are adverse, one or more new queens are produced, and a part of the colony may either swarm or “bud” away to find a more suitable habitat. If successful, a new colony is formed. Similar phenomena occur among bees and among other “eusocial” animals, such as wasps, certain species of mole rats, and certain crustaceans.
Whatever the mechanism of multiplication may be, the lesson to be drawn is that societies of animals—of which human societies are a typeE. O. Wilson, one of the most prominent contemporary evolutionary biologists has recently classed humans among the “eusocial species” of the planet, a noteworthy return to the Aristotelian view. Wilson’s position has caused controversy among biologists who, like Mises (vide infra), are ambivalent about relating man’s sociability to the sociability of animals. See, for example, Angier (2012).—naturally emerge from preexisting societies depending on territorial considerations which regulate the size of the community to optimize its flourishing and self-sufficiency.While modern political communities are rarely de facto self-sufficient and may rely largely on trade with other communities, potential self-sufficiency is a necessary and real aspect of any political community. It is precisely because a political community is at least potentially self-sufficient and therefore “one thing” that we can distinguish one political community from another. Social cooperation is cooperation in a certain place at a certain time. The material world is not immediately sustaining but its raw resources must be worked and developed through the division of labor. For ants as for men, the transformation of those resources into “capital goods” necessarily confines the division of labor to a given territory.
Given the natural propensity of living species to grow in size and number, the limitations imposed on a given community by a given territory is one important mechanism by which communities divide from one another, leading to a multiplication and diversity of populations segregated according to territorial considerations: at this point in time and under these current conditions, this ant colony thrives on this anthill, and that ant colony on that one; this human tribe lives in these pastures, and that human community dwells in that city on that riverbank.
Because human societies are societies of rational animals who possess creative imagination, the multiplication of human societies also produces a great diversification in the mode or manner of existence over time. What distinguishes one ant colony from another is simply its location, size, and whatever accidental features are dictated by the habitat. Human societies, on the other hand, are further diversified in their language, culture, political organization, moral norms, religions, etc.
The Political Common Good Is Prior to the Language, Culture, Religion, and Political Organization of a Political Community
Based on the metaphysical considerations given earlier in this essay, it should be apparent that the political common good must be ontologically prior to the language, culture, religion, and political organization of a community, even if language, culture, religion, or political ideology may temporally preexist the formation of the community. Linguistic, religious, cultural, or ideological affinity can explain the distinctive characteristics of a political community, but they cannot explain its being a political community as such.
Of course, shared cultural values, shared religion, and a shared language can be the impetus for forming a new political community in a new (and hopefully unclaimed) territory, or may be criteria by which a community chooses to include certain members and exclude others. But culture, religion, and language cannot be the reason a community is an actual political community.
If the “Catalan people” choose to secede from Spain and succeed in living together as a Catalan nation, their political common good will be distinct from the Catalan language and culture. To show this, consider that, for example, the Catalan language could, over time, cease to be spoken among the Catalan people without the integrity of the community suffering a loss. Also, any Catalan-speaking person may choose to leave the Catalan nation or to not join it to begin with. The Catalan language itself cannot be the cause of being of the Catalan nation.
Likewise, a community’s political organization and its dominant ideology cannot be the cause of its being a political community. The political community of Russia was organized as a monarchy for centuries but abruptly became a Communist nation in 1917 and, equally abruptly, changed into a constitutional democracy in 1991. Despite the dramatic changes in political organization, the same nation remained through the change. That sameness implies a sameness in the political common good that orders the Russian nation. That the political common good can persist despite dramatic changes in language or in religious, cultural, or political organization shows that the political common good is “prior” to all these attributes of a political community.
To be clear, however, this priority is not a priority in time, but an ontological priority. Common goods do not exist in themselves, “out there in the world,” waiting to be pursued by a people. A common good is a metaphysical principle that emerges in a historical context, under specific conditions, when a community succeeds in becoming self-sufficient. Nevertheless, the common good is a real teleological principle, distinct from its material principles, from its people, and from the cultural and ideological attributes that it brings to a community. It is not Clovis, his Frankish followers, their beliefs, and the territory they occupied that caused France to be a nation. But it is Clovis, his Frankish followers, their beliefs, and the territory they occupied that made the nation that emerged become “France” and not another nation.
The Necessity of a Political Authority
Because political communities are diverse, the question of how to distinguish a member of the community from an outsider arises. That distinction, of course, is essential to preserve the integrity of any given political community.
In animal societies, the distinction is made on a strictly material basis and, therefore, can be entirely decentralized. For example, an intruder ant which threatens the integrity of a colony may be detected based on a pheromone and be immediately attacked by any member of the colony, even one not specifically functioning as a guardian. The remarkably versatile life of ants is astonishingly decentralized with respect to authority, causing Aristotle to point out that each ant is “its own ruler.”
In human political communities, in contrast, information about the membership of a given human being cannot be communicated by material factors alone. Even though one ordinarily becomes a member of a political community by birth, no political community is established on a strict genetic or biological basis. Even the most primitive tribes are apt to include outsiders, for example, by marriage. Besides, when communities are large enough, there may not be any practical way for one person to know the genealogy of another.
To belong to a human political community obviously involves a degree of personal choice: I may choose to relinquish my membership in the American political community to become, say, Mexican. Making the choice effective, however, is clearly not up to me. I am effectively a Mexican only once I am deemed to be so by the Mexican community as a whole. Otherwise, disagreement among Mexicans on my status would threaten the integrity of the political community. But agreement among Mexicans cannot possibly come about through their individual free choices. Such unanimity would be highly unlikely or highly precarious. Rather, the need for establishing my status as a Mexican for Mexico as a whole necessitates an authority to ultimately decide and thereby communicate for all Mexicans whether or not I belong to their political community.
The fundamental need for all who engage in communal life to be informed—implicitly or explicitly—of the “membership status” of any given individual justifies the existence of a political authority to adjudicate this matter when the situation demands it. In primitive tribes, that authority may be confined to a single ruler or a council of individuals. In more developed societies, it is most often seen to take the form of an institution: the state.
But note that this justification for a political authority leads us to conceive of its primary function in a very specific way: the political authority is not primarily the person or institution holding “a territorial monopoly on the use of violence” for the purpose of achieving peace and security—the common understanding of the state in modern political theory. Rather, the political authority revealed to be necessary by Aristotelian metaphysical principles is primarily the person or institution to whose judgment the community must necessarily submit in matters regarding the ultimate identification of individuals as members of the community or as outsiders.
GRECO-AUSTRIAN CONFLICT? Since I began this essay with remarks on the Aristotelian roots of Austrian economics, I will now briefly comment on the political philosophy of Ludwig von Mises and Murray Rothbard in light of the preceding considerations. To be clear, the following comments cannot amount to a nuanced analysis of either man’s political thought. I will simply contrast a few of their salient ideas to those of Aristotle.
Both men, it appears, espoused a view of the nation as a natural community whose explanation transcends atomistic and mechanistic principles and does not come into being by any social contract. According to Salerno (2019, 8), Mises believed that “the nation has a fundamental and relatively permanent being independent of the transient state (or states) which may govern it at any given time,” causing him to view the nation as “an organic entity.”
Likewise, Salerno (2019, 9) draws attention to the following comment in Rothbard (1994):
Contemporary libertarians often assume, mistakenly, that individuals are bound to each other only by the nexus of market exchange. They forget that everyone is necessarily born into a family, a language, and a culture. Every person is born into one or several overlapping communities, usually including an ethnic group, with specific values, cultures, religious beliefs, and traditions. He is generally born into a “country.” He is always born into a specific historical context of time and place, meaning neighborhood and land area.
While those comments by Mises and Rothbard suggest compatibility with Aristotelian political principles, there are also striking dissimilarities.
Rothbard, for example, grounded much of his political ethics in John Locke’s theory of property. With its emphasis on the importance of “self-ownership,” that theory borrows heavily from post-Cartesian ideas in which the willful consent of man is central. For example, in his Anatomy of the State, Rothbard declared:
Man is born naked into the world, and needing to use his mind to learn how to take the resources given him by nature, and to transform them … into shapes and forms and places where the resources can be used for the satisfaction of his wants and the advancement of his standard of living. The only way by which man can do this is by the use of his mind and energy to transform resources … and to exchange these products for products created by others. (2009, 13, emphasis mine)
That passage, in contrast to the previous one, would place Rothbard in the modern liberal tradition of considering political communities as formed through the willful actions of individual human beings.
Mises’s views in regard to the genesis of human societies are also somewhat ambiguous. On the one hand, he emphatically rejects the Lockean idea of the isolated individual. As Salerno (1990) has remarked, the isolated human being is for Mises either fictional or metaphorical: “[M]an as man is necessarily a social animal. Some sort of social cooperation is an essential characteristic of his nature” (1985, 252).
At the same time, Mises rejects outright any metaphysical explanation for the political community and sees no explanation for it outside of the action of individuals:
Individual man is born into a socially organized environment. In this sense alone we may accept the saying that society is—logically or historically—antecedent to the individual. In every other sense this dictum is either empty or nonsensical. The individual lives and acts within society. But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men. It is a delusion to search for it outside the actions of individuals. To speak of a society’s autonomous and independent existence, of its life, its soul, and its actions is a metaphor which can easily lead to crass error. (1998, 143, emphasis mine)
Instead, Mises proposes evolutionary explanations for the origins of political communities in which human reason takes pride of place, and he rejects any political theory that adopts the animal society as an explanatory model:
The principle of the division of labor is one of the great basic principles of cosmic becoming and evolutionary change. The biologists were right in borrowing the concept of the division of labor from social philosophy and in adapting it to their field of investigation. There is division of labor between the various parts of any living organism. There are, furthermore, organic entities composed of collaborating animal individuals; it is customary to call metaphorically such aggregations of the ants and bees “animal societies.” But one must never forget that the characteristic feature of human society is purposeful cooperation; society is an outcome of human action, i.e., of a conscious aiming at the attainment of ends. No such element is present, as far as we can ascertain, in the processes which have resulted in the emergence of the structure-function systems of plant and animal bodies and in the operation of the societies of ants, bees, and hornets. Human society is an intellectual and spiritual phenomenon. It is the outcome of a purposeful utilization of a universal law determining cosmic becoming, viz., the higher productivity of the division of labor. (1998, 144–45, emphasis mine)
These comments place Mises in opposition to Aristotle who, as we mentioned earlier, saw teleology as pervading the entire natural world and considered the analogy between societies of men and societies of bees to be real and proportionate, rather than imperfect or metaphorical. Mises, in contrast, sees teleology only in the willful consciousness of man: “Reason and experience show us two separate realms: the external world of physical, chemical, and physiological phenomena and the internal world of thought, feeling, valuation, and purposeful action” (1998, 18).
What’s more, Mises seems to have rejected metaphysics wholesale, stating in Human Action that: “In the present state of our knowledge, the fundamental statements of positivism, monism, and panphysicalism are mere metaphysical postulates devoid of any scientific foundation” (1998, 17–18). But the lack of a specific reference to Aristotelian metaphysics in that statement, however, is noteworthy. To what extent was Mises familiar with Aristotelian first principles?
In the one passage of Human Action that mentions Aristotle, Mises criticizes the ancient philosopher for believing that value inhered in the good:
An inveterate fallacy asserted that things and services exchanged are of equal value. Value was considered as objective, as an intrinsic quality inherent in things and not merely as the expression of various people’s eagerness to acquire them. People, it was assumed first established the magnitude of value proper to goods and services by an act of measurement and then proceeded to barter them against quantities of goods and services of the same amount of value. This fallacy frustrated Aristotle’s approach to economic problems and, for almost two thousand years, the reasoning of all those for whom Aristotle’s opinions were authoritative. (Mises 1998, 204, emphasis mine)
Mises may have correctly criticized Aristotle’s primitive economics, but we should highlight the fact that the Aristotelian objective reality of metaphysical goodness does not entail that valuation itself should be objective.
Clarifying that point is not simply of arcane interest. Consider the positivist criticism of Austrian economics according to which a statement such as “an actor will always choose his most valued end” is a definitional statement, or a tautology. That criticism may be valid if the goodness of a thing is entirely subjective and determined by the actor. If the goodness of a thing does not pertain to the thing itself, to its extramental reality, but is only a psychological determination made by the choosing actor, then the positivists would be correct: “most valued” would simply mean what the acting person chooses. If such is the foundation of Austrian economics, it could not add new knowledge about the world.
By locating the goodness of a thing in the thing itself, Aristotelian metaphysics refutes the charge of tautology: the actor sees various goods in the world, subjectively ranks them at any moment in time, and chooses means to pursue the most valued ends at that particular time and place. The key element is to recognize that goodness is in the things themselves. The valuation, then, reveals the subjective, personal preference of the actor for one good over another. The revelatory character of the action allows the statement “an actor will always choose his most valued end” to be the premise for a deductive economic theory, and economics need not be reduced to identifying relationships between actors and goods solely by empirical, i.e., statistical, inference.
As Gordon (1994), Hoppe (2007), and others have noted, there is a strong Kantian influence on Mises, evident in his frequent use of Kantian terminology. His conceiving of the “external world of physical, chemical, and physiological phenomena” as a separate realm from the “internal world of thought, feeling, valuation, and purposeful action” raises a question about his stance on realism. But too strong a subjectivist view of the goodness of things could jeopardize the causal-realist claims of Austrian economics.
According to Hoppe (2007, 19), however, that need not be so: by adding to Kantian philosophy the a priori category of human action, Mises built a “bridge to reality” and allowed Austrian economics to escape from the Kantian idealism into which it might otherwise find itself. If that is the case, then Mises may not have been as far from Aristotle as he might have thought, especially since it is difficult to conceive of human action independently of sense knowledge.A similar conclusion was reached by Warren Orbaugh in an unpublished paper presented at the Mises Institute’s Austrian Scholars Conference in 2011, “Whether Mises’s Use of “a Priori” Is Kantian or Aristotelian,” a recording of which is available at https://mises.org/library/whether-mises%E2%80%99s-use-priori-kantian-or-aristotelian.
SUMMARY AND TAKE-HOME CONSIDERATIONS To summarize this introduction to Aristotelian principles of political life, we began by noting that human political communities exist not by the will of man, or by his power of reason, but by his nature as a social animal: man essentially depends on others and on the division of labor, and therefore social life is as natural to him as it is to bees and ants.
Aristotelian causal realism appeals to a plurality of causes to adequately explain the natural world: material, formal, efficient, and final (teleological). As part of the natural world, man is a teleological being whose actions are ordered toward ends. The teleological cause that orders the communal life of man is the political common good.
The understanding of the common good as a metaphysical principle with the character of a final cause is in stark contrast with the contemporary conception of the common good as an aggregate stock of “facilities” or as “shared interests.” The mechanistic assumptions that underlie the modern concept of the common good are unrealistic and fail to provide a causal explanation for the communal behavior of man.
Human political communities, as well as animal societies, are diversified: there is not one universal ant colony, nor is there one universal human society. The diversity of political communities implies that the division of labor and economic exchanges between members of a community are privileged as compared to the division of labor and economic exchanges that could occur between communities. This privileging implies the need for a mechanism to distinguish members of one community from others. In human societies, this mechanism involves rational judgment and is an operation of individuals or institutions: the political authority.
In this essay we have seen that Aristotelian teleological realism, which forms the foundation of Austrian economics, can also form the foundation of a true political science. The basic political principles summarized in the preceding pages are not prescriptive in and of themselves but may be prescriptive insofar as we understand real principles to be “laws of nature” that must be respected or else disregarded at great peril. Political life—life in society—is not an end but a means by which individual human beings flourish and attain their happiness. The better we understand and respect the principles of political life, the better the chance of finding happiness.
By rejecting the Lockean homesteading principle and by providing a justification for a formal political authority, the political realism of Aristotle may disappoint some members of the Austrian community who wish to pursue the ideals of anarcho-capitalism and the project of a purely voluntary society. I hope the Aristotelian principles will not be dismissed simply because they lead to a conclusion that is not desired.
At the same time, the justification for the state offered by Aristotelian metaphysics need not lead one to be resigned to coexistence with an aggressor, as was Mises’s view,“[P]eaceful human cooperation … cannot exist without a social apparatus of coercion and compulsion, i.e., without a government. The evils of violence, robbery, and murder can be prevented only by an institution that itself, whenever needed, resorts to the very methods of acting for the prevention of which it is established (Mises 1992, 97) so long as we conceive of aggression (and violence) in its Aristotelian sense, as going against the nature and the good of things.
Understood properly, the State’s only purpose should be the promotion of the common good of its community, a good that is naturally desired by all its members. It is only when the state deviates from this function—as it is apt to do when the community adopts a faulty understanding of the common good—that it is liable to act as an aggressor. Quoting Aquinas, De Koninck (1997, 36) highlights the importance of distinguishing the common good from the singular good to avoid tyranny:
[O]ne can love the common good in two ways. One can love it to possess it, and one can love it for its conservation and its diffusion. In effect, one can say: I prefer the common good because its possession is for me a greater good. But this is not a love of the common good as common good. It is a love which identifies the common good with the good of the singular person considered as such. “To love the good of a city in order to appropriate it and possess it for oneself is not what the good political man does; for thus it is that the tyrant, too, loves the good of the city, in order to dominate it, which is to love oneself more than the city; in effect it is for himself that the tyrant desires this good, and not for the city.”
The appropriation of the common good for one’s own possession brings to mind Rothbard’s depiction of the state as “a gang of thieves writ large.”
The political metaphysics sketched in this essay can also provide a principled opposition to the “warfare-welfare state.” First, political common goods are real principles, and political communities are natural orders that must be respected precisely because they are real. Therefore, imperialism and universalism are necessarily violations of those natural orders. Second, as we have seen, the political common good is not a treasury of singular goods to be taken from some and doled out to others under specious pretexts or based on a poorly conceived notion of social justice. With a realist’s understanding of the common good, the disastrous social policies adopted by all liberal democracies over the last two centuries would not have been enacted. As De Koninck puts it (again quoting Aquinas):
A society constituted by persons who love their private good above the common good, or who identify the common good with the private good, is a society not of free men, but of tyrants—“and thus the entire people becomes like one tyrant”—who lead each other by force, in which the ultimate head is no one other than the most clever and strong among the tyrants, the subjects being merely frustrated tyrants.
The political common good is a metaphysical principle that ultimately serves the happiness of individual man. Like all principles of nature, it must be pondered carefully. Clearly, this essay could only tangentially introduce the reader to Aristotelian metaphysics. Those unfamiliar with it will undoubtedly question many of the points we have made in passing: In what way does Aristotelianism provide an alternative to both Cartesian mind-body dualism and materialistic monism? What are the exact principles of causal realism, and how does Aristotle justify them as self-evident? What are the reasoning steps that allow the philosopher to proceed from first principles to a coherent anthropology?
Those questions are of utmost importance, and I hope that this essay will spur interest in the thought of Aristotle and Aquinas. The philosophical foundations they have provided can serve the gamut of scientific inquiry about man, from the physical sciences to the social sciences, acknowledging a fact that should be obvious to all: man is at once a rational being and a physical being.
Menger, Böhm-Bawerk, Mises, Hayek, Rothbard, and present-day contributors to Austrian economics have built a wonderful edifice of knowledge about the rules that govern the exchange of singular goods in society: economic science in the Austrian tradition. Perhaps it could be bolstered by being placed on a deeper anthropological foundation, one that more completely considers man in all his dimensions—physical, animal, rational, and political.
Murray Rothbard was a polymath, and philosophy is one of the fields to which he made important contributions. When people think of him as a philosopher, though, they often have in mind only his work in ethics and political philosophy, found, for example, in The Ethics of Liberty. His work in this area is of great significance, but he wrote about other areas of philosophy as well, and in this week’s article, I’d like to consider an important argument he made in epistemology, the theory of knowledge.
The issue he was concerned with arises in this way. Mises says that economic theory for the most part is known a priori. (I say “for the most part,” because economic theory also includes subsidiary postulates that are not known a priori.) In what follows, I’ll be talking about a priori “judgments” or “propositions” rather than “concepts,” because for our purposes this makes things easier, even though Mises himself usually talks about a priori concepts.)
By an a priori judgment, I mean one that can be known to be true without having to test it by experience. It can be known to be true just by thinking about it. For example, I know that “2 + 2 = 4” is true just by thinking about this judgment. Once I do so, its truth is clear to me. I don’t have to test it by counting collections of two objects added to collections of two other objects to see whether the judgment survives testing. A problem that now arises is this: How can judgments of this kind give us knowledge about the real world that we live in? You can’t discover the truth, it is claimed, just by thinking about it: you have to investigate the world empirically, i.e., though your senses. Rothbard has a very interesting response to this. You probably think I’m now going to discuss that response, but I’m not—that’s a topic for another time.
Rather, I’m going to address another twist in this tangled tale. Mises’s large claims for a priori knowledge were out of philosophical fashion when he wrote, at least among economists who thought they knew something about philosophy. Some of these economists tried to make Mises more palatable to the mainstream of the profession by watering down the meaning of a priori. His one-time student Fritz Machlup was one of these, and he developed an account of the a priori that anticipated influential later work in the philosophy of science. Rothbard offered a brilliant and neglected criticism of this account in his article “In Defense of ‘Extreme Apriorism’” and this I consider to be a substantial contribution to the theory of knowledge.
Machlup argues in this way. Even though Mises talks about the a priori, we don’t have to take him as departing from the standard method of empirical science. In order to test the propositions of a theory, we have to make certain assumptions. Without these core assumptions, which are immune from testing, we couldn’t carry out empirical tests at all. It doesn’t matter whether these assumptions are true or false in reality: they are held true within the theory. Norwood Russell Hanson and Imre Lakatos, independently of Machlup, developed similar accounts later, and these have become influential.
Rothbard rejects this totally. He compares Machlup’s view with that of Terence Hutchison, an economist who argues that all parts of a theory, including the theory’s assumptions, should be tested. Rothbard says:
The crucial difference is that Professor Machlup adheres to the orthodox positivist position that the assumptions need not be verified so long as their deduced consequents may be proven true—essentially the position of Professor Milton Friedman—while Professor Hutchison, wary of shaky assumptions takes the more empirical—or institutionalist—approach that the assumptions had better be verified as well. Strange as it may seem for an ultra-apriorist, Hutchison’s position strikes me as the better of the two. If one must choose between two brands of empiricism, it seems like folly to put one’s trust in procedures for testing only conclusions by fact. Far better to make sure that the assumptions also are correct.
Rothbard’s criticism is simple and devastating. He says that a statement is either true or false. There is no such thing as a special kind of truth, “truth within a theory.” You can refuse to test certain propositions, and in that sense you are “holding them to be true,” but that is a bad procedure if you are aiming to establish an empirical science.
Sometimes supporters of the view that Rothbard challenges point to cases like this. In Newton’s physics, the second law of motion is that force equals mass times acceleration (F = ma). But, it is claimed, this can’t be tested, because force is defined so that this law must come out to be true. The definition is “true within the theory.” If this is a correct account of Newton’s theory (I doubt that it is, but never mind that), then it seems wrong to call the law true. It is a definition, and how can you make something true just by defining it a certain way? The question would then arise: How helpful is it in generating true predictions to use this definition? It’s interesting to note that this criticism of Machlup-style interpretations of science uses a point that the logical positivists raised against Mises: How can you make something true just by defining it a certain way?
In making this criticism, Rothbard is not abandoning praxeology for positivism, or failing to see that he is using a point inconsistent with praxeological reasoning. His claim applies only to “nominal” definitions, that is, statements that a term is being used in a certain way. Nominal definitions aren’t true or false. This leaves room for “real” definitions, which aren’t postulated, but are directly grasped essences. Far from rejecting real definition, Rothbard uses a real definition to show why the action axiom is true. On this more later.
I’ve often argued against John Rawls’s theory of justice, and readers who see my title might be thinking to themselves, “Not another post on Rawls!” These readers can rest easy; this is not another post attacking Rawls. (It isn’t, of course, a post that says Rawls was right.)
Instead, I want to use an argument someone directed against Rawls to illustrate a basic principle of how we should read texts. I believe the author of the comment, who is an excellent pro–free market philosopher, violated this basic principle, and what I’d like to do in this week’s article is show how he did this. I won’t say who he is, as his comment was made on a private forum.
To understand the situation, we need some background. Robert Nozick claims that Rawls’s theory is an example of what he called a patterned theory of justice, and he uses his famous Wilt Chamberlain example against theories of this type. In this example, each person receives the amount of money that the patterned theory prescribes. As an example, let’s assume that each person starts off with an equal amount of money, though this isn’t Rawls’s own theory. Wilt Chamberlain sets up a basketball court in his free time after work and charges twenty-five cents for people to watch him shoot baskets. Many people pay to watch him, and as a result Wilt’s equal share of money at the start has become a much larger amount of money than most other people have. (I say “most” rather than “all” because there might be other voluntary transfers of money going on at the same time that leave some other people besides Wilt better off than most.)
One more bit of background is needed. Although the most famous part of Rawls’s theory is the “difference principle,” which mandates that inequalities be to the advantage of the least well-off class in society, this is only part of the second principle of justice. There is also a first principle, which requires equal liberty for all. The first principle has “lexical priority” over the second, which means it can’t be sacrificed to enable the second principle to be satisfied better. You can’t, for example, restrict someone’s freedom of speech even if doing so would make it easier to fulfill the difference principle. Imagine, say, that shutting down mises.org would decisively weaken opposition to redistribution of income. Rawls wouldn’t allow this.
After Nozick presented the Wilt Chamberlain example in Anarchy, State, and Utopia (1974), the philosopher Thomas Nagel criticized the example, and many other things in the book as well, in a review called “Libertarianism without Foundations.”
This is where the new criticism of Rawls, and Nagel along with him, enters the scene. The critic says this:
Nagel’s “Libertarianism Without Foundations” offers some pretty weak criticisms of Nozick. Consider Nagel’s take on the Wilt Chamberlain argument, an argument that alleges enforcing a patterned principle of distributive justice violates liberty:
“It only seems a problem to Nozick, and a further violation of liberty, because he erroneously interprets the notion of a patterned principle as specifying a distribution of absolute entitlements (like those he believes in) to the wealth or property distributed. But absolute entitlement to property is not what would be allocated to people under a partially egalitarian distribution. Possession would confer the kind of qualified entitlement that exists in a system under which taxes and other conditions are arranged to preserve certain features of the distribution, while permitting choice, use, and exchange of property compatible with it.”
But Nagel’s criticism misses Nozick’s point. Rawls himself recognizes that ownership of personal property is a basic liberty on a moral par with freedom of speech and bodily autonomy. Thus, your right to transfer your personal income to watch Wilt play is protected as an exercise of a basic liberty, by Rawls’s own standards.
To make this point clearer, look at how implausible Nagel’s response to Nozick is when applied to other basic liberties. Imagine that Twin Rawls endorsed a patterned principle of blood distribution: “Distribute blood in the way that maximizes the welfare of the worst off.” Twin Nozick objects that this patterned principle violates bodily autonomy because it will require compelled blood donations. Twin Nagel replies that Nozick misinterprets bodily autonomy—you only have the right to decide what happens to and in your body insofar as those decisions align with the patterned principle of blood distribution. Clearly Twin Nagel is the one who has the implausible interpretation of the right of bodily autonomy, understood as a basic liberty. Similarly, it’s Nagel, not Nozick, who has the mistaken interpretation of personal property ownership.
Let’s look at the critic’s argument. He is saying that Rawls made a stupid blunder. Rawls goes on at enormous length about the difference principle, but he fails to recognize something that is staring him in the face. Once he recognizes that the right to hold personal property is a basic liberty, it can’t be given up for the sake of the difference principle. The first principle has lexical priority.
It doesn’t seem credible that Rawls would have overlooked an obvious point that disables his entire enterprise, and if we look more closely, we see that Rawls’s acceptance of the right to hold personal property as a basic liberty is much more qualified than the critic thinks it is. Rawls does not mean that you are free to use all your personal property and income as you wish. In Political Liberalism (1993), Rawls says:
[A]mong the basic rights and liberties of the person is the right to hold and have the exclusive use of personal property. The role of this liberty is to allow a sufficient material base for a sense of personal independence and self-respect…. Two wider conceptions of the right of property as a basic liberty are to be avoided. Once conception extends this right to include certain rights of acquisition and bequest, as well as the right to own means of production and natural resources.
I am sure that, if asked, Rawls would have added “and transfer” after “bequest.”
Nozick’s criticism of Rawls isn’t that Rawls has violated his own acknowledgement that the right to hold personal property is a basic liberty. Nozick is saying to Rawls and other supporters of patterned principles: "According to your own theory, people have the right to a specified allocation of resources. But if they have this right, they can reallocate their shares in a way that will upset the pattern you want. You can't deny them the right to do this, because you yourself specified that they have the right to this allocation of resources." Nagel’s response is that we don't have to take the right in question to be one to do whatever one wishes with the allocation. Note the crucial difference between Nozick and Nagel, on the one hand, and the critic on the other. Nozick and Nagel are arguing about what the right to an allocation specified by a patterned theory entails, not about what the right to hold personal property as a basic liberty involves.
Also, the critic is mistaken in thinking that it follows from taking the right to hold personal property to be a basic liberty that Rawls cannot consistently favor more limits to property ownership than to bodily integrity or free speech.
The fundamental principle of reading that I want to emphasize is that, unless there is very strong evidence, we should avoid attributing to someone an error it would be hard to overlook. The critic ignored this principle and thus thought he had an easy refutation of Rawls. Refuting him isn’t that easy.
The economic analysis of repudiation applies to the debt of all levels of government and to all countries. The central question is not how big the government is or how much it owes, but rather whether the debt is funded by taxes.
Original Article: "The Economics and Ethics of Government Default, Part II"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Expanded Second Edition Foreword by Jeff Deist Congratulations! You hold in your hands one of the best collections of essays from one of the most vital and challenging thinkers on the planet. This book is a compendium of sorts, a cross section of Professor Hans-Hermann Hoppe’s best work across several decades arranged in one accessible volume. It originally was published by Laissez Faire Books in 2012, but languished without the audience it deserved. This volume rejuvenates that work with no less than six new chapters and more than a hundred new pages not found in the earlier version, along with some much-needed publicity and promotion.
Academics and social scientists today tend toward hyperspecialization, but Dr. Hoppe does not make this mistake. In this approach he joins a long line of important thinkers who did not confine themselves to a narrow academic discipline and did not care to “stay in their lane.” We forget that many twentieth century economists, for example, capably applied knowledge in history, philosophy, logic, anthropology, sociology, epistemology, politics, and ethics to their work—including Ludwig von Mises, Hoppe’s inspiration, and Murray N. Rothbard, Hoppe’s mentor. In that very important sense Hoppe continues and builds on the work of both men.
If you are new to Hoppe’s work, this is an excellent introduction and survey to his syntheses of history, anthropology, property, ethics, and state. If you already know and enjoy Hoppe, you will find here a “Hoppe reader”: many of his best and most representative articles across a range of topics in one accessible volume. Consider it almost a reference guide, from which readers can guide themselves back to his lengthy books and articles. But this book has something for everyone, from his rigorous yet often overlooked implications of capitalism and socialism to his broadside against democracy on property rights grounds. Even the new or casual reader will come away with an excellent understanding of Hoppe’s work and worldview.
The title of course comes from Claude-Frédéric Bastiat, the great nineteenth-century French economic journalist and liberal. Bastiat gave us “The Great Fiction” to describe the government mechanisms by which people attempt to live at the expense of others. The state is always present in Hoppe’s work, whether front and center or lurking in the background. Hoppe’s subtitle, Property, Economy, Society, and the Politics of Decline gives an unsubtle clue as to what readers should expect: a damning indictment of the political world and its twenty-first-century managerial superstates. In Hoppe’s world, the state is a wholly decivilizing institution: a predator rather than protector, a threat to property and peace. Markets and entrepreneurs produce goods, governments produce “bads”: taxation (theft), regulation (semi-ownership, thus semi-socialism), devalued money (central banks), war (defense), injustice (state courts and police), and the ruinous effects of high time preference (democracy). Like Bastiat, Hoppe has no patience for obscuring or soft pedaling the realities of our political world.
Part one of the book deals with the development of human society and the concomitant rise of two often opposing forces, namely property and states. Here Hoppe explains civilization rising against a backdrop of greater productivity enabled by the painfully slow shift from nomadic to agrarian living. Once sufficient calories could be yielded from land, concepts of family and ownership come into greater focus. The Enlightenment and Industrial Revolution create more and more prosperity, a proto-middle class, while feudal and monarchical arrangements face pressure from subjects developing greater wealth and literacy. This pressure explodes in the nineteenth century, as groups of largely decentralized kingdoms, principalities, territories, and city-states come under the full sway of national boundaries and governments. The twentieth century ushers in the era of full democratic government in the West: the Great War washes away the last vestiges of Old Europe, while growing economic and military power places the United States squarely at the helm of an international order.
Hoppe, of course, does not accept at face value the notion of the twentieth century as “liberal,” and in fact finds much of it illiberal. A particular favorite from part one is a chapter from Democracy: The God That Failed titled “On Democracy, Redistribution, and the Destruction of Property.” This essay beautifully encapsulates all of his fundamental critiques of modern mass democracy, namely that it produces bad, shortsighted politicians who care nothing about their nation’s capital stock; bad, shortsighted voters who care nothing about future generations; bad, expansionary economic and foreign policy; and bad, central bank money to pay for it all. Citizens, unlike subjects of yesteryear, enjoy the illusion that government is “us.” But an illusion is all it is, and Hoppe enjoys slaying this most sacred of cows.
Part two focuses on the hugely important but often overlooked relationship between money and the state. While kings and sovereigns once enjoyed debasing money to line their pockets, modern central banks turn seigniorage into something far more systemic and harmful. Fiat money enables politicians to fund welfare and warfare programs unimaginable in previous generations, increasing state power at every turn. It also distorts virtually every economic decision made across society, resulting in gross inefficiency and malinvestment. Society suffers, purchasing power erodes, but an undeserving and state-connected banking class benefits from all the new money. The quintessential Hoppean explanation for this sordid process, namely power, is nicely presented in chapter 9, “Why the State Demands the Control of Money.”
Part three forays into Dr. Hoppe’s economic theory, particularly in the area of method. Much of what we consider to comprise modern economics is wrong, and in particular wrong because it subverts the role of theory with empiricism, statistics, math, and modeling. Human actors apply deeply subjective values to all economic goods, values which change almost constantly. They are not atoms or vectors to be studied by testing hypotheses with data, but volitional beings to which we must apply axiomatic deductive reasoning. Hoppe gives readers a crash course in certainty, uncertainty, and probability, to show their uses and more importantly their limitations in economics.
Part four considers the important subject of intellectual history in the context of the broad Austro-libertarian movement, and includes a truly heartfelt speech from Hoppe on his friend and colleague Rothbard which is sure to move you. It also includes a typically Hoppean critique of Friedrich von Hayek’s political theory, which in Hoppe’s view compares very unfavorably to his work in monetary policy and the knowledge problem. This section finishes with the text of Hoppe’s sweeping talk titled “The Libertarian Quest for a Grand Historical Narrative,” a marvelous narrative about where we have been and where we might be going.
Finally, part five is a collection of interviews with Dr. Hoppe and autobiographical essays, including one conducted by yours truly. These interviews give a better sense of Hoppe as a person and thinker, and greater insight into his development both personally and professionally. Readers will find plenty of intellectual ammunition here, along with answers to many of the simplistic challenges posed to Hoppe’s idealized conception of a private law society.
Reading Hans-Hermann Hoppe is always a pleasure and never a chore, because both the subjects and Dr. Hoppe’s command of them quickly win the reader’s attention and even admiration. Most academic writing is almost unbearable; and as alluded to earlier it is designed to appeal only to a tiny group of PhDs who work in a very limited area or subfield. Hoppe, by contrast, produces academic treatments of much broader and foundational issues which manage to hold appeal for intelligent lay audiences. The footnotes, the diamond-sharp deductive logic, the references to earlier works and thinkers—all the hallmarks of academic journals are there—without the tedium and hubris.
Hoppe is the rare intellectual who never preens or bores, and never loses the plot. He keeps things close to the bone, one might say: not quite sparse but never ornate or superfluous. There are no twenty-page detours into some faintly related topic merely for show, a habit even the best of academics sometimes fall prey to. Not Dr. Hoppe. His work inevitably strips out the nonessential and gets to the root of the issue at hand. Sometimes that essential and unadulterated focus comports with popular sentiment and thinking; oftentimes it does not. Hence his controversial reputation in certain emotive circles. But Hoppe, like any good social scientist, has an obligation to seek truth and help us understand the world. Thus he never appeals to the reader’s existing pretensions or prejudices, but instead always demands we follow the praxeological path of understanding human actors as they really are.
In other words, truth—unadorned and uncomfortable as it may be—is the end goal of any good social scientist. Thus, Dr. Hoppe is an unflinching advocate for reality and logic, and one you cannot ignore.
I’d like to discuss today an argument that is popular among some contemporary political philosophers. If this argument is correct, it undermines the sort of natural rights found in Murray Rothbard’s The Ethics of Liberty. I hope that I am not spoiling the surprise by telling you immediately that I think the argument is wrong.
Natural rights of the sort that Rothbard favors are prepolitical. In other words, these rights aren’t dependent on the state for their existence. Each person is a self-owner and may acquire property in the “state of nature,” before there are states and state-created legal systems. Indeed, in Rothbard’s anarcho-capitalism, there aren’t any states: people hire private defense agencies to protect their rights.
According to the argument I wish to examine, prepolitical rights make no sense because there are no ways to define the boundaries of these rights. If each person is a self-owner, when does self-ownership begin? Are children self-owners? What about abortion—is a woman, as the owner of her body, entitled to abort a baby she doesn’t want? What are the permissible limits of self-defense? Is your right to life entirely negative, i.e., other people must not use force against you, or threaten you with force, unless you have aggressed against them, or do you in some cases have the right to the aid of other people to preserve your life? If you are accused of a crime, what (if any) rights do you have to be tried by fair procedures? The questions multiply when we reach property rights. What is the correct principle of initial acquisition? What about intellectual property?
Given the lack of clear boundaries to natural rights, it is argued, the notion is useless in practice. Instead, we must start with the notion of autonomous persons who in particular societies decide what legal rights people have, being guided in so doing by local practices. As an example, the notion of property is in this view entirely a social construct. The government in taxing you is not taking away what you rightfully have acquired, because it is the government (backed by democratic decision) that has decided what you own in the first place.
There’s an obvious objection to this argument, but the defenders of the argument have a reply to it. The objection is that proponents of natural rights don’t set clear boundaries for these rights. But if you read Ethics of Liberty, you will quickly discover that Rothbard does answer the questions about boundaries posed above. You may accept or reject what he says, but how can it be reasonably maintained that his natural rights are useless because they lack clear boundaries?
The reply that the opponents of natural rights would offer is that other supporters of natural rights often disagree with Rothbard’s answers. Rothbard, e.g., is critical of patents, but Objectivists regard intellectual property as an essential right. Given such disagreements, don’t even supporters of natural rights have to rely on social convention to decide what the proper natural rights are? If so isn’t it the agreement of people within a society that is doing the work rather than the natural rights?
This reply is very weak. People may disagree, but that doesn’t show that one opinion can’t be correct and the others wrong. That is something that needs to be settled by argument. If you think Rothbard is wrong about strict liability, for instance, it won’t do just to point out that some people accept the “reasonable man” standard at odds with it. You need to show that Rothbard’s arguments don’t settle the issue if you want to push the claim that social convention must play the primary role in settling disputed questions about rights. It’s an interesting point, I think, that showing Rothbard is mistaken doesn’t help the social conventionalist. If you did that, you would be merely eliminating one option, Rothbard’s, from consideration, not showing that the remaining options require a convention-based resolution. For the conventionalist position to remain intact, you would need to show that Rothbard’s arguments for his position aren’t dispositive and also that other arguments don’t show that he is wrong. Then, strict liability would still be in the running but not a clear winner.
But suppose that it can’t be shown that there is a correct theory of natural rights that settles all important issues and that people in a particular society must rely in part on convention to fix the boundaries of these rights. It hardly follows from this that natural rights are useless and everything important rests on the social practices of a particular society. Suppose that we don’t know the exact boundaries of the correct principle of initial acquisition. We do know, though, that people have a natural right to acquire property, so that social conventions that altogether deny people the right to own property are ruled out.
Supporters of the conventionalist view usually don’t like private property rights very much, but they support the right to free speech. The same sort of problems they raise for property rights arise also for free speech. Does free speech cover libel and slander? False advertising? Disclosure of trade secrets? The fact, if it is one, that the concept of “free speech” leaves these questions unsettled does not throw everything open to social decision. A law that prohibited political speech would violate people’s free speech rights, even granting the conventionalist point. Why are property rights subject to different treatment? Further, as Rothbard has pointed out, once property rights are settled, that resolves controversies about free speech rights. People do not have a vague and unlimited right to free speech but rather the right to set regulations for speech on their own property. If you are on someone else’s property, you must follow his rules about speech.
There is another problem with the social conventionalist view, and it is a glaring one. Even if people in a society need in part to rely on social practices to settle disputed issues, how does the state, democratic or otherwise, enter the picture? Why couldn’t those in a stateless society settle such problems through negotiation? People in the grip of the view I’m criticizing tend to assume without argument that we must accept the framework of the modern national state. Murray Rothbard shows us a different way to proceed, and that is a principal element in his greatness as a political philosopher.
I’d like to discuss what is sometimes claimed to be a major problem for theories of rights like that of Murray Rothbard, which start from the principle of self-ownership and incorporate a Lockean principle of initial appropriation of resources. In brief, you own yourself; you “mix your labor” with unowned land or resources, and in this way you acquire the land or resources. The details of what you have to do to acquire the property do not for our purposes matter, and some people prefer to avoid altogether the language of labor mixture. What counts for our purposes is that your self-ownership is extended outward to objects in the world, making these objects yours as well.
The alleged problem for theories of this type is that parents in some sense “make” their children. If “you own what you make,” don’t parents own their children? Thus, the two principles of the theory of rights we’re discussing seem to be in conflict. Persons are self-owners, you own what you make, and children are persons. Do parents own their children, because you own what you make, or are children self-owners, because they are persons, and persons own themselves?
One apparent escape route for the theory is blocked. Ownership in this sort of rights theory is permanent; once you acquire something, it is yours to keep, unless you give it away or exchange it for something else. Thus, one cannot say that parents own their children but lose their ownership of them when the children become adults. That position would be a different theory from the one we are now examining.
A new problem now arises. Suppose parents own their children because they made them. Who made the parents? Their parents. Do these parents own not only their children, but their grandchildren as well? Or should we say that each set of parents owns its own children, but is not itself composed of self-owners, because each member of the set is owned by its own parents? We seem caught in confusion. Are we driven to adopt the Roman concept of the pater familias, in which adult males remained under the life-and-death power of their fathers until their fathers died? They would then in their turn succeed to the role of pater familias. (I won’t go into complications resulting from bringing in the rights of the mother; in the libertarian theory we are examining no less than those of the father.)
One even more extreme solution would be that the first parents own all subsequent generations and that they pass on their ownership rights through bequest to their successors. This “solution,” if it can be called that, was actually adopted by the defender of absolute monarchy Sir Robert Filmer in his Patriarcha, published after his death in 1680, but as in the Roman system, ownership rights are passed only in the male line. Locke devotes his First Treatise on Government to a reply to him.
Is there a way out? I believe that there is indeed. The whole set of problems we have been talking about arises from a mistaken assumption. Our starting point, once more, is the principle of self-ownership. Given this principle, the question then arises, can self-owners extend their ownership to unowned resources? To say that they can do so, through Lockean labor mixture or the equivalent, does not commit you to the principle that you own what you make, where this is taken to include persons within its scope. The question we are addressing, to reiterate, concerns only unowned objects. Why create a problem where it is unnecessary to do so?
Suppose that you reject my solution and claim that self-ownership and “you own what you make” are principles of independent force. Then you will face the following difficulty, in addition to having to deal with the problems mentioned above. Suppose that someone paints your house while you are away from your property. Does he now own part of your house because he has “made” part of it? It would not be a good answer to say that he doesn’t because you did not give him permission to work on the house. The principle “you own what you make” is supposed to have independent force. Why is it to be restricted to unowned objects? And if it is, is it at all plausible to claim that it is not to be restricted to persons whom you have made, when it is also maintained that all persons are self-owners? The self-ownership principle, on the view we are contesting, also has independent force, so why is to be subordinated to “you own what you make”? This strikes me as bizarre.
I seem open to this objection. I’m talking about a Rothbardian theory of rights, but Rothbard himself speaks of “homesteading” children. Isn’t Rothbard then adopting the principle “you own what you make,” understood as applying to persons, which I claim is bizarre? An examination of The Ethics of Liberty shows that this objection is mistaken. What Rothbard has in mind is that parents are the guardians of their children while they remain under their care. Children cannot be prevented from leaving, and as soon as they do, they become full self-owners. Thus, he says,
We must therefore state that, even from birth, the parental ownership is not absolute but of a “trustee” or guardianship kind. In short, every baby, as soon as it is born and is therefore no longer contained within his mother’s body, possesses the right of self-ownership by virtue of being a separate entity and a potential adult. It must therefore be illegal and a violation of the child's rights for a parent to aggress against his person by mutilating, torturing, murdering him, etc.…But when are we to say that this parental trustee jurisdiction over children shall come to an end? Surely, any particular age (21, 18, or whatever) can only be completely arbitrary. The clue to the solution of this thorny question lies in the parental property rights in their home. For the child has his full rights of self-ownership when he demonstrates that he has them in nature—in short, when he leaves or “runs away” from home. (The Ethics of Liberty, pp. 100, 103)
In my view the language of “homesteading” of persons is best abandoned. Retaining it causes confusion, and nothing essential to the theory is lost by giving it up.
One of the first free market books I read, back in the early 1960s, was William Graham Sumner’s What Social Classes Owe Each Other.
The book originally appeared in 1883. It is often smeared for its “social Darwinism.” According to this interpretation, Sumner thinks that people must struggle with each other in order to live. Humanity will progress if the “fittest,” that is, the strongest, win out, and the weak are left to fall by the wayside. I’ll try to show that this isn’t what he says. To the contrary, he gives a forceful and effective defense of the free market, along lines that will be familiar to readers of Mises and Rothbard.
Sumner’s key point is not that people struggle with each other, but rather that people need to provide for themselves in order to live. To do this they must organize themselves in a society: people would not be able to survive if they tried to live on their own. And there are two basic types of society, ones organized by status and by contract.
In the Middle Ages men were united by custom and prescription into associations, ranks, guilds, and communities of various kinds. These ties endured as long as life lasted. Consequently society was dependent, throughout all its details, on status, and the tie, or bond, was sentimental. In our modern state, and in the United States more than anywhere else, the social structure is based on contract, and status is of the least importance. Contract, however, is rational—even rationalistic. It is also realistic, cold, and matter-of-fact.
Which one of these types is better? Sumner’s answer is that although a status society has its good points, we cannot go back to it; and this is a fortunate thing, because people are far better off in a society based on contract.
That we have lost some grace and elegance is undeniable. That life once held more poetry and romance is true enough. But it seems impossible that any one who has studied the matter should doubt that we have gained immeasurably, and that our farther gains lie in going forward, not in going backward. The feudal ties can never be restored. If they could be restored they would bring back personal caprice, favoritism, sycophancy, and intrigue. A society based on contract is a society of free and independent men, who form ties without favor or obligation, and co-operate without cringing or intrigue. A society based on contract, therefore, gives the utmost room and chance for individual development, and for all the self-reliance and dignity of a free man.
The secret to the success of a contract society, and here the similarity to Mises is unmistakable, is that this permits large accumulations of capital to occur. This is the only way the standard of living of the average worker can in the long run be increased.
So from the first step that man made above the brute the thing which made his civilization possible was capital. Every step of capital won made the next step possible, up to the present hour. Not a step has been or can be made without capital. It is labor accumulated, multiplied into itself—raised to a higher power, as the mathematicians say. The locomotive is only possible today because, from the flint-knife up, one achievement has been multiplied into another through thousands of generations. We cannot now stir a step in our life without capital. We cannot build a school, a hospital, a church, or employ a missionary society, without capital, any more than we could build a palace or a factory without capital. We have ourselves, and we have the earth; the thing which limits what we can do is the third requisite—capital. Capital is force, human energy stored or accumulated, and very few people ever come to appreciate its importance to civilized life. We get so used to it that we do not see its use.
But what about those who are unable to take care of themselves? Doesn’t society have a responsibility to provide for them? It’s from his answer to this question that Sumner’s reputation for social Darwinism arises. He starts his answer with another point that will be familiar to all Misesians and Rothbardians. Society doesn’t exist independently of the individuals in it. To say that “society” must provide for the poor and weak is to say that some people (the “haves”) should be compelled by others to do so. A person included among the haves “is the one who bears the penalty. But he is the Forgotten Man. He passes by and is never noticed, because he has behaved himself, fulfilled his contracts, and asked for nothing.”
He continues the argument by pointing out that the state, which produces nothing, turns people into slaves by taking money from them.
The capital which, as we have seen, is the condition of all welfare on earth, the fortification of existence, and the means of growth, is an object of cupidity. Some want to get it without paying the price of industry and economy. In ancient times they made use of force. They organized bands of robbers. They plundered laborers and merchants. Chief of all, however, they found that means of robbery which consisted in gaining control of the civil organization—the State—and using its poetry and romance as a glamour under cover of which they made robbery lawful….Now, if there are groups of people who have a claim to other people's labor and self-denial, and if there are other people whose labor and self-denial are liable to be claimed by the first groups, then there certainly are “classes,” and classes of the oldest and most vicious type. For a man who can command another man's labor and self-denial for the support of his own existence is a privileged person of the highest species conceivable on earth. Princes and paupers meet on this plane, and no other men are on it all. On the other hand, a man whose labor and self-denial may be diverted from his maintenance to that of some other man is not a free man, and approaches more or less toward the position of a slave.
Sumner does not object to helping others. What he emphasizes is that it should be up to each productive individual to decide how much to aid other people.
Furthermore, it ought to be distinctly perceived that any charitable and benevolent effort which any man desires to make voluntarily, to see if he can do any good, lies entirely beyond the field of discussion. It would be as impertinent to prevent his effort as it is to force cooperation in an effort on some one who does not want to participate in it. What I choose to do by way of exercising my own sympathies under my own reason and conscience is one thing; what another man forces me to do of a sympathetic character, because his reason and conscience approve of it, is quite another thing.
Moreover, it is good for people to help each other. “Men, therefore, owe to men, in the chances and perils of this life, aid and sympathy, on account of the common participation in human frailty and folly.”
Sumner does think, though, that people should be careful about whom they help. It is better, in his view, to help those who have good prospects of bettering themselves than to help the incorrigible. This is the grain of truth in the “social Darwinist” caricature, but it is no more than a grain.
Sometimes people claim the free market is unfair to future generations. Mises says again and again that capitalism is a system of “mass production for the masses” directed by the “dollar-votes” of consumers, and the consumers he is talking about are people who now exist. These people will act to secure their interests, but what about those who come after them? Don’t we have to consider the time “when like our sires, our sons are gone,” in Ralph Waldo Emerson’s phrase?
In A Poverty of Reason: Sustainable Development and Economic Growth (2002), the economist Wilfred Beckerman had some insightful comments on this issue. According to those who criticize the market, people care about their children and grandchildren but will rarely seek to conserve their resources beyond what is needed to provide for them. After they provide for their immediate descendants, the pursuit of profit will lead them to a wasteful use of scarce resources that may destroy the environment for those who live after them. Doesn’t the government need to protect the rights of future generations in order to prevent this catastrophe from happening?
There’s an obvious objection to this line of thought, besides those that Beckerman offers. The children and grandchildren in question in turn will have children and grandchildren of their own. So long as this continues from generation to generation, we won’t reach the situation that the environmentalists talk about. They might respond that we need even more conservation of resources than this, but that doesn’t seem plausible.
Beckerman’s main objection to the “future generations” argument is this: Suppose we grant that the present generation shouldn’t squander all its resources and leave nothing for distant future generations. It doesn’t follow that these future generations have an enforceable right that resources be conserved at a certain rate. To introduce the language of rights, Beckerman says, is to assume without basis that whatever moral claims future generations have on the present bind us absolutely, or close to it. Why don’t we instead view obligations to the future as one item to be weighed against other things?
He also challenges head-on a key premise of much contemporary moral philosophy. Those who favor “sustainable” growth to protect future generations maintain that each future generation should be provided with an equally good environment to the one we now have. Beckerman asks, What is so good about equality?
Arguments for equality often hide behind feelings of sympathy many people have for the impoverished. Environmentalists paint a bleak picture of a future in which essential fuels are exhausted and people confront catastrophically high temperatures. Isn’t it unfair, they say, to subject people to such conditions? If it is unfair, what is wrong is that people shouldn’t be subjected to bad conditions: equality is irrelevant.
But what happens if we do favor an “equal” environment for each future generation? Beckerman answers with a clever argument. Those who will live in the future are likely to benefit from continued economic growth. If they turn out to be more prosperous than we are, don’t they, by the criterion of equality, owe us compensation for their superior good fortune? Of course, they cannot pay us, since they don’t now exist. But we can do our best to achieve equality by refusing to conserve our resources. The poorer environment that results for our successors balances their superior prosperity and thus helps to achieve equality.
Beckerman states his reductio in this way:
But suppose future generations were expected to be richer than we are for reasons that are outside our control….if we regard natural inequalities as unjust, we would be morally obliged to take some action…to reduce our poverty compared with future generations by, say, slowing down future growth (e.g., by investing less or using up more of the earth’s supposedly scarce resources.)
Finally, I’d like to mention one more of Beckerman’s arguments. Many environmentalists are well aware of the fact that their predictions of disaster are controversial. But they claim to have an argument that their pessimistic views should still guide policy. If the optimists are correct, and we follow their advice, we shall have somewhat higher growth rates than otherwise. But if the environmentalists are right, and we ignore them, disaster threatens. Shouldn’t we then err on their side?
This is the so-called precautionary principle: "Where there are threats of serious or irreversible damage, lack of full scientific certainty should not be used as a reason for postponing measures to prevent environmental degradation."
Posed this way, the issue, Beckerman shows, rests on a false assumption. Why must a decision be made immediately? If "scientific certainty" is not available, why not wait until we have a clearer idea of what will happen? Why now install costly measures designed to curb global warming if in a few years we may find out that our efforts are futile or that global warming is not so bad?
To think that possible environmental disaster requires an immediate response is to assume falsely that we risk disaster by waiting for a short time before acting. But this does not follow, even if the environmentalists turn out to be right in their predictions. So far as climate change is concerned, "delaying action by several years makes a negligible difference." But what happens if we allow for this point? Suppose, e.g., that after several further years of research, we still face conflicting views about global warming. Should we then follow the pessimists in order to prevent catastrophe? (For an example of such controversy, see my review of S. Fred Singer’s Hot Talk, Cold Science.)
Not necessarily. Beckerman points out that the principle of avoiding disaster can be carried too far. We should indeed be cautious, but the benefits of economic development should never be ignored. The precautionary principle "is just a pompous way of saying that one should consider the case for making some investments now in order to minimize the danger of some unpleasant event taking place later. But nobody in their senses would make investments to avoid every remote possibility since that would leave precious little time for the enjoyment of life."
In the time since Beckerman wrote, the catastrophists have become more and more strident, and his book deserves our renewed attention.
Those of us who support a noninterventionist foreign policy find in Murray Rothbard’s work an inexhaustible source of facts and arguments. Mises, by contrast, usually doesn’t comment on foreign policy issues. Sometimes he did, but you won’t find in his published writings his views on the Cuban Missile Crisis or the Arab-Israeli conflict. I’d like to suggest, though, that a fundamental theme in his work supports noninterventionism.
The theme I have in mind is the evil of war. In an eloquent passage in Human Action, Mises says:
How far we are today from the rules of international law developed in the age of limited warfare! Modern war is merciless, it does not spare pregnant women or infants; it is indiscriminate killing and destroying. It does not respect the rights of neutrals. Millions are killed, enslaved, or expelled from the dwelling places in which their ancestors lived for centuries. Nobody can foretell what will happen in the next chapter of this endless struggle.
This has little to do with the atomic bomb. The root of the evil is not the construction of new, more dreadful weapons. It is the spirit of conquest. It is probable that scientists will discover some methods of defense against the atomic bomb. But this will not alter things, it will merely prolong for a short time the process of the complete destruction of civilization.
Modern civilization is a product of the philosophy of laissez faire. It cannot be preserved under the ideology of government omnipotence. Statolatry owes much to the doctrines of Hegel. However, one may pass over many of Hegel's inexcusable faults, for Hegel also coined the phrase “the futility of victory” (die Ohnmacht des Sieges) To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.
If war is destructive and evil, how can we eliminate it? Mises’s answer comes from a basic principle of his social philosophy: social cooperation through the free market allows people to relate to one another peacefully. Because all parties to an economic exchange benefit from it, people from other countries are not our enemies. The way to peace, then, lies in a policy of complete economic freedom. People should be able to trade with each other as they wish, without restriction. Mises says this far better than I can:
What distinguishes man from animals is the insight into the advantages that can be derived from cooperation under the division of labor. Man curbs his innate instinct of aggression in order to cooperate with other human beings. The more he wants to improve his material well-being, the more he must expand the system of the division of labor. Concomitantly he must more and more restrict the sphere in which he resorts to military action. The emergence of the international division of labor requires the total abolition of war. Such is the essence of the laissez-faire philosophy of Manchester.
This sounds simple enough, but an obstacle impedes carrying out this policy fully. Misled by false ideologies, many people think that nations prosper by seizing the resources of other nations. In Mises’s view, the motive behind modern warfare is thus economic. It’s just a tautology to say that war stems from aggressive nationalism; we need to ask what is responsible for that, and the answer lies in false doctrines of what leads to prosperity.
There is perfect agreement with regard to the fact that total war is an offshoot of aggressive nationalism. But this is merely circular reasoning. We call aggressive nationalism that ideology which makes for modern total war. Aggressive nationalism is the necessary derivative of the policies of interventionism and national planning. While laissez faire eliminates the causes of international conflict, government interference with business and socialism creates conflicts for which no peaceful solution can be found. While under free trade and freedom of migration no individual is concerned about the territorial size of his country, under the protective measures of economic nationalism nearly every citizen has a substantial interest in these territorial issues. The enlargement of the territory subject to the sovereignty of his own government means material improvement for him or at least relief from restrictions which a foreign government has imposed upon his well-being. What has transformed the limited war between royal armies into total war, the clash between peoples, is not technicalities of military art, but the substitution of the welfare state for the laissez-faire state.
Given that so much of the world is in the grip of false ideologies, what can we do? Mises says that the answer does not lie in international organizations or treaties.
It is futile to place confidence in treaties, conferences, and such bureaucratic outfits as the League of Nations and the United Nations. Plenipotentiaries, office clerks and experts make a poor show in fighting ideologies. The spirit of conquest cannot be smothered by red tape. What is needed is a radical change in ideologies and economic policies.
But how could this change in ideologies come about? Mises’s answer is that this will happen only if public opinion comes to support the free market, since all government rests ultimately on public opinion. He is pessimistic about whether this will happen.
Here is where Rothbard offers an indispensable addition to Mises. If we avoid military intervention except in case of direct attack, and always promote free trade, then we have done what we can to secure a peaceful world. As he put it in an article written in 1982,
No, far better and wiser [than collective security] is the old classical liberal foreign policy of neutrality and nonintervention, a foreign policy set forth with great eloquence by Richard Cobden, John Bright, the Manchester school and other “little Englanders” of the nineteenth century, by the Anti-Imperialist classical liberals of the turn of the twentieth century in Britain and the United States, and by the old right from the 1930s to the 1950s. Neutrality limits conflicts instead of escalating them. Neutral states cannot swell their power through war and militarism, or murder and plunder the citizens of other states.
Manent insists that if political leaders don’t lead society, we will have a society that isn’t led by political leaders. So what?
Original Article: "A World without Political Leaders?"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
The task at hand is the study of the problems of the determination of prices and interest rates. This task requires a sharp distinction between money-certificates and fiduciary media.
Original Article: "There Is Money and Then There Are Money Substitutes"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Thanks to politics, confirmation bias, and bad monetary economics, central banks have a lousy record when it comes to economic forecasts.
Original Article: "Why Mainstream Economic Forecasts Are So Often Wrong"
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The French political philosopher Pierre Manent has a view of politics that my readers are likely to reject, and rightly so. He has written a great deal about the French classical liberals, especially Tocqueville, but his heart lies more in the study of the classics. In his books, such as Metamorphoses of the City, he offers careful readings of Aristotle, Cicero, and many others. Few can match his interpretative depth. But there is a flaw in his method, and the flaw is not that his readings have been influenced by Leo Strauss, though Strauss may make the same mistake as the one I claim that he makes. Rather, it is that he assumes without argument that the ancient texts, as he interprets them, contain truths that we must without question accept.
The problem is evident in an essay of his that has attracted a good deal of attention, “The Tragedy of the Republic: The Decay of Political Culture in the West,” which appeared in English translation in the May 2017 issue of First Things. In this essay, Manent criticizes people in America and Europe today. The problem is that we don’t want to be commanded. “It has been too long since we had the rare benefit of being governed by a truly ambitious statesman.”
Instead, we hold a fallacious view.
The conviction has taken hold that our regime would be more republican if it ignored political rule still more. Political leaders are to serve our interests rather than commend our collective actions. The reigning social philosophy postulates the power and self-sufficiency of a spontaneous social form that would bring together order and freedom without the mediation of political rule. This is to abandon society to its inertia, that is, its corruption. Thus places and states of toxic stagnation have formed, spreading and producing cysts on the social body over the last ten, twenty, or thirty years; these places have never known the presence of political rule.
What is Manent saying here? If you don’t accept his opinion that political leaders should rule us, then you are abandoning society to “its inertia.” What does that mean? Apparently, it is that society will stay as it is; there will be no force exerted on it from the outside that moves it in a new direction. But this is a useless tautology: it just says that if political leaders don’t lead society, we will have a society that isn’t led by political leaders. So what?
Not content with one tautology, Manent gives us another. He talks of “its inertia, that is, its corruption.” This defines the present state of society—its inertia—as corrupt. Again, we haven’t been given a reason to think that there is anything wrong with letting people organize society without the help of great leaders. But perhaps I’m being uncharitable to Manent here. Maybe he means that it’s obvious that our present society is corrupt. He isn’t, in this construal, trying to make it true by definition that it is, but rather inviting us to look at the existing state of things. If we do, isn’t it evident that something is wrong? Indeed it is, but it isn’t at all evident that what is wrong is that society has been left to itself, bereft of great leaders. I’d say just the opposite: a major part of what is wrong is that political leaders, who arrogantly see themselves as superior to those they deem their inferiors, presume to order us around. In Shelley’s line, “Power, like a desolating pestilence, pollutes whate’er it touches.”
Manent has another pseudoargument on offer, but it need not long detain us. He says,
Europe cannot live indefinitely without any form. There are among us both reasonable citizens and passionate citizens who are waiting for the event that would force us to give ourselves some form, a European form for some and a national form for others. All discern the proliferation of signs of our fate, which they interpret in opposite ways.
Here the reasoning, such as it is, comes from the metaphysics of Aristotle. A substance cannot consist only of shapeless matter; it must be united to a form that shapes it. Applying this, society cannot exist formless but requires a leader to shape it. Two questionable presuppositions of this argument should be noted. First, why take it as given that “society” is a single substance rather than an association of individual persons, connected through certain relations? And if it is a substance, why must its form be imposed on it by a shaping entity from outside it? We are given no answer.
I suspect that the problem lies with Manent. He is bored by what he regards as the mediocrities of the present and longs for heroes. Thus, he says that the republic is
the regime that allows and encourages the most action. This can be seen in Rome, and we see it in England in the seventeenth and eighteenth centuries, a “republic disguised under the form of monarchy,” as Montesquieu put it. We see it in America’s founding, an extraordinary founding, and we see it in France in the great movement of ’89, especially if this movement is understood to include, as it ought, the adventure of the empire.
To be a republic, as he understands it, is to be committed to heroic action, and we do not now see that heroic action as we can look back on it in the glories of the French Revolution. It is odd that the empire of Napoleon is included within this capacious view of a republic. One can only respond that if this is what Manent means by a republic, we do not want it, nor has Manent given us any reason why we should want it. Murray Rothbard liked to quote Proudhon, “Liberty, the mother, not the daughter of order.” Manent to his cost would not agree.
The Marxist dialectic was purported to explain every development in Soviet society. But so much wishful thinking was required that eventually it all just became a subject for jokes.
Original Article: "The Problems with Marx's Dialectic"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
In a famous lecture delivered in August 1819, the great classical liberal Benjamin Constant contrasts the ancient and modern conceptions of liberty. By the “ancient conception,” Constant means the liberty of the citizens of a state to rule themselves, as opposed to rule by despots, whether foreign or domestic. He has primarily in mind the ancient Greek city-states. He says that ancient liberty
consisted in exercising collectively, but directly, several parts of the complete sovereignty; in deliberating, in the public square, over war and peace; in forming alliances with foreign governments; in voting laws, in pronouncing judgments; in examining the accounts, the acts, the stewardship of the magistrates; in calling them to appear in front of the assembled people, in accusing, condemning or absolving them. But if this was what the ancients called liberty, they admitted as compatible with this collective freedom the complete subjection of the individual to the authority of the community….All private actions were submitted to a severe surveillance. No importance was given to individual independence, neither in relation to opinions, nor to labor, nor, above all, to religion. The right to choose one's own religious affiliation, a right that we regard as one of the most precious, would have seemed to the ancients a crime and a sacrilege.
He contrasts this with the liberty of the moderns.
For each of them it is the right to be subjected only to the laws, and to be neither arrested, detained, put to death, or maltreated in any way by the arbitrary will of one or more individuals. It is the right of everyone to express his opinion, choose a profession and practice it, to dispose of property, and even to abuse it; to come and go without permission, and without having to account for his motives or undertakings. It is everyone's right to associate with other individuals, either to discuss their interests, or to profess the religion that he and his associates prefer, or even simply to occupy their days or hours in a way that is most compatible with his inclinations or whims.
In brief, the contrast is between political autonomy and personal liberty. It’s clear that Constant prefers modern liberty to its ancient predecessor. It’s sometimes overlooked, though, that he includes an element of collective self-rule in the modern conception: “it is everyone's right to exercise some influence on the administration of the government, either by electing all or particular officials, or through representations, petitions, demands to which the authorities are more or less compelled to pay heed.” This type of representation, he says, is a modern development:
called as we are by our happy revolution (I call it happy, despite its excesses, because I concentrate my attention on its results) to enjoy the benefits of representative government, it is curious and interesting to discover why this form of government, the only one in the shelter of which we could find some freedom and peace today, was totally unknown to the free nations of antiquity.
I’d like to discuss an objection to Constant’s “modern conception” that the intellectual historian Quentin Skinner and the philosopher Philip Pettit raise against it. The objection has to do with taking the modern conception as a normative goal. Whether Constant’s account is historically accurate about the beliefs of the ancients and moderns is a separate issue that won’t be addressed here. The objection is that we could imagine an absolute monarch who believes in “modern liberty” and leaves his subjects free to lead their lives as they wish. Even if he did, Skinner and Pettit argue, the people in his state wouldn’t be free in a sense we would accept as adequate. The monarch would be at liberty to change his mind and impose more restrictions on his subjects. They would be aware of this and would be careful to avoid offending him.
You might object that Constant already covers this point by building a representation condition into his conception of modern liberty, but that is easily answered. We simply remove the representation condition and take the Skinner-Pettit objection to be to what remains of “modern liberty.” The objection, taken this way, isn’t a straw man argument. There were theorists who did say that people who live under an absolute monarch who leaves them alone in their daily life have all the freedom they need. The historian Annelien de Dijn, in her Freedom: An Unruly History (Harvard, 2020), gives an example an essay published in 1784 by the Prussian philosopher Johann August Eberhard. He
claimed that political and civil liberty were not only different from each other but often inversely related. Experience taught that when a people enjoyed more political liberty, it had less civil liberty, whereas a people living under royal absolutism often had a great deal of civil liberty…[I]n the Swiss Republic, people enjoyed less freedom of thought than in an absolute monarchy such as Frederick the Great’s Prussia. (De Dijn, pp. 232–33)
Skinner and Pettit say that to answer their objection, we must include in an acceptable notion of freedom that the people in a society set the terms under which they live. If they do that, their freedom is not dependent on the whim of an absolute ruler.
Skinner and Pettit are right that if people enjoy civil liberty under an absolute monarch, their liberty has a precarious base. They are like “happy slaves” whose master leaves them free to do as they wish but who has not emancipated them. Unfortunately, their own solution to the problem they raise is also unsatisfactory. If people collectively set the terms under which they live, this leaves each person at the mercy of the collective. Your civil liberty isn’t guaranteed: an absolute monarch can’t take your property away but society as a collective body can do so.
Skinner and Pettit wouldn’t be too concerned with this complaint against them, because for them the collective or “republican” liberty they favor far exceeds individual liberty in importance. Those of us who follow Mises and Rothbard will disagree.
Mises often answers attacks on praxeology with a “minimalist” strategy. By this I mean that he denies that praxeology rests on controversial philosophical positions. By avoiding philosophical disputes, he tries to stay out of trouble he doesn’t need. He says, in effect, “We have an a priori grasp of the concept of action, and we can deduce various truths that follow from this concept. We also know that this concept applies to reality—actions exist. That’s all we need.” In what follows, I’ll give some examples of how Mises follows this strategy. It’s a hard strategy to follow, and Mises sometimes does take stands on disputed philosophical issues.
One objection to praxeology is this. Mises says there are a priori truths about action. We can discover the formal structure of all actions just by thinking about the concept of action. But what if our actions are determined by material forces, not by an independent realm of thoughts? To clear a space for praxeology, don’t we have to show that this claim about the way our actions are determined is false?
Mises says that we don’t. He supports what he calls “methodological dualism.” He says,
Various doctrines have been advanced to explain the relation between mind and body. They are mere surmises without any reference to observed facts. All that can be said with certainty is that there are relations between mental and physiological processes. With regard to the nature and operation of this connection we know little if anything.
Concrete value judgments and definite human actions are not open to further analysis. We may fairly assume or believe that they are absolutely dependent upon and conditioned by their causes. But as long as we do not know how external facts—physical and physiologica—-produce in a human mind definite thoughts and volitions resulting in concrete acts, we have to face an insurmountable methodological dualism….Reason and experience show us two separate realms: the external world of physical, chemical, and physiological phenomena and the internal world of thought, feeling, valuation, and purposeful action. No bridge connects—as far as we can see today—these two spheres. Identical external events result sometimes in different human responses, and different external events produce sometimes the same human response. We do not know why….Human action is one of the agencies bringing about change. It is an element of cosmic activity and becoming. Therefore it is a legitimate object of scientific investigation. As—at least under present conditions—it cannot be traced back to its causes, it must be considered as an ultimate given and must be studied as such. (Human Action, p. 61)
Someone might respond, “What if this situation changes in the future? What if we are able to show how thoughts arise from purely physical phenomena? Mises isn’t concerned with that. It isn’t our situation now, and this is all that we need.
Mises follows the same strategy on a related objection, but here he gets into a bit of trouble. The related objection I have in mind is this: “Doesn’t praxeology depend on the controversial philosophical position that people have free will? In praxeology, there is constant reference to people’s choices.”
Mises again denies that praxeology depends on doubtful doctrines. He says,
Some philosophers are prepared to explode the notion of man's will as an illusion and self-deception because man must unwittingly behave according to the inevitable laws of causality. They may be right or wrong from the point of view of the prime mover or the cause of itself. However, from the human point of view action is the ultimate thing. We do not assert that man is “free” in choosing and acting. We merely establish the fact that he chooses and acts and that we are at a loss to use the methods of the natural sciences for answering the question why he acts this way and not otherwise. (Human Action, p. 675)
The way he gets into trouble is that he is assuming that you can make choices even if you are determined. He is a “compatibilist.” Some philosophers deny this. These “incompatibilists” say that if we are determined, then we don’t choose. This position can be deployed against either determinism or the fact of choice. Since we are determined, we don’t choose. Alternatively, since we do choose, determinism is false. This isn’t the place to assess the controversy. The point I want to make is that Mises isn’t sidestepping a philosophical dispute here. He isn’t fully able to say, as he would like, “I leave such arguments to the metaphysicians.”
One more area where Mises tries to avoid philosophical disputes is in his doctrine of methodological individualism. Groups such as nations or classes don’t act apart from the individuals in them. The action of the United States in declaring war against Japan on December 8, 1941 is explainable entirely by actions of Franklin Roosevelt, members of Congress, and other people. So far, so good, but Mises extends the doctrine in a controversial way here. He says,
If one assumes that there exists above and beyond the individual's actions an imperishable entity aiming at its own ends, different from those of mortal men, one has already constructed the concept of a superhuman being. Then one cannot evade the question whose ends take precedence whenever an antagonism arises, those of the state or society or those of the individual. (Human Action, p. 705)
In another place, he says,
It is true that some philosophers were ready to overrate the power of human reason. They believed that man can discover by ratiocination the final causes of cosmic events, the inherent ends the prime mover aims at in creating the universe and determining the course of its evolution. They expatiated on the “Absolute” as if it were their pocket watch. They did not shrink from announcing eternal absolute values and from establishing moral codes unconditionally binding on all men. (Human Action, p. 656)
Here again Mises gets into controversial territory. To reject superhuman beings, Hegel’s Geist among them, is to take up a philosophical stance, not to insulate praxeology from philosophy.
Murray Rothbard looks at matters in a different way. He isn’t a minimalist but argues explicitly for various philosophical views, such as “strong” free will, in his defense of praxeology. I hope to address some of his arguments in a future column.
John Stuart Mill was more favorable to socialism than David Ricardo and his followers, even though Mill in economics was generally a Ricardian. In the preface to the third edition of his Principles of Political Economy (1852), he says that the main obstacle to socialism is that people might not yet be civilized enough to put it into practice. When people reach this higher state he isn’t sure what they will decide.
Mill says,
The chapter on Property has been almost entirely re-written. I was far from intending that the statement which it contained of the objections to the best known Socialist schemes should be understood as a condemnation of Socialism, regarded as an ultimate result of human progress. The only objection to which any great importance will be found to be attached in the present edition is the unprepared state of mankind in general, and of the labouring classes in particular; their extreme unfitness at present for any order of things, which would make any considerable demand on either their intellect or their virtue. It appears to me that the great end of social improvement should be to fit mankind by cultivation for a state of society combining the greatest personal freedom with that just distribution of the fruits of labour which the present laws of property do not profess to aim at. Whether, when this state of mental and moral cultivation shall be attained, individual property in some form (though a form very remote from the present) or community of ownership in the instruments of production and a regulated division of the produce will afford the circumstances most favourable to happiness, and best calculated to bring human nature to its greatest perfection, is a question which must be left, as it safely may, to the people of that time to decide. Those of the present are not competent to decide it.
When Mill wrote about socialism, though, he had mainly in mind a system of workers’ cooperatives, though he considered other arrangements, including communist systems in which people share equally, as well. He is sympathetic to these too, but of one variety of socialism he is critical. This is a centrally planned economy in which people’s jobs are assigned by an elite group at the top. He thinks this is hostile to liberty, and this verdict doesn’t change even if people can vote from time to time about the membership of the elite.
He says,
It supposes an absolute despotism in the heads of the association; which would probably not be much improved if the depositaries of the despotism (contrary to the views of the authors of the system) were varied from time to time according to the result of a popular canvass. But to suppose that one or a few human beings, howsoever selected, could, by whatever machinery of subordinate agency, be qualified to adapt each person's work to his capacity, and proportion each person's remuneration to his merits—to be, in fact, the dispensers of distributive justice to every member of a community; or that any use which they could make of this power would give general satisfaction, or would be submitted to without the aid of force—is a supposition almost too chimerical to be reasoned against. A fixed rule, like that of equality, might be acquiesced in, and so might chance, or an external necessity; but that a handful of human beings should weigh everybody in the balance, and give more to one and less to another at their sole pleasure and judgment would not be borne, unless from persons believed to be more than men, and backed by supernatural terrors.
This closely resembles the central argument of The Road to Serfdom. In chapter 7, Hayek says,
Most planners who have seriously considered the practical aspects of their task have little doubt that a directed economy must be run on more or less dictatorial lines. That the complex system of interrelated activities, if it is to be consciously directed at all, must be directed by a single staff of experts, and that ultimate responsibility must rest in the hands of a commander-in chief whose actions must not be fettered by democratic procedure, is too obvious a consequence of general ideas of central planning not to command fairly general assent.
Hayek goes on to say that supporters of central planning claim that coercion would be confined to the economic aspects of life and that this still allows considerable scope for individual freedom. Hayek denies this.
The authority directing all economic activity would control not merely the part of our lives which is concerned with inferior things; it would control the allocation of the limited means for all our ends. And whoever controls all economic activity controls the means for all our ends and must therefore decide which are to be satisfied and which not.
Central planning controlled by an elite leads to total dictatorship, exactly Mill’s argument. Hayek was well aware of Mill’s insight, and he quotes part of the same passage I have highlighted.
Unfortunately, Mill isn’t completely true to his insight. It applies only to people who have reached a certain level of civilization, not to “savages.” (He limits in the same way his defense of freedom of opinion in On Liberty.) Mill says,
That the scheme might in some peculiar states of society work with advantage, is not improbable. There is indeed a successful experiment, of a somewhat similar kind, on record, to which I have once alluded; that of the Jesuits in Paraguay. A race of savages, belonging to a portion of mankind more averse to consecutive exertion for a distant object than any other authentically known to us, was brought under the mental dominion of civilized and instructed men who were united among themselves by a system of community of goods. To the absolute authority of these men they reverentially submitted themselves, and were induced by them to learn the arts of civilized life, and to practise labours for the community, which no inducement that could have been offered would have prevailed on them to practise for themselves.
Mill was for much of his adult life a high official of the East India Company and an ardent imperialist. Liberty was not for the “lesser breeds without the law,” as Kipling later termed the subject peoples. But despite his many limitations, unforgettably brought out by Murray Rothbard, he does deserve praise for recognizing that central planning run by an elite would bring liberty to an end.
Human action cannot be analyzed in the same way that one would analyze objects. These quantitative methods do not improve our knowledge of the driving causes in economics.
Original Article: "Quantitative Methods in Economics Can Describe—but Not Explain—Events"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Near the beginning of Human Action, Mises makes a remarkable statement: “it is in this subjectivism that the objectivity of our science [economics] lies” (p. 21). What does he mean by this? How can a science be objective by being subjective.
Mises’s answer is that economics takes the ultimate preferences of people as given, not an occasion for further analysis by economics. This leads to another question. What is an “ultimate” preference? Mises’s answer starts from the fact that we want some things as means to achieve something else, e.g., we want food to satisfy hunger. Not everything that we want, though, is a means to some further end. Perhaps we satisfy our hunger not as an ultimate end but as a means to keep alive, but it does not seem plausible that “keeping alive” is a means to some further end. (There are exceptions to this claim that I’ll ignore here.) There has to be some ultimate end. There can’t be an endless series in which everything is a means to something else. It doesn’t follow from this, though, that there must be some one thing that is the ultimate end of all our actions. Rather, each chain of the form A is a means to B, B is a means to C,…etc., must finish with an ultimate end, but the ultimate end that is the termination point of each chain doesn’t have to be the same. To think otherwise would be to commit a logical fallacy, just as it does not follow from “Every man has a father” that “Some man is everybody’s father.” Some people think Aristotle made this mistake, but that is disputed.
With this understood, Mises’s argument becomes clearer. He says,
Because it is subjectivistic and takes the value judgments of acting man as ultimate data not open to any further critical examination, it is indifferent to the conflict of all schools of dogmatism and ethical doctrines, it is free from valuations and preconceived ideas and judgments, it is universally valid and absolutely and plainly human. (p. 21)
Mises takes ultimate ends as purely formal. The truths of praxeology apply to all human actions, regardless of their ultimate end. In particular, he stresses that economics doesn’t assume that people aim only at getting wealthy. He says,
Economics does not assume or postulate that men aim only or first of all at what is called material well-being. Economics, as a branch of the more general theory of human action, deals with all human action, i.e., with man's purposive aiming at the attainment of ends chosen, whatever these ends may be. To apply the concept rational or irrational to the ultimate ends chosen is nonsensical. We may call irrational the ultimate given, viz., those things that our thinking can neither analyze nor reduce to other ultimately given things. Then every ultimate end chosen by any man is irrational. It is neither more nor less rational to aim at riches like Croesus than to aim at poverty like a Buddhist monk. (p. 880)
Mises’s fundamental point is that if you don’t question people’s ultimate value judgments, but confine yourself to a discussion of means, you can be strictly objective and value-free. If you say to someone that he won’t get what he is aiming for by using the means he has chosen, you aren’t making a value judgment yourself. You are making a strictly scientific statement.
Mises explains this essential issue in this way:
An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If this economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate. In this sense the free-trade economists attacked protection. They demonstrated that protection does not, as its champions believe, increase but, on the contrary, decreases the total amount of products, and is therefore bad from the point of view of those who prefer an ampler supply of products to a smaller. It is in this sense that economists criticize policies from the point of view of the ends aimed at. If an economist calls minimum wage rates a bad policy, what he means is that its effects are contrary to the purpose of those who recommend their application.
I have so far just given an account of what Mises says. It seems to me exactly on target. But there is one area, though, in which he may be open to criticism. He rightly says that economists don’t tell people what they should do, where “should” implies an ethical judgment. Economists apply the purely scientific truths of praxeology to show whether means are suitable to attain ends. There is another area, though, where there is a contrast between “formal” and “material,” and that is within a type of ethical theory. Utilitarians in the nineteenth century often said that people ought to maximize “pleasure” or “utility,” where this meant a particular kind of felt experience. This has in more recent times largely though not entirely given way to what is called “preference utilitarianism,” where the aim is to maximize the realization of one’s preferences, whatever they turn out to be. Mises refers to this when he says, “If Eudaemonism says happiness, if Utilitarianism and economics say utility, we must interpret these terms in a subjectivistic way as that which acting man aims at because it is desirable in his eyes. It is in this formalism that the progress of the modern meaning of Eudaemonism, Hedonism, and Utilitarianism consists as opposed to the older material meaning” (p. 21, emphasis mine).
Where I think Mises goes astray is that he did not distinguish adequately between preference utilitarianism and economics. The former is not strictly scientific. It is an ethical theory, and someone who adopts it is engaged in philosophy and not praxeology. Mises is both a praxeologist and a preference utilitarian of a very distinctive sort, but you can be one without being the other. Murray Rothbard, for example, was a praxeologist but in ethical theory supported natural law, not preference utilitarianism. As Bishop Butler says, “Everything is what it is, and not another thing.”
Two of the leading British moral philosophers in the years after the end of World War II clashed about America’s dropping atomic bombs on Hiroshima and Nagasaki, and their clash has much to teach us about the principles that should govern a free society. The two thinkers are R.M. Hare and Elizabeth Anscombe. I’ll start with Hare because his way of looking at moral decisions is one many people will find reasonable, even if they don’t agree with his conclusions in this particular case. But it is Anscombe’s position that will teach us the most.
In an article, “Was Hiroshima Necessary?,” that was published in the New York Review of Books in May 1971, Hare strongly suggests that the answer is yes. But what I want to concentrate on first is not his argument that it was, but the way he arrives at his conclusion. He says that when you are faced with a decision, you should draw up a list of the good and bad consequences of the courses of action open to you and then pick the one that is best.
He thinks that this is how President Truman, who ordered the bombs dropped, reasoned. If Truman was correct in his assessment of the consequences, he was justified in what he did, and otherwise not.
If he is to be condemned, it will have to be because he did not do the best he could in the circumstances and did not take sufficient trouble to inform himself about the circumstances in order to determine what was the best thing to do. If this indictment is to be sustained, its second clause is crucial. Truman was, or would have been, very much to blame if there were other possible courses of action besides the bombing (both “conventional” and atomic) that would have ended the war at less cost in lives and suffering, and if he could have discovered and adopted them, but did not.
Hare mentions another way of looking at the question, and here his target is Elizabeth Anscombe, although he does not mention her by name. By the way, Hare and Anscombe disliked each other intensely, and Hare also despised her friend and fellow philosopher Philippa Foot, who supported her view.
According to Anscombe, you do, as Hare says, when making a decision weigh the good and bad consequences of the various courses of action open to you. But the fallacy Hare makes is to assume that any course of action that you are physically able to do should be included on your list of consequences. She denies this. She thinks that there are some courses of action that are absolutely forbidden. These don’t go on your list at all. Among them is the direct killing of the innocent.
Hare responds to her position in this way:
There are those who would say that…the dropping of the bomb was in itself a moral crime which could not be justified by any good consequences, even the saving of more lives (enemy and Allied alike) than it destroyed. People who discuss the morality of actions will perhaps always be divided into two classes: those who think that one should do the best one can in an evil world, and those who think it more important to keep oneself unspotted, by observing, “whatever the consequences,” certain simple moral principles which are not allowed to be over about twelve words long.
Anscombe thought that even on its own terms, Hare’s way of assessing the consequences of dropping the bombs was wrong. Why are the only alternatives under consideration dropping the bombs and a full-scale invasion of the Japanese mainland? What about a peaceful settlement? As she says,
I do not dispute it. Given the conditions, that [an invasion costly in lives] was probably averted by that action. But what were the conditions? “The unlimited objective.” Given certain conditions, drastic measures appear needed; but should this very fact not make us take a close look at the supposed necessities of the present state of things? If we do not, but instead insist that extreme circumstances demand extreme responses, we are in danger of adopting the maxim that “every fool can be as much of a knave as suits him.”
But what I’d like to stress here is something more general, how her position resembles Murray Rothbard’s defense of rights. For Rothbard, rights are barriers that forbid you from doing certain things. More specifically, his nonaggression principle forbids you from initiating force. You can only use force in defense against a rights violation. You don’t weigh the good and bad consequences of initiating force; you just don’t do it. The similarity to Anscombe’s view is unmistakable.
One bad consequence of Hare’s position is that holders of it often support violent action by the state. Hare not only defends dropping the bombs but he also thinks that holding government power tends to make people better. He says, “power, though it may corrupt, does also, often, bring with it a sense of that responsibility from which it is inseparable.”
I somehow doubt Murray Rothbard would agree. Hare and his ilk not only don’t hate the state, they adore it and its minions.
The trouble with China’s new five-year plan is that it attempts to solve problems while leaving their underlying structural causes unaddressed. In this it is not unlike the final Soviet five-year plans of the 1980s.
Original Article: "China's New Five-Year Plan Exposes the Wishful Thinking behind Socialist Regimes".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
In 1923 Lenin released a propaganda pamphlet titled Down with the Private Kitchen. It explained how private dinners with one's family are reactionary, bourgeois, and generally something requiring total destruction.
Original Article: "Why Commies Hate Your Thanksgiving Dinner".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Government planners have embraced a materialistic view of human beings which cheapens the importance of family and social events. These "experts" fail to understand what being human really means.
Original Article: "Lockdowns Destroy What Makes Us Human".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
If people want to dismiss this school of thought, which many seem inclined to do for political (not theoretical) reasons, at least they should do so based on facts and knowledge, not on falsehoods.
Original Article: "Debunking Seven Common Criticisms of Austrian Economics"
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Rawls’s doubts about global justice make him an effective critic of his own theory of justice.
Original Article: "John Rawls's Theories Help Refute John Rawls's Theories".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Michael Stack.
Listen to the Audio Mises Wire version of this article.
Last week, I drew attention to the important work of Antony Flew as an opponent of John Rawls’s A Theory of Justice. Flew exposes a fundamental fallacy in the famous “difference principle,” which says that all inequalities in wealth or income have to be to the advantage of the least well-off class in society. According to Rawls, it’s a matter of luck that you have talents that enable you to succeed. If the state wants to redistribute what you earn to help the poor, you can’t properly object that you “deserve” your talents. You just have them. Flew says that if Rawls is right about luck, all he has shown is that the category of desert doesn’t apply to distribution. It doesn’t follow that you don’t deserve to benefit from them, because this suggests that there is something wrong with the fact that you do.
Today, I want to talk about another effective critic of Rawls, John Rawls himself. After Rawls wrote A Theory of Justice, many philosophers thought he hadn’t gone far enough. He confines his theory to particular societies, such as the United States. Why not extend the theory so that it applies worldwide? If so, we would be asking about the globally worst off, not just the worst off in our own country.
Rawls doesn’t want to do this, as he makes clear in his book The Law of Peoples (Harvard, 1999). In defending his refusal to extend the difference principle all over the world, he raises some points that can be used against his own theory, even when it is confined to one country. Rawls thus becomes his own critic.
Rawls says that the difference principle applies only within particular societies. Separate rules apply to relations between societies, or “peoples,” as Rawls prefers to call them. Although he thinks that well-off peoples have a duty to assist others, this duty has strict limits. “[I]ts aim is to help burdened societies to be able to manage their own affairs reasonably and rationally and eventually to become members of the Society of well-ordered Peoples. This defines the ‘target’ of assistance. After it is achieved, further assistance is not required, even though the now well-ordered society may still be relatively poor.”
Rawls imagines a case in which two countries start out from roughly equal levels of wealth. One invests in industry, while the other prefers “a more pastoral and leisurely society….Some decades later the first country is twice as wealthy as the second. Assuming, as we do, that both societies are liberal or decent, and their peoples free and responsible, and able to make their own decisions, should the industrializing country be taxed to give funds to the second? According to the duty of assistance there would be no tax.”
The industrial society has, through its own efforts, done better than its lazier rival. Why, Rawls is asking, should it have to give away its gains to those who have worked less hard? But why doesn’t the same point apply also within a given society? Why, in other words, should those who gain through investment be required to subsidize those who do not?
A defender of the standard Rawlsian theory might respond in this way. A society that is “liberal” or “decent” has freely decided how much to invest. Individuals within a society lack such freedom. Their status in life is, to a large degree, fixed rather than chosen by themselves. Thus, the advantages of the well-off are subject to expropriation.
Rawls has the resources to respond to this objection, through a point he brings out in his discussion of the “law of peoples.” Let’s grant the premises of the reply that people need a certain level of resources for autonomy. Why is any redistribution above this level allowable?
Rawls puts the issue in this way: “Surely there is a point at which a people’s basic needs (estimated in primary goods) are fulfilled and a people can stand on its own.” Why doesn’t a similar point drastically limit the scope of the difference principle within a society? Why aren’t individuals, given their “basic needs,” on their own? (I’m not myself endorsing Rawls’s “assistance principle.” Rather, I want to emphasize its force against Rawls’s own system.)
Global redistributionists, unwilling to admit defeat, will probably try one more argument. Some countries are much better endowed in resources than others are. Is it fair, e.g., that Saudi Arabia is much wealthier than states less endowed with oil?
Rawls finds this line of thought unconvincing. Not natural resources, but the attitudes and ideas of a people, determine its achievement. Because “the crucial element in how a country fares is its political culture—its members’ political and civic virtues—and not the level of its resources, the arbitrariness of the distribution of natural resources causes no difficulty.” In support, Rawls cites the view of the economic historian David Landes “that the discovery of oil reserves has been a ‘monumental misfortune’ for the Arab world.” Can’t this same point be used to combat those who complain that some people inherit much more wealth than others? If people have good attitudes and ideas, can’t they succeed even if they don’t start with much in the way of resources?
A radical redistributionist might raise another point. Rawls takes for granted, he will say, a world composed of separate states. Why not amalgamate all societies into a single, world-embracing state? Then, Rawls’s limits on his difference principle cease to apply.
In the book’s best passage, Rawls decisively rejects worldly government. “I follow Kant’s lead in Perpetual Peace (1795) in thinking that a world government—by which I mean a unified political regime with the legal powers normally exercised by central governments—would either be a global despotism or else would rule over a fragile empire torn by frequent civil strife.”
Rawls’s doubts about global justice make him an effective critic of his own theory of justice. But I still prefer Antony Flew.
If democracy is so fundamental, shouldn’t we all have a vote in every place we set foot, from Sunbury, Alaska, to Monaco?
Original Article: "How I Survived Travel to a "Democracy" Where I Had No Vote".
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Abstract: Fegley and Israel (2020) have advanced the thesis that the status of leisure as a consumer good is an immediate inference from the action axiom rather than an empirical postulate as maintained by Mises and Rothbard. This comment argues that we can easily imagine a world in which leisure does not represent the opportunity cost of labor, and that Mises and Rothbard have been misconstrued. Additionally, I am strongly unsympathetic to the mode of argument they use in making their case, which is to directly challenge well-established foundational concepts and relations of economic theory. This may only provoke arid quibbling over epistemology.
JEL Classification: D01, J01, J20 Joseph T. Salerno (salerno@mises.org) is academic vice president of the Mises Institute and John V. Denson II Endowed Professor in the Department of Economics at Auburn University.
In their article, Tate Fegley and Karl-Friedrich Israel (2020) make two bold and sweeping claims. The first concerns the foundations of praxeology, the method of Austrian economics. Their second pertains to a different sphere altogether, that of “economic semantics” (Machlup 1967). Both spheres of inquiry are important in the development of economic theory, but it is crucial to maintain strict separation between them. Fegley and Israel (2020, 46) state their claims as follows:
[1.] Leisure (the state of not engaging in labor) is a necessary complementary good for consuming other goods. As such, leisure’s status as a consumer good is a priori true, not an empirical assumption. [2.] Furthermore, the concept of disutility of labor is not only unnecessary but also leads to confusion due to its being used in two different ways, and therefore ought to be discarded.
Unfortunately, the discussions of these two propositions are confusingly entwined throughout the article although they have no logical connection to one another. For the sake of conceptual clarity, I will analyze each proposition separately. I will begin with proposition 1, which is more important because it cuts to the heart of the praxeological method, which is the method of imaginary constructions, “the specific method of economics” (Mises [1949] 1998, 237).
Fegley and Israel contend that the proposition “leisure is a consumer good” is not an empirical postulate supplementing the action axiom. Rather, they argue, like the concepts of means and ends or uncertainty, it is an immediate inference of the axiom. This is tantamount to denying that a world can be conceived in which acting beings do not experience disutility of labor and, therefore, always expend their full capacity to work. This denial underlies their claim that labor always involves an inherent opportunity cost. As Fegley and Israel (2020, 51) state their argument:
Contrary to what Mises and Rothbard argue, we cannot without contradiction conceive of a world in which…engaging in labor has no opportunity cost. Hence, it is not really an additional assumption that supplements otherwise a priori praxeological theory, but rather an aspect of it that is already implied in the concept or axiom of action. Any specific course of action, be it classified as labor or leisure, has opportunity costs, as the choice of one action presupposes alternatives that must be forgone.
In fact, as I will argue, we can easily imagine a world in which leisure does not represent the opportunity cost of labor. However, the authors preempt the conception of such a world by a semantic sleight of hand. After initially defining leisure as “the absence of labor,” Fegley and Israel (2020, 48) subtly change their definition a sentence later. They first cite Mises’s definition of labor as “the employment of the physiological functions and manifestations of human life as a means” (Mises [1949] 1998, 131). They then assert that leisure as “the absence of labor” can “alternatively” be defined as “the employment of the physiological functions and manifestations of human life as an end.” From this they infer that “leisure is not only the act of ‘doing nothing,’ but the use of one’s body for consumption, rather than production.” And voilà, leisure is always and everywhere a consumer good and, therefore, labor bears an intrinsic opportunity cost.
Fegley and Israel believe that they have demonstrated aprioristically that leisure is a consumer good and labor always incurs an opportunity cost in terms of foregone leisure. But they have done no such thing. They have stated two premises:
Leisure is the absence of labor.Labor is a means to an end and requires the use of one’s body. From these two premises they claim to have logically deduced that leisure is the use of one’s body as an end and, therefore, that there is a tradeoff between time devoted to production and time devoted to consumption. For this syllogism to hold true, however, other—empirical—postulates are required relating to the human body, whose functions, capacities, and limitations are a datum for economic theory and closed to praxeological inquiry. This was clearly spelled out by Mises ([1949] 1998, 11, 642):
The unconscious behavior of the bodily organs and cells is for the acting ego no less a datum than any other fact of the external world. Acting man must take into account all that goes on within his own body as well as other data…. Praxeology deals with human action as such in a general and universal way. It deals neither with the particular conditions of the environment in which man acts nor with the concrete content of the valuations which direct his actions. For praxeology data are the bodily and psychological features of the acting men, their desires and value judgments, and the theories, doctrines, and ideologies they develop in order to adjust themselves purposively to the conditions of their environment and thus to attain the ends they are aiming at. (emphasis added)
Mises (2003, 16) specifically argued that praxeology may assume as a datum a human body with radically different features, limitations, and capabilities than exist in reality. For example, it may assume that “men lacked the possibility of understanding one another by means of symbols” or that they were “immortal and eternally young” and therefore “indifferent in every respect to the passage of time.” Indeed, according to Mises (15–16), it is possible to construct “a universal praxeology so general that its system would embrace not only all the patterns of action in the world that we actually encounter, but also patterns of action in worlds whose conditions are purely imaginary and do not correspond to any experience. The axioms of the theory could conceivably be framed in such universal terms as to embrace these and all other possibilities.” For Mises, the economist does not undertake such a project “because conditions that do not correspond to those we encounter in our action interest us only in so far as thinking through their implications in imaginary constructions enables us to further our knowledge of action under given conditions” (16).
This leads us to the question of whether we can imagine a world in which the physical bodies or psychological makeup of acting beings is such that they experience no disutility of labor? If the answer to this is yes, then Fegley and Israel have failed to prove their thesis that “leisure’s status as a consumer good is a priori true, not an empirical assumption.”
Let us first imagine a world in which all persons fully exhaust their capacity for productive labor after a certain period of time. They then enter a state of leisure, i.e., “absence of labor,” during which time they engage in what Mises called “recreation and restoration of the capacity to work.” We assume that during this time they are physically able to pursue various consumption goals. We further assume that every person’s consumption goals consistent with his stocks of goods and intertemporal consumption preferences are achievable within the state of leisure. Given these empirical assumptions—none of which contradict the action axiom—labor does not have an opportunity cost or disutility in terms of consumption foregone. The amount of leisure time is not chosen by the actor but imposed on him by the physiological requirements of his body and is superabundant with respect to his consumption goals. Leisure therefore has no value as a complementary input to the enjoyment of consumer goods. In the real world, these assumptions approximate the behavior of the “workaholic.” For example, the tech billionaire works to the point of exhaustion of his physical or mental labor capacity and then enjoys driving his Lamborghini home to consume a sumptuous meal prepared by a first-class private chef, after which he watches a movie in his private screening room, contemplates the fine art in his gallery, buys stuff online, and gets a few hours’ sleep.
Another hypothetical world in which leisure is not a consumer good is one in which the human body is imagined to have the capacity to process all conceivable consumption enjoyments while simultaneously expending maximum productive effort. In this imaginary construct “the state of not engaging in labor” is not required to achieve consumption goals and therefore labor has no opportunity cost. This has a parallel in our world with the consummate multi-tasker: the venture capitalist who can negotiate and close deals while sipping a martini and smoking a cigar on his yacht or the office worker who eats, uses social media, and gambles online while working hard in her cubicle. Actually, there are people who work twenty-four hours per day, seven days per week while managing to consume. A quick search of the internet reveals dozens and dozens of pornographic subscription websites on which people can literally be viewed “24/7” engaging in all kinds of activities via webcams strategically placed throughout their living spaces.
If one does not fancy these constructions, one can conjure up fictional worlds in which action is possible even further removed from our own. We can assume that the productive capabilities of the actors’ bodies are catalyzed by daylight while their capacity to consume lies dormant until the sun sets. Alternatively, it is conceivable all people choose to only work from sun rise to sunset and only consume after dark for religious, cultural, or psychological reasons. Letting our imagination range further afield, we may even suppose that an acting ego has control of two physical bodies: one specifically equipped solely for labor and the other solely for consumption activities.
It is evident that none of these imaginary constructions preclude the possibility of action, of the purposive use of means to attain ends. In all of them, there exist—that is, we cannot contemplate them without also thinking of—the means-end distinction, scarcity, uncertainty, the value scale, choice, and the other fundamental concepts and laws of human action.As Mises (2003, 15) pointed out, “we are quite incapable of thinking of this fundamental category [of action] and the system deduced from it without also thinking, at the same time, of the universal prerequisites of human action. For example, we are unable to grasp the concept of economic action and of economy without implying in our thought the concept of economic quantity relations and the concept of an economic good.” Yet in none of these constructions is leisure valued by the actor as a final consumer good or as a “complementary good for consuming other goods.” Therefore, “leisure’s status as a consumer good” is not an a priori inference from action but is established by empirical insight into the concrete conditions of action. Fegley and Israel (2020, 52) seem to glimpse the truth that the value of leisure depends on the assumption of definite empirical conditions:
Only if it is the case that there is no necessary relationship and one can engage in all types of consumption he or she desires without ceasing to labor, could it be possible at all that individuals would supply all the labor of which they are physically capable of providing. Only under such conditions would there be no opportunity cost, in terms of forgone consumption, to engaging in labor.
Unfortunately, at this critical point, the authors seem to experience a failure of imagination and stop short of spelling out the exact conditions under which labor would have “no opportunity cost in terms of forgone consumption” (52). Instead they resort to an assertion of what they have set out to prove, “the action axiom implies that the use of the human body is scarce and one must prioritize among ends.” But the action axiom does not imply that the human body is scarce in all its capacities and functions, no more than it implies that all kinds of land are scarce. The action axiom implies only that means are scarce in relation to ends. Exactly what those means are is a matter for empirical investigation. We can certainly conceive a world in which actors’ bodies are superabundant in relation to land. Imagine actors who have the ability to instantly replicate their bodies and, therefore, their capacity to work and consume, an endless number of times. However, assuming land and capital are scarce, doing so would drive the marginal product of labor to zero or below and, at this point, additional bodies would not increase income or consumption. In this world, the value of an extra human body would therefore be zero. Although the human body would not be scarce, actors would “still have to prioritize among ends,” because the scarcity of natural resources and capital goods would limit the supplies of consumer goods. Hence, the potentialities and limits of the human body are particular conditions of action that can only be learned by experience, not praxeological reasoning.
It actually is not necessary to construct fictional worlds to criticize Fegley and Israel’s argument, although it is a useful heuristic exercise to vividly differentiate between praxeological theory and the concrete data that ground such reasoning in the reality of our world. We can also challenge their argument by citing a theorem widely accepted by Austrian economists which assumes in its derivation a perfectly inelastic general supply of labor, i.e., the absence of the disutility of labor. The authors can then be called upon to demonstrate where the theorem fails because it is based on an assumption that contradicts the action axiom. One such theorem is that net saving in the economy “lengthens” the structure of production and raises the real wage rates of laborers. This theorem was given its most extensive development by Friedrich Hayek ([1935] 2008, 223–52) and Murray Rothbard ([1962, 1970] 2009, 517–43), whose analyses were very similar.
Hayek ([1935] 2008, 225–27) began his analysis from a “stationary state” in which the supplies of all resources are fixed and fully employed. His purpose was to show that an increased “output of consumers’ goods from a given quantity of original means of production” results from “transition to more capitalistic methods of production.” Hayek ([1935] 2008, 237–39) then demonstrated how a change in “the volume of voluntary saving” causes an increase in “the average length of the roundabout processes of production.” Once the transition to the lengthened structure of production has been completed, a new equilibrium ensues in which “the amount of original means of production [i.e., land and labor] used has remained the same” while the quantities of capital and consumer goods have increased (emphasis added). The prices of consumer goods therefore fall relative to the prices of the original factors, particularly labor, and real wages accordingly increase. But if the quantity of labor “has remained the same” in the new equilibrium despite higher real wage rates, then it means that Hayek has deduced his theorem with the assumption of a perfectly inelastic general supply curve for labor and hence has assumed that leisure is not a consumer good. In discussing the “effect of net investment” on the economy, Rothbard makes the same assumption and reaches the same conclusion as Hayek.Indeed, Rothbard ([1962, 1970] 2009, 453–507, 572–78) does not introduce upward-sloping general supply curves for labor in his discussion of net investment or his analysis of general factor pricing.
Now if Hayek and Rothbard’s theorem is based on an assumption that contradicts the action axiom, then it should conflict with other theorems in the chain of praxeological deductions and it could readily be proven false. The same could be said of the opportunity cost doctrine itself, which Fegley and Israel make extensive use of. In a famous article, Lionel Robbins ([1930] 1997, 72) articulated the crucial difference in assumptions underlying the controversy that took place during the period between 1890 and 1910 over the question: “Are all costs ultimately resolvable into foregone products, or are labor-pain and abstinence to be regarded as ultimate?” On one side of this “battle of giants” were arrayed the opportunity-cost theorists led by Böhm-Bawerk, Wieser, Wicksteed, and Davenport; on the other, stood the British economists Marshall and Edgeworth, who upheld the real-cost doctrine. Robbins perceptively pointed out that the debate turned on the different forms of the supply functions for labor and capital assumed by each side. Böhm-Bawerk et al. made the simplifying empirical assumption that labor and capital supply curves were perfectly inelastic, while Marshall and Edgeworth, in a quest for greater “realism,” assumed upward-sloping supply curves. As it turned out, it was easier to initially derive the opportunity cost doctrine with the aid of the simplified assumptions and then apply the doctrine to the realistic case of elastic supply curves.
If Fegley and Israel are truly interested in proving the a priori nature of the proposition that leisure is a consumer good, I suggest that they show the errors and contradictions in the praxeological theorems deduced using the antithetical proposition. Such an endeavor is potentially much more useful to the development of economic theory than advancing yet another hair-splitting argument about the epistemological status of the fundamental concepts and relationships from which the theory is deduced.
Let me now make a few brief remarks regarding Fegley and Israel’s contention that the concept of the disutility of labor is “not only unnecessary but also leads to confusion due to its being used in two different ways.” The authors cite the usage of the term by Percy Greaves, Mises, and Rothbard. I will focus on their criticisms of the latter two. The authors’ main critique of Mises is that in several passages he implies that “the disutility of labor is…a psychological phenomenon, an obstacle to be ‘overcome,’ rather than merely the opportunity cost of engaging in labor” (Fegley and Israel 2020, 49).
In one passage Mises ([1949] 1998, 585) states, “the disutility of labor in itself—not its product—satisfies.” The authors find this statement “utterly confusing” and interpret it as meaning that “the disutility of labor is not the utility of leisure foregone, but the pain, discomfort, or unpleasantness of engaging in labor.” But Mises makes this statement in his discussion of introversive labor, in which labor is undertaken as an end in itself. For Mises (484–85), introversive labor qualifies “as consumption,” and he suggests three motives for it. Let us take the example of a tennis player to illustrate these motives. First, he may play tennis with friends on weekends to maintain health and vitality and strengthen his body. Second, he may play tennis with disadvantaged children in order to serve God in compliance with his religious duties and his quest for eternal bliss. And, third, he may absorb himself in playing tennis to forget distressing events, ward off depression, or lift his spirits. In all of these cases it is the very disutility of labor, the very sacrificing of leisure, which serves as its own reward. Furthermore, Mises views leisure along an intensive as well as an extensive margin. Thus the more intense the labor, the greater is the sacrifice of leisure and, hence, the greater is the reward.With respect to “extroversive” labor in exchange for wages, the disutility of labor can be reduced on the intensive margin by what economists refer to as “shirking” or what used to be called in the vernacular “loafing” or “goofing off” on the job. In Mises’s example of the mountain climber: “The toil of climbing…involves disutility of labor. But it is precisely overcoming the disutility of labor that satisfies him. A less exerting [i.e., less leisurely] ascent would not please him better but less.”
Now, in contrast to Fegley and Israel (2020, 49), I do not find Mises’s usage of the term “disutility of labor” at all confusing in this context. Nor do I share the authors’ confusion concerning the implication that “‘disutility’ can generate something like ‘utility’” (ibid.). All disutility generates utility; otherwise it would not be voluntarily incurred by purposeful beings. The disutility of “extroversive” labor provided on the market generates the utility of a market wage rate, just as the disutility of playing tennis with less fortunate children produces the utility of complying with one’s religious duties. I also think that the authors’ concern about the psychological connotation of Mises’s term “overcome” with respect to disutility of labor is misplaced. In the very first sentence of his discussion of the topic, Mises ([1949] 1998, 584) uses the phrase “overcome the disutility of labor” followed immediately by the parenthetical clarification, “forego the enjoyment of leisure.”
Fegley and Israel (2020, 49–50) also find fault with Mises’s discussion of “the joy and tedium of labor.” They seize on the following statement: “Having completed a task the worker enjoys the feeling of having successfully overcome all the toil and trouble involved. He is happy in being rid of something difficult, unpleasant, and painful, in being relieved for a certain time of the disutility of labor” (Mises [1949] 1998, 586). They claim that Mises here “identifies the disutility of labor with unpleasantness, rather than strictly the opportunity cost of forgone leisure.” Their claim fails, however, because Mises is here referring to “special emotional phenomena [that] sometimes appear, feelings of joy or tedium, accompanying the execution of certain kinds of labor.” Mises is careful to specify that such feelings “are in a domain other than the disutility of labor… [and] therefore can neither alleviate nor remove the disutility of labor.” In other words, the disutility of labor lies in the praxeological realm and therefore influences choice and action. The joy and tedium of labor are emotional reactions to choices made and, as an ex post factor, they influence neither the choice of whether to incur the disutility of labor nor the value of the product or disutility of labor. Mises ([1949] 1998, 588) is clear and emphatic on this point:
The fact that the tedium of labor is substituted for the joy of labor [by ideological influences] affects the valuation neither of the disutility of labor nor of the produce of labor. Both the demand for labor and the supply of labor remain unchanged….What is altered is merely the worker’s emotional attitude.
Whatever one thinks of Mises’s psychological conception of the joy and tedium of labor, Mises leaves no doubt that it is completely distinct from the praxeological conception of labor’s disutility and that the only “pain” associated with the latter conception is the loss of satisfaction attending the sacrifice of a given quantity of leisure. For Mises “disutility” is purely a convenient accounting term. Every product of an act of labor is credited with a gain in utility on the revenue account of the individual’s “psychic” income statement and debited either with a loss of utility (opportunity cost of leisure forgone) or with the incurring of disutility (opportunity cost of leisure forgone) on the cost account. Psychic profit (or loss) is the same in either case. Because forgoing leisure is a (potential) opportunity cost of every act of labor, it is expedient to denote it with a general term and treat it positively as a cost item incurred when discussing the overall labor-leisure tradeoff. On the other hand, when we are conceiving of an actor as choosing among different employments, it is easier to debit psychic cost with the lost utility of the specific forgone money income and positive nonpecuniary components (shorter commute, more aesthetic work space, etc.) from the next best employment opportunity. If there are relatively disagreeable psychic components attaching to a job such as the forgone utility of healthful air and of freedom from perceived risk of being buried alive, which is experienced by subterranean miners, then it is perfectly correct to combine these specific opportunity costs with forgone leisure and treat them as part of the disutility of labor. The authors’ criticism of Rothbard for including “the disagreeable conditions under which labor is performed as part of what constitutes the disutility of labor” is thus groundless (Fegley and Israel 2020, 50).
I do not think that Fegley and Israel have proven their thesis that the status of leisure as a consumer good is an immediate inference from the action axiom rather than an empirical postulate as maintained by Mises and Rothbard. More important, I am strongly unsympathetic to the mode of argument they use in making their case, which is to directly challenge well-established foundational concepts and relations of economic theory. This is unlikely to be of much interest to working Austrian economists and, at best, will provoke arid quibbling over epistemology. A much more effective and fruitful approach would be to identify several economic theorems much further down the chain of praxeological deductions and demonstrate that they are false because they crucially depend upon an assumption that contradicts the action axiom, namely, that leisure is not a valuable consumer good. Indeed, one need not go searching for such false and contradictory theorems; if they exist, they will inevitably come to light during the work of applying praxeological theorems to explaining real-world economic events. This is the way that praxeological theory progresses. Regarding the authors’ subsidiary thesis that the concept of the disutility of labor should be discarded as unnecessary and because it is used by Mises and Rothbard in two different senses, I find no merit in this contention. Mises and Rothbard are crystal clear in what they mean by the concept and, although not absolutely necessary, the concept is expedient for certain problems in economic theory.
I’d like to continue the discussion of Scott Sehon’s article “No, the Nazis Were Not Socialists” that I began last week. At the end of my article, I berated Sehon. He says that the word “socialist” in the name of the Nazi Party (National Socialist German Workers’ Party) doesn’t show that the Nazis were really socialist. I complained, “Sehon is right that the word ‘socialist’ does not by itself tell us much, but unfortunately it does not occur to him to investigate what the Nazis meant by this word and why they used it.” Sehon might well answer me that that I didn’t do this either, and this is what I’m going to address in today’s article.
Sehon gives us a good suggestion that helps us to understand what the Nazis meant by “socialism.” He rightly calls attention to the 25-point Nazi Program of 1921. This, he says, is not a call to nationalize industrial production. Rather, it is a largely pro-business plan directed against the Jews: “When the Nazis talked about expropriation, they meant taking property belonging to Jews; they were quite in favor of private property for others.”
If we look at the Nazi program, this isn’t quite what comes to mind. Its dominant theme is that the German people have to come together as a collective entity: the common good must be put before the individual good. Differences in class and wealth must be strictly subordinated to the good of the German people (Volk) as a whole. Points 10 and 11 of the program declare:
The first obligation of every citizen must be to productively work mentally or physically. The activity of individual may not clash with the interests of the whole, but must proceed within the framework of the whole for the benefit for the general good. We demand therefore: Abolition of unearned (work and labour) incomes. Breaking of debt (interest)-slavery.
Point 14 is “We demand that the profits from wholesale trade shall be shared out.” Crucially, point 24 is
We demand freedom of religion for all religious denominations within the state so long as they do not endanger its existence or oppose the moral senses of the Germanic race. The Party as such advocates the standpoint of a positive Christianity without binding itself confessionally to any one denomination. It combats the Jewish-materialistic spirit within and around us and is convinced that a lasting recovery of our nation can only succeed from within on the framework: “The good of the community before the good of the individual”. (“GEMEINNUTZ GEHT VOR EIGENNUTZ”).
The great Austrian historian Erik von Kuehnelt-Leddihn has given the best analysis of Hitler and the the Nazi Party Program in his Leftism. He emphasizes Hitler’s disdain for traditional German society:
[Hitler] wanted to see Germany in complete monotony, with local traditions eliminated, regional self-government destroyed, the flags of the Länder strictly outlawed, the differences between the Christian faiths eradicated, the Churches desiccated and forcibly amalgamated. He wanted to make the Germans more uniform, even physically, by planned breeding and the extermination, sterilization, or deportation of those who deviated from the norm. The tribes (Stämme) should cease to exist.
Contrary to the impression Sehon gives, Hitler didn’t see himself as a partisan of business. In a conversation with Carl J. Burckhardt, the League of Nations high commissioner in Danzig, Hitler called himself a “proletarian.”
Sehon’s answer to this is that Hitler in power wasn’t a radical. There were socialists in the Nazi Party, such as Gregor Strasser, but Hitler kicked them out and in many cases killed them. He surrendered to big business in order to gain power. He did not nationalize the major industries of Germany. He was no socialist but favored private property and business enterprise.
In answer to Sehon, I mentioned Mises’s vital distinction between two kinds of socialism. In one of them, the state owns the means of production. In the other, private property still exists but the state tells the owners what to do. This is a form of central planning and still counts as socialism, and it was this that the Nazis put into practice.
Sehon says that this isn’t an accurate account of the Nazi economy and cites an article by Christoph Buchheim and Jonas Scherner to support his claim that private business enjoyed considerable autonomy in the Third Reich. Thanks to Mr. Paul McElroy, I now have access to the article.
Before I discuss this article, I need to mention another of Mises’s vital insights. As readers will remember, Mises in his famous socialist calculation argument proved that a fully socialist economy would collapse into chaos. If this is right, how can ostensibly socialist economies such as Soviet Russia exist? In answer, Mises said that these economies weren’t fully socialist. They allowed scope for private enterprise, albeit of a limited sort. Mises’s point applies to the German form of socialism as well as the Russian.
Thus, Buchheim and Scherner’s argument, even if we accept it, doesn’t disprove Mises’s claim that the Nazi economy was a form of socialism. Nazi control of business wasn’t complete, but neither was the Soviet economy totally socialist.
But should we accept Buchheim and Scherner’s argument? No, we shouldn’t. It is a response to a number of economic historians who accept an analysis of the Nazi economy like that of Mises. In particular, these authors criticize the famous MIT economist Peter Temin’s article “Soviet and Nazi Economic Planning in the 1930s,” available here by scrolling down.
In my opinion, Temin has the better of the argument. Buchheim and Scherner acknowledge:
The Nazi regime did not have any scruples to apply force and terror, if that was judged useful to attain its aims. And in economic policy it did not abstain from numerous regulations and interventions in markets, in order to further rearmament and autarky as far as possible. Thus the regime, by promulgating Schacht’s so-called “New Plan” in 1934, very much strengthened its influence on foreign exchange as well as on raw materials’ allocation, in order to enforce state priorities. Wage-setting became a task of public officials, the capital market was reserved for state demand, a general price stop decreed in 1936. In addition state demand expanded without precedent. Between 1932 and 1938 it increased with an average annual rate of 26 per cent; its share in GNP exploded in these years from 13.6 to 30.5 percent. As a consequence private consumption as well as exports were largely crowded out.
But, they say, this isn’t the whole story:
- Despite widespread rationing of inputs firms normally still had ample scope to follow their own production plans. 2. Investment decisions in industry were influenced by state regulation, but the initiative generally remained with the enterprises. There was no central planning of the level or the composition of investment. 3. Even with respect to its own war-related investment projects the state normally did not use power in order to secure unconditional support of industry. Rather, freedom of contract was respected. But the state tried to induce firms to engage according to its plans by offering them a whole bundle of contract options to choose from.
I think that their caveats, when read in the light of Mises’s point that a socialist economy needs to allow scope for private enterprise, leave Mises’s account of the Nazi economy intact. In this connection, an incident that Temin mentions is telling:
Terror was still a potent reality for I.G. Farben in 1939, at the probable zenith of its influence. The head of one the firm’s three divisions (Sparten) was alleged to have said to a visiting group of party officials that Hitler and Göring ‘were not sufficiently expert to be able to judge something like this…’.The Farben executive was denounced to the Gestapo, and threatened with a trial and possible prison sentence….He was subject to lengthy interrogation at the Gestapo office and had to petition the local Nazi Kreisleiter for permission to call on him and apologize. The Nazi Gauleiter reprimanded him and said that he could not protect him again from more serious consequences.
Sehon also takes it as an argument that the Nazis weren’t socialists that they suppressed the Communist and Social Democratic Parties and sent many of their members to concentration camps. I suggest that he look up what Stalin did to Mensheviks and dissident Bolsheviks. Socialists often kill their own, a point Sehon would do well to remember.
Last week, I talked about Mises and moral relativism, and in doing so I suggested a fundamental rule for understanding Mises. He always tries to defend the free market and his style of praxeological economics from any attack by other types of thought. Although he was a scholar of great learning and says interesting and valuable things about many different subjects, he is not trying to defend a particular philosophical system. This week, I’ll extend the discussion to one aspect of religion and theology. Once more, the same principle applies. Mises wants to deflect any attacks that come from these quarters. I’m not here attempting a comprehensive account of the religious thinkers who influenced Mises or of his views about religion. For those interested in these topics, I recommend Guido Hűlsmann’s monumental biography of Mises, The Last Knight of Liberalism. My discussion is confined to Mises’s response to critics of the free market who claim that the church can prescribe economic policies in a way that interferes with the operation of the free market. Also, my discussion will be an account of Mises’s position, not an assessment of it.
Many churches and theologians have recommended measurers that interfere with the free market. They think that class conflict is inevitable unless capitalism is replaced by socialism. “Such is the almost universally accepted social philosophy of our age. It was not created by Marx, although it owes its popularity mainly to the writings of Marx and the Marxians. It is today endorsed not only by the Marxians, but no less by most of those parties who emphatically declare their anti-Marxism and pay lip service to free enterprise. It is the official social philosophy of Roman Catholicism as well as of Anglo-Catholicism; it is supported by many eminent champions of the various Protestant denominations and of the Orthodox Oriental Church. . . they all agree in the fundamental thesis that the very existence of the capitalist system harms the vital interests of the immense majority of workers, artisans, and small farmers, and they all ask in the name of social justice for the abolition of capitalism.”
Mises doesn’t think that all theologians share this view. He wrote for Christian Economics, edited by Howard Kershner, and was a colleague of Edmund Opitz at FEE. Both of them strongly supported the free market. But the general anti-capitalist trend concerns him. For Mises, it is a scientific proposition, not a value judgment, that the free market promotes peace and prosperity. The Marxist doctrine of class conflict is false, regardless of who promotes it.
A natural way to deflect these attacks from church groups is to argue that true religion is a matter of an individual’s relation to God, and this is the path that Mises takes. He quotes William James: “It would, however, be a serious mistake to conclude that the sciences of human action and the policy derived from their teachings, liberalism, are antitheistic and hostile to religion. They are radically opposed to all systems of theocracy. But they are entirely neutral with regard to religious beliefs which do not pretend to interfere with the conduct of social, political, and economic affairs. . . we must not confuse the two things, religion and theocracy. William James calls religious ‘the feelings, acts and experiences of individual men in their solitude, so far as they apprehend themselves to stand in relation to whatever they may consider the divine.’. . This characterization of mankind's religious experience and feelings does not make any reference to the arrangement of social cooperation. Religion, as James sees it, is a purely personal and individual relation between man and a holy, mysterious, and awe-inspiring divine Reality. It enjoins upon man a certain mode of individual conduct. But it does not assert anything with regard to the problems of social organization. St. Francis d'Assisi, the greatest religious genius of the West, did not concern himself with politics and economics. He wanted to teach his disciples how to live piously; he did not draft a plan for the organization of production and did not urge his followers to resort to violence against dissenters. He is not responsible for the interpretation of his teachings by the order he founded.”
Again and again, Mises follows this strategy. He isn’t against religion, and he criticizes the logical positivists for rejecting religious speculation as meaningless. To the contrary, Mises says, it’s inevitable that human beings think about “the nature and destiny of man,” in Niebuhr’s famous phrase. But nothing in such speculations can contravene the scientific findings of praxeology. Here we are dealing with science, not speculation. Further, if God exists, his nature is totally different from ours.
Guido Hűlsmann has points out that here Mises was in accord with the teaching of the great Protestant theologian Karl Barth, who also held that God is “wholly other.” In The Ultimate Foundation of Economic Science, Mises says “With regard to the doctrine that God is wholly other than man and that his essence and nature cannot be grasped by mortal man, the natural sciences and a philosophy derived from them have nothing to say. The transcendent is beyond the realm about which physics and physiology convey information. Logic can neither prove nor disprove the core of theological doctrines.” But it isn’t clear to me that Mises takes the phrase “wholly other” from Barth. It’s also found in Rudolf Otto’s famous book The Idea of the Holy, and you can find the concept even earlier in Kierkegaard. Also, whether Barth took his doctrine of the wholly other to mean that Christianity has nothing directly to do with politics is at best highly controversial.
Mises isn’t a theologian or a philosopher of religion. He is an economist who always seeks to defend the free market.
Murray Rothbard’s theory of punishment has often been misunderstood. Economists who have written on punishment and mentioned Rothbard find his “double restitution” idea puzzling, because they think about it only in terms of economic efficiency. This isn’t what he has in mind. He is combining economics and moral philosophy.
Many economists reason in this way. Suppose we have a society in which the penalty for theft is that you have to return the item you stole. If you no longer have the item, you have to pay the monetary value of it. In that case, a thief has nothing to lose if he is caught, and something to gain if he isn’t caught. In other words, if the thief is motivated by self-interest, he should steal when he thinks he can get away with it. He has at least some chance of succeeding.
In “Punishment and Proportionality,” Rothbard acknowledges this argument: “if there were no punishment for crime at all, a great number of people would commit petty theft, such as stealing fruit from a fruit-stand.” But he rejects a pure deterrence principle of punishment:
most people have a far greater built-in inner objection to themselves committing murder than they have to petty shoplifting, and would be far less apt to commit the grosser crime. Therefore, if the object of punishment is to deter from crime, then a far greater punishment would be required for preventing shoplifting than for preventing murder, a system that goes against most people's ethical standards. As a result, with deterrence as the criterion there would have to be stringent capital punishment for petty thievery — for the theft of bubble gum — while murderers might only incur the penalty of a few months in jail.
His view of punishment is different. The victim can do to the criminal what the criminal did to him. This is the famous “double restitution” principle:
If, then, we are to say that the criminal loses rights to the extent that he deprives the victim, then we must say that the criminal should not only have to return the $15,000, but that he must be forced to pay the victim another $15,000, so that he, in turn, loses those rights (to $15,000 worth of property) which he had taken from the victim. In the case of theft, then, we may say that the criminal must pay double the extent of theft: once, for restitution of the amount stolen, and once again for loss of what he had deprived another.
This puzzles some economists. One of them wrote that this theory is arbitrary: Why not threefold restitution, or tenfold? Instead, these economists want to calibrate punishment so that we have the economically “efficient” amount of deterrence.
What these critics fail to see is that Rothbard’s theory is based on a moral principle:
It should be evident that our theory of proportional punishment — that people may be punished by losing their rights to the extent that they have invaded the rights of others — is frankly a retributive theory of punishment, a ‘tooth (or two teeth) for a tooth’ theory.
(Murray credits Walter Block for the latter expression.) Obviously, double restitution has a deterrent effect, but that isn’t its rationale.
If you keep this in mind, it’s obvious why he favors double restitution rather than some higher amount. It’s a basic moral principle, he thinks, that punishment should be proportional to the crime:
The proportionality rule tells us how much punishment a plaintiff may exact from a convicted wrongdoer, and no more; it imposes the maximum limit on punishment that may be inflicted before the punisher himself becomes a criminal aggressor.
Thus, it should be quite clear that, under libertarian law, capital punishment would have to be confined strictly to the crime of murder. For a criminal would only lose his right to life if he had first deprived some victim of that same right. It would not be permissible, then, for a merchant whose bubble gum had been stolen, to execute the convicted bubble gum thief. If he did so, then he, the merchant, would be an unjustifiable murderer, who could be brought to the bar of justice by the heirs or assigns of the bubble gum thief.
Now Rothbard has to face a new objection. Isn’t it obvious that retributive theories of punishment are wrong? The most important argument in favor of this view starts from the premise that pain is bad. The pain that the criminal causes the victim is bad, and adding to that pain is also bad. Punishment is inflicting pain. It may be necessary to inflict it to achieve some goal such as deterrence, but in itself punishment is bad. Retributive punishment, since it is carried out for its own sake, is thus bad.
There’s a philosophically very interesting way to respond to this argument. I’ll leave it to readers to assess how much merit this response has, but I do think it’s worth considering. A key assumption of the anti-retribution argument is that the badness of pain is always additive. (No, that isn’t a misprint for “addictive.”) If you combine the pain of the punishment with the pain caused by the crime, you will increase the total amount of pain. But, as the Austrian philosopher Franz Brentano pointed out, it’s an intelligible view that this decreases, rather than increases, the badness of this state of affairs. You might think that the whole composed of the pain caused by the crime plus the pain caused by retribution is better than the badness of the pain of the crime by itself, even though of course the amount of pain increases with retribution. We can view retribution, according to Brentano, as taking away part of the badness of the situation, even though—or rather because—the total pain increases. If you think about this, you will see that this view can be used to undermine certain forms of utilitarianism as well.
As usual, Rothbard opens up depths that lesser economists ignore.
One of the standard criticisms of the free market point of view is that it treats individuals as isolated atoms who view other people only as means to the pursuit of their selfish ends.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Jefferson on the Family and Liberty".
Ludwig von Mises rejects the standard arguments for democracy. Not for him are the alleged virtues of public deliberation. For him, there is only one argument for democracy that is convincing. He says that only democracy allows for a peaceful change of power. Every government, he thinks, rests on popular consent. If a sufficient number of people find the government no longer tolerable, it won’t be able to maintain itself in power. In a democracy, people in this situation can peacefully replace the government with an opposition party more to its liking. Without democracy, there is liable to be a violent revolution, because those in power and their supporters are likely to cling to power, even if their position is in the long run unsustainable.
Mises puts the argument in this way in Liberalism:
Government by a handful of people—and the rulers are always as much in the minority as against those ruled as the producers of shoes are as against the consumers of shoes—depends on the consent of the governed, i.e., on their acceptance of the existing administration. They may see it only as the lesser evil, or as an unavoidable evil, yet they must be of the opinion that a change in the existing, situation would have no purpose. But once the majority of the governed becomes convinced that it is necessary and possible to change the form of government and to replace the old regime and the old personnel with a new regime and new personnel, the days of the former are numbered. The majority will have the power to carry out its wishes by force even against the will of the old regime. In the long run no government can maintain itself in power if it does not have public opinion behind it, i.e., if those governed are not convinced that the government is good. The force to which the government resorts in order to make refractory spirits compliant can be successfully applied only as long as the majority does not stand solidly in opposition.
There is, therefore, in every form of polity a means for making the government at least ultimately dependent on the will of the governed, viz, civil war, revolution, insurrection. But it is just this expedient that liberalism wants to avoid. There can be no lasting economic improvement if the peaceful course of affairs is continually interrupted by internal struggles….
Here is where the social function performed by democracy finds its point of application. Democracy is that form of political constitution which makes possible the adaptation of the government to the wishes of the governed without violent struggles. If in a democratic state the government is no longer being conducted as the majority of the population would have it, no civil war is necessary to put into office those who are willing to work to suit the majority. By means of elections and parliamentary arrangements, the change of government is executed smoothly and without friction, violence, or bloodshed.
There are various points at which you can challenge this argument. For example, what if the majority of people oppose the government, but there isn’t a consensus backing a particular opposition group? (I don’t mean that the party in power won’t let popular opposition groups run. Mises when he talks about democracy assumes that elections are fair.) But even if the argument can be challenged, it seems to have much in its favor.
Murray Rothbard raises a remarkable objection to this argument that hasn’t received the attention it deserves. His book Power and Market contains a profusion of arguments, one right after the other, and this one has escaped much notice.
His argument, in brief, is that if democracy is supposed to be a substitute for violent revolution, then the democratic government must exactly resemble the government that would have won out in a violent revolution. It is most unlikely that this will happen. If so, Mises’s argument fails.
Rothbard explains what he has in mind in this passage:
There is, moreover, another flaw in the “peaceful-change” argument for democracy, this one being a grave self-contradiction that has been universally overlooked. Those who have adopted this argument have simply used it to give a seal of approval to all democracies and have then moved on quickly to other matters. They have not realized that the “peaceful-change” argument establishes a criterion for government before which any given democracy must pass muster. For the argument that ballots are to substitute for bullets must be taken in a precise way: that a democratic election will yield the same result as would have occurred if the majority had had to battle the minority in violent combat. In short, the argument implies that the election results are simply and precisely a substitute for a test of physical combat. Here we have a criterion for democracy: Does it really yield the results that would have been obtained through civil combat? If we find that democracy, or a certain form of democracy, leads systematically to results that are very wide of this “bullet-substitute” mark, then we must either reject democracy or give up the argument.
How, then, does democracy, either generally or in specific countries, fare when we test it against its own criterion? One of the essential attributes of democracy, as we have seen, is that each man has one vote. But the “peaceful-change” argument implies that each man would have counted equally in any combat test. But is this true? In the first place, it is clear that physical power is not equally distributed. In any test of combat, women, old people, sick people, and 4F’s would fare very badly. On the basis of the “peaceful-change” argument, therefore, there is no justification whatever for giving these physically feeble groups the vote. So, barred from voting would be all citizens who could not pass a test, not for literacy (which is largely irrelevant to combat prowess), but for physical fitness. Furthermore, it clearly would be necessary to give plural votes to all men who have been militarily trained (such as soldiers and policemen), for it is obvious that a group of highly trained fighters could easily defeat a far more numerous group of equally robust amateurs.
Could Mises respond to this argument? He might have said that even if Rothbard is right that democracy isn’t a perfect substitute for the results of a violent revolution, it’s close enough to merit our support, given the costs of violence. But I’m sure Rothbard would have had a counter for that as well. Murray had an amazing ability to counter any argument against him, and I’ve never met his match in this.
The political theorist Douglas W. Rae, who has taught at Yale University for decades, likes Hayek’s account of freedom but wants to expand what counts as coercion. By doing so, he hopes to be able to extend the amount of permissible redistribution from what Hayek allows.
In a lecture to his class at Yale, Rae says that he likes the definition of freedom that Hayek gives even though it is not as complicated as that given by most philosophers. Rae finds Hayek’s definition pragmatically useful. According to Hayek, you are free if you live in a society with fixed general rules that are known in advance to the members of society. These general rules let you plan what you are going to do. Hayek contrasts this sort of society with one in which you can be commanded to do something. Here, you cannot plan but are dependent on the arbitrary will of someone else.
Hayek of course applies this point to the economy, and this is what Rae likes about it. In a free market, no one plans the whole economy. A centrally planned economy depends on the limited knowledge of the planners. No matter how smart they are, Rae says, the immense expansion of information means that they can know only a minute amount of the total knowledge available. The price system in a free market enables people to take full advantage of their dispersed and local knowledge. (I’m not going to get into the issue of whether this is the best way to characterize the free market. It is, at any rate, accurate about Hayek’s view of the market.) Because of this, I benefit by your freedom, and you benefit by mine, since in a free economy, we can both produce goods and services for the market.
Hayek’s definition of freedom has an important consequence. If you are free if and only if no one can subject you to commands not based on rules known in advance, then some obstacles that you face to doing what you want do not violate your freedom. Obstacles imposed by nature do not do so. In a well-known passage of The Constitution of Liberty, Hayek says:
In this sense "freedom" refers solely to a relation of men to other men, and the only infringement of it is coercion by men. This means, in particular, that the range of physical possibilities from which a person can choose at a given moment has no direct relevance to freedom. The rock climber on a difficult pitch who sees only one way out to save his life is unquestionably free, though we would hardly say he has any choice. Also, most people will still have enough feeling for the original meaning of the word "free" to see that if the same climber were to fall into a crevasse and were unable to get out of it, he could only be figuratively called "unfree," and that to speak of him as being "deprived of liberty" or "held captive" is to use these terms in a sense different from that in which they apply to social relations.
Here is where Rae starts to edge away from Hayek. According to Rae, freedom isn’t worth anything to the climber stuck in the crevasse. Unless he gets out, he will die, and the fact that he isn’t in the crevasse because of someone’s command makes his predicament no easier to bear. Rae offers another example of the same sort. A diabetic who cannot get access to insulin will die, and here again the fact that his illness is a natural phenomenon does not help him.
Rae uses these examples to support a policy of redistribution. The point of Hayekian freedom, he says, is that we all benefit from the local knowledge of people in producing goods and services for the market. But you need a certain amount of resources and freedom of movement in order to participate in the market. The climber in the crevasse is not only in danger of losing his life. While he is in the crevasse, he isn’t part of the market.
Rae concludes from this that to get the advantages of Hayekian freedom, everybody should be guaranteed a minimum amount of resources. People should get enough to enable them to join the productive economy. Hayek might well endorse this proposal, so long as a general law prescribed in advance told people how much they would be taxed. Under this proposal, you wouldn’t get to spend all your income the way your like, but this is consistent with Hayekian freedom. Both Mises and Rothbard criticize Hayek, to my mind effectively, for allowing such redistribution.
But it’s difficult to see how a general law mandating redistribution could be of much help to the mountain climber. It is one thing to establish a baseline in resources for everyone. It is another thing altogether to favor intervention whenever a natural obstacle incapacitates someone. Is someone eligible for redistribution whenever natural misfortunate strikes? Given how unpredictable nature is, how could a law to deal with such situations meet Hayek’s standard of generality?
Rae doesn’t consider this problem, but instead falls into outright fallacy. Suppose he is right that the mountain climber in the crevasse does not gain anything from his Hayekian freedom. Rae wrongly concludes that the climber isn’t free. But this does not follow. Your freedom and the power to do things with your freedom are very different matters. That point is a principal theme of Hayek’s most famous book, The Road to Serfdom.
Rae takes the fallacy one step further. He says that people on the way to a picnic who pass by the mountain climber in the crevasse, ignoring his pleas for help, are coercing the climber. Similarly, someone who withholds insulin from a diabetic is also engaged in coercion. Unless there are special circumstances, this isn’t correct. If there are no general laws requiring people to assist others, or contractual arrangements by which you have agreed to do so, neither the mountain climber nor the diabetic is being coerced. Their Hayekian freedom remains intact. (I am grateful to Professor Ying Tang of the Economics Department of Shenzhen University, for calling this video to my attention and for helpful discussion.)
Thaddeus Russell, creator of Renegade University, has been arguing that libertarians should embrace postmodernism as their philosophical foundation, rather than blame it for today’s “social justice warriors” as Jordan Peterson has done. Bob profoundly disagrees, arguing that the Judeo-Christian notions of truth and morality are a much better foundation.
Mentioned in the Episode and Other Links of Interest: The YouTube version of this interview.The homepage for Thaddeus Russell and YouTube account of his Unregistered podcast.Thaddeus’ book A Renegade History of the United States. #CommissionsEarned (As an Amazon Associate I earn from qualifying purchases.)Thaddeus’ SoHo Forum debate against Stephen Hicks.The full clip on college students and identity, and Thad arguing gender identity with Joe Rogan. For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Murray Rothbard explains that anarcho-communists' longing for a preindustrial primitivism would mean starvation and death for nearly all of mankind and a grinding subsistence for the ones remaining.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Death Wish of the Anarcho-Communists".
Download lecture slides at Mises.org/MU20_PPT_01.
Recorded at the Mises Institute in Auburn, Alabama, on 13 July 2020.
Providing the opening for Mises’s great methodological work gave Rothbard the opportunity to set down his perspective on the importance of the praxeological method.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Forgotten Greatness of Rothbard’s Preface to Theory and History".
The division of labor promotes peaceful exchange and continues peace. But this can all break down when governments intervene to prevent peaceful interaction and when government incompetence promotes violence.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "COVID Lockdowns Crippled the Division of Labor, Setting the Stage for Civil Unrest".
Rothbard fans, this is the podcast you don't want to miss! Rothbard scholar Patrick Newman joins Jeff Deist to kick off a series of shows featuring Rothbard's landmark treatise Man, Economy, and State. They discuss the history and background behind this important book, how it changed the landscape, and why the concluding chapters titled "Power and Market" proved so controversial at the time–and remain so today! Dr. Newman calls Rothbard's opus "the best book I ever read," and makes a compelling case for lay readers like you to tackle it.
Read the book free of charge in searchable HTML format here.
Use the code HAPOD for a discount on Man, Economy, and State from our bookstore: Mises.org/BuyMES
Additional Resources Dr. Joe Salerno's introduction to Man, Economy, and State: Mises.org/SalernoMES
Man, Economy, and State: Mises.org/MES
Michael Sandel doesn't like capitalism. But he can't seem to manage an economic argument for why. He's content to claim that capitalism is morally corrupting, converting anticapitalism into a sort of pseudoreligious faith.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Does the Free Market Corrupt People?".
A moral injustice is a legal injustice, period.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Bastiat Leads the Way on the Morality of Forced Lockdowns".
The title of my column is misleading, in that I’m not going to comment on what policies should be adopted toward COVID-19. Instead, I want to address some remarks by Leslie Green, a philosopher of law who teaches at Oxford. Green is very influential, and his book The Authority of the State is well worth reading. (Many years ago, I was involved in a controversy with him in the philosophy journal Analysis.) But in a recent blog post, he suggests a way of thinking about freedom that is dangerous.
Green begins by noting that some people regard COVID-19 regulations as restricting their freedom. He thinks that, in one way of looking at freedom, they do. People who don’t like the regulations can’t do what they want, at least if the restrictions are enforced. Even if you accept this notion of freedom, though, it may turn out that the regulations on balance don’t restrict freedom.
Green says:
[W]hen freedom is at stake, it appears on both sides of the equation. Ill health itself limits our freedom to do a wide range of things, and not only for the twenty percent of victims who end up hospitalized or who suffer irreversible lung or kidney damage. Weeks of poor health is a real restriction on anyone. Those who refuse precautions or who insist on large indoor gatherings impose on others the risk of a freedom-limiting illness. The others can avoid that risk only at the sacrifice of their own freedoms, for example, by staying home to avoid the negligent and the reckless. In a pandemic, our freedoms are interlinked.
In other words, Green is saying that if you get sick, that lowers your ability to do things and also lessens your vitality. Further, if you want to avoid risks of this kind brought about by those who ignore the restrictions, you may decide to stay at home. This also restricts your freedom.
What is wrong with looking at freedom this way is that it takes freedom to be the ability to do what you want. This is a far different definition of freedom from that used by Murray Rothbard. On his account, only the use or threat of force against your person or property limits your freedom. If, for example, I threaten to hit you over the head with a baseball bat if you leave your house, that limits your freedom. If you would like to buy a house but don’t have enough money to do so and I don’t give you the money you need, that doesn’t limit your freedom.
If I don’t give you the money you need, it does violate your freedom in Green’s way of thinking, because you don’t have the ability to buy a house now given your lack of funds. You might object that I haven’t in fact limited your ability—you can still try to get the money from others. That is true, but I’ve still restricted your ability by making it harder for you to do what you want.
As we’ve seen, there are cases of limiting freedom in Green’s sense that aren’t cases of limiting freedom in Rothbard’s sense. There are also examples that go the other way—where you are restricting freedom in Rothbard’s sense but not in Green’s. To return to my earlier example, suppose I threaten to hit you over the head with a baseball bat if you leave your house. You don’t want to leave your house and would have stayed indoors even if I hadn’t threatened you. I have still limited your freedom by threatening you.
I have at most shown so far that Green and Rothbard mean different things by freedom, but I haven’t justified my claim that Green’s concept is dangerous. It is dangerous, because any restrictions on freedom, taken in Rothbard’s sense, can be justified by an exponent of Greenian freedom. Suppose, e.g., that a law forbids people to express political opinions that upset people who are members of groups that the state favors. The people whom the law threatens with force have their freedom restricted, in Green’s sense, so long as they want to express these opinions, but this may be offset by the ability of those in the favored groups to live lives free from upset by hearing such opinions. Or suppose that the state requires everyone making more than a specified income to work long hours subject to high rates of taxation in order to help the poor. Once more, Green would acknowledge that the freedom of the people taxed has been restricted, so long as they don’t want to give the money that the state confiscates to the poor but would prefer to use it in other ways. But this has to be balanced by the "freedom" the poor get in having more money to use as they want.
Things get worse. So far, Green’s sense of freedom allows many restrictions of freedom, understood in Rothbard’s way. It transpires that there are other senses of freedom according to which denials of Rothbardian freedom don’t even count as restrictions of freedom at all. As I’ve said, this isn’t the case using Greenian freedom as we’ve so far explained it, because Rothbardian freedom here is just outweighed, not canceled altogether.
The passage that discusses these other senses of freedom is this:
Some people hate restrictions just because they hate anyone making them do things they don’t want to do. (Teenagers, and some libertarians, tend to fall into this class.) For others, unfreedom is of concern only if it also limits their autonomy, the power to shape their lives to fit their needs and character, as JS Mill put it. Being forced to wear a mask while shopping may outrage the first group, but not the second because (save in special cases) wearing a mask does not limit any further activities. A third group have still narrower concerns. They only chafe under unfreedoms they judge to be imposed arbitrarily or unreasonably, in which cases they think they are being "dominated."
It’s clear from his slighting "teenagers, and some libertarians" that he rejects the first sense of freedom.
The second sense allows the state to ban activities that don’t restrict "autonomy," the power to shape your life to fit your needs and character. Who is to say what fits your needs and character? The state may say that people who hold the "wrong" political or religious views aren’t acting autonomously, because they don’t arrive at their opinions by critical thinking but absorb them through living in a closed community. Proponents of autonomy have sometimes defended incursions against the Amish and other tight-knit religious groups. And what sort of justification is it to require wearing masks because doing so "does not limit any further activities"? What if, after, careful critical thought, you decide that wearing a mask does limit your freedom to shape your life?
If anything, Green’s last sense of freedom is even worse. It allows restrictions that do interfere with your autonomy, taken the way Green wants to use this concept, so long as the person restricted thinks that the state’s restrictions of autonomy aren’t arbitrary. If someone said, for example, "The state’s heavy taxes interfere with my life plans, but I can see the state has a reason to impose these taxes," he would be acknowledging that his freedom hasn’t been restricted.
These senses of freedom are indeed a road to serfdom.
This book is a systematic treatment of the historic transformation of the West from limited monarchy to unlimited democracy. Revisionist in nature, it reaches the conclusion that monarchy, with all its failings, is a lesser evil than mass democracy, but outlines deficiencies in both as systems of guarding liberty.
Narrated by Paul Strikwerda.
Download the complete audiobook (15 MP3 files) in one ZIP file here. This audiobook is also available on Soundcloud and via RSS. Purchase the Audiobook on MP3-CD and Audible/Amazon, or paperback at the Mises Store. © 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Although it's true that Austrians agree with Chicago economists on many policy issues, their approach to economic science is very different.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Chicago School versus the Austrian School"
The weird thing about dialectical materialism is that Marx seems to have cobbled it together from two philosophies that contradicted each other.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "The Big Reason Mises Rejected Marx's Dialectical Materialism"
In theory, it is possible to adjust inflation measures to account for the many constant changes in prices resulting from changing demand, quality, and innovations. But it's essentially impossible to execute these adjustments accurately.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Why Official Inflation Measures Don't Work"
Buyers and sellers in the free market do indeed act from self-interest, but Adam Smith never argued that this excludes friendly feelings for those they do business with.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Adam Smith and Benevolence"
Presenting "saving lives" as a more or less equal alternative to commerce and community is a misguided view of what the lockdown debate is really all about.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Viruses versus Lockdowns: It's Not about Tradeoffs"
We've reached the end of Human Action! Tom Woods joins the podcast to discuss Part Seven, "The Place of Economics in Society," and it's a show you don't want to miss.
Woods and host Jeff Deist enjoy an engaging and far-ranging discussion of the book's place in history, Mises's frustration with economics co-opting the methods of physical sciences, and the public's seeming inability to overcome anticapitalist propaganda. Mises concludes his great treatise with unmatched clarity and wisdom, reminding us why economics belongs at the forefront of society—and why we all should retain our unwavering sense of élan vital.
Use the code HAPOD for a discount on Human Action from our bookstore: Mises.org/BuyHA.
Additional Resources The Sociology of the Development of Austrian Economics by Joe Salerno: Mises.org/SalernoHAP
Mises's Élan Vital by Jeff Deist: Mises.org/Elan
Human Action: Mises.org/HumanAction
Bob Murphy's Study Guide to Human Action: Mises.org/Study
GDP is fine for counting things like washing machines. But it is quite useless for counting other basic indicators of the quality of life.
This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: "Finally Kicking the GDP Habit"
Chapter 9 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 3 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 2 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 5 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Acknowledgments from Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 11 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 8 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Introduction to Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 6 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 12 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 13 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 4 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 10 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 1 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Chapter 7 of Democracy: The God That Failed. Narrated by Paul Strikwerda.
© 2001 Taylor and Francis, published 2017 by Routledge, an imprint of the Taylor and Francis Group.
Anticipating his forthcoming interview with Winston Ewert, Bob Murphy explains why the Intelligent Design movement will be to the natural sciences what the Public Choice school in economics is to the social sciences. Bob predicts that the explanation for the observed complexity of the universe will ultimately be pushed back into the structure of mathematics itself.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy gives a pragmatic case for pacifism, appealing to Christians who would like to take "The Sermon on the Mount" literally, but are worried it would spell disaster.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Bob Murphy conducts a friendly but challenging interview of Bryan Caplan, focusing on his new book making the case for open borders. They also discuss Bryan’s essay, “Why I Am Not an Austrian Economist,” and close with some brief remarks on pacifism.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
ABSTRACT: This article first explains the key libertarian insight into property and orthodox libertarianism’s philosophical confusion. It suggests making and applying distinctions among abstract liberty, practical liberty, moral defences, and critical rationalism. The two dominant (‘Lockean’ and ‘Hobbesian’) conceptions of interpersonal liberty are explained. A general account of libertarianism as a subset of classical liberalism is provided, and defended from a narrower view. Two abstract (non-propertarian and non-normative) theories of interpersonal liberty are developed and defended, and practical implications for these are derived and compared. This positive analysis is briefly related to morals. It is conjecturally concluded that this new paradigm of libertarianism solves the problems of the old paradigms.
“It’s an amazing fact that the nature of liberty is one of the least-discussed topics in what libertarians like to call ‘the literature of liberty’.” Irfan Khawaja (2009, 155)
J. C. Lester (jclester@gmail.com) is an independent scholar. This essay has benefitted from the critical input of Mark Brady, David McDonagh, and an anonymous referee.
INTRODUCTION The issue here is ‘liberty’ (from a Latin root), or ‘freedom’ (from an Anglo-Saxon root). But it is not ‘liberty’ in its most general sense: for that also applies outside the social realm, including to such matters as arise in physics and engineering (as any internet search shows; and it can be hard to preclude such references when one is not interested in them). The issue here is only social or interpersonal liberty: the liberty that people have in relation to each other. This essay will sometimes refer to ‘interpersonal liberty’ and sometimes simply to ‘liberty’, but the former is always what is meant.
There is a philosophical approach to libertarianism that is very different from the mainstream, or orthodox, varieties.Three main types are distinguished in Mack (2018, 1): “the natural rights approach, the cooperation-to-mutual-advantage approach, and the indirect utilitarian approach.” It has two principal differences: an abstract theory of interpersonal liberty (i.e., non-propertarian and non-normative); and critical-rationalist epistemologyFor detailed explanations of critical rationalism see, for instance, Popper ([1963] 1978) and Miller (1994). (i.e., no attempt to provide ‘supporting'Supporting justifications' entail circularities, infinite regresses, or dogmatic assumptions. As critical rationalism explains, all observations, arguments, explanations, and even logical inferences rest on, and thus logically amount to, assumptions. They thereby cannot offer support that transcends their assumptions (but those assumptions are either true or false, depending on the external facts). However, they can be criticized and tested—all within a framework of assumptions, of course (and presumably reality will tend to aid true assumptions to withstand criticisms and tests better than false ones, and true ones should resurface even if mistakenly rejected). justifications’This is emphatically not to object to ‘justification’ used in the completely different sense that means explaining a conjecture and squaring (justifying) it with any known criticisms or ostensible counterexamples by adequately responding to them (which cannot, of course, offer any support to the conjecture: it merely appears to remain unrefuted so far). or ‘foundations’).It would be possible to accept the abstract theory of liberty but reject or ignore critical rationalism. But all the logical problems of attempting to support theories are unavoidable. This heterodox philosophical paradigm remains largely unknown and otherwise largely misunderstood. In general attempts to explain different types of libertarianism it is typically completely absent.It is absent in, for instance, Mack (2018), Vossen (2019), Zwolinski (n.d.), and Boaz, (n.d.). This is a factual observation, not a complaint. If for no other reason, therefore, it would seem worthwhile to attempt to explain and defend it in outline; and that is one purpose of this essay. However, this is also an attempt to do this with more clarity, precision, and context than hitherto; and this has prompted some new arguments, explanations, and conjectures.This is partly intended to be a better version of the attempts that were Lester (1997; 2014, ch. 10). The result is still very far from being a pellucidly clearSome typical, and thereby useful, misunderstandings that arise in one anonymous review will be dealt with in footnotes at various points. and completely settled account. It would undoubtedly benefit from greater critical scrutiny if only in order to clarify it further, and it might even be significantly corrected or utterly refuted. But regardless of how right or wrong this theory is, it poses questions and problems that the orthodox varieties do not and which need to be answered and solved.
THE KEY LIBERTARIAN INSIGHT AND ITS CONFUSED ORTHODOX INTERPRETATIONS Whatever the various libertarian theories are stated to be, there appears to be one key insight that is behind them all. This is the realization—if only at an intuitive level—that property rights tend to protect and promote two very important things at once: some sense of interpersonal liberty as people not interfering with, or initiating constraints on, each other’s lives (sometimes generally expressed as ‘live and let live’); and maximal productivity, or economic efficiency, that benefits one and all (sometimes generally expressed as ‘a rising tide lifts all boats’). However, as we shall see, this insight remains philosophically confused in the various orthodox forms of libertarianism: there is no clear analysis and clarification of the distinguishable parts. Instead, there is a conflation of certain kinds of deontological rights, good consequences, property rights, and ‘supporting justifications’; and all the while being oblivious to the (absurd and ironic) fact that there is no explicit theory of interpersonal liberty to explain any of this.Two classic examples are Nozick (1974) and Rothbard ([1973, 1978] 2006). But see virtually any mainstream libertarian text. The philosophical sophistication of the Nozick text obscures the fact that it is at the same time ultimately superficial as regards some of the issues raised in this essay. At the same time, these orthodox positions are often perceived and presented by advocatory texts as being crystal clear and completely cogent.A good short example is Long (2014). And see the critical response that is Lester (2014, ch. 6) Critical texts cite real philosophical problemsFriedman (1989, ch. 41, 42). And see the critical response that is Lester ([2000] 2012, 71-123).,“For Nozick, … there is justice when there is no restriction on freedom. But freedom is then itself defined in terms of non-violation of rights, and the result is a tight definitional circle and no purchase either on the concept of freedom or the concept of justice,” Cohen (1995, 61).,See Sobel (2012, 2014). but they are usually answered with, unwittingly, ad hoc maneuvers.E.g., Block (2011). And see the response that is Lester (2014, ch. 8). The problem is that both the best criticisms and the best defences are fatally flawed insofar as they incorrectly assume, as they usually do, that something approximating to the current orthodox philosophical assumptionsSelf-ownership, homesteading, just property, and either deontologism or consequentialism are somehow ‘foundational’ to libertarianism—and all without an explicit theory of liberty. is necessary and sufficient to explain libertarianism and that supporting justificationsI.e., “supporting justifications” as such, not of any particular assumptions. A review overlooks or misunderstands the references to critical rationalism and asks, “Supporting justifications of what?” are possible. General problems with the orthodox assumptions will be explained in what follows. More-detailed criticisms can be found in the texts cited in the various footnote references. But this essay is primarily a short explanation of the heterodox paradigm.
A CLEARER APPROACH: SEPARATING DISTINCT ISSUES An adequate philosophical theory of libertarianism needs to make the following distinctions:
1) An abstract theory of interpersonal-liberty-in-itself that is independent of any type of property (i.e., ownership), or normativity.It will later be explained how Hobbes’s account in Leviathan is not adequate.
2) The practical and contingent, derived, objective applications of the abstract theory.
3) The separate moral and value defences of the abstract theory and its objective applications.
4) At every stage the abandonment of ‘supporting justifications’ in favour of critical rationalism, which explicitly uses conjectures and criticisms.
That these distinctions are needed should become clearer as this explanation proceeds. This approach appears to be sufficiently radical to amount to a different philosophical paradigm of libertarianism. And this is a fortiori true if also combined with the extreme version of the, implicit, classical-liberal/libertarian compatibility conjecture: there is no systematic practical clash between interpersonal liberty (or the libertarian ideology) and want-satisfaction welfare (or preference-utilitarian morals). Some general philosophical explanations of this compatibility will be suggested at various points, but there cannot be a comprehensive social scientific defence of this conjecture here. The following account attempts a new, short, explanation of just such theories of liberty and libertarianism.
INTERPERSONAL LIBERTY There are various competing conceptions of interpersonal liberty. But there are only two dominant conceptions in both common sense and in political or social philosophy. They are not negative liberty and positive liberty, as might be supposed. Rather, they are both types of so-called ‘negative liberty’. One conception is that of people not initiating constraints on each other. This is something that could, as far as is practical, be universally observed: everyone could have maximal such liberty at the same time. This is more or less the conception that John Locke (1632–1704) uses in his Second Treatise of Government (1690).For instance, in section 57: “Liberty is freedom from restraint and violence by others; and this can’t be had where there is no law. This freedom is not—as some say it is—a freedom for every man to do whatever he wants to do (for who could be free if every other man’s whims might dominate him?); rather, it is a freedom to dispose in any way he wants of his person, his actions, his possessions, and his whole property—not to be subject in any of this to the arbitrary will of anyone else but freely to follow his own will, all within whatever limits are set by the laws that he is under.” However, as we shall see later, bringing in “property” and “law” at this stage is partly what prevents this account from being the abstract theory of liberty that will be argued to be necessary. The other conception is that of people not being constraints in any way on each other. And this is something that will, in practice, be a universal zero-sum game: someone can gain such liberty only at the expense of someone else’s loss of such liberty. This is more or less the conception that Thomas Hobbes (1588–1679) uses in his Leviathan (1651), but here restricted only to interpersonal constraints—which Hobbes does not do.For instance, in chapter xxi. Of the liberty of subjects, “Liberty, or FREEDOME, signifieth (properly) the absence of Opposition; (by Opposition, I mean externall Impediments of motion;)” (“Liberty What”); and “A FREE-MAN, is ‘he, that in those things, which by his strength and wit he is able to do, is not hindred to doe what he has a will to’” (“What It Is To Be Free”). And so we see that Hobbes’s account relates to zero-sum action. Neither conception is usually explicitly, clearly, and abstractly theorized, even by libertarian philosophers. Consequently, people sometimes switch between one and the other, or conflate the two, without realizing that this is what they are doing.Such due, general, acknowledgements to Locke and Hobbes are not intended to imply that what follows is about the details or implications of their specific theories of liberty.
LIBERTARIANISM ‘Libertarianism’, in the social or political sense, is a modern name for a long-existing subset of classical liberalism:For instance: “political philosophy that takes individual liberty to be the primary political value. It may be understood as a form of liberalism ….” (Boaz n.d.) “full-fledged libertarianism, as opposed to more moderate forms of classical liberalism.” (Zwolinski n.d.) “Depending on the context, libertarianism can be seen as either the contemporary name for classical liberalism, adopted to avoid confusion in those countries where liberalism is widely understood to denote advocacy of expansive government powers, or as a more radical version of classical liberalism.” (Conway 2008, 295–98). that which advocates maximum interpersonal liberty and either a minimal ‘night watchman’ state (minarchy) or no state (anarchy).On anarchism, see especially Molinari ([1849] 1977), and Bastiat ([1850] 2007). But there are also Jakob Mauvillon (1743–94), Julius Faucher (1820–78), and various others. Hence libertarianism (avant la lettre) seems to have long been be a type of classical liberalism, contra S. Freeman (2001). It is less clear that the politically-correct “liberalism” defended in that essay is entirely a version of classical liberalism. The version of interpersonal liberty that libertarianism tends to assume is no-initiated-constraint liberty. This will be the primary focus here. However, it sometimes assumes no-constraint liberty. A clearer and more explicit theory of each can avoid much philosophical confusion and solve many related philosophical problems. This is useful not only for libertarianism; it will also apply to the common-sense conceptions whether or not they are being used by libertarians.
Some self-described libertarian texts make the characterisation of ‘libertarianism’ more precise. They assume that libertarianism involves “foundational philosophical commitments”“Most of the libertarian theories we have surveyed in this article have a common structure: foundational philosophical commitments are set out, theories are built upon them, and practical conclusions are derived from those theories.” (Zwolinski n.d.) to some combination of certain deontological rights,The most well-known being Nozick (1974). or self-ownership,Which even “left libertarianism” makes foundational. See Vallentyne, Steiner, and Otsuka (2005). or the non-aggression principle (or axiom),For instance, Block (2003). or ‘just’ (i.e., ‘libertarian’) private property, etc. This mightOr, therefore, it also might not. This is not to imply, as a JLS review incorrectly supposes is intended, that all foundationalists would reject this as a form of libertarianism. However, some responses appear to do so; not least, Block (2019) which, for instance, calls “private property rights, the be-all, and end-all of libertarianism, along with the NAP” (p. 142). Reply in progress. be seen as implying that the overall approach taken here is ‘not, real, libertarianism’. Such a position would appear to be somewhat like a Catholic rejecting Protestantism as ‘not, real, Christianity’. It would be dogmatism rather than precision. As what follows is explained as a heterodox paradigm of libertarianism in which abstract liberty is explicitly theorized and very similar practical implications are derived, it would seem perverse to deny that it is a form of libertarianism. If anything, it appears to be more coherently libertarian than the mainstream varieties.
AN ABSTRACT THEORY OF INTERPERSONAL LIBERTY The Philosophical Problem and Its Intuitive but Incorrect Solutions
A ‘practical theory of interpersonal liberty’ can be explained as an attempted account of what interpersonal liberty involves in contingent practice as regards rules and consequences. This can be done by using an intuition that implies a tacit theoryA quoted JLS review comment with interspersed replies: This “suggests that intuitions about liberty are based on tacit theories of interpersonal liberty”. Yes, intuitions that rules and consequences can be categorized as fitting or not fitting liberty in practice thereby imply possession of some sort of theory, however muddled or protean, of abstract liberty to sort them. However, the far more important—non-psychological—matter here is that the possibility of an explicit, abstract theory of liberty is implied by such categorization. “But it isn’t clear that such theories have to be based on complete theories of interpersonal liberty”. It is clear that they rarely are; they are usually inchoate and tacit. Why next mention “in particular theories of libertarian rights”? Why bring in rights at this stage? Before one can coherently assert “libertarian rights” one must first determine what is non-normatively libertarian (what factually fits liberty); whether there is a right to that is a separate, later, and normative question. “Someone might, […] if Popper is right, have some theory in mind, but it might not be a worked-out but tacit complete theory of interpersonal liberty.” Of course it isn’t “worked-out” or “complete”. It would hardly be tacit if it were. of interpersonal liberty; and this is what most orthodox accounts of libertarianism do. But if we are explicitly to derive these rules and consequences, then we first need to have an explicit, abstract theory of interpersonal liberty. An ‘abstract theory of interpersonal liberty’ can be explained as an attempted account of what interpersonal liberty is in itself before any contingent practical applications.
How is an abstract theory of the liberty of libertarianism—and thereby also of the relevant dominant common-sense conception—to be understood? To have a theory of liberty that inherently involves particular property rules and particular moral rights is not to have a clearer and stronger theory. Rather, it is to attempt to have an unfalsifiable or uncriticisable theory. And that, as Karl Popper explained, is not clearer and stronger: it is really to avoid saying anything substantive at all. It is certainly to have no proper theory of liberty. Instead, it is in effect to assume the legitimacy or morality of certain rules or rights and then stipulatively or persuasively—and thereby vacuously—define those rules or rights as ‘libertarian’ and their flouting as ‘unlibertarian’ (or even ‘aggression’The idea that libertarianism is about the absence of aggression, or the Non-Aggression Principle (NAP), or Non-Aggression Axiom—as found in Block (2003), for instance—means, it is explained, that one should “not initiate (or threaten) violence against the person or legitimately owned property of another.” Even if we interpret “violence” to mean only ‘violations’, this raises two crucial problems. 1) How do we know that any so-called “legitimately owned property” actually fits interpersonal liberty (after all, not all property rights fit liberty) unless we have an explicit abstract theory of liberty? 2) If “non-aggression” is absolute (as “non” ipso facto implies), then how can any ‘boundary crossings’, such as even the smallest pollution, be allowed or otherwise dealt with? Rothbard and his followers attempt answers (see, for instance, Block (2011, esp. 2.2–2.5); but they do not work (see in response, Lester [2014, ch. 8, esp. 2.2–2.5])., or—still worse—‘coercion’The narrow, plain-English meaning of ‘coercion’ is “the use of force to persuade someone to do something that they are unwilling to do” (https://dictionary.cambridge.org/dictionary/english/coercion), or “[a]ctual or threatened force for the purpose of compelling action by another person” (https://en.wiktionary.org/wiki/coercion). In this sense, legitimate coercion is not a contradiction in terms. A libertarian society would use legitimate coercion to defend liberty (and sometimes coercion is contractual or even the whole point of some libertarian interaction: boxers are using coercion on each other). However, libertarian texts sometimes use ‘coercion’ to mean any action that is ‘unlibertarian’ or flouts ‘libertarian’ property rights. For instance, “…liberty is by definition an absence of coercion…”; Machan (1998, 184).). Texts that are critical of libertarianism often note this. Therefore, it is better not to tie a theory of interpersonal liberty to specific property rules or to specific moral rights. Then it can be used independently to assess and explain whether any property rule or any moral right is in accord with liberty. Moreover, it is necessary that some such abstract theory is possible. For it is always coherent to ask whether, and how, some property rule or moral right is compatible with interpersonal liberty as a factual matter—rather than by some ideological definition of ‘liberty’ or ‘libertarianism’.A quoted JLS review comment followed by a reply: “This assumes that in order to answer the question, one must have a theory of interpersonal liberty. But couldn’t one attempt to answer the question by pre-theoretical intuitions about liberty?” No, “pre-theoretical intuitions about liberty” cannot explain “whether, and how, some property rule or moral right is compatible with interpersonal liberty as a factual matter”. At most they can assign an intuitive libertarian category to the “property rule or moral right”. And if mainstream libertarianism—of all ideologies—cannot give a coherent answer to such a question, then it is in a state of philosophical confusion that is acutely ironic: it cannot; it is. In any case, the correct eleutherology (philosophical study and theorizing concerning interpersonal liberty) is a fundamental philosophical problem—not only one for libertarians. It is surely no less important than the correct epistemology, for instance. Therefore, if the following account is not the correct abstract theory of interpersonal liberty, still there must be such an abstract liberty to be correctly theorized and it is important that it be attempted.
Is it possible to formulate a libertarian theory of interpersonal liberty that is sufficiently abstract such that it is both non-propertarian and non-normative? First consider the dominant ‘Lockean’ conception. Conceptually, liberty is always about the absence of some kind of constraints on something. Here it is about the absence of some kind of constraints on people by people: interpersonal constraints (it is not about intrapersonal constraints—limits within a person—or the constraints of the natural world). More precisely here, it must be some sense of the absence of people initiating—whether intentionally or not—relevant constraints on each other in some way: a purely reactive or defensive constraint would preserve interpersonal liberty; a proactive or offensive constraint would reduce interpersonal liberty. But what, in the most abstract sense, is it about a person that cannot be proactively constrained by other people if he is to have his interpersonal liberty? This is the key question.
As we have seen, it cannot be either his property or his rights as such—however intuitive such answers may appear.What is currently intuitive for holders of any theories may change for them in the light of a perceived better alternative. It may, of course, be some of, or all of, or only his property or rights where these are compatible with liberty. But that brings us back to the problem. Without an independent, explicit, and abstract theory of liberty, we cannot determine with any clarity what is compatible with liberty. The other main intuitive contender is actions. That also runs into clear difficulties. Proactive constraints on possible actions that someone does not want to perform may not be cared about, or even noticed; so they will not be in any way oppressive (felt as constraining). And some proactive constraints on wanted actions will be perceived as much more oppressive than others in a way that cannot be explained merely in terms of actions. Moreover, sometimes it is not an action but some other wanted state of affairs that might be being constrained; and, again, in a way that admits of theoretically unexplained degrees of oppression. Therefore, abstract interpersonal liberty also does not appear to be about the absence of proactive constraints on actions as such.
The Counter-Intuitive but Correct Solution
So what is being relevantly constrained? The clues are in the references to people’s wants. It is the proactive constraining of the satisfaction of wants. This is the most general description of what we do not want others to proactively constrain with respect to ourselves. And, therefore, it seems to fit what is required for the abstract theory of liberty, despite being a counter-intuitive answer for most orthodox libertarians. Hence we can theorize such ‘libertarian liberty’ as ‘the absence of interpersonal proactively-imposed constraints on want-satisfaction’ (or ‘preference-satisfaction’: as no distinction is made here). Ex hypothesi, this rules out both proactively imposing wants themselves (by—ipso facto unwanted—violent threats, fraud, secret drugging, etc.) and want-satisfactions that themselves would proactively constrain another person’s want-satisfactions (for constraints on them would not be proactive but reactive). Otherwise, the wants may be indefinitely many, heterogeneous in nature, sometimes apparently incommensurable, varying in intensity and importance, biological necessities, or entirely contingent and transitory.
A focus on—and aggregation of ostensibly disparate types of—want-satisfactions ought not to seem too strange. Such want-satisfaction is fairly well understood in economics and in utilitarianism: whatever diverse things people actually want, they must in some sense be obtaining ex ante utility (or usefulness) from them; and people do make some kind of utility-maximising trade-offs among all of their own very different types of wants. Want-satisfaction, in itself, is even one interpretation of ‘utility’ in economics and in preference utilitarianism. Preference utilitarianism is distinguished from the other types by not necessarily having a positive conscious sensation as an effect or a goal. It has only a conscious ‘utility’ as a cause or motive: at the thought of achieving whatever is wanted (even if that is never experienced or known to come about by the person who wants it to be). Consequently, happy delusions are ruled out—unless those happen to be what someone spontaneously does want. Hence preference-utility (or want-satisfaction) is part of what helps us to make sense of the abstract conception of liberty and also of liberty’s ultimate congruence with maximizing one conception of human welfare. For human welfare is rightly perceived as the other main social desideratum, but wrongly perceived as often in serious and systematic conflict with liberty.As already stated, this conjecture cannot be defended here in social scientific terms. That is primarily a task for economists.
A possible—even likely—criticism may be that this is, therefore, really some strange variety, or subset, of utilitarianism being presented as libertarianism. But positively promoting utility is no part of this abstract theory of liberty, let alone using some people for the benefit of others. The theory solely rules out proactive interpersonal constraints on individuals achieving their (non-proactively-constraining) goals. Utility does not even need to be mentioned. However, it is sometimes convenient to speak in terms of utility in order to explain the congruence of liberty with free-market economics and preference-utilitarian welfare.
A further criticism may be that, nevertheless, there are still some interpersonal-utility comparisons implied by this theory, and that this is—at the very least—problematic. And here it has to be conceded that an element of interpersonal-utility comparison is indeed implied. It appears to be theoretically unavoidable for the abstract theory. However, as we shall see later, it is only necessary to make the plausible assumption that people are very broadly similar in their responses to certain very fundamental choices. This is not to suppose, or require, or imply either complete homogeneity or any cardinality of people’s want-satisfaction responses.At this point a review makes a somewhat muddled intervention: “if rights and non-aggression are just contingently related to liberty, how is it that wants are intrinsically connected to liberty in a way rights are not? Unless ‘wants’ and ‘liberty’ are equivalent, the inherent connection between the two calls out for an explanation that is not given.” A reply is best given in stages. 1) It is always best to accurately quote rather than to assume that a paraphrase is accurate. 2) To make a conceptual distinction between two things is not to imply that they are only “contingently related” (any particular number is conceptually distinct from mathematics as a subject, but they are necessarily related). 3) A positive theory of interpersonal liberty and what it entails in practice appears to be conceptually separable from a normative theory of “rights and non-aggression” and what they entail in practice. 4) It is explained in the text how wants relate to an abstract (non-propertarian and non-normative) theory of interpersonal liberty. 5) Rights are either propertarian or normative, and so cannot be part of any such abstract theory.
Now that the abstract theory of interpersonal liberty has been theorized as “the absence of interpersonal proactively-imposed constraints on want-satisfaction”, it may be convenient to abbreviate this unwieldy expression. “No” is shorter than “the absence of”; we are unlikely to forget that it is “interpersonal”, so that can usually be omitted; but “proactively” is crucial here, so best included (usually, at least); “constraints on” someone’s “want-satisfaction” (from what it otherwise would have been) is an ‘imposed cost’ to him (in the sense of the opposite of a merely withheld benefit). Therefore, the full formulation can conveniently be abbreviated to ‘no proactively-imposed costs’ (or more briefly, ‘no proactive impositions’). Ten words have been reduced to four (or three). Whenever an abbreviated formulation is used, the full theory will be implied. Thus any alleged ‘proactively-imposed cost’ must in principle be translatable into the longer formulation. But none of these particular words really matter. The same abstract theory of liberty might be expressed in a different way, as long as the general idea is understood. (And it is now possible simply to add—by analogy with all of the foregoing explanation—that the no-constraint, ‘Hobbesian’, theory of interpersonal liberty will be ‘no impositions’.)
Note that this verbal formulation is not a definition of the word ‘liberty’. It is a philosophical theory about the nature of the abstract liberty that libertarianism, and common sense, presupposes or entails. Definitions attempt to provide the meanings of words (whether by usage or by stipulation). Theories attempt to provide descriptions of the world. And the world includes the realm of all abstractions (which is also inhabited by all the entities of logic and mathematics). It is very remiss to fail to make, or fail to grasp, this crucial distinction. It is part of the philosophical philistinism of common sense when philosophy is seen as “merely arguing about words.” Indeed, one orthodox response to what is being discussed here is that it is mere semantics that does not really contradict or correct anything in mainstream libertarianism.Private communication. Name withheld to protect the guilty. As ought to be clear, that response does not bear serious philosophical scrutiny.A review asks, “How is it that the meanings of words and descriptions of the world are so separate?” Put as simply as possible, to define what a word means (“God”, “phlogiston”, “Yeti”) is not to assert that the definition describes a real thing. Here we appear to have a real abstract thing—a tacit theory of abstract libertarian liberty—and we are attempting to provide an explicit theory that accurately describes it.
This may still appear to be too unlike any theory of what libertarian liberty plausibly could be. But we have seen that orthodox libertarianism has no proper abstract theory of liberty, and that abstract liberty cannot be explained in terms of property, or rights, or actions. That mainstream libertarianism does not have an explicit abstract theory of interpersonal liberty is as strange and scandalous as it would be if utilitarianism were to offer no explicit abstract theory of utility (in fact there are several). It might also be thought that this unorthodox account has not been given a, sufficient, ‘supporting justification’. And that is correct. For, as critical rationalism explains, ‘supporting justifications’ are logically impossible. Nevertheless, it would still be possible to further explain and defend this abstract account of interpersonal liberty at an abstract level. But rather than do that in this new, short, explanation, it will now be applied to the apparent contingent circumstances of the world. Will it produce the results that libertarianism requires? If it does, then that should itself help to explain and defend it.
HYPOTHETICAL DERIVATIONS OF SELF-OWNERSHIP AND EXTERNAL PROPERTY As initially stated, the focus has been on the no-initiated-constraint—‘Lockean’—view of interpersonal liberty. But there are self-described ‘Hobbesian’ libertarians.Such as Hillel Steiner and Jan Narveson. It should be illuminating to show how both of the main abstract theories of interpersonal liberty explained here can be applied to derive practical conclusions. These are hypothetical derivations concerning what the application of abstract liberty factually, or positively, entails; they are not advocatory, or normative. Then there is also the issue of whether these approaches are in any way different in their practical outcomes.
Applying No-Proactive-Imposition Liberty
Here interpersonal liberty is interpreted as being free from peoples’ proactively-imposed constraints on our want/preference-satisfactions; that is, people are not initiating interferences—whether intentionally or not—on our having what we want. If no one is proactively constraining us in this way, then we have full interpersonal liberty. If Adam initiates any control on—interferes with—Eve’s body against Eve’s preferences, then that is a proactive constraint on Eve: the body that, contingently, Eve more or less is. We can imagine a world where a person (understood as a unitary consciousness with appropriate capacities) does not care about control of their body or is not physically attached to a particular body (and can easily move to a different one). In either case, liberty might have different practical implications. But in the reality we seem to observe, for Adam to flout Eve’s preferences as regards her body is not for Adam to exercise his own interpersonal liberty—as here conceived—but to exercise power over another person. And if Eve manages to prevent this, then she is not, significantly, proactively imposing on Adam (except, for instance, to the trivial, and reciprocal, degree that her body comprises natural resources that Adam might otherwise have usedTherefore, even this example does have some conflict in applying pure liberty. In which case it is immediately clear that all that can be achieved is the more libertarian option (maximising liberty) and not perfect liberty. Another example might be the non-trivial disutility proactively imposed on Adam by Eve’s existence and rejection of him versus the extreme disutility of Eve if Adam were to force himself upon her to reduce his disutility.) but reactively defending herself.A quoted JLS review comment with interspersed replies: “The author plausibly conjectures that the disutility to an individual from allowing interferences with his body will normally outweigh the utility gained by someone who interferes with it.” That utilitarian comparison may be true, however what fits abstract liberty is not calculated by what is utilitarian. The correct abstract libertarian comparison is that the proactively imposed disutility on person A of interferences with A’s body by person B far outweighs any proactively imposed disutility on B by his being required not thus to interfere. However, the basic idea can also be explained intrapersonally: it is far less of a proactively imposed cost to be required not to interfere with other’s bodies than it is to be required to suffer their interference with yours. This “seems very plausible for two-person cases, but […] what if one person, or the members of a small minority, is hated by a vast number of people and elimination of the hated would increase the utility of the majority?” Or, rather, what if it would decrease the proactively imposed disutility of the majority that the existence of one person, or a minority, causes? This is somewhat similar to one of the many criticisms dealt with in Lester ([2000] 2012): “A Critic of Religion” (pp. 66–69) (not all of those criticisms and replies could be incorporated into this relatively brief exposition). However, to reply directly but briefly, consider the universalized and long-term effects of institutionalizing a rule that a sufficiently hated person, or minority, can be put to death to minimize the proactively imposed cost that their mere existence causes. This would universally undermine toleration and stoke up hatred and fear. No one would dare to become too well known in case that somehow turned to infamy. To even express an opinion in public might become a serious risk. Therefore, such a rule would appear to allow more proactive impositions that not allowing it. Expressed individually, it is a lesser proactively imposed cost by far to know that someone you hate continues to live (even though you never need to see him or hear anything about him: if you choose to find out about him—or choose to experience media that might mention him—then that is not proactively imposed on you) than it is to live in fear that you, or any one of the many individuals that you value, can be killed if enough people somehow come to feel sufficient hatred. Hence, having ultimate control of one’s body normally follows from having (more strictly, maximally applying) such liberty. This factual and contingent consequence is before needing to assume the legal institution of property (or needing to assume morals either). However, in order better to protect this ultimate control of one’s body, it is efficient to institute self-ownership (which can be done with spontaneously-arising lawOr ‘natural law’, but only in the same sense that there are natural languages. rather than by state commandSee, for instance, Benson (1990).).
With external resources (that is, resources external to people’s bodies) it might be supposed that, logically, we at least need to derive self-ownership first and proceed from that. This does not appear to be the case, for the explanation runs independently: self-ownership does not need to be mentioned, or presupposed, or implied. In fact, a living human body can be thought of as simply one type of resource; just one that contingently happens to be tied to a particular person (intellectually conceived) with very strong and stable fundamental wants or preferences about controlling it. However, because bodies are more or less what we are, and external resources are not, the situation with external resources is somewhat different.
Once we have begun to useThere need be no labor-mingling. It is possible to find a use for something by its remaining as it was found: a beautiful tree outside our abode, or the sunlight that falls daily on us. Neither need labor-mingling be using something: to walk across mud is to mix one’s labor of walking with that mud, but not thereby to use the mud (which is, we may suppose, a mere nuisance). Hence, it is use that is fundamental. a natural resource for some purpose, then it typically proactivelyA review asserts that “no account of what ‘proactively’ means or describes is adequately given”. Why is this needed? ‘Proactive’ is in most dictionaries; it is the antonym of ‘reactive’. Perhaps the review means ‘proactively imposed’. However, a little above in the text that expression is explained as “initiating interferences”. And earlier still the text explains “a purely reactive or defensive constraint would preserve interpersonal liberty; a proactive or offensive constraint would reduce interpersonal liberty”. Can this be made plainer? The basic idea is more generally expressed simply as an ‘interference’. But rather than belabor this point further, it is probably easier to deal with specific examples as they arise. imposes a significant cost on us if someone takes that resource from us or uses it in a way that flouts our purposes. By possessing and controlling it we might proactively impose a cost on other people too; but this is mainly to the, usually small and reciprocal, extent of the unmodified resource’s want-satisfaction value to them. For to be denied a benefit that someone else has somehow produced—such as a wooden cabin—is not in itself to be proactively imposed on.However, to simplify matters, this ignores discussions of costs relating to envy, frustrated desire, lost status, ‘utility monsters’, and other mainly ‘self-inflicted’, or moral hazard, or reciprocal examples: all of which it would, at least overall and in the long term, proactively impose more to allow to limit ultimate control by initial use and subsequent voluntarily agreed transfer. But see the index of Lester ([2000] 2012) for relevant discussions of such things.,A review asserts that “the claim that ownership does not proactively frustrate the non-owners’ preferences is ad hoc at this point.” Several responses are relevant. 1) Accurate quotation is better than inaccurate attempted paraphrase. 2) There is no such assertion or implication. 3) This is “at this point” about ultimate control and not about “ownership”. 4) It is stated in the main text that “we might proactively impose a cost on other people too; but this is mainly to the, usually small and reciprocal, extent of the unmodified resource’s want-satisfaction value to them.” 5) It is stated in the footnote that “to simplify matters, this ignores discussions of costs relating to envy, frustrated desire, lost status, ‘utility monsters’, and other mainly ‘self-inflicted’, or moral hazard, or reciprocal examples …” (and a reference to discussions of such issues is given). 6) There is a severe limit on how much detail is possible in this relatively short explanation. Therefore, it appears that the least proactiveA review asserts that “it is not clear how degrees of proactivity are even relevant at this point.” It is not about “degrees of proactivity” but ‘degrees of proactively imposed cost’. It has already been explained how these can be on both sides with both a person’s body and external resources. In all such, ubiquitous, cases liberty can only be maximized. imposition on people’s preference-satisfactions is usually to allow ultimate control to the initial user,But exceptions can be imagined, such as where this monopolizes a vital natural resource that other people would themselves have discovered. and thereafter control by voluntarily agreed transferA review asserts that the “conclusion on this point is insufficiently supported”. This is, again, to overlook, or reject without explanation, the assumed epistemology that is cited and outlined earlier. It would only be relevant to produce a criticism that is inconsistent with the text. (as mentioned above, these interpersonal comparisons plausibly assume only that people are very broadly similar in their responses to certain fundamental choices). Assuming the theory of liberty, this entails that it usually maximally observes, or instantiates, liberty to have personal ultimate control of external resources where one has initiated a use (or subsequently received them by voluntarily agreed transfer). This factual and contingent consequence is also before needing to assume the legal institution of property (or needing to assume morals). However, in order better to protect liberty, it is efficient to institute property rights in such resources.A review asserts that “the notion that property and trade maximize liberty (and not merely want satisfaction) […] requires both [1] data to show that property and trade do satisfy wants more than the alternatives and [2] an explanation of how those satisfied wants are indeed of the type that are included in the theory of liberty.” Replies to both points follow. 1) This is philosophy and not social science, so empirical “data” cannot usually be more than background assumptions. Assuming critical rationalism (as this essay does), which includes falsificationism, no amount of “data” can “show” (i.e., support or justify) anything. What has here been called the “classical-liberal/libertarian compatibility conjecture” cannot be defended here apart from a few passing philosophical aspects. 2) A philosophical explanation has been provided of the fundamental relationship between want-satisfaction and the property and trade that is implied by applying the abstract theory.
In short, we can derive both self-ownership and external private property (usually arising from initial use and thereafter voluntarily agreed transfer) because, contingently (for we can imagine worlds where this is not so), they maximally observe such interpersonal liberty. They are not what interpersonal liberty is in abstract theory, but what maximum interpersonal liberty entails in practice (hence they are not, philosophically, the ‘foundational’ assumptions of libertarianism—as is often supposed). And once self-ownership and such property are thus derived from maximally observing abstract liberty, we can use them as strong, prima facie, positive rules as to what is ‘libertarian’: that is, factually maximally liberty-instantiating in practice. Therefore, we have arrived at the two main rules that libertarians intuit to fit liberty, but now with an explicit, non-propertarian, non-normative, abstract theory of liberty to explain that intuition.
Such ‘rule libertarianism’ (but non-moral at this stage) is analogous with rule utilitarianism. This may sound odd mainly because orthodox libertarianism jumps straight to normative rules without any explicit non-normative, act-libertarian, abstract theory. It might even seem that this abstract theory necessarily implies act-libertarianism. But that seems to be as mistaken as the view that utilitarianism necessarily implies act-utilitarianism instead of rule-utilitarianism.If the compatibility conjecture is true, then libertarian rules are also utilitarian rules. Now that these practical property rules are derived, it is only necessary to go back to the abstract theory of interpersonal liberty in problem cases or to answer further philosophical questions.
However, there is an immediate and obvious problem that has already been touched on with respect to deriving self-ownership and external-resource ownership. Very often a near-absence of proactive impositions is impossible because there is a significant reciprocal clash. For instance, either you suffer the smoke-pollution from my fire or I suffer going without warmth and cooking: both the allowance and the disallowance of the fire will proactively impose, but on different people (confused criticisms of deontological or rule libertarianism often see only the allowance of pollution as imposingFor instance, Zwolinski (2015). And see the reply that is Lester ([2011] 2016, ch. 31).).Either of us could move our dwelling places, of course. But that would be, we may assume, an even greater proactive imposition on whichever side did this. In such cases it is impossible to achieve anywhere near perfect liberty or to apply any plausible interpretation of the so-called ‘non-aggression principle’, for liberty can only be maximized as best as is practical; and this might involve compromise or compensation. It is important not to misunderstand this point. Dealing with inevitable clashes by maximising liberty might appear to be collectively consequentialist (in some non-moral sense at this stage, at least). But that can’t be right; for no one’s liberty is curtailed in order to promote the maximum liberty of other people in general. It is simply that maximisation is all that is possible when specific liberties conflict. These specific liberties might include indefinitely large groups of indeterminate people (‘the public’), and be best dealt with by a class, or representative, law suit. But even such ‘collective’ minimising of proactively imposed costs on indeterminate people is not ‘collectivist’ in any way that overrides libertarian individualism in principle. As a consequence, applying this theory of liberty inherently internalizes externalities (but in a pre-propertarian sense) as far as is practical and thereby tends to be economically efficient. And this is one significant philosophical link between liberty or libertarianism and want-satisfaction or preference-utilitarianism.
Once all this is understood, it is possible to apply the abstract theory of liberty to derive relatively precise and clear implications for an indefinite variety of other issues within libertarianism. For instance, intellectual property, restitution and retribution, emergency situations, etc.As found throughout Lester ([2000] 2012, [2011] 2016, 2014). But none of this can be attempted here.
Applying No-Imposition Liberty
As we have seen, a straightforward no-constraint-on-actions approach to interpersonal liberty is in itself more or less zero-sum: if you have more interpersonal liberty, then someone else has just that much less. By this conception, a slave-owner qua slave-owner has more liberty where, and to the exact extent that, his slaves have less: whatever he can enforce that the slaves cannot prevent. Such zero-sum interpersonal liberty cannot in itself be maximized or protected; it can only be competed over or redistributed for some non-liberty reason—such as utility or equality. Therefore, it cannot be the liberty required by most versions of libertarianism (and one common-sense conception). Yet some libertarian texts do seem to accept it. They usually opt for something along the lines of ‘maximum like (i.e., similar or equal) [valuable] liberty for all’—the word ‘valuable’ often being implicit.For instance, “every man may claim the fullest liberty to exercise his faculties compatible with the possession of like liberty to every other man” and “each has freedom to do all that he wills provided that he infringes not the equal freedom of any other”; Spencer (1851, ch. 4, sec. 3). More recently, “everyone has an equal right to the most extensive liberty compatible with the like liberty for all”; Rawls (1971, sec. 11). Hence, in these theories, liberty-in-itself cannot be the criterion or the goal that is to be maximized or protected. They have the rather different criterion or goal of valuable liberties that all can share equally.
However, if the subjective intensities of interpersonal impositions are taken into account, then this does allow for a liberty-maximising interpretation. Adam might prefer to have ultimate control of Eve’s body. And Eve prefers that Adam doesn’t. In the event of such clashes of no-imposition liberty, the most ‘libertarian’ (i.e., liberty-instantiating) approach is to have whichever option is the lesser constraint.With the possibility of compensation in certain cases. Perhaps where there is no similar reciprocity, for instance. Almost universally, it is a greater constraint on one’s preference-satisfactions to have any aspects of one’s body under someone else’s ultimate control than it is to be denied any similar control of another person’s body (or to have any other system of bodily control). Therefore, no-imposition liberty is maximally observed if people have ultimate control of their own bodies. This factual consequence is before the legal institution of property (and also before morals) needs to be assumed. However, an efficient way to protect this ultimate control of one’s body is then to institutionalize this as the property right of self-ownership.
A similar type of argument also applies to the control of all other resources. It is typically a greater constraint on our preference-satisfactions for other people to deny us ultimate control of the resources we already use (and thereafter receive by voluntarily agreed transfer), than it is to be denied access to resources that others are already using. Etc., etc.A review asserts that “[1] The argument of [this section] seems to apply equally well to the author’s argument, [2] for the author never shows that want satisfaction is a non-zero-sum game, [3] nor does the author make a convincing case that interpersonal liberty, as defined by rights or some other criteria, is actually zero sum.” There appears to be confusion here. 1) This section shows how it is possible to avoid the zero-sum-game interpretation of ‘Hobbesian’ liberty “if the subjective intensities of interpersonal impositions are taken into account”. 2) This essay’s main theory is not about mere want-satisfaction but the absence of proactive constraints on want-satisfaction. 3) Interpersonal liberty as somehow “defined by rights” may very well not be zero-sum. But, for the reasons explained, that cannot be an abstract theory of liberty (which does indeed use “some other criteria”).
Do These Two Theories Have Any Different Practical Outcomes?
In light of these two explanations of interpersonal liberty, one important question immediately arises: are they fully equivalent in terms of what they entail in practice? Both conceptions of interpersonal liberty appear—at least initially—to have the same practical implications. Thus one could explain interpersonal liberty using either. With the no-imposition approach, we still have to say that a slave-owner is having his liberty lessened if his slaves are freed without his consent; just not as much liberty as his slaves gain by being freed. Similarly, a would-be murderer has less liberty if his target-victim escapes; just not as much as his target-victim preserves his liberty by escaping that intended murder. This seems to be a coherent account. However, it is not how people mainly think about interpersonal liberty—either as self-described libertarians or otherwise. People typically think that when someone escapes proactively-imposed slavery he gains liberty; but his previous master has lost only his power over him. And the would-be murderer does not have his liberty lessened if his target-victim escapes him; his target-victim’s liberty is simply preserved. Thus the no-imposition view fails to capture the intuitions that people usually have (as a matter of fact: this is not to advocate anything here) that there is a real causal and also moral difference between withholding a benefit and proactively imposing a cost even when the outcomes are the same. Consider a well-known example in the philosophical literature: coming across a drowning child in a shallow pond. Not saving the child will usually be viewed as morally reprehensible and despicable, but it is not usually viewed as causally or morally equivalent to pushing a child into the pond so that he drowns: to the equivalent of murder.Matters would be different if one were contractually employed as a lifeguard: then not saving the child would be proactively imposing by breaking one’s contractual duties (on deriving contracts see Lester ([2000] 2012, 80–85). Hence it is closer to the main libertarian, and also more popular, approach to view abstract interpersonal liberty as the absence of people’s proactively-imposed constraints on our preference-satisfactions. And that fact possibly means that it is more stable and less costly to preserve. If so, other things being equal, more liberty should result. Thus that may be one important practical difference, after all.
Nevertheless, there are—as mentioned—some self-described “Hobbesian” libertarians (although they would probably not give the same account as here). And there are also anti-libertarians that take a Hobbesian approach to liberty. Therefore, it is useful to be able to explain both of these two approaches. It is also possible that one of these approaches is in some way logically incoherent or in some other way unfixably faulty. In which case, it is good to have the other to fall back on. But if they are both logically incoherent or unfixably faulty, then that would mean starting again. For it seems that there must be a tacit, non-propertarian, non-normative, abstract conception of interpersonal liberty that distinguishes between those rights, property rules, and activities that instantiate (or fit) liberty and those that do not. And so an explicit account of that conception should be possible.
LIBERTARIAN MORALS An abstract theory of interpersonal liberty and of what it entails in practice has now been broadly explained. Orthodox libertarianism brings morals into the picture before this has been done. But it seems that only after this has been done can it be fully coherent to ask ‘how does liberty and what it entails relate to morals?’ Given—as seems to be the case—that there cannot be any supporting justifications, it can only be a bold conjecture that such abstract and practical libertarianism is morally preferable to any alternative. This conjecture needs to be defended in the light of any criticisms that arise. It can be explained and defended how there does not appear to be any significant clash between libertarianism and the most defensible versions of various morally desirable things: rights and duties, justice, social justice, a social contract, human flourishing, human welfare, etc. But this does not mean that libertarianism is thereby morally supported by any of these things (or any combination of them). It remains a separate conjecture that libertarianism is morally desirable, and all moral criticisms are potential refutations that require adequate responses.A review suggests, without any explanation (or ‘justification’), that this short section should be omitted. Perhaps the implied reason is that it is better to say nothing about libertarian morals rather than to fail to produce a scholarly length ‘justification’ of what is being explained here. But to say nothing may leave it mysterious to many readers how morals are supposed to relate to libertarianism with this theory. Or it may be thought that morals are still what will give it a ‘supporting justification’. Or it may be supposed that morals are implied to be not needed.
CONCLUDING CONJECTURES This philosophical essay is, ineluctably, more than averagely broad and speculative. Consequently, even if it were not assuming critical rationalism, it is not being presented as completely clear and convincing. However, it would be remiss not to conclude with some boldA JLS review notes the Popperian approach to bold conjectures but suggests that “it does not follow from accepting this methodology that one must make bold and extravagant comments about the value of one’s conjectures”. However, no specific examples are quoted or explained to be “extravagant”. And none of the comments ought to be read as intentionally “extravagant”, although a sound criticism may reveal them to be so. conjectures that ought to be eminently criticisable. As regards interpersonal liberty, the abstract theory captures and explains it. As regards libertarianism, a “paradigm shift”To put it in the terms used and popularized by Thomas Kuhn. is required. The fundamental philosophy involved with mainstream libertarianism is a refuted and “degenerating research programme”.To put it in the terms used by Imre Lakatos. Referring to Popper, Kuhn, and Lakatos might seem to be epistemologically promiscuous and inconsistent. However, the different expressions seem to capture important phenomena. Also, Kuhn’s approach can be interpreted as more sociological than epistemological. And Lakatos did not see his own work as contradicting Popper’s basic epistemology. The philosophy involved with this new paradigm is an unrefuted and highly fruitful one. It offers a clearer understanding, better and more comprehensive solutions to problems, and more convincing replies to criticisms. However, despite its radical and important differences, the new paradigm is not fundamentally ideologically at odds with libertarianism itself—although that is sometimes the mainstream perception. For it reaches more or less the same conclusionsIt deals precisely with any exceptions in a principled way where mainstream libertarianism is either unable to answer or is forced to make ad hoc assumptions. but with greater philosophical clarity and cogency.
So far, this heterodox paradigm has been largely unnoticed or ignored. Where it has occasionally been subjected to criticismFor instance, Gordon and Modugno (2003), Frederick (2013, 2105). it appears to have been misunderstood.Replies to the critical texts listed in the previous footnote can be found here: Lester (2014, ch. 9, 10; 2017). Links to other replies to reviews: http://www.la-articles.org.uk/lwa.htm. This is only to be expected. It is sufficiently radically different from the current orthodoxy to confuse most mainstream libertarians, even philosophers.As illustrated by the review quoted throughout. It is still ‘axiomatic’ to them that self-ownership, ‘just’ property, and some version of morality are somehow ‘foundational’ to explaining and ‘justifying’ libertarianism philosophically (and all without an explicit, abstract theory of liberty), despite the increasingly obvious problems with such assumptions. It will only slowly become clear that it is necessary to make the philosophical distinctions of abstract liberty, applied liberty, and moral defenses, while using critical-rationalist epistemology.A review objects that this essay “has provided nowhere near the argument necessary” for its concluding conjectures. Of course, conjectures cannot be supported by arguments: only explained and defended. However, there have been short explanations of 1) the fundamental philosophical problems with mainstream libertarianism, and 2) how an alternative approach can solve those problems. The review has offered no sound criticism of any part of these explanations. Hence it “has provided nowhere near the argument necessary” as a criticism to refute the concluding conjectures.
Bob goes through much more scandalous and corrupt activities from Presidents Clinton, Bush, and Obama, and why Hillary Clinton has a much worse record on self-dealing than Donald Trump.
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David Gordon is a Senior Fellow with the Mises Institute who has a long history in Austrian economics and libertarianism. He talks with Bob Murphy about his personal story, including taking an undergrad class at UCLA with Hayek as his professor. Then they turn to philosophical issues in economics, and end with an analysis of the Strauss/Jaffa critique of libertarianism.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
This Murray Rothbard Memorial Lecture, sponsored by Dr. Don Printz, was given at the Austrian Economics Research Conference at the Mises Institute on March 23, 2019. A number of edits have been made for clarity.
I was invited to talk on “how I came to develop my novel anarchistic arguments against the classical liberal and social democratic conceptions of the state, which parallel, but are not based on the views of Murray Rothbard and Hans Herman Hoppe.” Indeed, I am not a longtime participant in your conferences and the Mises Institute. It is relatively late that I got in contact with you. But it was at a moment, when I realized, there is a group, there is a movement whose way of thinking is precisely or let’s say, very close to what I think.
In any event, I feel deeply honored to present this Murray Rothbard Lecture on how I came to these almost same conclusions. The short answer is, because it’s inescapable. And a more extensive answer on how I came to this inescapable result will follow now.
WHAT IS LAW? At the beginning, there was not something like, there is a fundamental problem with the state, or property rights should be supported in a much better way. At the beginning, there was a different and quite simple question: What is law? When I began to study this subject, I didn’t know exactly why. If you choose medicine as the subject of your education, it’s much easier to imagine the topic. But law is something quite abstract and I really wanted to learn what it was. The answers in the first courses were quite disappointing. In the basic studies as well as in later courses for the bar exam I just learned something like a professional craft, but not what this remarkable phenomenon of law is.
A bit later I came closer to the answer of my question, when I spent a year at Harvard Law School with interesting comparisons between our European system of codified law on the one hand and the US and English tradition of the precedent-based common law on the other hand. There I met different ways of thinking about sources of the law and related questions such as whether the law is just there or whether it emerges on special occasions and whether the law needs judges to apply and legislators to produce it. I then deepened these aspects in my habilitation thesis some years later and came to the conclusion that law does not depend on official authorities such as judges, magistrates or legislators, but that the law gives answers even though there are no statutes or no precedents at all, and that the final “source” of law is the conflict at the occasion of which the law is called upon. Or in short, the conflict creates its own legal solution.
That gave a first answer to what law is: Law is a phenomenon that emerges under certain situations. It is not just there as a preexisting body of abstract norms, but it is something, some reaction, some need that appears if there is a conflict to be solved.
Law, that was a further consequence, is somehow a side effect of a world in movement and in change, it is a function of something which is happening. It is a dynamic phenomenon, not a static one. It is a correction of something happening and not a correction of something being.
And thirdly, law depends on being articulated within a conflict of colliding and therefore incompatible interests. I.e., law is something that arrives loudly, which in turn has to do with its dynamic aspect just mentioned. The law is articulated, there are outraged arguments, there may be crying or shouting, there are subjects impacted by the conflict and assuming the role of parties of a legal dispute.
LEGAL PRINCIPLES Now, within this context, parties are relevant only as far as they collide with each other. Any other properties or features of the parties are irrelevant, i.e. no party is of more value than another party. They just collide. And out of just the collision all elements to deal with the case emerge. This quite trivial aspect is nothing less than the principle of Equality before the Law.
Then, only as far as their collision is in contrast with the parties’ subjectivity, you have to deal with law. Otherwise, i.e. if a party agrees with the collision there is no need to consider the legal consequences. This — again quite trivial — aspect shows a further well-known principle of law, i.e., the principle of consent or of contract, or in Latin: volenti non fit iniuria, no injustice is done to the consenting party.
And a third triviality, so to speak, that can be drawn out of the facts of a conflict is that preexisting positions are stronger than later ones. What you already have, such as your body, your personal belongings, the land you stand on etc. become objects of a conflict if somebody else touches or takes or destroys them. What is then being articulated by the previous holder of these objects is nothing but property and the nonaggression principle or again in Latin: neminem laedere, do not hurt anybody.
All these principles are developed out of the conflicts themselves. Historically too, one could say that almost all western legal tradition, not only the common law tradition, the European one as well, have emerged from court cases. The ancient Roman law is primarily court-made law. Even most parts of the famous Corpus Iuris Iustiniani were not state made legislation. They were long time collections of court decisions. And private law in general, even in the European continental system, is court-made law. The many codes in that tradition are derivations out of court decisions, at least until the mid-19th century.
All this means that both theoretically as well as historically, principles of law do not need the state. They just come out of the conflicts at stake and of long traditions of courts handling them. You do not need anybody, namely no state legislator, to make law, you just need people and organizations that find it, such as judges, courts, or mediators. This was especially interesting for me as a civil law lawyer accustomed to look first for answers in the state made code. In any event this brought me close to anarchism, even though I did not say yet the State is illegitimate. That came later.
It came when I thought that those principles of Equality before the Law, of Consent and of Nonaggression should be applied to the state as well, and then realized that the state violates these principles in an almost excessive way:
EQUALITY OF LAW According to the lex, rex slogan, formulated in the Scottish enlightenment by Samuel Rutherford, the king or the state should be subject to law. This is what we call today the “Rule of Law”, i.e. that the state should not act arbitrarily but according to legal rules. And in fact, if you look at the formalities of today’s state behavior you see that the state — usually — corroborates his activities with paragraphs of statutes, ordinances, guidelines etc. The problem, however, is that all these laws are made by the state itself. I.e., the law that should guide and control the state is made by itself!
And so, it is no accident, that the state preaches water and drinks wine (as we say), i.e., the state grants broad privileges to itself while he denies them to normal people. The most prominent case is the explicit distinction between private and criminal law on the one hand and public law on the other. Private law for normal people like you and me or private enterprises, and public law for the State itself. In practice this means that the state allows itself to collect taxes even against the will of the taxpayer while the very same behavior made by a citizen, would be punished as a criminal offense, namely theft. And it furthermore means that in case of litigation between the state and a citizen, it is a state paid court that decides on the case, while an analogous dependence of a judge from one party in a private lawsuit would be prohibited. And there are many more examples. There is an institutionalized violation of the principle of equality before the law, a breach of this important principle by the very fundamental structure of our law system.
A next element of the Rule of Law is Separation of Power, in order to prevent the risk of concentration of state power. Traditionally, we distinguish between the legislative power, the executive power and the judicial power which means that these are three different organizations for these three functions. Now are there three organizations? In reality there is just one! The notion “branches of governments” is as accurate as it is treacherous: Three branches of the one and very same tree, a concentration of all three powers to one organization. All three powers are on the same payroll, financed by taxes levied by the one and same state.
DEMOCRACY Now, what about the next principle, the principle of consent we developed from the conflict? Once you scale up this principle from a small-scale contract to society as a whole, you will get to a principle of democracy. Since the state’s field of activity is society as a whole — and if the state respects the principle of consent — then it must grant democracy. In a strict sense of the Greek Demos and Kratein, it is the people who govern themselves. Or in a saying of the French revolution “… that under democracy men are not governed by other men but exclusively by laws, and thus by laws that nobody has made but themselves."
This sounds convincing, but reality is different. Take as an example Switzerland, which is proud of its direct democracy, as opposed to just an indirect, parliamentary one. Here, the figures — on the federal level — show this:
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Direct democracy—in the meaning that people vote on material legislative bills—sometimes takes place indeed, but to an almost negligible extent. It is rather an allusion to democracy, than democracy itself. Much more legislation is rendered by the people’s representatives, i.e. the deputies in the two parliamentary chambers. But this is not a representation such as a power of attorney you can grant along with specific instructions and withdraw again, it is rather something like tutorship by a guardian. Because you share “your” representative with 30,000 other “principals,” you are not allowed to give instructions and you cannot withdraw the power. Therefore, the ratio of representation, beside other quantitative modification, must be divided by 30,000 which leads to a very low rate under indirect democracy. And finally, 74 percent of all legislation is not even rendered by the parliament but by the executive branch, which has nothing to do with democracy at all.
When I realized that all the many state interventions such as taxation, economic regulation etc. are based on virtually no consent of the people themselves, which is a flagrant violation of the principles mentioned before including the Nonaggression Principle, I became even more sympathetic with anarchy. It was clear now that the state is not only unnecessary in order to have legal order, but that it is the pure opposite of lawfulness. In other words, with a state you cannot have a legal order.
MORE KNOWLEDGE ABOUT THE LAW This outcome, in turn, is an exemplary case of the theory mentioned earlier, i.e. that law emerges out of a conflict. The unlawfulness of the state is not just there, it becomes evident only at the many occasions of its interferences with the interests of the people. It is this aggression that creates reactions, argumentations, and hence the counterreaction by the state trying to justify its behavior. Not by accident it refers to principles that are objectively convincing in cases of conflicts, such as equality of law, consent and nonaggression. But since its excuses are false, he turns out to be unlawful, i.e., law forbids its aggression.
In other words, law emerges in case of need and disappears (not when justice is established, but) when unlawfulness is eliminated. Law is the absence of unlawfulness, such as for instance the unlawfulness of the State. Law is essentially negative. It is destructive, but what it destroys is worth being destroyed, namely unlawfulness.
Unfortunately, this does not mean that law is always successful against unlawfulness. Its main adversary is power, and quite often power is stronger than law. So, what about the force of law? How can law have effects on unlawful facts? The answer to this again, has to do with that interrelation between unlawfulness and law: The force of law comes out of the unlawfulness it reacts with. The heavier the unlawfulness, the stronger the reaction by law. Action equals reaction. The law does not need to be put into force. It is a myth that law needs some strong instance that helps enforcing it, such as the State. Law takes place, you do not deed to order it and you cannot escape it. Law is essentially inescapable. Law is what no one can escape from, not you, not me, not the universe, and of course not the state. Law is — and I think this is the answer to my original question — inescapability.
And by the way of law’s inescapability, I became an anarchist.
LUDWIG VON MISES, MURRAY ROTHBARD, AND HANS HOPPE As inescapable as are law and anarchism, as inescapable are Mises, Rothbard and Hoppe.
Ludwig von Mises himself deals in some contexts with inescapability of law, though less of legal laws but of the laws of the market (Mises 1951). He showed how “the discovery of the inescapable interdependence of market phenomena overthrew … [the] opinion of an ideal state. … In the course of social events there prevails a regularity of phenomena to which man must adjust his action if he wishes to succeed.” And what convinced me most: “One must study the laws of human action and social cooperation as the physicist studies the laws of nature.” (Mises [1949] 1998, 2). I think it convinced me more than Mises did himself, since in later writings he seems to be somehow reluctant to follow this point of view.
Murray Rothbard was more important for me, namely because he — unlike Mises — explicitly advocated anarchism. After I had already converted to anarchism myself, I came across a small article entitled “Society Without the State,” some few pages, very precisely written in 1975, by an author, so far unknown to me, called Murray Rothbard. And I read sentences like “The basic point, however, is the legal state is not needed to arrive at legal principles or their elaboration….” and
[I]ndeed, much of the common law, the law merchant, admiralty law, and private law in general, grew up apart from the State, by judges not making the law but finding it on the basis of agreed upon principles derived either from custom or reason. The idea that the State is needed to make law is as much a myth as that the State is needed to supply postal or police service.… (Rothbard [1975] 2016, 283)
That was precisely what I thought too, when I realized that conflicts produce their own solution. That was precisely the reason why the State is not needed. And then, of course, there are these very clear and true sentences: “Thus the State, by its very nature, must violate the generally accepted moral rules, to which most people adhere. … Thus, the State is a coercive criminal organization that subsists by a regularized large-scale system of taxation-theft, and which gets away with it by engineering the support of the majority ….” (Rothbard [1982] 2016). By the way, it is never a majority, it is always a tiny minority, as demonstrated in my chart above.
So much for the inescapability of Murray Rothbard. And finally comes the inescapability of Hans Hermann Hoppe. There is that interesting link from Rothbard to Hans Hoppe: “And yet, remarkably and extraordinarily, Hans Hoppe has proven me wrong. He has done it: He has deduced, an anarcho-Lockean rights ethic from self-evident axioms.” What Rothbard alludes to here is Hoppe’s concept of argumentation. Its ethics are not derived from sources such as natural law, customs etc. but rational consistency, avoidance of self-contradiction. And it seems to me that this approach is quite close to mine, once you accept that rational consistency is always related to some object. There is no meaningful argumentation without an object, no meaningful legal argumentation without a conflict to argue and to fight about. And the other way round, there is no conflict without subjects articulating their respective positions. In other words, the Hoppean Argumentation is part of the phenomenon that conflicts create their own solution, that they provoke arguments and that these arguments help to find a solution for the conflict.
Hans Hoppe’s approach is more on the rational level of how to argue about the conflict, while mine is more on the real level of the conflict as such. We debated these issues on several occasions already, and by this we became good friends, inescapably. Many thanks!
Due to listener request, Bob Murphy offers further thoughts on Hoppe’s argumentation ethics, following his discussion with Stephan Kinsella. Bob then discusses Hoppe’s profound essays on praxeology, in which he argues that Mises has solved the famous mind-body problem in philosophy.
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Bob Murphy and Stephan Kinsella debate Hans-Hermann Hoppe’s famous "argumentation ethics" case for libertarianism. Stephan defends Hoppe's claim that any attempt to justify a non-libertarian system would result in a performative contradiction, while Bob clarifies the argument and raises concerns about it.
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Will the randomized control trial bring more clarity and certainty to economic science? Is “evidence-based economics” something to be hailed as a welcome innovation or should it be appraised with a more sober attitude? To examine this topic and discuss the relative place of randomized trials in economics and medicine we have as our guest Peter G. Klein, W. W. Caruth Chair and Professor of Entrepreneurship at Baylor University’s Hankamer School of Business. Professor Klein is also the Carl Menger Research Fellow at the Mises Institute. He obtained his PhD in Economics from the University of California Berkeley, and his BA from the University of North Carolina Chapel Hill.
His field of interest is in the area of the economics of entrepreneurship and business organization. He taught previously at the University of California, Berkeley, the University of Georgia, the Copenhagen Business School, and the University of Missouri, and served as a Senior Economist with the Council of Economic Advisers. He is the author of five books and numerous peer-reviewed articles.
Titus Gebel has a PhD in international law, and has written a book, Free Private Cities: Making Governments Compete For You. Bob discusses Titus’ proposal and how it differs from other types of abstract libertarian theorizing.
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Includes an introduction by Peter Klein.
Ludwig von Mises and his work remain incredibly prescient and relevant today. The world needs his voice more than ever, and our speakers celebrate Mises as a supremely vital thinker well-suited for today's challenges. Recorded in Los Angeles, California, on October 26, 2019.
[All lectures from the Supporters Summit 2019 are available here.]
Ludwig von Mises and his work remain incredibly prescient and relevant today. The world needs his voice more than ever, and our speakers celebrate Mises as a supremely vital thinker well-suited for today's challenges. Recorded in Los Angeles, California, on October 26, 2019.
[All lectures from the Supporters Summit 2019 are available here.]
Bob Murphy asks a series of tough (but fair, he hopes) questions for conservatives, ranging from tariffs to impeachment to drug prohibition.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
Quarterly Journal of Austrian Economics 22, no. 2 (Summer 2019) full issue. ABSTRACT: This paper examines John Maynard Keynes’s ethical theory and how it relates to his politico-economic thought. Keynes’s ethical theory represents an attack on all general rules. Since capitalism is a rule-based social system, Keynes’s ethical theory is incompatible with capitalism. And since socialism rejects the general rules of private property, the Keynesian ethical theory is consistent with socialism. The unexplored evidence presented here confirms Keynes advocated a consistent form of non-Marxist socialism from no later than 1907 until his death in 1946. However, Keynes’s ethical theory is flawed because it is based on his defective logical theory of probability. Consequently, Keynes’s ethical theory is not a viable ethical justification for socialism.
ethics socialism keynes JEL Classification: B22, B24, E122, P20 INTRODUCTION John Maynard Keynes (1883–1946) was the most influential economist of the twentieth century. However, ethics and probability were Keynes’s primary intellectual interests for the first seventeen years of his academic career. In fact, his early ideas on ethics and probability inspired and suffused his politico-economic theory. His biographer, Robert Skidelsky, agrees: “His theories of politics and economics were expressions of his beliefs about ethics and probability” (1991, 104). The Keynes scholar Athol Fitzgibbons states, “His economics has not been adequately recognized as an expression of his probabilistic and moral philosophies. These are the implicit and inseparable foundations of Keynes’s economic policies” (1988, 5). The editor of The Further Collected Writings of John Maynard Keynes, Rod O’Donnell, writes, “To comprehend the political-economist adequately, we must first understand the philosopher” (1989, 1–2). Simply put, a complete understanding of Keynes and his economics requires an understanding of his ethical theory and his theory of probability.
Unfortunately, Keynes’s theories of ethics and probability were almost completely unknown for five decades after he published The General Theory of Employment, Interest and Money (1936). These theories only started receiving serious scholarly attention in the 1980s. Still, the literature remains problematic. Specifically, the literature never connects his radical stance on general rules to capitalism and socialism, and the literature never addresses potential problems with the Keynesian probability theory. First, this paper shows that Keynes’s ethical theory is an intellectual justification for violating general rules. Then the paper shows that Keynes was a non-Marxist socialist, and his ethical theory is consistent with his non-Marxist socialism. Finally, the paper explains why Keynes’s probability theory is flawed.
GENERAL RULES AND PROBABILITY THEORY Keynes’s ethical master was the British philosopher George Edward Moore (1873–1958). Moore’s Principia Ethica (1903) was “the most important book in [Keynes’s] life” (Skidelsky 1983, 119). Keynes first read Principia Ethica in October 1903, just after starting his second undergraduate year at the University of Cambridge. He described the book as “a stupendous and entrancing work, the greatest on the subject” (1903). He exclaimed, “It is impossible to exaggerate the wonder and originality of Moore.… How amazing to think that we and only we know the rudiments of the true theory of Ethic” (1906, 123–24).
Opposed to natural law, Moore argued it is impossible to prove that a general rule of conduct is correct. He writes, “It is plain that no moral law is self-evident” (1903, 148). Still, Moore was highly skeptical that human beings could know all the consequences of their actions: “Our causal knowledge is utterly insufficient to tell us what different effects will probably result from two different actions…. We can only pretend to calculate the effects of actions” (1903, 202). Despite his claim that general rules can never be proved universally true, Moore concluded that general rules must always be obeyed: “With regard to any rule which is generally useful, we may assert that it ought always to be observed…. Though we may be sure that there are cases where the rule should be broken, we can never know which those cases are, and ought, therefore, never to break it” (1903, 162–63). In short, Moore rejected natural law and advocated a form of rule consequentialism.
On reading Principia Ethica, Keynes embraced Moore’s view that it is impossible to prove a general rule is universally true. While he adopted Moore’s attack on the truth of general rules, however, he was revolted by the conclusion that general rules must be obeyed. Like Moore, Keynes rejected natural law.On Keynes and natural law, see Dostaler (2007, 82) and O’Donnell (1989, 286; 1991, 6). But he went even further and categorically rejected all general rules: “What we ought to do is a matter of circumstance; metaphysically we can give no rules” (1905a, 2). He wanted to overturn Moore’s case for following rules, so he developed a variation of Moore’s ethical theory. He kept the basic structure of Moore’s framework, but he modified it in a way that allowed actors to violate general rules. Keynes declared in a 1938 speech called “My Early Beliefs,”
[I rejected] the part [of Moore’s theory] which discussed the duty of the individual to obey general rules. We entirely repudiated a personal liability on us to obey general rules. We claimed the right to judge every individual case on its merits, and the wisdom, experience and self-control to do so successfully. This was a very important part of our faith, violently and aggressively held.… We repudiated entirely custom morals, conventions and traditional wisdom. We were, that is to say, in the strict sense of the term, immoralists…. I remain, and always will remain, an immoralist. (CW 10, 446–47)
Keynes’s rebellion against general rules propelled him into probability theory. As he saw it, Moore’s conclusion that rules must be obeyed followed from his theory of probability. Keynes recalled in 1938, “[Moore] has a section on the justification of general rules of conduct. The large part played by considerations of probability in his theory of right conduct was, indeed, an important contributory cause to my spending all the leisure of many years on the study of that subject [probability]” (CW 10, 445). Although he studied mathematics at Cambridge, he wrote his fellowship dissertation on the philosophy of probability. The dissertation was rejected in 1908 and accepted in 1909, meaning Keynes was elected a fellow of King’s College, Cambridge for his theory of probability, not for his economics. A revised version of the dissertation was published twelve years later as A Treatise on Probability (1921). Although he published two works before 1921, A Treatise on Probability must be considered his first book.
On Keynes’s interpretation, Moore’s conclusion that rules must be obeyed was premised on the frequency theory of probability. As Keynes noticed, the frequency theory of probability places strict limits on the scope of probability. According to the frequency theory, probability can only be applied to repeatable events. The mathematician Richard von Mises was a leading developer of the frequency theory, and he writes: “In order to apply the theory of probability we must have a practically unlimited sequence of uniform observations” ([1928] 1981, 11; Gillies 2000, 89–90). In short, probability can only be applied when it is possible to construct a long series of homogeneous repetitions.
Significantly, the frequency theory’s requirement of repeatability makes probability inapplicable to human action. Mises writes, “The theory of probability can never lead to a definite statement concerning a single event” ([1928] 1981, 33; Gillies 2000, 97). Human actions are singular events because the conditions of human action are never homogeneous and repeatable. Thus, on the frequency theory, it is illegitimate to apply probability to human action. Keynes realized the “narrow limits” of the frequency theory and concluded, “If we allow [the frequency theory] to hold the field, we must admit that probability is not the guide of life” (CW 8, 103–04).
What does all this have to do with general rules? As Keynes interpreted Moore, it is best to follow general rules because it is impossible to have any probabilistic knowledge about action. To Keynes’s mind, the strict limits of the frequency theory forced Moore to conclude that general rules must always be obeyed.
Keynes developed his logical theory of probability to replace the frequency theory in Moore’s ethical framework. On the frequency approach, probability theory is a branch of empirical science. But for Keynes, it is a branch of logic. In classical logic, the logical structure of the human mind can intuitively perceive whether a conclusion follows from the premises. In the same way, Keynes argues the logical structure of the human mind can intuitively perceive probability. The human mind can naturally grasp probability without empirical observation of repetitions. This means that, in sharp contrast to the frequency theory, the logical theory allows one to apply probability to singular events. Consequently, the logical theory makes probability applicable to human action. Compared to the frequency theory, the logical theory greatly magnifies the human capacity to intuitively understand the probable consequences of actions.Intuition is vital to Keynes (Moggridge 1992, 553; O’Donnell 1989, 209–13; Skidelsky 1992, xix, 411, 424; 2009, 141). In this way, the logical theory of probability sets actors free to violate general rules.
For example, consider the general rule “Thou shalt not steal.” While stealing is bad for the victim, it is good for the thief. To Moore, it is impossible to comprehend and weigh all the good and bad consequences of stealing in a probabilistic manner. Thus, the rule “Thou shalt not steal” must always be obeyed. But the logical theory amplifies the human ability to understand the consequences of action. It allows the actor “to judge every individual case on its merits” (CW 10, 446). The logical theory permits the thief to form (objective) probabilistic beliefs about the consequences of stealing. While objective, these probabilities are non-numerical rather than numerical. In fact, for Keynes, most probabilities are non-numerical: “Not all probabilities are numerical … Numerical measurement is often impossible” (CW 8, 70).On Keynes’s non-numerical probability, see Carabelli (1988, 42–50), Gillies (2000, 33–35), Lawson (1985, 913), Meltzer (1988, 139), Moggridge (1992, 149), O’Donnell (1989, 50–55; 1990), Runde (1995, 334), and Skidelsky (1992, 59). Still, non-numerical probability enhances the thief’s ability to understand the consequences of stealing. If the probable consequences of stealing are good, then the thief should steal the property. This example illustrates that the logical theory functions as an intellectual justification for breaking general rules such as “Thou shalt not steal,” “Thou shalt not kill,” “Thou shalt not aggress against person and property,” and the like.
KEYNES ON SOCIALISM Keynes categorically rejected all general rules, but how does this relate to his political vision? Unfortunately, controversy over his political thought has muddled the relation between his ethics and politics. The standard interpretation is that Keynes was a great liberal. Robert Skidelsky writes, “Keynes was a lifelong liberal” and “He was not a socialist” (2009, 135, 157; 1992, 233; 2000, 478).Also see Backhouse and Bateman (2011, 148), Clarke (2009, 101, 179), Davidson (2007, 13–14), and Harrod (1951, 192). Contrary to Skidelsky, important Keynes scholars have aligned him with socialism.Keynes’s socialism has been acknowledged in passing by Dostaler (2007, 98), Fitzgibbons (1988, 191), Groenewegen (1995, 153), Lekachman (1985, 37), and Moggridge (1976, 38; 1992, 469). Joan Robinson worked closely with Keynes, and she considered him a socialist (Lekachman 1985, 37). For example, Rod O’Donnell writes, “Keynes envisaged and espoused a particular form of socialism” and “It is clear, explicit and unambiguous; he used the term socialism to characterise his own views” (1999, 149, 164; 1989, 322; 1992, 781–82). To comprehend the real significance of Keynes’s ethical theory, it is necessary to explore his politico-economic thought.
The evidence confirms Keynes was a non-Marxist socialist throughout his adult life.Ludwig von Mises used the term non-Marxist or non-Marxian socialism ([1922] 1981, 12, 356; 1949 [1998], 52, 503, 579; [1944] 2011, 234; 1956 [2006], 51; [1957] 2005, 43). In fact, he dedicated a paper to anti-Marxian socialism ([1929] 1977, 120–27). Later, Mises aligned Keynes with socialism: “Keynes was influenced by the German socialists of the chair and … he outdid them in many points” (quoted in Hülsmann 2007, 881). Although O’Donnell’s work on Keynes’s socialism is noteworthy, there are several problems with his account. First, O’Donnell (1999, 149) avoids defining capitalism or socialism, and this leads him to neglect Keynes’s policy views. Second, O’Donnell (1999, 150) argues Keynes first embraced socialism in the mid-1920s. However, his ethical theory was on display by January 23, 1904, and he wrote a draft outline of his dissertation The Principles of Probability by September 5, 1905 (1904a, 1905b, document 1). Hence, O’Donnell faces a temporal problem when he connects Keynes’s ethical and political thought.Skidelsky faces a similar temporal problem. He incorrectly claims Keynes’s life before 1914 was a period of “political indifference” (1983, 229, 262). Even a cursory examination of the Keynes Papers (OC/1–6) will show Keynes was deeply interested in politics when he was developing his ethical theory. Contrary to O’Donnell, the evidence indicates Keynes advocated a stable form of non-Marxist socialism from no later than October 1907 until his death in 1946.
Just after reading Principia Ethica, Keynes supported the motion “that this house approves of the rise of the Independent Labour [socialist] Party in present day English Politics” (1904b). He was an early member of a socialist club at the University of Cambridge called the Cambridge University Fabian Society (Dow 2016, 11n24). The Fabian leader George Bernard Shaw spoke to the club on October 24, 1907, and Keynes wrote to his lover Lytton Strachey the next day: “Mr. Bernard Shaw converted us all to socialism last night” (1907, document 2).Keynes and Shaw were lifelong friends. Keynes wrote in 1927, “What a debt every intelligent being owes to Bernard Shaw!” (CW 9, 320). In 1946, Keynes noted the “love and honour in which I hold G.B.S.” (CW 10, 381). Shaw was a socialist and a supporter of Hitler, Mussolini, Lenin, and Stalin. Also see note 27. At the Cambridge Union on February 7, 1911, Keynes argued publically that “the progressive reorganisation of Society along the lines of Collectivist Socialism is both inevitable and desirable” (1911). He was extremely close to his father John Neville Keynes, and Neville recorded in his diary on September 6, 1911: “Maynard avows himself a Socialist and is in favour of the confiscation of wealth” (1911, emphasis added, document 3). This shows that Keynes described himself as a socialist, and did so in the first decade of the twentieth century.
Keynes celebrated the Bolshevik Revolution of 1917. He wrote to his mother, “I was immensely cheered up and excited by the Russian news” (1917). On December 24, 1917, he proclaimed, “The only course open to me is to be buoyantly bolshevik” (CW 16, 266). That month, he cofounded the socialist 1917 Club with Ramsay MacDonald, the man who became Britain’s first socialist prime minister (Thomas 1973, 68). In February 1918, he confessed to “being a Bolshevik” (CW 16, 267). The famous financial journalist Clarence W. Barron met Keynes in September 1918, and he reported: “Lady Cunard says Keynes is a kind of socialist and my judgment is that he is a Socialist of the type that does not believe in the family” ([1918] 1930, 189).
Keynes wrote in 1922, “An extraordinary experiment in socialism is in course of development. I think there may be solid foundations on which to build a bridge” (CW 17, 420). That year, he stated Vladimir Lenin’s “political control of affairs was of a high intellectual competence. The histories of revolution contain nothing more remarkable or more coldly and splendidly glittering than the career of Nicholas [sic] Lenin” (CW 17, 436–37). He demanded in 1923, “Liberals must move towards Labour [socialism] and not in the other direction” (1923a). He declared in a 1924 speech, “In many respects [the Labour Party] want[s] the same thing [as the Liberal Party]” (1924a, 262). Although he was a member, Keynes always wanted to transform Britain’s Liberal Party into a socialist party of the far left.Keynes’s affiliation with the Liberal Party does not mean he was a liberal. Keynes’s friend Kingsley Martin recognized that most British socialists at this time “aimed at the permeation of the existing political parties” (1970a, 33). Although Keynes, Leonard Woolf, Gerald Shove, David Garnett, Francis Birrell, Rupert Brooke, and James Strachey were involved in Liberal Party politics and clubs, they all aligned themselves with socialism. This shows not all members of liberal parties are liberals.
In February 1924, he boasted that he joined a “new USSRian Society,” and in May he joined “a new Society… for getting into intellectual touches with Russians!” (1924b, 1924c). On June 8, 1924, he drafted an outline for a book called Prolegomena to a New Socialism (1924d, document 4). In July 1924, Keynes was a founding vice president of the Society for Cultural Relations with the USSR (SCR 1924, document 5). This explicitly pro-Soviet society was financed and controlled by VOKS, the Soviet government’s international propaganda agency (Miner 2003, 228, 248). In September 1925, he visited the USSR and he addressed the Soviet politburo. Leon Trotsky attended, and Trotsky described Keynes as an advocate of socialism: “Even the most ‘progressive’ economist Keynes told us only the other day that the salvation of the British economy lies in Malthusianism! And for England, too, the road of overcoming the contradiction between city and country leads through Socialism” (1925, 286).
Contrary to O’Donnell, the evidence above shows Keynes aligned himself with socialism long before the mid-1920s. Overlooked evidence confirms he aligned himself with socialism until his death in 1946. For example, in 1926, his close friendship with the leaders of Fabian socialism, Sidney and Beatrice Webb, led Virginia Woolf to observe: “Lydia [Keynes’s wife] and Maynard are both completely under the sway of the Webbs…. [The great Keynes] is at [Beatrice Webb’s] feet” ([1926] 1978, 289). Beatrice wrote, “There is no reason why Keynes … should not be among the leaders of the Labour Party—[he] is certainly more advanced than [the socialist Ramsey] MacDonald” ([1926a] 1985, 103). Keynes proclaimed, “I am less conservative in my inclinations than the average Labour [socialist] voter; I fancy that I have played in my mind with the possibilities of greater social changes than come within the present philosophies of, let us say, Mr Sidney Webb.... The republic of my imagination lies on the extreme left of celestial space” (CW 9, 309).Ludwig von Mises describes Sidney Webb as “the outstanding man in the British socialist movement” ([1922] 1981, 484).
After his 1928 trip to the Soviet Union, he noted “my sympathy with communists over money motives” (1928a). That year, he endorsed the socialist program Labour and the Nation: “Since this motion was framed, [the] Labour Programme [Labour and the Nation was] published. The Lib[eral] Summer School met with pleasure and no false sense of proprietorship how much of it overlaps … [The] Lib[eral] and Lab[our] [Parties] shall cooperate. For there is a large enough measure of agreement on what to do next” (1928b). This program was concerned with “transforming Capitalism into Socialism” and “the establishment of the Socialist Commonwealth” (Labour Party 1928, 3, 14).Keynes made these statements in a debate with Labour politician Thomas Johnston. In that debate, Johnston “regarded many of the proposals in the Liberal Yellow Book as proposals for which Socialists could vote with both hands” (1928, 11). Moggridge notes, “Keynes’s contributions to the Inquiry’s report Britain’s Industrial Future, or the Yellow Book as it was and is known, were substantial” (1992, 458). Mises writes, “The English ‘Liberals’ of today are more or less moderate socialist” ([1922] 1981, 17). He continues in a footnote, “This is shown clearly in the programme of present-day English Liberals: Britain’s Industrial Future” ([1922] 1981, 17n3).
In a 1929 speech, “Social Reform as the New Socialism,” he sketches his “type of social[ist] action for the future” (1929).Hayek notes that the term ‘social reform’ is a euphemism for socialism: “Efforts for social reform, for something like a century, have been inspired mainly by the ideals of socialism” ([1960] 2011, 369). Keynes abandoned the Liberal Party after the 1929 general election, and he proclaimed, “England must break sharply with the Liberal tradition” (quoted in Martin 1970a, 198). He became an important economic advisor to Britain’s first socialist prime minister, Ramsay MacDonald, after the 1929 election. At a meeting with MacDonald on June 1, 1930, Keynes described himself as “the only socialist present” (quoted in Dalton 1986, 115). His first major work on economic theory, A Treatise on Money (1930), imagines “socialistic action by which some official body steps into the shoes which the feet of the entrepreneurs are too cold to occupy” (CW 6, 335).
Keynes began meeting with the socialist politician Oswald Mosley frequently in late 1930 (Mosley 1968, 238; Smith 1996, 244). That year, Mosley produced his famous Mosley Manifesto, a socialist proposal calling for “industrial reorganisation in the form of the big merger involving standardisation and the pooling of resources” (Mosley 1930, 11). Keynes thought the socialist proposal was “a very able document and illuminating,” and “I do not see what practical socialism can mean for our generation in England, unless it makes much of [Oswald Mosley’s] manifesto its own—this peculiar British socialism” (Henderson 1930; CW 20, 475). Mosley founded a socialist political party in early 1931 called the New Party, which later became the British Union of Fascists and National Socialists. Harold Nicolson, another leader of the party, reported to Mosley:
Dined with Clive Bell and Keynes. Keynes is very helpful about the economics of the New Party. He says that he would, without question, vote for it.… He feels that our Party may really do an immense amount of good and that our Programme is more sound and certainly more daring than that which any other party can advance. (Nicolson [1931] 2004, 79; Mosley 1968, 237–38)Mosely recalled, “I had the massive support of Keynes, not only in his theory but as already noted in his personal intervention” (1968, 253). Mosley says, “The background of my economic thinking was first developed by a study of Keynes—more in conversation with him than in reading his early writings” (1968, 178).
In early 1931, Keynes became the chairman of Britain’s leading socialist newspaper, New Statesman and Nation, and he maintained that position until his death in 1946. He described the paper as “an independent organ of the Left,” and the paper’s historian acknowledges it was an “unequivocally socialist weekly” (Smith 1996, 249, 156).Harrod and Skidelsky argue the editor Kingsley Martin was responsible for the newspaper’s socialist policy. Skidelsky notes the paper’s “sympathy for Soviet communism” and says “the New Statesman was unmistakably Kingsley Martin’s” (1992, 389). However, Martin refutes this notion: “Maynard was the only active director of the N.S.&N.… His biographer, Sir Roy Harrod, mentions his intimate connection with the Nation and then says that as the years went by he fell out of sympathy with the N.S.&N. policy. This does not tell the story” (1970b, 41). Also see Hyams (1963, 125) and Martin (1970a, 198). On December 13, 1931, he gave a speech to the Society for Socialist Inquiry and Propaganda called “A Survey of the Present Position of Socialism.” He declares, “I should like to define the socialist programme as aiming at political power,” and he discusses the “grand experiment of the ideal [socialist] republic,” (CW 21, 34; Moggridge 2012, 58). Around this time, he joined the New Fabian Research Bureau, Britain’s leading socialist think tank (Cole 1961, 235). The New Fabian Research Bureau was the sister organization of the Society for Socialist Inquiry and Propaganda (Cole 1961, 230), and it amalgamated with the Fabian Society in November 1938.
Keynes lived with members of the socialist Bloomsbury group throughout his adult life.On Bloomsbury’s socialism, see Marler (1993, xviii) and Rosenbaum (2003, 85). Skidelsky writes, “The Bloomsbury group [was] a commune of Cambridge-connected writers and painters” (2015, xvii). The Bloomsbury “communal household” was conceived by Virginia Woolf in late 1911, and Keynes was one of the first residents (Delany 2015, 147, 156). Woolf’s biographer reports, “Virginia looked back on this communal household as one of her pioneering achievements,” and Virginia referred to the residents as “inmates” (Lee 1997, 301, 288). Virginia nicknamed Keynes “dear old Hitler” ([1938] 1984, 163; Lee 1997, 680, 715), and she recorded in 1933: “We are going over to Tilton [Keynes’s country home], to be converted by Maynard to what I suspect of being a form of Fascism [national socialism]” ([1933] 1979, 222). That same year, “Mosley wrote to him [Keynes] congratulating him on his ‘fascist’ economics” (Skidelsky 1975, 306).Although Skidelsky denies Keynes’s socialism, he admits that “Keynesianism was [Mosley’s] great contribution to fascism. It was Keynesianism which in the last resort made Mosley’s fascism distinctively English” ([1975] 1990, 302). Murray N. Rothbard notes “Keynes’s strong fascist bent,” and states “Keynes was a fascist” ([1992] 2010, 51, 56).
Keynes supported the socialist Labour Party in the 1930s, and he declared in October 1935, “I do not really agree with … maintaining the separate identity of the Liberal Party” (CW 21, 373).Moggridge agrees, “In the course of the 1930s [Keynes] frequently commented on Labour policy proposals, more often than not sympathetically.… He was more inclined to support individual Labour candidates” (1992, 465). O’Donnell writes, “Keynes identified three main political ‘parties’ or groupings—the Socialists, Liberals and Conservatives. It was with the ‘Socialist’ grouping that his general sympathies lay” (1999, 158; Clarke 1988, 221). As Scott Newton recognizes, “Harrod concealed the drift of Keynes’s sympathies from the Liberal Party to Labour in the 1930s” and “felt it his duty to protect the public name of Keynes from association with the socialists” (2001, 15–16, 24). Like Harrod, Skidelsky conceals Keynes’s support of Labour after 1929. In the general election of 1935, he voted for Britain’s Labour Party just three months before The General Theory was published. Notably, the Labour platform was entitled For Socialism and Peace, and it called for “creating a new social order and a British Socialist Commonwealth” (Labour Party 1934, 29). He wrote, “I scarcely know where I stand. Somewhere, I suppose, between Liberal and Labour, though in some respects to the left of the latter [Labour]” (CW 21, 372–73).
He praised the Soviet experiment just four months after The General Theory was published: “Until recently events in [Stalin’s] Russia were moving too fast and the gap between the paper professions and the actual achievements was too wide for a proper account to be possible. But the new system is now sufficiently crystallised to be reviewed. The result is impressive” (CW 28, 333). Keynes’s engagement diaries show that he met with the Webbs at least twenty-two times between 1931 and 1937. And just five months after The General Theory was published, Beatrice Webb recorded that he desired “a modified socialism” ([1936] 1985, 371). The novelist John Buchan dined with Keynes regularly for over a decade, and Buchan reported Keynes was a “gentlemanly Communist” and “His line is that he despises capitalism” (1936, 105–06). Keynes confirmed, “Private capitalism is an out-of-date institution incapable of meeting the requirements of the twentieth century” (CW 21, 491).
In 1939, he praised “the splendid material of the young amateur communists” and applauded the socialist Left Book Club as “one of the finest and most living movements of our time” (CW 21, 496). That year, Stafford Cripps attempted to unify the Labour and Communist Parties, and Keynes announced, “I am all for Sir Stafford Cripps, and I would join his movement” (CW 21, 496). He congratulated Cripps: “I am in full sympathy with what you are doing” (CW 21, 502). Critically, Keynes proclaimed in 1939, “The question is whether we are prepared to move out of the nineteenth century laissez-faire into an era of liberal socialism” (CW 21, 500). In the early 1940s, he described Beatrice Webb as “the greatest woman of the generation,” and she reported that he was still “going ‘left’” (Keynes 1943; Webb [1942] 1985, 488). In 1944, Keynes was running the British Treasury and planning the new world monetary system at Bretton Woods. Still, he remained vice president of the socialist Society for Cultural Relations with the USSR, an arm of the Soviet propaganda agency VOKS (SCR 1944, document 6).
KEYNES AND SOCIALIST POLICY Keynes aligned himself with socialism throughout his entire adult life, and he described himself as a socialist. But can he actually be defined as a socialist? Did he actually advocate socialist policy? Traditionally, socialism is defined as a system of social organization based on government ownership of the means of production. Many Keynes interpreters have used the traditional definition of socialism to argue that Keynes was not a socialist. For example, Skidelsky writes, “He had no time for public ownership” and “His demand in the General Theory for a somewhat comprehensive socialisation of investment was a demand not for greater public ownership—which he always opposed” (1990, 52; 2000, 274). The traditional definition of socialism leads many interpreters to conclude that “He never embraced socialism” (Skidelsky 1992, 437).
The traditional definition of socialism can lead to error, for it is misleading if ownership is not properly defined. In economics, ownership is defined as ultimate control over a scarce good. Murray Rothbard writes, “Ownership is the ultimate control and direction of a resource” ([1962] 2004, 1277, 91–92, 959, 1273–74). Rather than using the proper economic definition, interpreters who argue Keynes was not a socialist must rely on a purely legal definition of ownership. But as Ludwig von Mises warns, “It is a mistake to deal with economic problems according to legal criteria” ([1957] 2005, 73).
Ownership is power of disposal, and when this power of disposal is divorced from its traditional name and handed over to a legal institution which bears a new name, the old terminology is essentially unimportant in the matter. Not the word but the thing must be considered. Limitation of the rights of owners as well as formal transference is a means of socialization. If the State takes the power of disposal from the owner piecemeal, by extending its influence over production; if its power to determine what direction production shall take and what kind of production there shall be, is increased, then the owner is left at last with nothing except the empty name of ownership, and property has passed into the hands of the State. (Mises [1922] 1981, 45)
Again,
Ownership means full control.... This catallactic [economic] notion of ownership and property rights is not to be confused with the legal definition of ownership and property rights as stated in the laws of various countries…. nowadays there are tendencies to abolish the institution of private property by a change in the laws determining the scope of the actions which the proprietor is entitled to undertake with regard to the things which are his property. While retaining the term private property, these reforms aim at the substitution of public ownership for private ownership…. In dealing with private property, catallactics [economics] deals with control, not with legal terms, concepts and definitions. Private ownership means that the proprietors determine the employment of the factors of production, while public ownership means that the government controls their employment. (Mises [1949] 1998, 678–79, emphasis added; Rothbard [1962] 2004, 1273).
There is no economic difference between government ownership and government control of the means of production. To avoid error, it is best to define socialism with the term control rather than the term ownership. Specifically, socialism is a system of social organization based on government control over the means of production. Although Mises used the term ownership to define socialism, he also frequently used the more precise term control: “Socialism is a social system based on public control of the means of production” ([1922] 1981, 505).For examples of Mises using the term control to define socialism, see Mises ([1922] 1981, 211; [1927] 2005, 35; 1944 [2011], 201, 203; 1949 [1998], 701; [1956] 2006, 38). For examples of Mises using the term ownership to define socialism, see Mises ([1919] 2006, 142; [1920] 2008, 3; [1922] 1981, 22, 498; [1940] 2011, 1, 71; [1944] 2011, 60; [1949] 1998, 183, 712). Still, he stressed, “To avoid any misunderstanding we will henceforth use the words, ‘ownership of the means of production’ in the generally accepted sense, i.e. to signify the immediate power of disposal [control]” ([1922] 1981, 32). Keynes’s friend Sidney Webb, the leader of Fabian socialism, defines socialism as “control by the community of the means of production” (1890, 4). Joseph Schumpeter writes, “By socialist society we shall designate an institutional pattern in which the control over means of production and over production itself is vested with a central authority” ([1943] 2006, 167).Murray Rothbard writes, “When government ownership or control extends to the entire productive system, then economics system is called socialism” ([1962] 2004, 958). According to Milton Friedman, “Socialism means government control of the means of production. That’s the old-fashioned definition and a good one” (1993, 4). In fact, Skidelsky admits that socialism means “control and direction of human resources” ([1975] 1990, 136, 145).
To determine whether Keynes was a socialist, it is necessary to examine whether he advocated government control over the means of production. As it turns out, Keynes’s main policy recommendation was government control, or socialization, of investment. To him, socializing investment is the only way to permanently solve cyclical and secular unemployment: “A somewhat comprehensive socialisation of investment will prove the only means of securing an approximation of full employment” (CW 7, 378, emphasis added). It must be remembered that in economic theory, investment refers to real investment, not financial investment. Investment goods refers to property, plant, and equipment—that is, the means of production (Garrison 2001, 37). Thus, Keynes’s call to socialize investment is a call for government control over the means of production. Therefore, Keynes fits the definition of a socialist.
It is important to emphasize that Keynes advocated government control over investment long before The General Theory. In February 1910, he already expressed the cynical view of private investment contained in The General Theory: “[The investor] will be affected, as is obvious, not by the net income which he will actually receive from his investment in the long run, but by his expectations. These will often depend upon fashion, upon advertisement, or upon purely irrational waves of optimism or, depression” (CW 15, 46). Like the other Cambridge business cycle theorists, he did not believe private businessmen can make good investment decisions: “There are still a good many perfect fools amongst our business men” (1910).
He stated in 1923, “The present organisation of investment is not such as to maximise the individual investor’s self interest, even in so far as it does this, it does not follow that it maximises the national income” (1923b, 252). He said the day before drafting Prolegomena to a New Socialism, “The state encouragement of new capital undertakings… is becoming an inevitable policy” (CW 19, 229). He verifies government control of investment is a socialist policy in Prolegomena to a New Socialism: “Investment of Fixed Capital” is one of the “Chief preoccupations of the State” (1924d, document 4). He says, “A great deal of money was being invested by those who had no special knowledge” (1924e, 313). On December 12, 1924, he said that private investors could not “direct the new savings of the community into ideal channels” and government must “improve our organisation for employing our capital” (1924f, 315, 318).
He exclaimed in his 1925 speech to the Soviet politburo, “I direct all my mind and attention to the development of new methods and new ideas for effecting the transition from the economic anarchy of the individualistic capitalism which rules today in Western Europe towards a regime which will deliberately aim at controlling and directing economic forces” (CW 19, 439). He continues, “I believe that there are many other matters, left hitherto to individuals or to chance, which must become in future the subject of deliberate state policy and centralised state control. Let me mention two—(1) the size and quality of the population and (2) the magnitude and direction of employment of the new national savings year by year” (CW 19, 441).
He wrote during 1926, “I do not think that these matters [investment] should be left entirely to the chances of private judgment and private profits” (CW 9, 292). It was Keynes who inspired the socialist Labour Party to include “centrally planned investment” in its 1926 program, Socialism in Our Time (Walker 1988, 84). Beatrice Webb penned after Keynes attended the Socialist Summer School in 1926: “Keynes seems such a treasure!…. I see no other man that might discover how to control the wealth of nations in the public interest” ([1926b] 1985, 93–94).
During 1928, he devised a National Investment Board “to mobilise and to maintain the supply of capital and the stream of savings” (1928c, 69). In “Social Reform as the New Socialism,” he states, “Modern economic organisation is liable to produce unintended and undesired results unless it is controlled from the centre” (1929, 187). Again, “I conceive that the greatest contribution that the politically minded can now make to Social progress is by thinking out the central controls scientifically sound” (1929, 191).
In A Treatise on Money, he wants to “control the rate of investment,” and “perhaps the ultimate solution lies in the rate of capital development becoming more largely an affair of the state, determined by collective wisdom and long views” (CW 5, 151–52, 190; CW 6, 145). He declared, “I am in favor of an admixture of public works, but my feeling is that unless you socialize the country to a degree that is unlikely, you get to the end of the public works program…. You have shot your bolt, and you are no better off.… I should be afraid of that as the sole remedy” (1931, 494). He declared during his 1931 speech to the Society of Socialist Inquiry and Propaganda, “The central control of investment” is “urgently called for on practical grounds” (CW 21, 36). Clearly, Keynes advocated the socialist policy of controlling investment many years before he started developing his general theory in late 1931.
In September 1932, he advocated “a large measure of control over the volume of new investment” (CW 21, 130). Importantly, Keynes conceived socialism as government control over investment: “The chief problem would be to maintain the level of investment at a high enough rate to ensure the optimum level of employment…. The grappling with these central controls [on investment] is the rightly conceived socialism of the future” (CW 21, 137). This passage shows that Keynes viewed socialism as government control over investment, and he can be identified with socialism because he advocated this policy.
Keynes developed his general theory by mid-1933, and it must be stressed that he invented the theory to serve as an economic justification for his previously held political and policy views.This is not controversial. Don Patinkin writes, “the purpose of the theory is to provide a rigorous underpinning for a policy” (1976, 18, xxiii, 9; Meltzer 1988, 5, 303). According to Gilles Dostaler, “The economic theory he developed, known more appropriately as ‘political economy’, was subordinate to politics” (2007, 80). In short, Keynes was not a value-free economist: “economic theory was seen by Keynes as being scope-dependent. It had lost all presumptions of neutrality from values” (Carabelli 1988, 159; Fitzgibbons 1988, 43–44). He wrote, “I am not one of those who believe that the business cycle can be controlled solely by manipulation of the short-term rate of interest, that I am indeed a strong critic of this view.… My proposals for the control of the business cycle are based on the control of investment” (1933a, 675). Under capitalism, “there should be on the average a tendency to severe unemployment” (KL, L9); but there is “no unemployment [in a] Socialist or Communist state” (KL, I3).The Keynesian economist Paul Davidson realizes, “There is never involuntary unemployment of slaves” (2007, 192n3). According to Mises, “total enslavement of all members of society is not a merely accidental attendant phenomenon of the socialist management. It is rather the essential feature of the socialist system…. Either man is free to live according to his own plan or he is forced to submit unconditionally to the plan of the great god state” ([1968] 2007, 44). Hayek writes, “Socialism means slavery” ([1944] 1994, 16). He declared in November 1934, “Private capitalism is in this matter [i.e., investment] an open scandal and grossly inefficient. There may be no remedy except the direction of long-term investment by the State” (KL, H32). The Labour Party put Keynes’s National Investment Board in its 1935 program, For Socialism and Peace, and thereby certified that he advocated socialist policy (Walker 1988, 123). Labour leader Hugh Dalton recognized, “Such a board will, I believe, be one of our most effective instruments of Socialist planning” (quoted in Pimlott 1985, 218).
In The General Theory, he asserts that the “functionless investor” has “uncontrollable and disobedient psychology” (CW 7, 376, 317). Investors’ “animal spirits” mean “the mass psychology of a large number of ignorant individuals is liable to change violently” (CW 7, 161–62, 154). For Keynes, “The weakness of the inducement to invest has been at all times the key to the economic problem” (CW 7, 347–48). Therefore, “I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organizing investment” (CW 7, 164). He declares, “I conclude that the duty of ordering the current volume of investment cannot safely be left in private hands” (CW 7, 320; CW 29, 232).
He writes in a 1938 letter to President Roosevelt, “Durable investment must come increasingly under state direction” and investors should be treated like “domestic animals” because they have “delusions” (CW 21, 438). For Keynes, “The Board of National Investment would in one way or another control by far the greater part of investment” (CW 14, 49, emphasis added). He warned in 1943, “Public works at short notice is a clumsy form of cure and not likely to be completely successful” (CW 27, 326). Instead, he demanded “the bulk of investment … under public or semi-public control” (CW 27, 322). Three months before his death in 1946, he boasted that the idea of a “National Investment Board … is a very ancient one with me” (1946). In summary, Keynes must be defined as a socialist because he wanted to transfer ultimate control over investment from private investors to government.
Keynes realized that government control over investment leads to government control over virtually all economic activity. As Mises writes, “People can consume only what has been produced” ([1955] 2007, 53). Comprehensive government control of investment means government determines what is produced and, consequently, what is eventually consumed. Keynes admits, “It is not possible to control production without controlling consumption in an equally drastic manner” (CW 16, 114). But investment and consumption are the only components of aggregate demand in the Keynesian framework. Keynes knew that socializing investment gives the government control over both components of aggregate demand. In short, Keynes’s call for government control of investment was a call for government control over the entire economy.
In addition to the non-human factors, Keynes advocated government control over the human means of production. If the government controls investment goods, it must also control the workers that work with those goods. The government must control each person’s occupation, meaning it must control where each person lives and works. Simply put, government control of investment requires extensive government control over the population. Actually, Keynes went beyond simple control of the workforce. In addition, he advocated systematic government control over the quantity and quality of the population.
Keynes was a lifelong eugenicist. He became treasurer of the Cambridge University Eugenics Society in 1911 (Marshall 1911, 284; Toye 2000, 141), and he was vice president of the British Eugenics Society from 1937 to 1944. Just sixty-seven days before his death, he endorsed “the most important, significant and, I would add, genuine branch of sociology which exists, namely eugenics” (1946b, 40). In Prolegomena to a New Socialism, he confirmed a direct link between his socialism and ideas on population by listing “Population, Eugenics” as “Chief preoccupations of the State” (1924d, document 4). He proclaimed to the Soviets in 1925, “There is no more important object of deliberate state policy than to secure a balanced budget of population” (CW 19, 437). Keynes declared in another speech,
In the light of present knowledge I am unable to see any possible method of materially improving the average human lot which does not include a plan for restricting the increase in numbers [of population]…. It may prove sufficient to render the restriction of offspring safe and easy … Perhaps a more positive policy may be required…. [I] would like to substitute schemes conceived by the mind in place of the undesigned outcome of instinct and individual advantage playing within the pattern of existing institutions. (CW 17, 453, emphasis added)
Beyond quantity, Keynes wanted government to control the quality of the population: “the community as a whole must pay attention to the innate quality as well as to the mere numbers of its future members” (CW 9, 292). He was chairman of the Malthusian league, and that organization’s motto was non quantitas sed qualitas (not quantity but quality). He declared in his 1927 address, “We of this society are neo-Malthusians,” and “I believe that for the future the problem of population will emerge in the much greater problem of Hereditary and Eugenics. Quality must become the preoccupation” (1927, 114). These passages show that Keynes called for comprehensive government control over all aspects of production, including the human beings who comprise the labor force.Other than O’Donnell (1992, 779–80), influential Keynes historians, including Harrod, Patinkin, Skidelsky, and Moggridge, never mention his views on population and eugenics. But such views are inevitable given his socialism. Mises explains, “Without coercive regulation of the growth of population, a socialist community is inconceivable. A socialist community must be in a position to prevent the size of the population from mounting above or falling below certain definite limits” ([1922] 1981, 174). Also see Mises ([1922] 1981, 531; [1949] 1998, 224).
Keynes and Marx had similar visions, and Keynes had far more sympathy for the Soviet experiment than is commonly recognized. However, Keynes was a non-Marxist socialist. First, he rejected Marx’s revolutionary approach to socialism. Opposed to Marx, he wanted to implement socialism gradually: “Socialisation can be introduced gradually,” and “We have everything to lose by the methods of violent change” (CW 7, 378; CW 9, 267). Second, Keynes was an elitist, and his elitism made him allergic to Marx’s proletarian class analysis: “The Class war will find me on the side of the educated bourgeoisie,” and “The right solution will involve intellectual and scientific elements which must be above the heads of the vast mass of more or less illiterate voters” (CW 9, 297, 295). Opposed to Marx’s proletarian socialism, he advocated elitist socialism. Keynes was a non-Marxist socialist, and he viewed his brand of “anti-Marxian socialism” as “the true socialism of the future” (CW 7, 355; CW 19, 222).
THE ETHICS OF CAPITALISM AND SOCIALISM Although the significance of Keynes’s ethical theory is often emphasized, its extreme radicalism is not. Keynes’s categorical rejection of general rules is radical to the extreme. General rules make society possible. Hayek writes, “Life of man in society, or even of the social animals in groups, is made possible by the individuals acting according to certain rules” (Hayek [1960] 2011, 216). In fact, “Rules of conduct [are] the basis of a prescriptive science of ethics” (Hayek [1982] 2013, 24). By overthrowing general rules, Keynes seems to overthrow the basis of society and ethics. Thus, from an ethical standpoint, he was certainly correct to describe himself as a “radical” and “heretic” (CW 20, 265, 527; CW 13, 489). How is Keynes’s radical ethical thought related to his views on capitalism and socialism?
Traditionally, capitalism is defined as a social system based on private property in the means of production. As this definition indicates, capitalism is a social system based on rules—precisely, the general rules of private property. Fundamentally, free market capitalism is a social system based on one supreme ethical rule: never use violence against the person or property of another human being, unless defending person and property from aggressive violence. This general rule of conduct is called the non-aggression principle.Murray N. Rothbard was the twentieth century’s most consistent champion of the non-aggression principle ([1962] 2004, 1053n4; [1973] 2006, 27, 55, 282; [1982] 1998, 24, 42, 52, 82, 131). Among economists, similar ideas are found in Friedman ([1962] 2002, 14, 22, 39), Hayek ([1982] 2013, 221), and Knight (1939, 5). Pure capitalism is a social system in which the non-aggression principle is universally obeyed. Rothbard writes, “the free market is a society in which all exchange is voluntary [non-violent]. It may most easily be conceived as a situation in which no one aggresses against person or property” ([1962] 2004, 1067).This idea is not unique to Rothbard. Mises writes, “In the market economy the individual is free [from violence] in his actions as far as private property and the market extend … no force is used unless for the protection of private property and of the market against violence” ([1940] 2011, 14). Rothbard writes, “A society formed solely by the market has an unhampered market, or free market, a market not burdened by the interference of violent action” (Rothbard [1962] 2004, 90–1; 1982 [1998] 40). Free market capitalism is predicated on an ethical position that accepts a general rule of conduct—the non-aggression principle.
For Moore, it is impossible to prove the general rules of private property are universally correct. Still, he insists they should never be broken: “The common legal rules for the protection of property must serve greatly to facilitate the best possible expenditure of energy…. A general observance of them would be good as a means” (1903, 157). In sharp contrast, Keynes’s ethical system is an attack on rules and, by extension, the rules of private property. The Keynesian ethical theory is utterly incompatible with the non-aggression principle. He wrote, “I am afraid of principle” and “What a very odd, and sometimes terrible, thing are strict principles!” (CW 20, 379; CW 10, 234). Actually, Keynes emphatically rejected capitalism’s non-aggression principle, and ridiculed it as “dogma” and the “political economist’s religion” (CW 9, 280–81).Keynes’s rejection of non-aggression explodes the claim that he was liberal. Mises writes, “For the liberal, any system which does not exclude every violent interruption of peaceful development is, from the very outset, out of the question” ([1927] 2005, 134). Frank Knight notes, “The essential social-ethical principle of liberalism … is that all relations between men ought ideally to rest on mutual free consent, and not on coercion” (1939, 5). In contrast to liberalism, “Socialism is the expression of the principle of violence” (Mises [1922] 1918, 320). Capitalism is a rule-based social system, and Keynes categorically rejected all rules. Therefore, Keynes’s ethical theory is incompatible with capitalism.
Keynes’s rejection of general rules is consistent with socialism. As Hayek writes, “Socialism lacks any principles of individual conduct” ([1982] 2013, 484).From a legal perspective, Keynes’s ethical theory means he was a legal positivist. But as Hayek wrote, “Legal positivism is … the ideology of socialism” (Hayek [1960] 2011, 353; [1982] 2013, 211). Also, Keynes’s rejection of rules means he rejected the rule of law: “The rule of law and socialism are incompatible” (Hayek [1960] 2011, 357n64). In distinct contrast to capitalism, socialism is always based on an ethical position that rejects the rules of private property. George Bernard Shaw, the man who converted Keynes to socialism in 1907, wrote, “Socialism, reduced to its simplest legal and practical expression, means the complete discarding of the institution of private property.… In Socialism, private property is anathema.… In Capitalism, private property is cardinal” (1929, 3).Kingsley Martin recalled, “Maynard Keynes wrote that they [H.G. Wells and G.B. Shaw] were our two schoolmasters; Wells was the stinks master, while Shaw taught divinity” (1970b, 94). Also see note 8. Keynes’s categorical rejection of general rules means he categorically rejected the rules of private property: “There is no ‘compact’ conferring perpetual rights on those who Have or on those who Acquire [property]” (CW 9, 287). On the spectrum of ethical thought that runs from pure socialism to pure capitalism, Keynes’s radical ethical theory is one of pure socialism. Although his ethical theory by itself does not make him a socialist, the Keynesian ethical theory is compatible with socialism.
Indeed, Keynes was a non-Marxist socialist, and his ethical theory was central to his socialism. Socializing investment requires government to systematically break the general rules of private property; it requires government to systematically violate capitalism’s non-aggression principle. However, Keynes does not view this as an ethical problem, for there is no need to obey general rules in his ethical theory. To him, “It is not true that individuals possess a prescriptive natural liberty…. Individuals acting separately to promote their own ends are too ignorant or too weak” (CW 9, 287–88). He argues socializing investment will benefit everyone, including the victims of government’s aggressive violence:
Whilst, therefore, the enlargement of the functions of government … would seem to [advocates of rules] to be a terrific encroachment on individualism, I defend it, on the contrary, both as the only practicable means of avoiding the destruction of existing economic forms in their entirety and as the condition of the successful functioning of individual initiative. (CW 7, 380)
A CRITIQUE OF KEYNES’S ETHICAL THEORY Importantly, Keynes maintained his early ethical theory throughout his entire life. As noted above, he boasted in his 1938 speech “My Early Beliefs,” “I remain, and always will remain, an immoralist” (CW 10, 447).Bateman (1987), Davis (1994, 70–71, 98, 139, 176), and Gillies (2006, 204–16) argue Keynes abandoned the logical theory around 1931. After 1931, however, Keynes confirmed his conceptual framework never changed (CW 7, 148n1; CW 16, 113; CW 29, 289). Those who agree he maintained the logical theory include Carabelli (1988, 151, 155, 173, 176), Lawson (1985, 914), Meltzer (1988, 120, 139, 199, 182–83), Moggridge (1992, 623), O’Donnell (1989, 141–48, 248), Runde (1994), and Skidelsky (1992, 83, 87, 543). Keynes’s logical theory of probability is the lynchpin of his ethical attack on general rules. However, if the logical theory is flawed, then his ethical theory cannot justify violating general rules, including the general rules of private property. Is the logical theory of probability viable?
Since the very beginning, Keynes’s logical theory of probability has been almost universally rejected by philosophers of probability. As noted, he wrote his fellowship dissertation on the logical theory, and it was rejected in March 1908. One dissertation examiner, Alfred North Whitehead, reported his theory was “muddled and of very mediocre value” and parts of the theory were “very perfunctory,” “poor in quality,” and a “hopeless fog” (1908, 2). The other examiner, William Ernest Johnson, wrote that facets of Keynes’s theory were “essentially unsound” and he had “not fully understood the arguments of his opponents” (1908, 3). Even Lytton Strachey, Keynes’s lover and confidant, described the logical theory as “a mass of muddled facetiousness” ([1908] 2005, 138). Lawrence Klein, a Keynesian economist and later Nobel laureate, noted in 1951, “Keynes’s ideas on probability represent a minority position among current workers on the subject and are not those for which we shall long remember his work … He did not make a sensational advance in probability theory” (1951, 446; Runde 1994, 97).
There are several technical problems with Keynes’s logical theory of probability. First, on the logical theory, numerical probability is only possible when all outcomes are equally probable. Keynes writes, “In order that numerical measurement may be possible, we must be given a number of equally probable alternatives” (CW 8, 44, 70). This is an extremely strict requirement for numerical probability. It essentially means probability mathematics can only be applied to games of chance. Keynes’s requirement of equal probability means his logical theory cannot explain a loaded die (Mises [1928] 1981, 69; Gillies 2000, 18). Furthermore, the equal probability requirement means the logical theory can only explain the uniform probability distribution. It cannot explain other distributions, such as the normal distribution. The normal distribution is perhaps the most important concept in statistics, and any theory of probability that is incompatible with the normal distribution must be problematic.
Moreover, the logical theory of probability cannot explain the continuous probability distribution. Keynes writes, “A rule can be given for numerical measurement when the conclusion is one of a number of equiprobable, exclusive, and exhaustive alternatives, but not otherwise” (CW 8, 122). For Keynes, numerical probability requires exhaustive and “indivisible alternatives” (CW 8, 65). However, the continuous probability distribution means the alternatives are not indivisible; the alternatives are in a continuous interval with an infinite number of values. This means the logical theory can only explain the discrete distribution, and not the continuous distribution (Gordon 1992, 155; Gillies 2000, 43, 48). But many important and successful applications of probability mathematics involve the continuous case. A theory of probability that cannot explain the continuous probability distribution must be inadequate.
Beyond all this, the entire program of the logical theory is problematic. For Keynes, probability is a logical relation between the premises and the conclusion of a logical argument: “Let our premises consist of any set of propositions h, and our conclusion consist of any set of propositions a, then if a knowledge of h justifies a rational belief in a of degree α, we say that there is a probability-relation of degree α between a and h” (CW 8, 4; 1908, 139, 142). To demonstrate, consider the following logical argument:
h1. All men are mortalh2. Socrates is a man∴ a. Socrates is mortal
Given the premises that all men are mortal (h1) and Socrates is a man (h2), the conclusion that Socrates is mortal (a) is logically certain, so the probability α = 100 percent. On the other hand, the conclusion that Socrates is immortal (-a) is logically impossible, so the probability is 0 percent. In the logical theory, the extreme of logical certainty is the maximum probability 100 percent, and the extreme of logical impossibility is the minimum probability 0 percent. But for Keynes, logical certainty is not achievable in most practical situations. In most cases, the conclusion only partially follows from the premises, so the probability will usually fall in a range between 0 and 100 percent. For example, consider the case of rolling a three spot on a die:
h1. The die has six sidesh2. The die has a single three spoth3. The die is fair∴ a. The outcome is three
The conclusion of rolling a three spot is not logically certain and is not logically impossible. Given the premises, the conclusion only partially follows, so the probability falls somewhere between the logical extremes of 0 and 100 percent. In the case of rolling a three spot, logical intuition tells us that the probability α = 16.67 percent. When dealing with a syllogism, the logical structure of the human mind intuitively perceives that the probability is 100 percent. Similarly, when rolling a die, the logical structure of the human mind intuitively perceives that the probability of rolling a three spot is 16.67 percent. Since the logical theory extends logic beyond the syllogism, Keynes viewed his theory as a more “general theory” of logic (CW 8, 106).
In logic, however, the conclusion is true only if the premises are true. This means logical probabilities can only successfully guide action if the premises are true. But how can we know whether the premises are true? How can we know the die has six sides and a single three spot? Moreover, how can we know whether the die is fair and not loaded? Since these premises are not self-evidently true, the only way to confirm the truth of these premises is to empirically examine the die. But this introduces an empirical requirement into the logical theory. The only way to confirm the die is fair and not loaded is to roll the die numerous times in the real world, and evaluate the empirical outcomes. This example illustrates that logical probability can only describe the real world if the premises are confirmed with the frequency theory: “Without the complement of the frequency definition, probability theory cannot yield results that are applicable to real events” (Mises [1928] 1981, 221–22, 70). Contrary to Keynes, it is impossible for probability to be “purely logical” (CW 8, 4).
Keynes’s entire ethical justification for violating general rules depends on his logical theory of probability. The logical theory amplifies the human ability to understand the probable consequences of action, and thereby frees actors to violate general rules like the non-aggression principle. Keynes’s ethical justification for violating general rules is central to his politico-economic thought, because his brand of non-Marxism socialism requires government to systematically break the general rules of private property. However, since the logical theory of probability is flawed, Keynes’s ethical theory is not viable. In the end, the ethical foundation of Keynes’s non-Marxist socialism is flawed.
CONCLUSION Not all ethical theories are compatible with capitalism or socialism. Instead, capitalism and socialism are based on irreconcilable ethical views about private property. Specifically, capitalism accepts and socialism rejects the general rules of private property. Keynes rejected all rules, and he invented his ethical theory as an intellectual justification for violating general rules. As Robert Skidelsky writes, “He invented theory to justify what he wanted to do” (1992, 344). Keynes’s categorical rejection of all rules means his ethical thought is incompatible with capitalism and consistent with socialism. He embraced the ethic of pure socialism by January 1904, and the evidence confirms he was a non-Marxist socialist from no later than October 1907 until his death in April 1946. However, the logical theory of probability, the key to his ethical justification for non-Marxist socialism, is flawed. Therefore, Keynes’s radical ethical theory is not a successful ethical justification for any brand of socialism, including his own.
APPENDIX Document 1. The Principles of Probability (1905)
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Document 2. Keynes to Lytton Strachey (1907)
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Document 3. John Neville Keynes (1911)
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Document 4. Prolegomena to a New Socialism (1924)
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Document 5. Society for Cultural Relations with the USSR (1924)
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Document 6. Society for Cultural Relations with the USSR (1944)
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Includes introductions by Tho Bishop and Judge John V. Denson. Recorded on the Auburn University campus in Auburn, Alabama, on 15 July 2019.
JEFF DEIST: Does economics need philosophy? The idea of a school of economics having a philosophical underpinning might strike some people as odd. Why should economists care about philosophy at all?
DAVID GORDON: Well, that’s a very good question. You see, what Mises held was that economics has a distinct method or way of proceeding, and he felt that way of proceeding was under criticism by many philosophers and social scientists of his time. I think for Mises, what was always primary was to vindicate economic theory against its detractors. He wasn’t trying to construct a philosophical system. But if people criticized economics and said “well, there’s something wrong with Austrian economics because it doesn’t depend on verifying things empirically,” Mises wanted to come up with a reply to that, so that was what really got him into philosophy.
JD: For purposes of this conversation, logic is a critical branch of philosophy. What should we think about rhetoric?
DG: Well, clearly logic is a branch of philosophy. It brings in all the sciences which use logic. Rhetoric is the general study of techniques of persuasion. There are philosophers who have written about rhetoric, Aristotle and others, but that would be a somewhat broader category than they wrote about. To the extent you’re interested in persuading others of the truth, you could consider economics rhetorical, but one point that people miss is when you’re elaborating a structure of argument, it doesn’t involve necessarily arguing in the sense of trying to have an actual debate where you have an adversary you’re trying to win over.
JD: Let’s start with Aristotle then. Can we trace a line from him to Menger, Böhm-Bawerk, and Mises?
DG: I think this is one point Murray Rothbard stressed very much. In the pamphlet I wrote called Philosophical Origins of Austrian Economics, I tried to elaborate upon that. I’m not sure everything I said in that pamphlet was right. What Aristotle thought was that in science we’re really proceeding deductively from first principles. He says this in the Posterior Analytics. So, we start off with a fundamental principle. We’re starting from what Aristotle thought: that there are essences of things and substances which means that the essence is the property something has that makes it that thing. Like “what is a human being?” It’s a rational animal. Aristotle thought we could discern these essences and that’s a theme you get in both Mises and Rothbard who started with the action axiom that human beings act.
Mises didn’t really use an Aristotelian method, but Menger was very influenced by Aristotle. Menger studied philosophy with Franz Brentano, who was one of the great authorities on Aristotle of the nineteenth century. So Menger took a lot of his notion of method from Brentano who was this Aristotelian figure. And I think that Rothbard, in particular, argues that praxeology, the science of human action, could be understood in this Aristotelian way as knowledge of essences. It’s a bit different from Mises, but I think it’s a very valuable way to proceed.
JD: Modern economics, of course, doesn’t start for several hundred more years. Menger doesn’t publish his Principles of Economics until 1871. Talk about some of the interim thinkers of the 1600s and 1700s. What about Locke? What was his influence on the Austrian school?
DG: Locke had a very interesting theory of knowledge that was a bit different from Aristotle’s. Locke thought, like Aristotle, there were essences of things, but he thought we really can’t know what they are. We’re cut off from essences. So, we do have some knowledge. We can prove we exist. We know God exists. He thought we could derive ethics as some kind of deductive system and he also thought we know there is something behind our experience, but we can’t really know what it was. So it’s a much more skeptical view. But Locke certainly had influence on economics. Remember in Human Action, Mises talks about action as the relief of felt uneasiness. I think that comes from Locke. That’s his phrase, “felt uneasiness.” But Locke wasn’t especially influential in Austrian economics. He had the labor theory of value as well as the labor theory of original acquisition, and that wasn’t so influential with Austrians. I would say his influence on Austrians was much more in the area of political philosophy with his views on natural law and his particular defense of a somewhat libertarian view. In some respects, he was close to being an anarchist, with significant differences.
JD: So we fast-forward to the 1700s. Talk about the German Historical school, which in part the Viennese economists rebelled against.
DG: The Austrians thought there are economic laws that are true for everybody. We have the law of supply and demand, which applies regardless of where you are in time. We could apply the law in primitive societies, we can apply it in the Middle Ages. Everywhere. The German Historical school said no, there are different stages of history and each stage would have its own laws that when you’re investigating, economics, you’re interested in the particular. One should amass as many facts as one can and maybe be able to get some inductive generalization about what applies to particular periods. So, it isn’t that you can reason out things before, looking at the empirical facts. You could find, for example, that free trade benefits certain economies at certain periods, but not in others.
The theories of Gustav Schmoller, Adolph Wagner, and various others were important. Schmoller was very influential in scholarship about the history of Prussia. He wrote a great deal on the Prussian economy. Mises’s view of this was very interesting. He said, the real thrust of the Historical school’s views is that they didn’t like the idea that there were economic laws because this might limit what the state could do. Suppose, for example, we know by applying basic economic principles, that if you put into effect minimum wage laws, it’s going to cause unemployment. So then, if you don’t want unemployment, you can’t put in minimum wage laws. You shouldn’t do that, but the German Historical school didn’t like that and they said this is limiting the state. So, in Mises’s view, they were trying to undermine economic theory to promote their ends.
JD: They’re talking about economics as a historical discipline, with no universal laws or independent theory. It can’t be studied independently of history and other fields. Menger and Mises reject this.
DG: Yes, that’s right. Instead of thinking, as Mises did, there is a science that we can get just by thinking about our notion of action — trying to figure out what’s involved in that — they said we have to study the particular. Some of them did very important work on particular historical periods, but they didn’t believe in economic laws. So, they would say, we have to just study what’s going on at the time. We might eventually be able to come up with some kind of generalization that would apply to different periods, but not for now.
JD: And the German Historical school still held sway, in Germany and the Austro-Hungarian Empire, well into the 1800s and even 1900s.
DG: Yes. They lasted through the twentieth century. One of the great figures of the school was Werner Sombart, whom Mises knew. They were on fairly friendly terms. He was teaching until 1930, when they were really dominant. When the German historians named the Austrian school as opposed to the German Historical, the term “Austrian” was coined with the implication that Austria was stuck in the past, the future was really with Germany and Prussia. So, if you say “the Austrian school,” you’re saying “outdated reactionary group,” rather than progressive. They were certainly influential, not only in Germany, but they were very similar to a group in the US called the Institutionalists, who were very influential in the late nineteenth century and early twentieth century. There were even Austrians who were influenced by the Historical school. So, Mises had them very much in mind when he was writing Human Action, this was one of the main groups he wanted to oppose.
JD: Of course, there are two other Germans we need to consider, Hegel and Immanuel Kant. Both lived into the 1800s, but not by much. Talk about both these figures and their influence on Austrian thought.
DG: Kant said that in philosophy people hadn’t agreed on what the correct solution is to the various philosophical problems, like how can we prove that God exists or how we know if there is an external world. So, there are all sorts of disagreements on all of these various philosophical systems. He said the philosophers have so far made a basic mistake. Instead of asking, “what is the nature of the world,” what they should be studying is our knowledge. We should ask, “what are the categories that we use in trying to get knowledge?” And by thinking about that, then we would get some answers to the philosophical questions. For Kant, we can’t know the world as it is in itself. All we can know is the world as we construct it through using our concepts. There is a given element also, which is intuition. You get to space and time through intuition and we apply concepts to that, so that gives us the world that we know, which he called appearance. That’s the only world accessible to us.
JD: No wonder Ayn Rand called him evil. Constructing reality and using intuition certainly sounds very un-Randian.
DG: Oh yes, you know, she called him the machine gunner of the mind. There’s something to be said for that and it does introduce some kind of a skeptical way of looking at things, but Kant didn’t think he was a skeptic. He thought the world of appearances is the one we’re dealing with. So we do have knowledge of that.
But there are various views on what the relation is between the world that we know, which is called the phenomenal world, and then this other noumenal real world. So, he then thought that limits our knowledge. However, we could go beyond that in a certain way because we also know we’re ethical beings. We can recognize through reason that we have certain requirements, certain things we ought to do, just by thinking about them. He thought we could, from the concept of what we ought to do, get a notion of what was ethically required. This is his famous categorical imperative. When he applied this to his political views in practice to a large extent, it was reminiscent of classical liberalism. He believed in property rights and favored some sort of welfare state, but it would have to be very limited. He favored a peaceful foreign policy. He wanted some kind of federation of republics.
Now, Hegel reacted very much to this. He thought Kant was a great philosopher, but he said, “look, Kant is wrong in thinking that we’re limited to our own concepts. We really do know the world as it exists.” The mistake he thought Kant made was that Kant is assuming that there is some kind of separation between reason and the world. In fact, the world is rational, the world is reason developing itself, so there is no separation between the two and our minds are really just reason coming into consciousness. So, Hegel thought, that as the universe develops, rationality is increasingly coming to self-consciousness. And in ethics, in political philosophy, Hegel reacted somewhat against Kant. He said Kant is right that there is a sphere of freedom, but where he made the mistake is trying to come up with these abstract rules that were completely separate from the concrete lives of real people. In Hegel’s view, this concrete life is manifested in the state. A famous sentence from one of his writings is, “The State is the march of God on Earth.” That’s not a very classical liberal state, although if you look at his main work on political philosophy, which is called Philosophy of Right, Hegel says that people are free to make exchanges. But this isn’t freedom fully developed. It develops more when you have the state.
Hegel thought that up to this time, the Prussian state, as a limited monarchy, was the highest development of reason. He didn’t claim this would always be true, but at that time, the Prussian state was the most advanced. Hegel was quite aware of economics. He read Adam Smith and James Steuart, who was an early mercantilist writer. But he didn’t really develop an economic theory.
JD: Kant also discussed the importance of a priori knowledge, which is reflected in Misesian praxeology. How does Kant help us understand economics?
DG: In this way, suppose we get the law of supply and demand, thinking about who has a surplus or a shortage. But we know that minimum wage laws will result in unemployment. So then, if we can figure this out a priori, then we don’t have to say, “well, this is just a hypothesis, let me apply it to the real world and maybe it will turn out that minimum wages don’t cause unemployment.” We will be able to tell because we have this economic law that there will always be some effect from the minimum wage law. It may be that other things will override it, but we’ll know that the law has some effect in the world. It isn’t something that we have to investigate. So, the way it applies to economics is that it enables us to have a theoretical discipline that isn’t subject to further testing. We can be wrong and make mistakes in our deductions, but we can’t be wrong in the sense that it’s open to future investigation whether our reasoning, even if it is correct, arrives at truth or not. If we reason correctly from true premises, then what we come up with is true, then that’s it. That’s unpopular with many philosophers.
JD: Contrast this with the logical positivists of Mises’s time. His own brother, Richard, the mathematician, disagreed with him very strongly on method and logic for example. Give us the context of the time in which Mises developed his views, and the opposition he faced.
DG: There was a group of logical positivists, the Vienna Circle, originally headed by Moritz Schlick, who was a professor of philosophy at Vienna and a lot of the top philosophers of that time attended that group. They said there is a priori knowledge, but this is just really conventional, this is just definitions or parts of definitions. So, what they would say is, suppose I say something like this: “we choose our most highly valued preference.” We have a preference scale, this one is the one that ranks highest, so I’m going to choose that. They said, “that doesn’t tell you anything. That’s a tautology because it’s just saying you’re choosing whatever one you’re choosing. You’re just defining the highest value preference is the one you in fact, choose.”
For the Vienna Circle, if you want to know what’s true in the world, the only way we can find out is by investigating, by doing empirical work. One example they might use: suppose one says, “how many people are going to attend the Austrian Economics Research Conference next month?” The way you would find out is to see how many people show up. We couldn’t figure that out just by thinking about it. They have to find out by using their senses, their empirical senses, what actually is the case. But in the Austrian view — Mises’s view — that isn’t always true. Sometimes you can realize things have to be a certain way just by thinking about them. The positivists say no, if it isn’t empirical knowledge, then it’s a tautology. It doesn’t tell you anything. So, they said, “if you want to know what’s going on in the world, you just have to look at matters, investigate them.” What you would get would not be what has to be the case, but just what is the case. “Laws” developed this way would really not be statements of what’s necessary in this very strong sense that we have in other types of scientific laws like math.
JD: What would you say is Mises’s best rebuttal to this? Where in his writings, whether in Human Action or perhaps in The Ultimate Foundation of Economic Science, does he lay out his best philosophical case for the method of economics? Where do we find his most philosophical work?
DG: Well, I would say probably two. The first, say, 110 or 150 pages of Human Action. The second chapter of the book is titled “The Epistemological Problems of the Sciences of Human Action.”
JD: I noticed to my surprise that Kant is not specifically mentioned in Human Action. Mises mentions him very briefly in Liberalism, but as you point out even when Mises resorts to Kantian language nothing in his argument depends on Kant. Elaborate on this for us.
DG: Suppose you don’t know the game of chess, have never heard of it and then you see people moving these pieces on a board and just see them moving them in various ways. You wouldn’t understand what’s going on unless you had the concept of chess, you wouldn’t be able to figure out what they’re doing. Similarly, we can see people moving their bodies in various ways, but we wouldn’t know what they’re doing. But, once we have Mises’s concept of action we can understand things. So, in that respect, that’s a Kantian idea that you have to have certain concepts in order to understand what’s going on in various activities. But Mises doesn’t depend on particular controversial points in Kant’s theory of knowledge by any means. He’s not adopting a Kantian system at all, I don’t think, even though Mises is a very widely read scholar in philosophy and other disciplines.
Nevertheless, it’s sometimes surprising the range of Mises’s knowledge. For example, in Human Action, when he’s talking about quantum mechanics, he says quantum mechanics has some implications for free will. So, he quotes works on quantum mechanics. He’s up on all sorts of things, but he isn’t adopting a particular school.
I should say also: One thing I see when I talk of Human Action over a great many years at the Mises Institute is that a mistake a lot of people make is, they think well, because Mises discusses philosophical topics, they think he’s trying to solve some philosophical problems. One problem is: how do we know that there is a real world out there? Maybe we just have certain experiences and you could imagine, Descartes’s malicious demon that’s deceiving us, how do we know the world really exists? That isn’t a problem he is addressing, he’s not trying to solve problems of philosophical skepticism. It would be odd if we were saying how to explain the recession of 2008, it would be kind of strange to say, “well look, how can you talk about explaining the recession in 2008 when we haven’t even proved there’s an external world yet.” That wouldn’t make sense. So, we need to get he’s talking about the world we live in and he’s seeing economics as one of the sciences. It’s not part of philosophy. He’s just thinking that there’s a particular method in science, an a priori method that we can use. This is one of his objections to Karl Popper, who was a philosopher also from Vienna, and had some connection with the Vienna Circle but reacted very strongly against them. But Popper had a view that a statement is scientific if it can be falsified. So, they say, well, economics, as Mises conceded, it wouldn’t be falsifiable because if these laws of economics were a priori truths, then nothing can show they’re false. What Mises said is if you’re trying to come up with what is scientific, you should look at the actual sciences in question. You should do that and take that into account in trying to come up with your criteria of what’s a scientific statement.
JD: Let’s talk about the philosophy of Murray Rothbard.
DG: Rothbard was a very systematic thinker. He was interested in a great many things, but Rothbard in his philosophical views, he had been very much influenced by Aristotle and Thomas Aquinas and he made a study of scholastic philosophy. So he adhered to this view where he studied the essences of things in order to gain knowledge of them. He was able to absorb information very rapidly and had tremendous bibliographic knowledge and if you asked him something, he could just give you a bibliography immediately. He knew scholastic material very well and studied it a lot. For a while, his group, which was called The Circle Bastiat, attended sessions of Ayn Rand’s circle. Rand was a remarkable thinker in her own right. Although she hadn’t studied history of philosophy very systematically, she developed views that were in many respects similar to those of Aristotle. So, there was some convergence there. He didn’t really take it from her, but there was some convergence, because he was in his philosophical focus, very much an Aristotelian, like her. He didn’t really write on metaphysics, he wrote on epistemology insofar as it applies to economics, but he was very influenced by Aristotelian and Thomistic ethics and developed that further. He developed natural law thinking on that basis.
JD: We think of Aquinas as a philosopher, as a legal theorist, and of course as a religious thinker. Most people probably think of him more as a religious thinker than a philosopher per se.
DG: The relation between theology and philosophy is one of the most contested topics in the study of Aquinas. I would say he was a philosopher as well as a theologian in that a good many of his works are commentaries on Aristotle. He wrote books on how you could convert people who don’t accept Christianity, not presupposing that theology is true. For him, in fact, there was some knowledge that could be obtained just by reasoning, and there was certain knowledge that couldn’t be obtained by reasoning. This you could get only by faith, which is from revelation. But for him, even some of the knowledge obtained through reasoning could show why we should accept the Church’s teachings.
JD: When Rothbard makes the normative case for laissez-faire in The Ethics of Liberty, he makes that normative case without appeal to higher powers. He relies on a secular morality as the foundation for a free and just society. What’s his biggest influence there?
DG: Well, I think in this he talks about people as self-owners. You could say “why are we self-owners?” I think he would rely on an Aristotelian focus.
JD: Maybe this is my own Protestant upbringing, but when we talk about self-ownership it sounds inherently incompatible with Christianity. If you’re a Christian you believe you were made in the image of God, and thus you’re not some wholly independent being. You don’t “own” yourself as part of God’s creation.
DG: Yes. Well, that’s a very interesting objection. If you look at Locke, Locke did believe that God really owns everybody. He also defends the self-ownership principle.
JD: God owns everybody?
DG: The claim here is God created us so God really owns us. But under that, we’re in charge of our own lives, so it’s something like this: suppose for all practical purposes, unless God is directly trying to tell us something, we’re in charge of our own lives. The fact God owns everything doesn’t mean someone else can go around saying, “I’m God’s representative, so you have to do this, do that.” No one has direct access to God in that way that would justify that person imposing various limits on what a person can do. The notion of God owning us does have some bite to it in the real world. For example, many theologians have thought it’s wrong for you to commit suicide. Because God owns you, you don’t have the right to end your own life because that would be inconsistent with God’s ownership. You could say, you could acquire property in the world because subject to God’s ultimate ownership, you’re really free to homestead land at least under certain conditions.
Rothbard is probably best called agnostic. I think his atheism wasn’t as strong in his later years as earlier. His later position is something like, if there is a God, his actions and his knowledge would be so far different from normal, we wouldn’t really be able to grasp what he was doing. This is more in conformity with Aristotle because Aristotle did believe that God really takes no notice of what’s going on in the world and Aristotle says God is thinking about his own activities, his own being, and is not concerned with human beings.
JD: David, let’s talk about Ayn Rand. Both Mises and Rothbard knew her personally, and both socialized with her at one time. Many people think she was a highly derivative philosopher, that she didn’t exhibit much original thought. Many people disagree, and think she was a brilliant philosopher who developed a fully complete system of original ideas on her own. Tell us about her relationships with Mises and Rothbard, how they may have influenced her, and vice-versa.
DG: It is true that some of her thought certainly resembles Aristotle in many points, but she was able to get a lot of her views independently. I think in some respects, she deviated in an incorrect way from Aristotle. She was certainly a significant thinker in philosophy. I frequently disagree with her, but she’s certainly someone who’s worth reading.
We also know a bit about her thinking on Mises because she used to make notes on books she was reading. We have her notes on Human Action and one note on that always makes me laugh. She said that Mises usually talks about supply and demand, but one place he talks about demand and supply and she thought that there was something suspicious about that, but she didn’t say what it was. So, she thought Mises was extremely good with economic theory, but she thought he didn’t have the right theory of knowledge. She took him to be a Kantian and she didn’t like this. They met a few times in person and Mises liked her Atlas Shrugged. He thought she was portraying the businessman as a hero, she was really doing something very valuable, but apparently they didn’t get along. There’s this story Henry Hazlitt invited both for dinner and they had some big falling out. They both had very strong personalities.
Now, Murray Rothbard, when he first heard about her, he tended not to like her much because he thought she was a very dogmatic thinker and if you disagreed with her, she would exclude you and he thought the tendencies in her personal way of dealing with people, he didn’t like. So, he tended very much to stay away from her and was suspicious of her, but when Atlas Shrugged came out, he really liked it, admired her writing, so for a while, his group met with her group, but they didn’t get along. The thing she most opposed in Murray’s thinking was that Murray did not believe in the need for government, the state would be replaced by competing protection agencies. She was very much against that. She thought that would lead to having no law and order. There were also other issues as well.
JD: There’s a famous conversation, recounted in Nathaniel Branden’s biography of Rand, where she asked Rothbard how police and court services would be provided under anarchy. Rothbard responds with “private, competing defense agencies” and Rand expressed in horror: “You mean as in civil war?” Let’s just say their respective philosophies of governance diverged.
DG: There were other issues as well. One was that Murray’s wife, JoAnn Rothbard, also a great friend of mine, was a quite devout Protestant. So Rand wanted her to listen to some tapes by Nathaniel Branden on why God doesn’t exist and he felt that any rational person after listening to these tapes would be converted to atheism. So, if they listened to them and if she wasn’t converted to atheism, then Murray should divorce her. Of course, he wasn’t having any of that. of Barbara Branden’s master’s thesis where she said that, and used that argument. So then, when the volume came out, for some reason the citations to Branden were taken out, and Rand and Branden and the Rand group got very angry about it. They said, “oh, he’s plagiarized Barbara Branden.” In fact, the argument wasn’t original with her,it’s a very common argument. So, they were very angry and they protested, and they went to the publisher. And then Murray wrote to Mises, and Mises replied and said, “what’s going on here, everybody knows about this argument, what are they complaining about?” But the Randians never forgot it.
JD: David, one final question. Menger, Mises, Hayek, and the older Austrians all pre-dated the rise of postmodern philosophy in the late twentieth century. Did Rothbard address postmodernism, and what effects do you think it has on economics today?
DG: Rothbard did address postmodernism in his essay “The Hermeneutical Invasion.” There are many different varieties of postmodernism but in general, postmodernists attack the notion of truth as fixedand unalterable. Rothbard resisted this, relying on his Aristotelian realistic views. Fortunately, postmodernism hasn’t influenced economics as much as it has the humanities.
Dr. Joe Salerno joins Jeff Deist to explore another foundational topic: the method of economics. Mises developed praxeology, perhaps his most controversial contribution to economic science. Praxeology starts with fundamental axioms, then derives economic theory by working logically through a deductive process. As such, praxeology is at odds with logical positivism and empiricism—and presents a markedly different approach to economics.
Readings Ludwig von Mises, The Ultimate Foundation of Economic Science
Ludwig von Mises, Human Action, Part One, Chapter II: "The Epistemological Problems of the Sciences of Human Action"
Murray Rothbard, "In Defense of Extreme Apriorism"
Hans-Hermann Hoppe, Economic Science and the Austrian Method
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ABSTRACT: In the division of labor, economizing valuations require an appraisement of the structure of market prices of goods beforehand. Yet, investment decisions concerning the purchase of an entire business enterprise, for example, necessitate considerations beyond appraisement. An economizing valuation of businesses must be based upon both appraisement and a genuine investment appraisal which provides the valuing person with the marginal price he can barely accept. However, even though the computation of this marginal price is a necessary step towards an economizing investment decision, it is still not sufficient. In case of a company purchase, the price to be paid is unknown beforehand. Therefore, an economizing valuation of firms not only requires both appraisement and investment appraisal but also a negotiation of the final price to be paid. Because the corresponding negotiation process must be characterized as a terra incognita in Austrian economics, this paper investigates in depth the negotiation between the involved parties as the final step towards their economizing valuations and discusses purposive negotiation tactics.
KEYWORDS: value of the firm, investment appraisal, negotiation, value theory, subjectivism, purpose-orientation, Austrian school, neoclassicism JEL CLASSIFICATION: B53, C78, G32, G34 Florian Follert, M.Sc. (follert@iwp.uni-saarland.de) is a Research Associate and doctoral student with the Institute of Auditing at Saarland University, Germany. Dr. Jeffrey Herbener (jmherbener@gcc.edu) is Chairman of the Department of Economics and Sociology at Grove City College and a Senior Fellow at the Mises Institute. Dr. Michael Olbrich (olbrich@iwp.uni-saarland.de) is Professor of business economics and Director of the Institute of Auditing at Saarland University. Dr. David J. Rapp (rapp@iwp.uni-saarland.de) is an Assistant Professor with the Institute of Auditing and a regularly recurring Visiting Professor at Grove City College.
The authors wish to thank conference participants of the 2017 Austrian Economics Research Conference at the Mises Institute and two anonymous referees for constructive and helpful suggestions.
Quarterly Journal of Austrian Economics 21, no. 4 (Winter 2018) full issue, click here.
- INTRODUCTION In an autistic economy, valuation alone is a sufficient condition for economizing decisions (Mises, 1998 [1949], p. 329). In the market economy, however, things look different. In the division of labor, valuation needs to be based upon appraisement to result in economizing decisions (Mises, 1998 [1949], p. 329). While this insight holds true for each and every good to be valued, in the case of financial investment decisions, and particularly concerning the purchase of an entire business enterprise or a substantial share package, acting man’s final valuation must be based upon both appraisement and investment appraisal (Herbener and Rapp, 2016, pp. 10–11). Moreover, contrary to the typical purchase of a consumer good, the asking price of a business enterprise is unknown beforehand. In cases of particular investment decisions, therefore, valuing persons need to engage in a negotiation about the price to be paid (Matschke, Brösel, and Matschke, 2010, p. 6). Apart from appraisement and investment appraisal, this negotiation is the last condition necessary for this person’s final valuation. To date, the Austrian-informed literature lacks a comprehensive analysis of such negotiation process. This paper aims to fill this gap by thoroughly investigating what role negotiation plays for the valuation of, in particular, a business enterprise and how it can be operationalized purposefully.
In order to do so, the paper is structured as follows: In section 2, we will illustrate the requirements for economizing decisions in different economic settings and for different goods. Section 3 will serve to review the status quo of Austrian theorizing on the issue of negotiating in isolated exchanges, to analyze the negotiation process in depth, to illustrate its relevance for valuation, and to discuss tactics for successful negotiations. Finally, section 4 will present the main conclusions which can be drawn from our analysis.
- VALUATION, APPRAISEMENT, AND INVESTMENT APPRAISAL Value is neither intrinsic nor objective in any sense; rather, valuation is an individual act of comparing and, eventually, ranking alternative courses of action in aiming at particular ends, which is necessarily subjective in nature (Menger, 2007, pp. 120–121). Valuation is reflected in a value scale which varies both from one person to another and—for the very same acting human—as time goes by (e.g., Hering, Toll, and Kirilova, 2015a, p. 24; Olbrich, Quill, and Rapp, 2015, p. 20; Rapp, Olbrich, and Venitz, 2017, p. 16), and is demonstrated through action (Mises, 1998 [1949], p. 95). As a consequence of these facts, Mises (1990, p. 56) rightly rejects the very idea of intrinsic value as “the naive conception of the layman.”On the flaws and fallacies inherent in the investment strategy “value investing”, which claims and is built upon the existence of intrinsic value, see Rapp, Olbrich, and Venitz (2017) as well as Rapp, Olbrich, and Venitz (2018).
Mises (1998 [1949], p. 233) emphasizes that
[i]n order to conceive the market fully one is forced to study the action of hypothetical isolated individuals [...] [and in] studying interpersonal exchange one cannot avoid dealing with autistic exchange.
Mises (1998 [1949], p. 195) defines an autistic exchange as an “action [...] performed by an individual without any reference to cooperation with other individuals.”
In an autistic economy, then, economizing decisions are solely made through valuations without further ado, in particular without reference to money prices (e.g., Herbener and Rapp, 2016, p. 7). For example, if Robinson Crusoe had two options to choose from, say, to spend his time either (1) going fishing or (2) collecting berries to satisfy his hunger, he will make an economizing decision solely through preferring either (1) fishing to berry picking or (2) berry picking to fishing based upon his personal preferences.
In juxtaposing an autistic economy with society, Mises (1998 [1949], p. 195) asserts:
Within society cooperation substitutes interpersonal or social exchange for autistic exchanges. Man gives to other men in order to receive from them. Mutuality emerges. Man serves in order to be served.
The exchange relation is the fundamental social relation. Interpersonal exchange of goods and services weaves the bond which unites men into society. The societal formula is: do ut des.
Necessarily, interpersonal exchange both requires and reveals exchange ratios for the goods and services subject to market transactions. In a monetary market economy allowing for indirect exchange through the application of a generally accepted medium of exchange, these ratios become evident in market-clearing money prices (Mises 1998 [1949], pp. 206, 218, 287, 324). While valuation is a prerequisite for economizing decisions in the division of labor too, it is not by itself sufficient. Rather, it must be supplemented by appraisement, which aims at the anticipation of the structure of such market prices or—in other words—at the assessment of the purchasing power of the money concerned (Mises 1998 [1949],p. 329). To rank order in value a particular amount of money, say $1, against a particular good, say an apple, a consumer must know the alternative uses of the dollar, say the purchase of two oranges. Consequently, for decisions in the division of labor to be economizing they must not be based on valuation only; rather, valuation must be well-grounded on appraisement.
While combining both appraisement and valuation usually allows for economizing decisions of consumer goods, there are financial investments, in particular those concerning entire business enterprises, which require additional considerations (for this entire paragraph see Herbener and Rapp, 2016). In buying consumer goods, acting man aims at non-financial ends, for example, to satisfy hunger. A person can directly evaluate in his mind the contribution of a particular consumer good to reaching such ends. In contrast, financial investments are mostly undertaken to fulfill financial ends. How the possession of a firm, for example, contributes to reaching such ends cannot simply be assessed at first glance, that is, directly by one’s mind without economic calculation. In this respect, Menger (2007, p. 255) emphasizes that the “value [of factories] can be determined only after a careful investigation of all the relevant circumstances.” Therefore, acting man needs to apply a particular tool of economic calculation as a decision method, which allows him to evaluate the degree to which the firm contributes to reaching his (financial) ends. Specifically, this tool is to be found in a genuine investment appraisal.Note that the application of investment appraisal to compute the present value of the expected financial benefits of a particular course of action does not prohibit valuing man from complementing this financial analysis with considerations outside of the mere financial sphere. For the role of non-financial aspects in investment decisions and their impact on valuation, see Herbener and Rapp (2016, p. 11). Its purpose is to provide the decision maker with the most important financial piece of information he needs for his economizing decision: the marginal price he can barely accept in a transaction without suffering an economic loss (fundamentally Matschke, 1975; further, e.g., Hering, 2014, pp. 5–6). This marginal price is highly individual data, determined by the (financial) ends a person aims at and the (financial) means available to him in reaching those ends. Following investment theory, which is rooted in early Austrian economics (Schmalenbach, 1919, p. 334; Schmalenbach, 1937, p. 27; Hering, 2014, pp. 27–28; Olbrich, Quill, and Rapp, 2015; Herbener and Rapp, 2016, pp. 12–13), it equals the present value of the individually predicted future earnings, discounted with the correct individual discount rate, that is, the internal rate of return of the best alternative use of funds which is derived from the person’s consumption preference.In this respect, Herbener (2011, p. 14) notes: “As a temporal being, man distinguishes between sooner and later. He can, therefore, judge the value of attaining an end sooner differently than attaining it later. Just as the principle of preference is implied by man’s finitude, time preference is implied by his temporality.” In reflecting the present value of expected future earnings from a particular person’s perspective, the marginal price manifests the contribution a firm, for example, is expected to make in reaching particular ends and, therefore, allows for an economizing ranking against the asking price.
However, in contrast to the regular purchase of a consumer good, for example, an apple in a grocery store, in cases of the acquisition or sale of a firm, the asking price is unknown beforehand. Consequently, a person cannot establish his final value scale beforehand. Therefore, to rank the business concerned against a certain amount of money and, eventually, to act accordingly requires a negotiation about that price beforehand.
- NEGOTIATION AND ITS RELEVANCE FOR VALUATION 3.1 Catallactics and the Status Quo of Austrian Theorizing
Whately (1831, p. 6)—objecting to the formerly established term “political economy”—originally introduced the term “catallactics” to frame the sphere of economics and defined it as the “Science of Exchanges.”Rothbard (1951, p. 946) similarly defines catallactics as “The Theory of Voluntary Interpersonal Exchange.” Following Whately’s (1831, p. 6) definition of man as “[a]n animal that makes exchanges,” catallactics, then, ultimately deals with exchanges conducted by acting man in the marketplace. As Mises (1998 [1949], p. 233) describes it:
[T]he task of this branch of knowledge [is] to investigate the market phenomena, that is, the determination of the mutual exchange ratios of the goods and services negotiated on markets, their origin in human action and their effects upon later action.
It was Mises who revived the term “catallactics” (Rowley, 1994, p. 289) integrating it into his broader analysis of human action, that is, praxeology (Mises, 1998 [1949], p. 233). Mises (1998 [1949], p. 3) concludes:
The economic or catallactic problems are embedded in a more general science, and can no longer be severed from this connection. No treatment of economic problems proper can avoid starting from acts of choice; economics becomes a part, although the hitherto best elaborated part, of a more universal science, praxeology.
Ever since Carl Menger’s (1871) fundamental work, Austrian economists have approached market phenomena progressively by distinguishing various forms of interpersonal exchange, based on the structure of both the supply side and the demand side of markets. Apparently, the simplest case of interpersonal exchange one can imagine consists of one particular seller and one particular purchaser only and, thus, has been labeled “isolated exchange” (Menger, 1871, p. 179 [2007, p. 197]). The investigation of such isolated exchange has been used frequently as a starting point to gain deeper understanding of market transactions in more complex circumstances (e.g., Menger 1871, pp. 175–212; Mises, 1998 [1949], p. 324; Rothbard, 2001, pp. 106–126). However, Austrian economists characterize isolated exchanges as rather rare and occasional while mainly occurring at early stages of the emergence of civilization. For instance, Menger (2007, p. 197) notes:
This case, which could be termed isolated exchange, is the most common form of human trade in the early stages of the development of civilization. Its importance has survived to later times in sparsely populated backward regions and it is not completely absent even under advanced economic conditions, since it can be observed in highly developed economies wherever an exchange of goods that have value only to two economizing individuals takes place, or where other special circumstances economically isolate two persons.
Mises (1998 [1949], p. 324) describes such isolated exchange as “an occasional act of barter in which men who ordinarily do not resort to trading with other people exchange goods ordinarily not negotiated.”
However, even in highly developed economies, such as our own, isolated exchanges turn out to be much more than merely occasional acts. Most of the firms or larger share packages being bought and sold in the market are subject to situations, in which there is neither competition on the demand side nor on the supply side; the latter being impossible anyway due to the uniqueness of the asset concerned, at least as long as the potential exchange concerns a share package exceeding 50 percent of a company’s stocks. Therefore, the Austrian investigation of isolated exchange matches the circumstances in which most presumptive sellers and presumptive purchasers of a business enterprise find themselves. In consequence, it seems worthwhile to review the status quo of Austrian theorizing on the catallactics of isolated exchanges in order to ascertain which fundamental insights can be drawn from previous analyses for the assessment of the role of negotiations for the valuation of firms.
In a monetary market economy, “objective prices [...] are reflections of subjective values” (Ritenour, 2016, p. 21). Mises (1998 [1949], p. 324) explicates, prices
are determined between extremely narrow margins: the valuations on the one hand of the marginal buyer and those of the marginal offerer who abstains from selling, and the valuations on the other hand of the marginal seller and those of the marginal potential buyer who abstains from buying.
Due to the lack of competition on both the supply side and the demand side within isolated exchanges, however, “the ratio of exchange is determined only within broad margins” (Mises, 1998 [1949], p. 324). These margins result from the individual marginal prices of both the presumptive seller and the presumptive purchaser (e.g., Olbrich, Quill, and Rapp, 2015, p. 31). Austrian economists have concluded that catallactic analysis proper cannot say with certainty what the final price involved parties eventually agree upon will look like (Mises, 1998 [1949], p. 324; Rothbard, 2001, p. 109); one thing catallactics can tell us, though, is that if the exchange is finally conducted, the given margin must have allowed for a mutually beneficial agreement, and that the final price is established somewhere within that margin. For instance, Menger (1871, p. 177 [2007, p. 195]) concludes:
Hence, whatever the price that is finally established for 40 units of wine in an economic exchange between A and B, this much is certain, that it must be formed between the limits of 80 [the seller’s minimum price in this example] and 100 [the buyers maximum price in this example] units of grain, above 80 and below 100 units.
Böhm-Bawerk (1930, p. 199) forms the following general proposition:
In isolated exchange—exchange between one buyer and one seller—the price is determined somewhere between the subjective valuation of the commodity by the buyer as upper limit, and the subjective valuation by the seller as lower limit.
Accordingly, Mises (1998 [1949], p. 324) underscores that
[c]atallactics, the theory of exchange ratios and prices, cannot determine at what point within these margins the concrete ratio will be established. All that it can assert with regard to such exchanges is that they can be effected only if each party values what he receives more highly than what he gives away.
Similarly, Rothbard (2001, p. 109) emphasizes that
[a]ll analysis can say about this problem is that, since the exchange must be for the mutual benefit of both parties, the price of the good in isolated exchange will be established somewhere between the maximum buying price and the minimum selling price [...] We cannot predict the point that the two will agree on, except that it will be somewhere in this range set by the two points.
While any sound attempt to deduce a generally applicable law of how the price eventually established will look like in isolated exchange is doomed to failure,We classify the attempts to formulate a general bargaining theory as unsound for such “bargaining theory [is] rarely applicable in the real world” (Rothbard, 2011, p. 365). Austrian economists have at least named potential determinants of that price. Particularly, they have pointed to the fact that the opposing parties will engage in a process of negotiating about the final price (Menger, 1871, p. 177 [2007, p. 195]; Gross, 1884, pp. 46–47; Schullern-Schrattenhofen, 1889, p. 31; Böhm-Bawerk, 1930, pp. 198–199; Rothbard, 2001, p. 109) which will be influenced by both the negotiators’ abilities (e.g., Endres, 1995, p. 4) and their position within the negotiation (e.g., Gross, 1884, p. 131).With reference to Hermann (1874) and Schäffle (1873), Gross (1884, p. 131) argues that “whether or not the price will approximate the minimum or maximum limit, apparently depends on the position the entrepreneur has within the price duel, whether his position is superior to his counterparty’s one or not” (authors’ translation). For example, Menger (1871, p. 177 [2007, p. 195]) while coining the term “Preiskampf”This term has been frequently used by Menger’s disciples Gross (1884) and Schullern-Schrattenhofen (1889), see Streissler (1972, p. 437, footnote 54). For more recent applications see, for example, Spitznagel (2013, p. 22). (“price duel”; “price conflict”; “price war”) states that
it appears equally certain to me that the outcome of the exchange will prove sometimes more favorable to one and sometimes more favorable to the other of the two bargainers, depending upon their various individualities and upon their greater or smaller knowledge of business life and, in each case, of the situation of the other bargainer.
Similarly, Rothbard (2001, p. 109) analyzes that the finally established price “depends on the data of each particular case, on the specific conditions prevailing. In particular, it will depend upon the bargaining skill of the two individuals.”
Moreover, Böhm-Bawerk (1930, p. 199) explicates with more detail:
According as in the conduct of the transaction the buyer or the seller shows the greater dexterity, cunning, obstinacy, power of persuasion, or such-like, will the price be forced either to its lower or to its upper limit.
Rothbard (2001, p. 363) notes that “[l]ittle of value has been said about bargaining since Böhm-Bawerk” (footnote 27) and that “[e]conomists have always been very unhappy about bargaining situations of this kind, since economic analysis is estopped from saying anything more of note.”
Unlike economists in the tradition of Menger, Böhm-Bawerk, Mises, and Rothbard, however, neoclassical economists have attempted to overcome this barrier to economic analysis by formalizing the bargaining process. This development has been a natural extension of their formal-modeling approach to explaining human behavior. To construct a mathematically tractable model of human action, neoclassical economists assume economic agents, instead of human persons, whose simulated behavior is determined by stipulated underlying conditions, namely, the agent’s utility function and objective circumstances whose value in an agent’s behavior is determined by its utility function. Neoclassical economists have modeled every functional type of human action as optimization under constraint: consumption, production, and exchange. Price setting eluded formalization, however, until the advent of game theory after the Second World War. Before that time, neoclassical economists typically assumed the existence of an auctioneer compiling bids and offers made by all buyers and sellers in a market, then computing the equilibrium price, and finally announcing the price after which all trades would be made.See Hahn (2008) for an overview of the Walrasian auctioneer in general equilibrium theory and Negishi (2008) on advancements beyond tâtonnement as a process of price setting in neoclassical economics. Since the early 1950s, neoclassical economists have developed game-theoretic models of bargaining.See Serrano (2008) for an overview of game-theoretic bargaining.
As Rothbard notes in the quote above, economists in the tradition of Mises have considered bargaining an entrepreneurial activity not subject to economic-theoretical laws.The quote (Rothbard, 2001, p. 363) was originally published in 1962, before the game-theoretic treatment of bargaining gained ascendency in neoclassical literature. Such laws describe the universal, cause-and-effect structure of human action. Under adequately competitive conditions, for example, the level of the price of a good is completely determined by the preferences of buyers and sellers, which in turn are subject to the laws of utility. The preferences of the marginal traders are so near to each other that no bargaining range exists. Any seller can always sell to the marginal buyer if any buyer attempts to negotiate for a lower price. And any buyer can always buy from the marginal seller if any seller attempts to negotiate for a higher price. If a market is inadequately competitive, then a bargaining range will exist and the level of price will be determined, not solely by the laws of utility which are universal principles of human action, but by the particular conditions of person, place, and time in which bargaining takes place as noted above in isolated exchange, the extreme case of an inadequately competitive market.
Although it is indeed true that catallactics has no means to completely determine the actual final price in any isolated exchange, additional theoretical insights can be discovered about isolated exchange in cases of investment appraisal in contrast to cases of valuation (and appraisement) alone. The following two sub-sections are devoted to a praxeological investigation of the negotiation process between a presumptive seller and a presumptive purchaser in the special case of an entire business enterprise.
3.2 Negotiation Process and Possible Scenarios
The negotiation about the purchase/sale of a firm, basically, consists of price offers executed by the involved parties, either directly or indirectly through the proposal of an appraisal method or corresponding data (Matschke and Brösel, 2013, pp. 615–616). Every potential price offered by one of the parties is the outcome of that party’s valuation. Through the action of proposing a certain price, that party demonstrates its particular value scale, that is, how it has ranked the business concerned against the suggested price. Inversely, to the opposing party, the offered price serves as an input variable for its valuation. The opposing party compares the quoted price to its marginal price and, eventually, ranks the offered price against the business enterprise in question. Therefore, the negotiation process must be interpreted as a series of repetitive valuations reflected in the proposal, acceptance, or rejection of price offers, both from the presumptive buyer’s and the presumptive seller’s perspective.
In the potential transaction of an entire business enterprise, basically, we can distinguish three scenarios:
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The presumptive seller’s marginal, that is, barely acceptable price exceeds the presumptive purchaser’s marginal price; in other words, the presumptive seller needs to earn more than the presumptive purchaser is willing to pay.
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The presumptive purchaser’s marginal price is identical to the presumptive seller’s barely acceptable price; in other words, the presumptive buyer may at most pay what the presumptive seller at least needs to earn.
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The presumptive purchaser’s marginal price is greater than the presumptive seller’s barely acceptable price; in other words, the presumptive buyer can be willing to pay more than the presumptive seller needs to earn.
In scenario 1, no potential area of agreement exists, since the presumptive seller needs to earn more than the presumptive purchaser may pay:
Figure 1: Presumptive Seller’s Marginal Price > Presumptive Buyer’s Marginal Price
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Rothbard (2001, pp. 107–108) illustrates this scenario using two opposing parties’ value scales as follows:
Smith would be willing to acquire a horse from Johnson if he could give up 100 barrels of fish or less. One hundred barrels or less are less valuable to Smith than the horse. On the other hand, 101 or more barrels of fish are more valuable to him than the horse. Thus, if the price of the horse in terms of the fish offered by Smith is 100 barrels or less, then Smith will make the exchange. If the price is 101 barrels or more, then the exchange will not be made [...] Johnson will not give up his horse for less than 102 barrels of fish. If the price offered for his horse is less than 102 barrels of fish, he will not make the exchange. Here, it is clear that no exchange will be made; for at Johnson’s minimum selling price of 102 barrels of fish, it is more beneficial for Smith to keep the fish than to acquire the horse.
In this scenario, consequently, the negotiation process will be rather short, since there is no price both parties will accept voluntarily which they will realize fairly quick. In any case, one party will value the status quo higher than the transaction, which will be reflected in the rejection of the deal.
Contrary to scenario 1, in scenario 2 a potential area of agreement exists, since the presumptive purchaser may offer a price which is also acceptable to the presumptive seller:
Figure 2: Presumptive Seller’s Marginal Price = Presumptive Buyer’s Marginal Price
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If both the presumptive purchaser’s and the presumptive seller’s marginal prices equate to one another, however, the only price acceptable to both parties equals their common marginal price. Rothbard (2001, p. 109, footnote 23) discusses the same scenario and eventually concludes: “Thus, if Smith’s maximum buying price is 87, and Johnson’s minimum selling price is 87, the price will be uniquely determined at 87.”
Given the identical marginal prices, however, while both parties would not suffer engaging in the transaction which might indeed lead them to conduct it at their shared marginal price, neither can the presumptive purchaser benefit from the transaction by paying less than the business is worth to him nor can the presumptive seller benefit earning more than the business is worth to him respectively (e.g., Menger, 2007, p. 185). Consequently, as both parties cannot improve their state of affairs by means of the transaction, they might—as their equally valuable action alternative—simply abstain from undertaking it, that is, no price at all might be established. The fact that conducting the exchange does not make any of the involved parties better off, leads Menger (2007, p. 185, footnote 5) to classify “indifferent exchanges such as this as definitely non-economic since in them the provident activity of men is set in motion aimlessly quite apart from all the economic sacrifices they may entail.”
Hence, the process of negotiating between the involved parties might again be rather short, since none of them has an incentive to actually conduct the transaction. Either of the parties’ valuations will most likely become evident in the rejection of the deal eventually. Rothbard (2001, p. 108), thus, concludes that “[i]n order for an exchange to be made, then, the minimum selling price of the seller must be lower than the maximum buying price of the buyer for that good” since, as Menger (2007, p. 194) points out, “[both buyer and seller] will agree to an exchange only if it enables [...] [them] to make better provision for [...] [their] needs than would be possible without the exchange.”
Similarly, Böhm-Bawerk (1930, p. 193) argues that
[exchanges] are not made simply for amusement. People who take the—not always trifling—trouble to exchange the goods which they possess for other goods, do so for a rational and material end, and, in nine hundred and ninety-nine cases out of a thousand, this end is to better their economical condition by the exchange.
Unlike scenario 2, scenario 3 allows for more than one particular solution to the Preiskampf. The potential area of agreement is established because the purchaser’s barely acceptable price exceeds the seller’s minimum selling price:
Figure 3: Presumptive Seller’s Marginal Price < Presumptive Buyer’s Marginal Price
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Any price offer within the range between the marginal prices serves as a potential final price, since each of them is mutually beneficial (e.g., Matschke, Brösel, and Matschke, 2010, p. 10). In discussing the same scenario, Böhm-Bawerk (1930, p. 198), therefore, appropriately claims that “it is certain that there will be an exchange; in the assumed circumstances each of the contracting parties can make a considerable profit by the exchange.”
Owing to the existence of potential prices beneficial to both buyer and seller, the involved parties have an incentive to seriously negotiate with each other about the final price since both parties seek to improve their state of affairs through means of the transaction.
3.3 Negotiation Tactics and Appraisal Methods
Before engaging in negotiation, both presumptive seller and purchaser separately compute their strictly confidential (Matschke, 1975, p. 11; Matschke, 1976, p. 519; Matschke, 1979, p. 18) individual marginal prices applying investment appraisal (e.g., Hering, Toll, and Kirilova, 2015b, p. 1), which, then, limit the range of acceptable prices, that is, the potential area of agreement (Matschke, 1979, p. 57). Since man is a purposeful being (e.g., Herbener, 2011, p. 14), his action always aims at particular ends. Mises (1998 [1949], p. 11) emphasizes:
Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines his life.
The action of negotiating does not form an exception to this rule; rather, acting man engages in negotiation to reach a certain goal, his negotiation tactics serve a particular purpose. According to the end involved parties aim at, that is, wealth maximization (e.g., Mises, 1998 [1949], pp. 241–243; Rothbard, 2001, pp. 104, 213, 231), both buyer and seller intend to maximize their share of the transaction’s benefit through negotiating with each other (Matschke, 1975, p. 11; Matschke, 1976, p. 521; Olbrich, Quill, and Rapp, 2015, p. 32).For practice-oriented guidance on how to negotiate, see, e.g., Ury (1991); Fisher, Ury, and Patton (2011); Voss and Raz (2016). Herbst et al. (2018) as well as Nagler et al. (2018) provide some current insights on negotiation management. To do so, they will want to reach an agreement at a price as close as possible to the opponent’s marginal price, that is, one that is still acceptable since beneficial to him. Rothbard (2001, p. 109) explicates:
Clearly, Johnson will try to set the price of the horse as high as possible, while Smith will try to set the price as low as possible. This is based on the principle that the seller of the product tries to obtain the highest price, while the buyer tries to secure the lowest price.
Even though a price slightly below (purchaser) or slightly above (seller) the marginal price is beneficial and, hence, acceptable, both parties will engage in a purposive negotiation aiming to maximize their share of the gain to be established through the exploitation of the potential exchange. Menger (2007, p. 195) notes:
It is easily seen that A [, given his marginal price of 100 units of grain,] could provide better for the satisfaction of his needs even if he should have to give 99 units of grain for the 40 units of wine, and that B [, given his marginal price of 80 units of grain,] would be acting economically on the other side if he were to accept as little as 81 units of grain in exchange for his 40 units of wine. But since there is an opportunity for both economizing individuals to exploit a much larger economic advantage, each of them will direct his efforts to turning as large a share as possible of the economic gain to himself. The result is the phenomenon which, in ordinary life, we call bargaining. Each of the two bargainers will attempt to acquire as large a portion as possible of the economic gain that can be derived from the exploitation of the exchange opportunity, and even if he were to try to obtain but a fair share of the gain, he will be inclined to demand higher prices the less he knows of the economic condition of the other bargainer and the less he knows the extreme limit to which the other is prepared to go.
In order to reach a worthwhile agreement, involved parties, therefore, necessarily need not only know their own marginal prices but also need to form an assumption about the opponent’s marginal price (Matschke, Brösel, and Matschke, 2010, p. 6; Brösel, Toll, and Zimmermann, 2012, p. 95; Matschke and Brösel, 2013, p. 622).
Within the negotiation about the transaction of a firm, involved parties usually agree upon a certain appraisal method and negotiate about the corresponding input data rather than merely proposing actual price offers as commonly known from, for example, auctions or flea markets (Matschke, 1976, p. 520; Matschke and Brösel, 2013, pp. 615–616). A party’s negotiation tactics and its proposal for applicable appraisal methods being subject to the negotiation are neither arbitrary nor random; rather, acting man will select the appraisal method and choose the negotiation tactics he prefers purposefully in light of the overall end of the negotiation process, that is, to reach the most profitable agreement. Basically, every imaginable method, which serves to support the quoting party, can be reasonably applied for that purpose. However, methods that are widely known, generally accepted, arbitrarily adjustable, and considered to result in “fair” and “impartial” prices suit best to convince the opposing party of a particular agreement (Matschke, 1976, p. 523; Matschke and Brösel, 2013, p. 624). In other words, conventional appraisal methods are the best fit for negotiation purposes. In recent years, so-called market-value-orientedMises (1951, p. 113) emphasizes: “Only the individual thinks. Only the individual reasons. Only the individual acts.” Since individual action is the visualization of man’s valuations (Mises, 1998 [1949], p. 120), furthermore, only individuals value. Therefore, the prevalent term “market value” is—at best—delusive. Unlike any individual, the market in the aggregate does not and cannot value anything; rather, the market reflects prices resulting from individuals’ valuations and actions. Only under the rigid and unrealistic assumptions that underpin neoclassicism, values and prices equate to one another. Only then does a reference to “market value” make any sense. In the real world, however, the term is nothing but preposterous. methods dominate among business appraisals and, hence, are considered the state of the art (e.g., Olbrich, Quill, and Rapp, 2015, pp. 6–8). Market-value-oriented methods subsume both (1) neoclassical finance-theory-based discounted cash flow methods (DCF) and (2) methods of so-called relative valuation (e.g., Matschke and Brösel, 2013, pp. 125–126).
While both concepts suffer from various profound issues and are, hence, of no use to support valuing man in an investment decision (e.g., Olbrich, 2000, pp. 458–459; Hering, Olbrich, and Steinrücke, 2006, pp. 411–413; Brösel, Matschke, and Olbrich, 2012, pp. 241–242; Olbrich, Quill, and Rapp, 2015, pp. 12–17; Herbener and Rapp, 2016, pp. 20–23), they perfectly meet the demand for negotiation purposes (e.g., Brösel, Toll, and Zimmermann, 2012, p. 96–97; Matschke and Brösel, 2013, p. 624),Functional business valuation theory stresses the significance of purpose-orientation for each and any business appraisal. See, for example, Matschke, Brösel, and Matschke (2010) and Matschke and Brösel (2013). since they are (for whatever dubious reason)Olbrich, Quill, and Rapp (2015, pp. 7–8) provide some insights on the unbounded popularity of prevalent DCF methods. generally accepted, adjustable as needed, and seemingly objective. As long as market participants believe in the superiority of such “objective” methods of business appraisal, subjectivists can make use of that misbelief in order to reach a preferable negotiation result (e.g., Matschke and Brösel, 2013, p. 624; Hering, 2014, p. 222).
One exemplary DCF variant, the flow-to-equity method, can be illustrated as follows (similarly Matschke and Brösel, 2013, p. 725):
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To allow for face saving of the quoting party throughout the negotiation, an appraisal method suits best if it incorporates a certain degree of adaptability without seeming questionable (Matschke, 1976, pp. 523–524; Matschke and Brösel, 2013, pp. 620, 665). DCF methods’ adaptability can, for example, be shown by means of analyzing the popular and Nobel Memorial Prize awarded Capital Asset Pricing Model (CAPM) usually serving to deduce the so-called cost of equity,Even though frequently applied in the broader sphere of finance, the term “cost of equity” is meaningless. (Money) costs are caused by the input factors of, for example, a product, such as raw materials or labor. The dividends distributed to a company’s shareholders, however, reflect the appropriation of a firm’s net income, that is, the output of its operations. Therefore, to refer to (money) costs while actually meaning appropriation of net income mixes two entirely different things up and is, hence, both inaccurate and fallacious that is, (parts of) the discount rate (e.g., Fama and French, 1997, p. 153; Koller, Goedhart, and Wessels, 2015, p. 286). CAPM’s essential conclusion (the expected return of a particular security j (“µj”) equals a “risk-free” rate (“i”) plus a risk premium which reflects the surplus of the expected return of the market portfolio (“µM”) over the “risk-free” rate multiplied by the beta-factor (“βj”)) can be visualized as follows (e.g., Hering, 2015, p. 301):
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The practically applied data for the “risk-free” rate, the expected market return, and the beta-factor cannot perfectly match the theoretical demands of the CAPM (e.g., Hering, 2017, p. 309) simply because its assumptions are not met in reality as the model has an entirely hypothetical nature (e.g., Herbener and Rapp, 2016, p. 22). Hence, the input data are never correct or false; rather, they are the outcome of a willful choice. For instance, the appraiser will usually select a particular government bond (country, maturity, ...) as an approximation for the “risk-free” rate (Damodaran, 2012, pp. 154–155), and a certain stock index (country, industry, period, ...) as a substitute for the theoretically correct market portfolio (Hering, 2017, pp. 302, 309) which shall incorporate the performance of every risky asset rather than merely stocks (Damodaran, 2012, p. 66; Hering, 2017, p. 298). Therefore, CAPM’s inherent degrees of freedom alone—apart from other factors within a DCF appraisal such as the estimation of future cash flows or the computation of a weighted average cost of capital—allow for the justification of basically any price offer supporting the quoting party taking into account both its own and the opponent’s marginal price.
In contrast to the present-value-based DCF methods, so-called “relative valuation”The pleonastic term “relative valuation” fails to describe the special features of this approach sufficiently, since every valuation is in relative terms in the sense that it takes into account at least one alternative course of action. aims to capture the “market value” of a business either based on that business’s market capitalization or the market capitalization of or prices recently paid for (seemingly) comparable companies (Olbrich, 2000, pp. 455–457). For instance, one particular variant of “relative valuation” seeks to compute the appraised firm value of a particular company (“A”) through assessing the market capitalization of one comparable company or several comparable companies (“CC”), dividing it by a particular reference figure of the comparable company or the comparable companies, such as the EBIT, EBITDA, or net income, and to multiply the resulting factor with the respective reference figure of the company being appraised (Olbrich, 2000, p. 456). Hence, it can be visualized as follows:
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Comparable to the application of DCF methods, “relative valuation” suits well for negotiation purposes, since this approach incorporates a high degree of both adaptability and credibility. For example, the selection of comparable companies, the assessment of their market capitalization, and the selection of applicable reference figures allow for more or less arbitrary modeling (e.g., Olbrich, 2000, p. 459; Matschke and Brösel, 2013, p. 680). Moreover, the justification of “fair values” based on observable prices in the marketplace appears to be credible (e.g., Matschke and Brösel, 2013, p. 678). Therefore, this approach suits well for negotiation purposes too.
- CONCLUSIONS Robinson Crusoe engages in autistic exchange only. His actions aim at substituting one state of affairs by a more preferable state of affairs without referring to other individuals. In such an autistic economy, valuation alone is a sufficient condition for economizing decisions. In a market economy, in contrast, economizing decisions concerning, for example, consumer goods rely on both appraisement and valuation. While economizing decisions concerning investments, for example, the purchase of a firm necessitate both as well, however, they are different in two respects: First, appraisement and valuation are necessary yet not sufficient. Investment decisions require knowledge of the barely acceptable price, that is, the application of investment appraisal. Second, the final valuation of a business enterprise is infeasible in the first place, since one lacks knowledge of the asking price beforehand. The price, therefore, must be negotiated. Praxeologically, the negotiation process has to be interpreted as a repetitive series of valuations reflected in the proposal, acceptance, or rejection of price offers. To maximize their share of the benefit of the transaction, both buyer and seller will purposefully engage in a negotiation aiming to reach a price which ought to be as close to the opponent’s marginal price as possible. To accomplish such worthwhile agreement, application of DCF methods and “relative valuation” suit best as they are both highly adaptable and credible.
The Murray N. Rothbard Memorial Lecture, sponsored by Don Printz. Includes and introduction by Joseph T. Salerno.
The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.
The Lou Church Memorial Lecture, sponsored by the Lou Church Foundation. Recorded at the Mises Institute on March 23, 2019. Includes an introduction by Joseph T. Salerno.
The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian School, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and is directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.
You probably haven't read Carl Menger's Principles of Economics, but you should: it's a groundbreaking work that created a new theory of value and built a foundation for praxeology. Dr. Joe Salerno joins us for the definitive podcast on the founder of the Austrian school.
Dr. Joe Salerno's brief biography of Menger
Dr. Peter Klein's foreword to Principles of Economics
Carl Menger's Principles of Economics online in PDF and ePub formats
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Professor Peter Klein joins The Human Action Podcast to explain how and why.
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David Gornoski is the creator of ANeighborsChoice.com, a media platform that tells the stories of victims of State violence and which provides healthy alternatives to a violence-based society. David hosts the Orlando-based “A Neighbor’s Choice” radio program on WFLA 93.1 FM and 540 AM. Much of his work is an application of René Girard’s mimetic theory.
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To understand the marketplace, it is not necessary to believe in the existence of a selfish, profit-maximizing human.
Original Article: "The Homo Economicus Straw Man".
Bob gives the context for his children’s book, The Three Lads and the Lizard King. He covers a wide range of related issues, including Jim Carrey’s Illuminati “warning” (?), nonviolence, and the sovereignty of God.
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[Note: Henry Hazlitt considered The Foundations of Morality to be his most important work. The following two reviews of that book were found in one of the many boxes of papers generously given to the Mises Institute by Bettina Bien Greaves. Bettina wrote in a letter to Hazlitt "It seems to me this is your very best book, and one that will live through the centuries." Unfortunately The Foundations of Morality never received the audience recognition he would have liked, but as Bettina said, it is a book for the ages. Bettina was right because it remains immensely important today.]
"Codes to Live By" — Rosalie Gordon writing in America's Future (April 1973):
It is particularly fitting that there now be re-issued (it was first published in 1964) this seminal work by one of America's most distinguished journalists, economists and philosophers. Henry Hazlitt is as far as one can get from that breed of "instant" analyzers and accepters of current modes, which is merely another way of saying he thinks — thinks things through. And in these times, when at long last great numbers of our people are beginning to question the so-called "new morality" (which is neither new nor moral), his book could provide a needed buttress for that questioning. Besides, it will outlast by many decades the screeds of the "instant thinkers."
As an economist, Mr. Hazlitt is a practical man. As a moral philosopher, he understands the need for a rational basis for an ethical way of life. Contrary to modern "new morality" preachings, civilized man must have codes to live by; otherwise all is chaos and barbarism. Mr. Hazlitt traces most interestingly man's search for such codes throughout history, down to the present day. And between the Scylla of complete self-interest and the Charybdis of complete altruism, he reaches what he calls cooperatism — not the misnamed "social cooperation" of the socialist-communist state which imposes its dictators' brand of thinking on the people, but the sort of cooperation which flows naturally from men and women (as nearly as can be expected of fallible human beings) living by an individual ethical code which, being best for them, in the end is best for the whole society.
He puts it this way:
... social cooperation is the essence of morality. And morality, as we should constantly remind ourselves, is a daily affair, even an hourly affair, not just something we need to think about only in a few high and heroic moments. The moral code by which we live is shown every day, not necessarily in great acts of denunciation, but in refraining from little slights and meannesses, and in practicing little courtesies and kindnesses. Few of us are capable of rising to the Christian commandment to "love one another," but most of us can at least learn to be kind to one another — and for most earthly purposes this will do almost as well.
We found especially discerning Mr. Hazlitt's analysis of the moral or ethical bases of capitalism and socialism. He sees clearly that because capitalism promotes freedom, justice and productivity it has far more right to be called "social" (or "moral") than socialism which in its despotism actually promotes a code of immorality.
He cites, among other disciples of socialism, Lenin, who declared: "We must be ready to employ trickery, deceit, law-breaking, withholding and concealing truth. We can and must write in a language which sows among the masses hate, revulsion, scorn, and the like toward those who disagree with us."
We cannot begin to indicate the wide scope of this study, save to say that the author delves deeply into the relationship of ethics or morality to law, economics, equality and inequality, freedom, rights and even (bless him — could anything be more necessary these days?) to good manners!
The Foundations of Morality — Bettina Bien Greaves writing in The Freeman (June 1973):
The many contradictions among different philosophical theories have caused much confusion over the years. Unfortunately, too few teachers and textbooks explain the basic principles that could help students discriminate intelligently among them and understand the ethical code which fosters freedom, morality and social cooperation. Thus, Henry Hazlitt deserves special credit for bringing logic and clarity to the subject. His book, The Foundations of Morality, was first published in 1964. After having been out of print for several years, it is again available thanks to Nash and the Institute for Humane Studies.
The author is primarily an economist, a student of human action. As a result, he is a strong advocate of individual freedom and responsibility. He has long been a close personal friend and associate of Professor Ludwig von Mises, the "dean" of free market economics, to whom he acknowledges a great intellectual indebtedness. With this background, he is well qualified to discuss the ethics of social cooperation. His many years of "apprenticeship" as essayist, book reviewer and columnist (New York Times, Wall Street Journal, Newsweek, The Freeman, National Review and many others) prepared him well for explaining complex matters simply. The reader may wish to pause, ponder and reflect from time to time on the ideas and concepts presented, but the author's reasoning is clear, his prose unambiguous and most chapters delightfully short.
Mr. Hazlitt's position is that "the interests of the individual and the interests of society," when "rightly understood" are in harmony, not conflict. His goal in writing this book was "to present a 'unified theory' of law, morals and manners" which could be logically explained and defended in the light of modern economics and the principles of jurisprudence. This reviewer believes most readers will agree that Mr. Hazlitt succeeded. He has marshalled the ideas of many philosophers and analyzed them with careful logic. He has explained many of the contradictions among them, thus disposing of much confusion. He has formulated a consistent moral philosophy based on an understanding of ethical principles, so frequently ignored in today's "permissive" climate, which promote peaceful social cooperation and free enterprise production.
Mr. Hazlitt points out that our complex market economy requires peaceful and voluntary social cooperation. The preservation of the market is essential for large scale production and thus for the very survival of most of us. Therefore, social cooperation is the very most important means available to individuals for attaining their various personal ends. This means that social cooperation is also at the same time a well worthwhile goal. Let Mr. Hazlitt speak for himself.
For each of us social cooperation is of course not the ultimate end but a means. ... But it is a means so central, so universal, so indispensable to the realization of practically all our other ends, that there is little harm in regarding it as an end-in-itself, and even in treating it as if it were the goal of ethics. In fact, precisely because none of us knows exactly what would give most satisfaction or happiness to others, the best test of our actions or rules of action is the extent to which they promote a social cooperation that best enables each of us to pursue his own ends.
Without social cooperation modern man could not achieve the barest fraction of the ends and satisfactions that he has achieved with it. The very subsistence of the immense majority of us depends upon it.
The system of philosophy outlined in the book is a form of utilitarianism, "insofar as it holds that actions or rules of action are to be judged by their consequences and their tendency to promote human happiness." However, Mr. Hazlitt prefers a shorter term, "utilism," or perhaps "rule utilism" to stress the importance of adhering consistently to general rules. He suggests also two other possible names — "mutualism" or "cooperatism" — which he thinks more adequately reflect the central role of social cooperation in the ethical system described.
The criterion for judging the consistency or inconsistency of a specific rule or action with this ethical system is always whether or not it promotes social cooperation. Mr. Hazlitt reasons from the thesis that social cooperation is of benefit to everyone. Even those who might at times like to lie, cheat, rob or kill for personal short-run gain can usually be persuaded of the longer-run advantages of social cooperation, i.e., of refraining from lying, cheating, robbing or stealing.
Even the most self-centered individual, in fact, needing not only to be protected against the aggression of others, but wanting the active cooperation of others, finds it to his interest to defend and uphold a set of moral (as well as legal) rules that forbid breaking promises, cheating, stealing, assault, and murder, and in addition a set of moral rules that enjoin cooperation, helpfulness, and kindness. ...
The predominant moral code in a society is compared with language or "common law." Society does not impose a moral code on the individual. It is a set of rules, hammered out bit by bit over many centuries:
[O]ur moral rules are continuously framed and modified. They are not framed by some abstract and disembodied collectivity called "society" and then imposed on an "individual" who is in some way separate from society. We impose them (by praise and censure, approbation and disapprobation, promise and warning, reward and punishment) on each other, and most of us consciously or unconsciously accept them for ourselves. ...
This moral code grew up spontaneously, like language, religion, manners, law. It is the product of the experience of immemorial generations, of the interrelations of millions of people and the interplay of millions of minds. The morality of common sense is a sort of common law, with an indefinitely wider jurisdiction than ordinary common law, and based on a practically infinite number of particular cases. ... [T]he traditional moral rules ... crystallize the experience and moral wisdom of the race.
But what about religion, you say? Doesn't a moral code have to rest on a religious bases? The fundamental thesis of this book as noted, is that reason and logic are sufficient to explain and defend the code of ethics which fosters and preserves social cooperation. Yet, the author does not ignore religion. He calls attention to similarities among the world's great religions and the contradictions in some of them. Religion and morality reinforce one another very often, he says, although not always and not necessarily. Here is his description of their relationship:
In human history religion and morality are like two streams that sometimes run parallel, sometimes merge, sometimes separate, sometimes seem independent and sometimes interdependent. But morality is older than any living religion and probably older than all religion. ... [W]hile religious faith is not indispensable [to the moral code] ... , it must be recognized in the present state of civilization as a powerful force in securing the observance that exists. ...
The most powerful religious belief supporting morality, however, seems to me ... the belief in a God who sees and knows our every action, our every impulse and over every thought, who judges us with exact justice, and who whether or not He rewards us for our good deeds and punishes us for our evil ones, approves of our good deeds and disapproves of our evil ones. ...
Yet it is not the function of the moral philosopher, as such, to proclaim the truth of this religious faith or to try to maintain it. His function is, rather, to insist on the rational basis of all morality, to point out that it does not need any supernatural assumptions, and to show that the rules of morality are or ought to be those rules of conduct that tend most to increase human cooperation, happiness and well-being in this our present life.
Mr. Hazlitt discusses many perplexing ideas and concepts such as natural rights, natural law, justice, selfishness, altruism, right, wrong, truth, honesty, duty, moral obligation, free will vs. determinism, politeness, "white lies." Anyone who has speculated on these problems without reaching satisfactory conclusions, as has this reviewer, will no doubt find his analyses and comments both stimulating and enlightening.
The book contains numerous quotations from the works of early and recent philosophers, which the author always analyzes for their consistency with social cooperation. Except for a few technical philosophical terms — such as tautology (repetition of the same idea in different words), eudaemonism (the doctrine that happiness is the final goal of all human action) and teleotic (an adjective derived from the Greek meaning end, design, purpose or final cause) — readers should not find anything in the book really difficult to understand. As they follow the author's line of thought, they will discover that reason and logic come to the defense of morality; order and a common sense ethical code evolve from philosophical chaos.
Mr. Hazlitt has long been a noted free market economist — one of the very best. His introductory Economics In One Lesson is a long-time best seller. The Failure of the "New Economics," a careful critique of Keynes, is a real contribution to economic theory. With the publication of The Foundations of Morality in 1964, he added another very important feather to his cap as a moral philosopher. It is good to have it in print again.
To summarize, the author explains again and again, in the course of the book under review, that the rules of ethics are neither arbitrary nor illogical. They are not mere matters of opinion. They are workable, acceptable, moral rules developed over long periods of time. They must be adhered to consistently and may not be willfully violated without detriment to social cooperation. In this age of permissiveness, when everyone is encouraged "to do his own thing" and few see any urgency in respecting the rights of others, it is a rare philosopher who recognizes that the consistent adherence to a set of ethical rules promotes social cooperation and benefits everyone in society. Perhaps a free market economist, whose very field of study encompasses the role of social cooperation, is the most appropriate person to explain the logic of this position. This book should live through the centuries.
In 1931 Kurt Gödel published his now-famous "incompleteness theorems," which showed the limitations of axiomatic systems of mathematics. Specifically, Gödel showed: (1) there are true statements about numbers that humans will never be able to prove, and (2) a mathematical system that is internally consistent (i.e. doesn't generate contradictions) cannot prove its own consistency. These results have been widely cited not just in mathematics but also philosophy and computer science, as they completely revolutionized our understanding of knowledge itself. It this episode Bob gives an intuitive explanation of what Gödel precisely did and how he did it.
For more information, see BobMurphyShow.com. The Bob Murphy Show is also available on iTunes, Stitcher, Spotify, and via RSS.
[Previously unpublished online; Faith and Freedom 2, no. 7 (March 1951).]
Jeffersonian or Hamiltonian? Every college student, indeed every literate person, is expected to choose up sides and pin a label on himself in the Great Debate. Most people today consider themselves as Jeffersonians. Groups as diverse as the States' Rights (or Dixiecrat) movement and the Communists consider themselves heirs to the Jeffersonian mantle. At one and the same time, conservative southerners refer to themselves as "Jeffersonian Democrats," while the leading revolutionary Marxist school in the country is called the "Jefferson School of Social Science." Amidst this welter of confusion, to find the true picture of Jefferson the man and political philosopher is an extraordinarily difficult task.
A Bewildering Mosaic Analysis of Jefferson is made far more difficult by the complex nature of Jefferson's personality and career. A man of brilliant intellect; keenly interested in the whole range of human thought, from economics to architecture to scientific farming; active, dynamic, and spirited in an amazing multitude of enterprises, and moreover a political leader the greater part of his life, necessarily presents to posterity a bewildering mosaic. Politics itself is a day-to-day affair, imposing by its very nature on the politician a series of shifts and compromises. Thomas Jefferson combined within himself the qualities of a soaring intellectual spirit, searching for political principle, busy man of affairs, and political boss. When it is further remembered that Jefferson dominated the stage during the most vital years of the Republic (Revolution Independence, Constitution, Growth, War, etc.), it becomes more understandable that so many contrasting groups can pick out of his immense record of writings and actions support for their own ideologies.
A Mere Scribbler? But to an unbiased observer who explores Thomas Jefferson, his principles stand out indelible and crystal clear. His political philosophy has been imbedded deep into the very soul of America, and has imprinted itself on the minds of innumerable Americans of later generations. His achievement has been sneered at by Hamiltonians of our day as well as his. Hamilton, they claim, was a constructive and practical man of action. He funded the national debt, reformed the administration of government, established a national bank, etc. Jefferson was a mere phrase-maker and scribbler. These "practical men" fail to grasp that the forces which generate the actions of men, and therefore human history, are, for good or bad, the ideas of men. It is ideas, political, economic, ethical, esthetic, religious, that have prime significance for human action in the present and over the centuries. It is ludicrous to claim that Hamilton's financial measures were of comparable importance to the Declaration of Independence or the Kentucky Resolutions.
The battle between Jefferson and Hamilton, however, is of very great significance, and precisely because it represented a clash between two fundamentally contrasting systems of political principle. Jefferson's political philosophy is summed up in the phrase: "That government is best which governs least." It received its finest expression in our own Declaration of Independence: man is endowed by God with certain natural rights; "to secure these rights, governments are instituted among men, deriving their just powers from the consent of the governed," and when government becomes destructive of that end, the people have the right to change the form of government accordingly. Thus Jefferson, as John Locke had done a century before, drastically shifted the moral emphasis from the State to the individual. In the absolutist and feudal era from which the world was beginning to emerge, divine right settled only on the kings, the nobility; in short, the State and its rulers. To Jefferson, the divine rights were conferred on each and every individual, not on rulers of government.
The Great Jeffersonian Lesson What were these natural rights? The fundamental right, from which all others are deduced, is the right to life. Each individual has the moral right to live without coercive interference by others. To live, he must be free to work and acquire property, to "pursue happiness." In political terms, the one important natural right is self-defense; defense of one's life, liberty, and property from invasive attack. Government's function, then, is to use its power of force to prevent and combat attempts to use force in the society. If the Government extends its powers beyond this "cop-on-the-corner" function, it in itself becomes the greatest tyrant and plunderer of them all. Since the Government has virtual monopoly of force, its potentialities for evil are far greater than that of any other institution. The people must constantly keep their Government small and local, and even then must watch it with great vigilance lest it run amok. That is the great Jeffersonian lesson, and it is one that all Americans must begin to learn again.
From this basic cornerstone, the rest of the Jeffersonian edifice is easily deduced. It explains his passionate, lifelong adherence to States' Rights, his determined opposition to John Marshall in the latter's successful campaign to make the Constitution more elastic so as to permit wider extension of federal power, his very distrust of the Constitution itself and insistence upon incorporating a Bill of Rights.
Jefferson's position on foreign policy stemmed from the same source. He did not believe that our government, or any government, is equipped to remake the world by force to our own liking. He was frankly a whole-hearted patriot, whose natural love of the soil and his country was reinforced by the fact that America constituted the Great Experiment in Liberty. His foreign policy was expressed in this classic phrase: "Peace, commerce, and honest friendship with all nations-entangling alliances with none." Particularly marked was his perceptive distrust of the wily imperialism of Great Britain.
The Fundamental Cleavage In the economic sphere, Jefferson was not anti-capitalist, as his enemies charged. He believed in genuine freedom of enterprise, unencumbered by government regulation or grants of monopoly privilege. His opposition to paper money and a central bank were based on profound insight into the then new science of economics. Jefferson's almost unknown writings on banking, money, and depressions demonstrate that he was head and shoulders over the allegedly "practical men" who opposed him. What has since been interpreted as anti-capitalist rhetoric, was simply expression on Jefferson's part of a personal preference for the soil and a distaste for the life of the cities.
The importance of the Jefferson-Hamilton struggle has been unfortunately obscured. It is a struggle which, in one form or another, has continued to mark our country since its inception. Hamilton and the Federalists believed in ever-expanding power of the federal government, a myriad of governmental regulations, controls, and special privileges in economic life, the crushing of the states, and limiting the rights of the individual. Their ideal was the British model — a strong monarch ruling the country in behalf of the "general welfare"; failing the adoption of a monarch, a strong President to act as benevolent despot. In foreign affairs, the Federalists looked to the British Empire as friend and ally. Hamiltonian Federalism was, in the profoundest sense, un-American; it represented a conscious harking back to the imperial British mode, a retention of the typically European forms of strong central government and semi-socialist "planned economy." Our Constitution was forged as a compromise between the Jefferson and Hamilton forces, with James Madison acting as the eternal tightrope-walker and fence-straddler between the two camps. The trappings, the rhetoric, the specific issues have changed, but the fundamental cleavage remains, unresolved, on the American scene.
[This article originally appeared in the publication New Libertarian in April 1985.]
Since anarchists and other libertarians are, to say the least, an embattled minority, we have tended to be indulgent toward anyone and everyone in our ranks, even those who have been busily pecking away at the vitals of the libertarian position; Or, to change our metaphor, who have been picking off stragglers as we try to continue our march against the State. Without going all the way with Orthodox Randians who excommunicate anyone that makes a slight error over Concept or Percept, or who confesses a sneaking preference for Bach over Chopin, I say it is high time to take off the gloves in the struggle against those whom Sam Konkin incisively calls "Natural Outlaws." (Or, as in the classic joke about Hitler in the Bunker, "From now on, no more Mr. Nice Guy!")
For many years now, first as anarcho-Stirnerites and now also as anarcho-pragmatists, the Natural Outlaws have been firing away from inside their supposedly impregnable fortress of ethical nihilism, sneering at such fundamental libertarianism as individual rights and rational ethical principles. Since the Outlaws stand for nothing, they believe they can remain permanently blessed with the advantage of the strategic offensive. They are akin to some group who might, say, pester physicists with the demand: "Nyah, nyah, prove to me that physics is a science!" If the physicist tries to defend himself, it is seemingly easy for the critic, secure in his ignorance, to keep up the verbal challenge. I remember once a young libertarian (who, characteristically, was soon to become a lifelong Orthodox Randian) saying to me, in all seriousness, "How do they [Establishment astronomers) know that the sun is 93 million miles away? To me it looks like a few thousands miles!" And how, indeed, could an "Establishment" astronomer reply verbally, unless to say, "For Chrissake, go, study!" And this is also the proper answer to those who challenge the existence of rights and moral principles. The standard rebuttal of the Outlaws that moral theorists or rights theorists differ among themselves, doesn't wash either; for so do physicists and astronomers, but this hardly means that no such disciplines exist.
The nihilists remind me of the classic bore at college bull sessions: "Nyah, nyah, prove to me that this chair exists!" Trying desperately for "proof" accomplishes nothing, of course, to wipe the mocking smile off the face of the Outlaw. In a deep sense, and on many levels, the proper riposte is to hit the Outlaw over the head with the chair. For one thing, the purpose of philosophic discourse is, or should be, to arrive mutually at the truth, not to engage in parlor games or verbal fencing. To engage in such games, to be a bravura pest for pest's sake, is to put oneself outside the realm of rational discourse. (But this, of course, is a moral as well as factual statement!)
It is high time, then, that ethicists and natural lawyers take the strategic and tactical offensive. The fastest and most thorough way of disposing of a philosophic enemy, as all good Aristotelians know, is to show that he is mired inextricably in self-contradiction. In this essay, I propose to show that anarcho-pragmatism and anarcho-Stirnerism (or at least their preaching) is self-contradictory and therefore wrong on their own terms.
First, the trouble with pragmatism, and especially anarcho-pragmatism, is that it doesn't work. And since pragmatists believe that the only truth is whatever "works," that settles that (setting aside such deep problems as the meaning of "work:" work for "what," etc.). Take, for example, the severe criticisms that Jorge Amador, the guru of anarcho-pragmatism, has made of the Bergland-Lewis presidential campaign, in his organ, The Pragmatist. Amador's critique is that the LP was (a) too gradualist, and also (b) ideological. In other words, his preferred campaign would be radical anarchist to the hilt, and yet non-ideological. That is, all talk of moral principles or rights would be tossed aside. Not only that: we could no longer call the State an organization of a criminal ruling class, because "crime" itself is a moral and natural-law concept, and presumes immoral criminals ripping off innocent victims. So what would an Amadorean LP campaigner talk about? He would confine himself to demonstrating the pragmatic virtues of the radical anarchist alternative.
But this is a tall order indeed. In fact, a virtually impossible one. The pragmatic radical anarchist is faced immediately with powerful critiques from pragmatic statists. He can show, for example, that anarchy would increase production, yield a higher standard of living, etc., in the long run. But in the short run, lots of the privileged, subsidized, or monopolistic would be cast adrift. All these short-run and maybe intermediate-run problems could only be offset by vague future benefits. But why pragmatically, should everyone prefer the long-run to the short-run? What about the high-time preference people, who thus challenge the Amadorean: "Look here, fella, I know the pragmatic benefits I'm getting from the current system. And I know, too, the headaches, the disruptions, the losses that I and lots of others will suffer during the lengthy 'transition' period. Even if you've convinced me that eventually I might benefit, these benefits are too chancy and too long-run for me to want to risk it." And if the average person cannot be sold on radical immediatist anarchism, a fortiori the criminal ruling class, those net beneficiaries of the State, they who might well be losers even in the long-run, certainly won't be convinced. At best, the Amadorsymp will say: "Well, I admit this anarchism sounds pretty good. But pragmatically, to ease the transition and minimize the costs that even you admit, let's move toward the ideal very, very gradually." And we are back, will-nilly, to the Republication or Democrat Party, the master "gradualists" of us all.
It is no accident, then, that Democrats and Republicans proudly call themselves "pragmatists." Sure, they believe in freedom, in peace, in free markets, in all the goodies, but these goals have to be approached, they tell us, piecemeal, by the groping push-and-pull of the democratic consensus. And we are back hip deep in the status quo. "Radical pragmaticism" of any sort, whether anarcho or Khomeino or whatever, is virtually a contraction in terms.
But this is only the beginning of our story. For it is also no accident that never in history has pragmatism inspired any sort of radical or revolutionary movement for social change. For who in hell would join a radical minority movement, and commit him- or herself for life to social obloquy and a marginal existence, for the sake of 20% more bathtubs, or 15% more candy bars? Who will man the barricades either physically or spiritually, for more peanuts or Pepsi? Look at all radical or revolutionary movements of the 20th century, whether they be Communist or fascist or Khomeiniite. Did they struggle and move mountains for a few more goods and services, for what we used to call "bathtub economics?" Hell no, they moved mountains and made history out of a deep moral passion that would not be denied. What moves men and women and changes history is ideology, moral values, deep beliefs and principles.
It is no coincidence, then, that even in the libertarian movement, the people who have stuck to it over the years have been almost exclusively the believers in rights and possessors of moral passion. The libertarian pragmatists, what the Marxists call "economists," have generally hived off to good jobs and have forgotten any movement concerns. And, by their lights, why not? Why not let the crazy ideologues worry about the movement and about liberty? The pragmatists, as usual, will just take what comes.
Anarcho-Pragmatism, then, simply doesn't work. It cannot push radicalism among the public, and it cannot build a radical movement. All it can do is subvert, weaken, and, if unchecked, even destroy the libertarian movement which the anarcho-pragmatists claim they are striving to strengthen and promote. Objectively, anarcho-pragmatists can only function as wreckers of libertarianism, And since moral passion and ideology work and pragmatism doesn't, the anarcho-pragmatists have a pragmatic obligation either to convert to natural rights, or, at the very least, to pretend to convert and then use natural rights and ideology as a weapon with which to build an anarchist movement. Objectively, then, and on their own terms, the anarcho-pragmatists have a solemn duty to surrender, to shut up about their doctrines and abandon the field.
The same is true of the anarcho-Stirnerites, they who proclaim loudly that all moral principles and rights are mere "spooks in the head," internalized restraints upon their sovereign will. To the Stirnerites, only might makes right, and each individual has the right to grab whatever he wishes. It has always struck me as ludicrous for a dozen or so anarcho-Stirnerites to swagger around, proclaiming that might is the only right. In any contest of might between the anarcho-Stirnerites and the State, who do they think is going to win? For a tiny minority to preach might-makes-right makes no sense whatever. In fact, what makes sense, from either a pragmatic or a Stirnerite point of view, is to proclaim one's absolute devotion to individual rights even if one doesn't believe it. And what in the world should stop a pragmatist or a Stirnerite from lying in this way? Surely, not devotion to absolute truth, the denial of which is crucial to the nihilist creeds of pragmatism and Stirnerism!
The Stirnerite obligation, on Stirnerite grounds, to pretend to be a moralist and a believer in property rights runs even deeper than that. For who in the world will deal with or trust any person who loudly proclaims his contempt for property rights and moral principles? It should be obvious to the thickest Stirnerite that if he wants to pursue a ruthless amoral policy of steal and grab, he could not do so by proclaiming Stirnerism to the high heavens. No, as Machiavelli counseled the Prince, the Prince must pretend to morality and the Christian virtues while secretly practising the opposite whenever opportunities arise. (Oddly enough, Machiavelli himself violated his own rule by proclaiming Machiavellism!) So therefore Stirnerism itself requires that Stirnerites shut up and pretend to be moralists and natural lawmen. And, once again, any balking at such pretense in the name of devotion to truth would, in itself, violate Stirnerism by surrendering Stirnerite self-interest to the constraining "spook" of objective truth.
But, you might ask, if the Stirnerites and pragmatists surrender to their own logic and shut up and pretend to be natural lawyers, would I not be worried that their seeming conversion to rights and moral principles might be mendacious and inauthentic? No. I would cheerfully embrace that uncertainty for an end to the pollution of anarcho-nihilism and its baneful influence upon the libertarian movement. Let them practise their pragmatic or Stirnerite rites in the closet if they wish; they will at least have been neutralized.
But suppose, after my demonstration of their bounden duty, the anarcho-pragmatists and Stirnerites pay no heed, and keep sounding off anyway, as I strongly suspect will be the case. What will thus be demonstrated about the true motivations of our anarcho-nihilist comrades? Could it be, dare I say it, that they really don't give a hoot about the truth or principles of anarcho-pragmatism or anarcho-nihilism, and that, like the guy at the college bull session, they are simply interested in calling attention to themselves and being a pain-in-the-rear for its own sake? And if so, and I fear we may be driven to that conclusion, then the treatment they will deserve will be metaphorically the same as the guy hit by the chair. For they will have shown themselves to be outside the realm of rational discourse. They will be Outlaws indeed.
Among the great books of mankind are the immortal writings by the Greek philosopher Plato. The Republic and The Laws, written 2300 to 2400 years ago, dealt not only with philosophy, the theory of knowledge, epistemology, but also with social conditions. The treatment of these problems was typical of the approach which philosophical and sociological problems, discussions of state, government, and so on, continued to receive for more than 2000 years.
Although this approach is familiar to us, a new point of view toward social philosophy, the sciences, economics, and praxeology has developed during the last hundred years. Plato had said that a leader is called on by “Providence” or by his own eminence, to reorganize and to construct the world in the same way that a builder constructs a building—without bothering with the wishes of his fellowmen. Plato’s philosophy was that most men are “tools” and “stones” to be worked with for the construction of a new social entity by the “superman” in control. The cooperation of the “subjects” is unimportant for the success of the plan. The only requirement is that the dictator have the requisite power to force the people. Plato assigns to himself the specific task of being adviser to the dictator, the specialist, the “social engineer” reconstructing the world according to his plan. A comparable situation today may be seen in the position of the college professor who goes to Washington.
The Platonic pattern remained the same for almost 2,000 years. All the books of that era were written from this point of view. Each author was convinced that men were merely pawns in the hands of the princes, the police, and so on. Anything could be done, provided the government was strong enough. Strength was considered the greatest asset of government.
An indication of the success of this thinking may be realized in reading the adventures of Télémaque by Bishop Fénelon [François de Salignac de la Mothe Fénelon, 1651–1715]. Bishop Fénelon, a contemporary of Louis XIV, was an eminent and great philosopher, a critic of government, and tutor to the Duke of Burgoyne, heir to the French throne. Télémaque, written for the young Duke’s education, was used in French schools until recently. The book tells of world travels. In each country visited, all that is good is credited to the police; everything of value is attributed to the government. This is known as the “science of the police”—or in German Polizeiwissenschaft.
The eighteenth century saw a new discovery—the discovery of a different approach to social problems. The idea developed that there was a regularity in the sequence of social problems similar to the regularity in the sequence of natural phenomena. It was learned that legal decrees and their enforcement alone would not remove an ill. The regular sequence or concatenation of social phenomena must be studied to find out what can be done, and what should be done. Although regularity had been recognized in the field of the natural sciences, the existence of order and of regular sequences also in the field of social problems had not been recognized before.
The Utopian conditions of the natural state, as described by Jean Jacques Rousseau [1712–1778], are transformed, it was held, by “wicked” men and by their evil social institutions to produce the destitution and misery that exists. It was believed that the happiest man—the one living under the most satisfactory conditions—was the Indian of North America. North American Indians were idealized in European literature of that time; they were considered happy because they were not acquainted with modern civilization.
Then came Thomas Robert Malthus [1766–1834] with the discovery that nature does not provide the means of existence for everybody. Malthus pointed out that there prevails for all humans a scarcity of the requirements of subsistence. All men are in competition for the means of survival and for a share of the world’s wealth. The aim of man was to remove the scarcity and make it possible for a greater number of persons to survive.
Competition leads to the division of labor and to the development of cooperation. The discovery that the division of labor is more productive than isolated labor was the happy accident that made social cooperation, social institutions, and civilization possible.
If all production is consumed immediately, any improvement of conditions would be impossible. Improvement is possible only because some production is saved for use in later production—that is only if capital is accumulated. Savings are important!
In the eyes of all reformers such as Plato, the “body politic” could not operate without interference from the top. Intervention by the “king,” by government, and by the police was necessary to obtain action and results. Remember that this was also the theory of Fénelon; he described the streets, factories, and all progress as being due to the police.
In the eighteenth century, it was discovered that even in the absence of the police—even if no one gives orders—people naturally act in such a way that the fruits of production finally appear. Adam Smith [1723–1790] cited the shoemaker. The shoemaker doesn’t make shoes from an altruistic motive; the shoemaker provides us with shoes because of his own selfish interest. Shoemakers produce shoes because they want the products of others which they can get in exchange for shoes. Every man, in serving himself, of necessity serves the interest of others. The “king” doesn’t have to issue orders. Action is brought about, therefore, by the autonomous actions of people in the market.
The eighteenth century’s discoveries with respect to social problems were closely connected with, and inseparable from, the political changes brought about during that period—the substitution of representative for autocratic government, free trade for protection, the tendency toward international peace instead of aggressiveness, the abolition of serfdom and slavery, and so on. The new political philosophy also led to substituting liberty for monarchism and absolutism. And it brought about changes in industrial life and social life which altered the fact of the world in a very short time. This transformation is customarily called the Industrial Revolution. And this “revolution” resulted in changes in the whole structure of the world, populations multiplied, the average length of life expectancy increased, and standards of living rose.
With specific reference to the population, it is four times greater today [1951] than it was more than 250 years ago. If Asia and Africa are eliminated, the growth is even more startling. Great Britain, Germany, and Italy, three countries that were completely settled and where every bit of land was already in use by 1800, found room to support 107 million more people by 1925. (This seems all the more remarkable when compared with the United States—many times the area of these three countries—which increased its population by only 109 million in that same period.) At the same time, the standard of living was raised everywhere as a result of the Industrial Revolution by the introduction of mass production.
Of course, there are still unsatisfactory conditions; there are still situations that can be improved. To this, the new philosophy responds: There is only one way to improve the standard of living of the population—increase capital accumulation as against the increase in population. Increase the amount of capital invested per capita.
Although this new doctrine of economic theory was true, it was unpopular for many reasons with certain groups—monarchs, despots, and nobles—because it endangered their vested interests. In the nineteenth and twentieth centuries, these opponents of this eighteenth-century philosophy developed a number of objections, epistemological objections which attacked the basic foundation of the new philosophy and raised many very serious and important problems. Their attack was more or less a philosophical attack, directed at the epistemological foundations of the new science. Almost all their criticism was motivated by political bias; it was not brought forth by searchers for the truth. However, this does not alter the fact that we should study seriously the objections to the various truths of the eighteenth century—sound philosophy and economics—without reference to the motives of those who bring them forth. Some were well founded.
During the last hundred years, opposition to sound economics has arisen. This is a very serious matter. The objections raised have been used as arguments against the whole bourgeois civilization. These objections cannot be simply called “ridiculous” and dismissed. They must be studied and critically analyzed. As far as the political problem is concerned, some people who supported sound economics did so in order to justify, or to defend, the bourgeois civilization. But these defenders didn’t know the whole story. They limited their fighting to a very small territory, similar to the situation today in Korea where one army is forbidden to attack the strongholds of the other army.[After the capture of the North Korean stronghold, Pyongyang, it became evident that the armies of Communist China were amassing for attack north of the Yalu River, the boundary between North Korea and Communist-controlled Manchuria. Yet requests by General Douglas MacArthur to do anything to forestall an attack were denied; his planes were not allowed to bomb the bridges over the Yalu; and the Red Chinese forces were even granted a five-mile-deep sanctuary south of the Yalu where they could assemble.—Ed.] In the intellectual struggle, the same situation exists; the defenders are fighting without attacking the real foundation of their adversaries. We must not be content to deal with the external paraphernalia of a doctrine; we must attack the basic philosophical problem.
The distinction between “left” and “right” in politics is absolutely worthless. This distinction has been inadequate from the very beginning and has brought about a lot of misunderstanding. Even objections to the basic philosophy are classified from that point of view.
Auguste Comte [1798–1857] was one of the most influential philosophers of the nineteenth century, and probably one of the most influential men of the last hundred years. In my own private opinion, he was a lunatic as well. Although the ideas he expounded were not even his own, we must deal with his writings because he was influential and especially because he was hostile to the Christian church. He invented his own church, with its own holidays. He advocated “real freedom,” more freedom, he said, than was offered by the bourgeoisie. According to his books, he had no use for metaphysics, for freedom of science, for freedom of the press, or for freedom of thought. All these were very important in the past because they gave him the opportunity to write his books, but in the future there would be no need for such freedom because his books had already been written. So the police must repress these freedoms.
This opposition to freedom, the Marxian attitude, is typical of those on the “left” or “progressive” side. People are surprised to learn that the so-called “liberals” are not in favor of freedom. Georg Wilhelm Friedrich Hegel [1770–1831], the famous German philosopher, gave rise to two schools—the “left” Hegelians and the “right” Hegelians. Karl Marx [1818–1883] was the most important of the “left” Hegelians. The Nazis came from the “right” Hegelians.
The problem is to study basic philosophy. One good question is why have the Marxists been to a certain extent familiar with the great philosophical struggle, while the defenders of freedom were not? The failure of the defenders of freedom to recognize the basic philosophical issue explains why they have not been successful. We must first understand the basis for the disagreement; if we do, then the answers will come. We will now proceed to the objections that have been raised to the eighteenth-century philosophy of freedom.
People generally believe that economics is of interest only to businessmen, bankers, and the like and that there is a separate economics for every group, segment of society, or country. As economics is the latest science to have been developed, it is no wonder that there are many erroneous ideas about the meaning and content of this branch of knowledge.
It would take hours to point out how common misunderstandings developed, which writers were responsible, and how political conditions contributed. it is more important to enumerate the misunderstandings and discuss the consequences of their acceptance by the public.
This first misunderstanding is the belief that economics does not deal with the way men really live and act, but with a specter created by economics, a phantom that has no counterpart in real life. The criticism is made that real man is different from the specter of the “economic man.” once this first misunderstanding is removed, a second misunderstanding arises—the belief that economics supposes that people are driven by one ambition and intention only—to improve their material conditions and their own well-being. Critics of this belief say that not all men are egoistic.
A third misunderstanding is that economics assumes all men to be reasonable, rational, and guided by reason only, while in fact, the critics maintain, people may be guided by “irrational” forces.
These three misunderstandings are based on entirely false assumptions. Economics does not suppose that economic man is different from what man is in everyday life. The only supposition of economics is that there are conditions in the world with regard to which man is not neutral, and that he wants to change the situation by purposeful action. So far as man is neutral, indifferent, content, he takes no action, he does not act. But when a man distinguishes between states of various affairs and sees an opportunity to improve conditions from his point of view, he acts.
Action is the search for improvement of conditions from the point of view of the personal value judgments of the individual concerned. This does not mean improvement from a metaphysical view, nor from God’s point of view. Man’s aim is to substitute what he considers a better state of affairs for a less satisfactory one. He strives for the substitution of a more satisfactory state of affairs in place of a less satisfactory state of affairs. And in the satisfaction of this desire, he becomes happier than he was before. This implies nothing with reference to the content of the action, nor whether he acts for egoistic or altruistic reasons.
To eliminate the misunderstanding that arises when a distinction is attempted between “rationalism” and “irrationalism,” it must be realized that what man does consciously is done under the influence of some force or power which we call reason. Any action aimed at a definite goal is in this sense “rational.” The popular distinction between “rational” and “irrational” is entirely without meaning. Examples of “irrationalism” cited are patriotism or the purchase of a new coat or a symphony ticket when something else might have appeared a more sensible action. The theoretical science of human action presupposes only one thing—that there is action, i.e., the conscious striving of individuals to remove uneasiness and to substitute a more satisfactory state of affairs for one that is less satisfactory. No judgment of value is made as to the reason or content of the action. Economics is neutral. Economics deals with the results of value judgments, but economics itself is neutral.
Nor is there any sense in trying to distinguish between “economic” and “non-economic” actions. Some actions deal with the preservation of man’s own vital senses and necessities—food, shelter, and so on. Others are considered to be driven by “higher” motivations. But the value placed on these various goals vary from man to man, and differ for the same man from time to time. Economics deals merely with the action; it is the task of history to describe the differences in goals.
Our knowledge of economic laws is derived from reason and cannot be learned from historical experience because historical experience is always complex and cannot be studied as in a laboratory experiment. The source of economic facts is man’s own reason, i.e., which we call in epistemology a priori knowledge, what one knows already; a priori knowledge is distinguished from a posteriori knowledge, knowledge which is derived from experience.
Regarding a priori knowledge, the English philosopher John Locke [1632–1704] developed the theory that the human mind is born a blank slate on which experience writes. He said there was no such thing as inherent knowledge. Gottfried Wilhelm von Leibniz [1646–1716], a German philosopher and mathematician, made an exception in the case of the intellect itself. According to Leibniz, experience does not write on empty white pages in the human mind; there is a mental apparatus present in the human mind, a mental apparatus that does not exist in the minds of animals, which makes it possible for men to convert experience into human knowledge.
I am not going to enter into the argument between “rationalism” and “empiricism,” the distinction between experience and knowledge, which the British philosopher and economist John Stuart Mill [1806–1873] called a prioristic knowledge. However, even Mill and the American pragmatists believed that a prioristic knowledge comes in some way from experience.
The way in which economic knowledge, economic theory, and so on relate to economic history and everyday life is the same as the relation of logic and mathematics to our grasp of the natural sciences. Therefore, we can eliminate this anti-egoism and accept the fact that the teachings of economic theory are derived from reason. Logic and mathematics are derived in a similar way from reason; there is no such thing as experiment and laboratory research in the field of mathematics. According to one mathematician, the only equipment a mathematician needs is a pencil, a piece of paper, and a wastebasket—his tools are mental.
But, we may ask, how is it possible for mathematics, which is something developed purely from the human mind without reference to the external world and reality, to be used for a grasp of the physical universe that exists and operates outside of our mind? Answers to this question have been offered by the French mathematician Henri Poincaré [1854–1912] and physicist Albert Einstein [1879–1955]. Economists can ask the same question about economics. How is it possible that something developed exclusively from our own reason, from our own mind, while sitting in an armchair, can be used for a grasp of what is taking place on the market and in the world?
The activities of every individual—all actions—stem from reason, the same source from which come our theories. Man’s actions on the market, in the government, at work, at leisure, in buying and selling, are all guided by reason, guided by choice between what a person prefers as against what he does not prefer. Reason is the method by which a solution (whether good or bad) is reached. Every action can be called an exchange insofar as it means substituting one state of affairs for another. Hopefully the actor is substituting a situation he prefers for one which he likes less.
The starting points for the natural sciences are the various facts established by experiment. From these facts, theories are built to more and more abstractions, to more and more generalities. Final theories are so abstract that they are practically inaccessible to the general multitude. That doesn’t make them less valuable; it is enough that they are accessible to the few scientists.
In an a prioristic science, we start with a general supposition—action is taken to substitute one state of affairs for another. This theory—meaningless to many—leads to other ideas that become more and more understandable and less abstract.
Natural sciences progress from the less general to the more general; economics proceeds in the opposite direction. Natural sciences are in a position to establish constant relations of magnitude. In the field of human action, no such constant relations prevail, so there is no opportunity for measurement. The value judgments which spur men to act, which lead to prices and market activity, do not measure; they establish distinctions of degree; they grade. They do not say “A” is equal to, or is more or less than “B.” They say, “I prefer A to B.” They don’t establish judgments. This has been misunderstood for 2000 years. Even today there are many persons, even eminent philosophers, who misunderstand this completely. It is from the system of values and preferences that the price system of the market arises.
Aristotle wrote, among other things, about the various attributes of men and women. He was often mistaken. Had he asked Mrs. Aristotle about women, he would have found he was mistaken in some respects; he would have learned differently. He was also mistaken in stating that if two things were to be exchanged on the market, they must have something in common, that they were being exchanged because they were equal. Now if they were equal, why was it necessary to exchange them? If you have a dime and I have a dime, we don’t exchange them because they are the same. It follows, therefore, that if there is an exchange, there must be some inequality in the items being traded, not equality.
Karl Marx [1818–1883] based his theory of value on this fallacy. In Capital and Interest, by Eugen von Böhm-Bawerk [1851–1914], see Chapter XII dealing with Marx (“The Exploitation Theory” in Volume I, History and Critique of Interest Theories). Long after Marx, Henri Bergson, in a much-admired book about the two sources of morals in religion, accepted the same fallacy—if two things are exchanged on the market they must be equal in some way. But things that are “equal” are not exchanged; exchanges take place only because things are unequal. You take the trouble of going to the market because you value the loaf of bread more highly than the money you give for it. People exchange things because at that time they prefer other things to money. An exchange never occurs with the intention of a loss. The acting man is never pessimistic because his action is inspired by the idea that conditions can be improved.
The aim of action is to substitute a state of affairs better suiting the men taking the action than the previous situation. The value of any change in their situation is called a “gain” if it is positive, a “loss” if it is negative. This value is purely psychic, it cannot be measured. You can say only that it is greater or less. It becomes measurable only insofar as things are exchanged on the market against money. As far as the action itself is concerned, it has no mathematical value.
But, you say, this contradicts our daily experience. Yes, because our social environment makes calculations possible insofar as things are exchanged for a common medium of exchange, money. When things are exchanged against money, it is possible to use monetary terms for economic calculations, but only when three conditions are filled:
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There must be private ownership, not only of the products, but also of the means of production;
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There must be division of labor and, therefore, production for the needs of others;
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There must be indirect exchange in the terms of a common denominator.
By and large, given these three conditions some mathematical values may be established, although not precisely. These measurements are not exact because they deal with what took place yesterday, historically. Business financial statements may look precise, but even the money value of an inventory entered at “so many dollars” is a speculative value of future anticipations; the value credited to equipment and other assets also is speculative. The real problem of inflation is that it falsifies these calculations and brings about tragic problems.
Monetary calculations do not necessarily exist in all kinds of organizations or societies. They did not exist when economics began. The earliest humans acted; humans have always acted; but it was thousands of years before the evolution of the division of labor and of a financial apparatus made monetary calculations possible. Monetary calculations developed step by step during the Middle Ages. In their early development they lacked many features we think of today as necessary. (In a socialist system, these conditions would again disappear and make such calculations and measurements impossible.)
The quantitative nature of the natural sciences enables mechanics to make plans and build bridges. If you know what must be built, technology based on the knowledge of the natural sciences is sufficient. The questions are, however: What should be constructed? What should be done? Technologists cannot answer these questions.
In life the materials of production are scarce. No matter what we do there will always be other projects for which the necessary factors of production cannot be spared. There will always be other urgent demands. This is the factor that businessmen take into account in calculating loss and success. When a businessman decides against a certain project because the cost is too high, it means the public is not prepared to pay the price to use raw materials in that manner. Use is made of the available factors of production for the realization of the greatest number of those projects that satisfy the most urgent needs without wasting factors of production by withdrawing them from more urgent to less urgent employment.
To establish this it is necessary to be in a position to compare the outlays of various factors of production. For example, let it be assumed that it is necessary to build a railroad between two towns—A and B. Let us assume that there is a mountain between A and B. There are three possibilities—to go over, through, or around the mountain. A common denominator is necessary to calculate the comparative value. But this can give only a picture of the monetary situation; it is not a measurement. It is an evaluation in the light of present-day needs and situations. Tomorrow conditions will be different. The success or failure of every business project depends upon its success in anticipating future possibilities.
The problem with trying to develop a quantitative science of economics is that many persons imagine that theoretical economics must follow the evolution of other branches of science. The natural sciences developed from being qualitative to being quantitative in nature and many people are inclined to believe that the same trend must take place in economics also. However, there are no constant relationships in economics, so no measurement is possible. And without measurement, the quantitative development of economics cannot take place. Quantitative facts in economics belong to economic history—not to economic theory.
A book titled Measurement of the Elasticity of Demand was reviewed recently by a man now in the U.S. Senate, Paul Douglas [1892–1976], who may even be hoping for higher political office sometime. Douglas said economics should become an exact science with fixed values like atomic weights in chemistry. But this book itself does not refer to fixed values; it refers to the economic history of one definite period of time in one particular country, the United States. The results would have been different if another period of time or if another country had been considered. Within the framework of the universe in which we operate, atomic weights do not change from one period of time or from one country to another. On the other hand, economic values and economic quantities do change from time to time and from place to place.
Economics is the theory of human action. It is a historical fact of great importance, for example, that the usefulness of the potato was discovered by the natives of Mexico, brought to Europe by a British gentleman, and that its use spread all over the world. This historical fact has had important effects on Ireland, for instance, but from the point of view of economic theory it was just an accident.
When you introduce figures into economics you are no longer in the field of economic theory, but in the field of economic history. Economic history is also, of course, a very important field. Statistics in the field of human action is a method of historical study. Statistics give a description of a fact, but they cannot prove any more than that fact. (It is true that some statisticians are “swindlers” and, as a matter of fact, some statisticians in the government were probably appointed merely for that purpose.)
Some people may misinterpret these statements and conclude that the purpose of economics, being a purely a prioristic science, is to develop a program for a future science, and that economics is a theory practiced only by “armchair gentlemen.” Both these statements are wrong. Economics is not a program for a science that doesn’t yet exist. And it is not a science merely for purists. Therefore, we must reject the ideas of some people that one must learn history to study human action. History is important. But you cannot deal with present-day conditions by studying the past. Conditions change.
As an example of what I mean. The National Bureau of Economic Research published a report on the subject of installment selling which appeared on the eve of World War II, on the eve of inflation, and on the eve of government credit restrictions. At the moment when the study was made, it was already “dead”; it dealt with matters that were already past. I don’t mean to say that it was useless. With good brains one can learn a lot from it. But don’t forget it is not economics—it is economic history. What they were really studying was the economic history of the most recent past.
Darwin realized this too. He saw that in studying animals, the animal was killed at the moment when it was dissected for study, so that one could never actually study the animal—one can never study life itself.
The same is true of economics. One cannot describe the present economic system—one can only describe the past. One cannot predict about the future as a result of studying the past. Very often economic historians teach history under the label of “economics.” Even though you know everything about the past, you know nothing about the future.
[Excerpt from Epistemological Problems of Economics, chap. 1]
The reproach of individualism is commonly leveled against economics on the basis of an alleged irreconcilable conflict between the interests of society and those of the individual. Classical and subjectivist economics, it is said, give an undue priority to the interests of the individual over those of society and generally contend, in conscious denial of the facts, that a harmony of interests prevails between them. It would be the task of genuine science to show that the whole is superior to the parts and that the individual has to subordinate himself to, and conduct himself for, the benefit of society and to sacrifice his selfish private interests to the common good.
In the eyes of those who hold this point of view society must appear as a means designed by Providence to attain ends that are hidden from us. The individual must bow to the will of Providence and must sacrifice his own interests so that its will may be done. His greatest duty is obedience. He must subordinate himself to the leaders and live just as they command.
But who, one must ask, is to be the leader? For many want to lead, and, of course, in different directions and toward different goals. The collectivists, who never cease to pour scorn and derision on the liberal theory of the harmony of interests, pass over in silence the fact that there are various forms of collectivism and that their interests are in irreconcilable conflict. They laud the Middle Ages and its culture of community and solidarity, and with romantic sentimentality they wax ecstatic over the communal associations "in which the individual was included, and in which he was kept warm and protected like fruit in its rind." But they forget that papacy and empire, for example, opposed each other for hundreds of years and that every individual could find himself at any time in the position of having to choose between them. Were the inhabitants of Milan also "kept warm and protected like fruit in its rind" when they had to hand over their city to Frederick Barbarossa? Are there not various factions fighting today on German soil with bitter anger, each of which claims to represent the only true collectivism? And do not the Marxian socialists, the national socialists, the church, and many other parties approach every individual with the demand: join us, for you belong in our ranks, and fight to the death the "false" forms of collectivism? A collectivist social philosophy that did not designate a definite form of collectivism as true and either treat all others as subordinate to it or condemn them as false would be meaningless and vain. It must always tell the individual: Here you have an unquestionably given goal, because an inner voice has revealed it to me; to it you must sacrifice everything else, yourself above all. Fight to victory or death under the banner of this ideal, and concern yourself with nothing else.
Collectivism, in fact, can be stated in no other way than as partisan dogma in which the commitment to a definite ideal and the condemnation of all others are equally necessary. Loyola did not preach just any faith, but that of the Church of Rome. Lagarde did not advocate nationalism, but what he regarded as German nationalism. Church, nation, state in abstracto are concepts of nominalistic science. The collectivists idolize only the one true church, only the "great" nation — the "chosen" people who have been entrusted by Providence with a special mission — only the true state; everything else they condemn.
For that reason all collectivist doctrines are harbingers of irreconcilable hatred and war to the death.
[Full issue of the Quarterly Journal of Austrian Economics 20, no. 4 (2017)]
KEYWORDS: free choice, counterfactuals, economic lawsJEL CLASSIFICATION: B00, B40, B53INTRODUCTIONIn a series of articles written around the turn of the century, Guido Hülsmann has tried to answer one simple question: “How can we reconcile the idea that there are laws of human action, that manifest themselves in market prices and the structure of production, with the idea that there is also freedom of choice?” (Hülsmann, 2000, p. 48) He has addressed the question most extensively in his “Facts and Counterfactuals in Economic Law” (Hülsmann, 2003), but his distinctive approach is present in several other articles as well (Hülsmann, 1998, 1999, 2000, 2004). Moreover, the first explicit development of this insight is in Hülsmann (1999), in response to Caplan’s elaborate critique of the Austrian methodology, thereby indicating how crucial the issue is to praxeology as an intellectual enterprise, and to that extent to Austrian economics. Mateusz Machaj has commented on the very core of Hülsmann’s proposal (Machaj, 2012). As an epigraph, he chose a quote from Morpheus in The Matrix: “What happened, happened, and couldn’t have happened any other way”—pun intended or not against Hülsmann’s (metaphysical) libertarianism. This paper will briefly present Hülsmann’s main claim, Machaj’s comments, and offer a reply to those comments, further clarifying Hülsmann’s point.
HÜLSMANN’S CLAIMHülsmann considers the essence of scientific explanation to give “a law-based account of facts in terms of other facts, so scientists search for and study laws that exist among the things observed in our world. A thing X is scientifically “explained” if we can show that there exists a constant (e.g., causal) relationship between X and another thing Y.” (Hülsmann, 2003, p. 67) However, given the existence and nature of free human choice, no constant relationships seem to exist between a particular human choice or action, and, quite literally, anything else in the universe. There are no necessary constant relationships between anything a person does at a certain point in time, and anything preceding that choice in time—including all the past choices of that person—or anything in the world at that instant, including all facts about that person, that could explain the choice made. Sciences such as psychology, sociology, or first-hand acquaintance with a person can mitigate the strictness of that fact, but metaphysically it remains the case—unless one adopts some version of determinism. Economics, likewise, can mitigate the implications of (metaphysical) free choice by adopting some stylized ‘homo oeconomicus’ that works in most cases or is sufficiently useful for purposes of prediction and modelling. As Hülsmann puts it in his critique of neoclassical economics: “They want to analyze how people act as a corollary or sequel of given circumstances; that is, they want to explain human behavior in terms of other observable and introspectively knowable facts.” (Hülsmann, 1999, p. 5) The significance of Hülsmann’s proposal is that it grounds the existence of economic laws precisely on the metaphysical irreducibility of free choice with alternative possibilities, instead of trying to mitigate its implications:
I will argue that the bulk of economic laws are based on relationships that are contained within choice. The visible part of a choice, the realised alternative, brings an observable fact into being, for example, a walk in a park. This fact stands in certain essential relationships to the unrealised alternatives of the same choice, for example, staying home to watch TV, staying home to eat ice cream, etc. These unrealised alternatives are the other side of choice, its invisible part. They have no actual existence for the very reason that they are unrealised alternatives.” (Hülsmann 2003, p. 70, emphasis in original)
This proposal is a philosophical treasure trove—or hornet’s nest—but the main implication for economic methodology would be that economics can therefore provide us with strict counterfactual laws that do not need a ceteris paribus (CP) clause. If the essential relationships discovered by economists are between facts within choice, it is unconditioned by what is or is not happening ‘outside’ the choice. Economists can therefore not merely predict what will happen other things being equal, but what will happen regardless of other things—but compared to counterfactual, unrealized possibilities. That is, the seemingly problematic metaphysical status of human choice, as being unrelated to anything outside of that choice, has become the very foundation for the epistemological robustness of economic laws.
MACHAJ’S COMMENTSMachaj critically engaged the very core of Hülsmann’s proposal (Machaj, 2012), ultimately defending a modified version of the ceteris paribus approach. He gives a stylized reconstruction of Hülsmann’s argument by introducing a simplified equation for capital accumulation, for illustrative purposes only, whereby K stands for the amount of accumulated capital, T for the influence of taxation, and the letters A, B, C, D for other factors affecting the amount of capital:
K = f(A, B, C, D, T)
(Machaj, 2012, pp. 445–446)
In the CP approach as understood by Hülsmann and Machaj, assessing the influence of taxation on capital accumulation would look thus:
K↓ = f(A, B, C, D, T↑)
(Machaj, 2012, p. 446)
That is, only if the other factors remain constant can we know that an increase in taxation will lead to a decrease in capital accumulation.
Machaj grants Hülsmann’s basic point that we can weaken this strict ceteris paribus rule towards a counterfactual rule, because even with other factors (A, B, C, D) influencing K, we can still know that the increase in T led to a lower level of K than otherwise would have been the case. Hence, even if all the other factors contributed towards a higher level of K, and a higher level of K than in the previous period was indeed obtained, still the level would have been even higher without the increase in T. But here is his worry:
There are numerous possible worlds in the counterfactual ladder—which possible world does Hülsmann advise us to hide behind the phrase “otherwise would have been”? Certainly he cannot have in mind the whole set of all the possible worlds that could have existed. (Machaj, 2012, p. 448, emphasis in the original)
He makes this point more explicit with the capital accumulation equation used above, asking us first to consider a case where the other factors changed as well:
K = f(A↑, B↓, C↑, D↑, T↑)
(Machaj, 2012, p. 448)
For such a case, the counterfactual law would be that the capital level is lower than in the counterfactual state of affairs in which taxation was not increased. But as Machaj points out, we simply do not know what that other scenario would have looked like—except for the level of taxation—so we do not know whether or not capital would have been higher. If we do not know what’s behind the question marks, we do not know what happens:
K′ = f(A?, B?, C?, D?, T)
(Machaj, 2012, p. 449)
Hence, he concludes:
The suggested answer would be that in the alternate scenario other factors have to change in the same way as in the actualized scenario of increased taxation: K′ = F(A↑, B↓, C↑, D↑, T) [...] Factors do not have to stay the same, but in counterfactual scenarios they have to change in the same way as in the factual scenario. That is why the counterfactual approach can be seen as a broader ceteris paribus assumption. (Machaj, 2012, p. 449, emphasis in the original)
To sum up, Machaj grants to Hülsmann that we can go beyond a strict CP rule claiming that economic laws only hold between different points in time where all other factors remain the same, but that Hülsmann’s counterfactual approach only holds if we compare the factual scenario to a counterfactual scenario in which the other factors changed in the same way as in the factual scenario. That is, the CP rule still holds, but between two possible scenarios at one point in time (one with, one without a tax increase) instead of between two scenarios at different points in time.
A COMMENT ON MACHAJ’S COMMENTHowever, Hülsmann’s point is that the counterfactual law quite literally does apply to “the whole set of all the possible worlds that could have existed.” It does not matter at all what is behind these question marks in the counterfactual case, and hence these counterfactual laws are indeed unconditioned by evolutions in these other factors. Hülsmann’s point is precisely that no matter what one fills in for these question marks, in each and every counterfactual state of affairs, K’>K.
To continue on the toy-model, let
(K1, K2, K3, …, Kn)
stand for all possible states of affairs where taxes were increased, with the four other variables varying in all possible ways. In each and every one of these cases, there is a corresponding scenario
(K’1, K’2, K’3,…, K’n)
in which taxes would not have been increased and where capital accumulation therefore would have been higher. Hence, no matter in which of the possible increased-taxation scenarios we end up, the counterfactual scenarios in which taxes would not have been increased are ones with a higher level of capital accumulation
(K’1>K1, K’2>K2, K’3>K3, ... , K’n>Kn),
or:
∀ i ∈ {1, 2, 3, …, n) : K’i > Ki
The CP rule still holds between any of these pairs, with the only changed variable being T, whereas all others remain constant. Hence, looking backwards in time, one can indeed point at the one factual scenario (e.g. K3) and say that in the counterfactual case (K3’), capital would have been higher.
However, when choosing for a higher level of taxation, it is not only not yet known in which scenario one is, it is strictly speaking not yet settled—it is still metaphysically ‘open’—which counterfactual scenario will obtain, given the countless free choices of other persons affecting the course of events. The validity of the law therefore does not depend upon that one CP pair of the factual and counterfactual scenario (K’3 > K3), but upon the entire range of possible scenarios for which (K’i > Ki) holds at the very moment of choosing. The validity of the purported economic law holds regardless of—unconditioned by the fact—which scenario eventually obtains, and the case for Hülsmann’s strong claim still stands.
CONCLUSIONHülsmann’s proposal is rife with philosophical assumptions, and implications for economic methodology. Carefully unpacking them all will require a lot more work and cooperation between economists and philosophers, but the stakes are high—both for praxeology and economics if they claim to be a science of (free) human action, and for philosophy for seeing how a science of free action is at all possible. After the stimulating challenge by Machaj, this paper offered a further contribution to clarify and strengthen that project.
[The author wishes to thank Dr. Guido Hülsmann, Dr. Mateusz Machaj, and Geraldine Waelkens for clarifications and stimulating discussions.]
The Lou Church Memorial Lecture, sponsored by the Lou Church Foundation. Presented at the Austrian Economics Research Conference at the Mises Institute in Auburn, Alabama, on 24 March 2018.
[Murray Rothbard wrote this in 1956. It originally appeared in the Southern Economic Journal (January 1957) and was reprinted in Rothbard's, The Logic of Action One (1997) and Economic Controversies (2011).]
The stimulating methodological controversy between Professors Machlup and Hutchison proves that there are sometimes more than two sides to every question.Terence W. Hutchison, “Professor Machlup on Verification in Economics,” Southern Economic Journal (April 1956): 476–83; Fritz Machlup, “Rejoinder to a Reluctant Ultra-Empiricist,” ibid., pp. 483–93. In many ways, the two are debating at cross-purposes: Professor Hutchison is primarily tilting against the methodological (and political) views of Professor Ludwig von Mises; his most serious charge is that Professor Machlup’s entire position is, at bottom, an attempt to cloak the Misesian heresy in the garments of epistemological respectability. Professor Machlup’s reply, quite properly, barely mentions Mises; for, in fact, their methodological views are poles apart. (Machlup’s position is close to the central “positivist” tradition of economic methodology.) But, in the meanwhile, we find that Professor Mises and “extreme apriorism” go undefended in the debate. Perhaps an extreme apriorist’s contribution to this discussion may prove helpful.
First, it should be made clear that neither Professor Machlup nor Professor Hutchison is what Mises calls a praxeologist, that is, neither believes (a) that the fundamental axioms and premises of economics are absolutely true; (b) that the theorems and conclusions deduced by the laws of logic from these postulates are therefore absolutely true; (c) that there is consequently no need for empirical “testing,” either of the premises or the conclusions; and (d) that the deduced theorems could not be tested even if it were desirable.he praxeological tradition, though named only recently, has a long and honored place in the history of economic thought. In the first great methodological controversy in our science, John Stuart Mill was the positivist and Nassau Senior the praxeologist, with J.E. Cairnes wavering between the two positions. Later on, the praxeologic method was further developed by the early Austrians, by Wicksteed, and by Richard Strigl, reaching its full culmination in the works of Ludwig von Mises. Mises’s views may be found in Human Action (New Haven, Conn: Yale University Press, 1949), and in his earlier Grundprobleme der Nationalökonomie [translated into English as Epistemological Problems of Economics (Princeton, N.J.: D. Van Nostrand, 1960]. On the similarity between Senior and Mises, see Marian Bowley, Nassau Senior and Classical Economics (New York: Augustus M. Kelley, 1949), chap. 1, esp. pp. 64–65. Lionel Robbin’s Essay on the Nature and Significance of Economic Science was emphatically praxeologic, although it did not delve into the more complex methodological problems. Both disputants are eager to test economic laws empirically.
The crucial difference is that Professor Machlup adheres to the orthodox positivist position that the assumptions need not be verified so long as their deduced consequents may be proven true — essentially the position of Professor Milton Friedman — while Professor Hutchison, wary of shaky assumptions takes the more empirical — or institutionalist — approach that the assumptions had better be verified as well.
Strange as it may seem for an ultra-apriorist, Hutchison’s position strikes me as the better of the two. If one must choose between two brands of empiricism, it seems like folly to put one’s trust in procedures for testing only conclusions by fact. Far better to make sure that the assumptions also are correct. Here I must salute Professor Hutchison’s charge that the positivists rest their case on misleading analogies from the epistemology of physics.
This is precisely the nub of the issue. All the positivist procedures are based on the physical sciences.On the differences between the methodologies of praxeology and physics, see Murray N. Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” in On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises, Mary Sennholz, ed., (Princeton, N.J.: D. Van Nostrand, 1956), pp. 226ff). It is physics that knows or can know its “facts” and can test its conclusions against these facts, while being completely ignorant of its ultimate assumptions. In the sciences of human action, on the other hand, it is impossible to test conclusions. There is no laboratory where facts can be isolated and controlled; the “facts” of human history are complex ones, resultants of many causes. These causes can only be isolated by theory, theory that is necessarily a priori to these historical (including statistical) facts. Of course, Professor Hutchison would not go this far in rejecting empirical testing of theorems; but, being commendably skeptical of the possibilities of testing (though not of its desirability), he insists that the assumptions be verified as well.
In physics, the ultimate assumptions cannot be verified directly, because we know nothing directly of the explanatory laws or causal factors. Hence the good sense of not attempting to do so, of using false assumptions such as the absence of friction, and so on. But false assumptions are the reverse of appropriate in economics. For human action is not like physics; here, the ultimate assumptions are what is clearly known, and it is precisely from these given axioms that the corpus of economic science is deduced. False or dubious assumptions in economics wreak havoc, while often proving useful in physics.This holds also for Professor Machlup’s “heuristic principles” which area allegedly “empirically meaningful” without being verifiable as true. I do not wish to deny that false assumptions are useful in economic theory, but only when they are used as auxiliary constructs, not as premises from which empirical theories can be deduced. The most important such construct is the evenly-rotating economy, or “equilibrium.” It is not intended that this state be considered as real, either actual or potential. On the contrary, the empirically impossible ERE is constructed precisely in order to analyze theoretically a state of no-change. Only by analyzing a fictive changeless state can we arrive at a proper analysis of the changing real economic world. However, this is not a “false” assumption in the sense used by the positivists, because it is an absolutely true theory of a changeless state, if such a state could exist.
Hence, Professor Hutchison is correct in wishing to establish the assumptions themselves. But these premises do not have to be (indeed, cannot be) verified by appeal to statistical fact. They are established, in praxeology, on a far more certain and permanent basis as definitely true. How, then, are these postulates obtained? Actually, despite the “extreme a priori” label, praxeology contains one Fundamental Axiom — the axiom of action — which may be called a priori, and a few subsidiary postulates which are actually empirical. Incredible as it may seem to those versed in the positivist tradition, from this tiny handful of premises the whole of economics is deduced — and deduced as absolutely true. Setting aside the Fundamental Axiom for a moment, the empirical postulates are: (a) small in number, and (b) so broadly based as to be hardly “empirical” in the empiricist sense of the term. To put it differently, they are so generally true as to be self-evident, as to be seen by all to be obviously true once they are stated, and hence they are not in practice empirically falsifiable and therefore not “operationally meaningful.” What are these propositions? We may consider them in decreasing order of their generality: (1) the most fundamental — variety of resources, both natural and human. From this follows directly the division of labor, the market, etc.; (2) less important, that leisure is a consumer good. These are actually the only postulates needed. Two other postulates simply introduce limiting subdivisions into the analysis. Thus, economics can deductively elaborate from the Fundamental Axiom and Postulates (1) and (2) (actually, only Postulate 1 is necessary) an analysis of Crusoe economics, of barter, and of a monetary economy. All these elaborated laws are absolutely true. They are only applicable in concrete cases, however, where the particular limiting conditions apply. There is nothing, of course, remarkable about this; we can enunciate as a law that an apple, unsupported, will drop to the ground. But the law is applicable only in those cases where an apple is actually dropped. Thus, the economics of Crusoe, of barter, and of a monetary economy are applicable when these conditions obtain. It is the task of the historian, or “applied economist,” to decide which conditions apply in the specific situations to be analyzed. It is obvious that making these particular identifications is simplicity itself.
When we analyze the economics of indirect exchange, therefore, we make the simple and obvious limiting condition (Postulate 3) that indirect exchanges are being made. It should be clear that by making this simple identification we are not “testing the theory”; we are simply choosing that theory which applies to the reality we wish to explain.
The fourth — and by far the least fundamental — postulate for a theory of the market is the one which Professors Hutchison and Machlup consider crucial — that firms always aim at maximization of their money profits. As will become clearer when I treat the Fundamental Axiom below, this assumption is by no means a necessary part of economic theory. From our Axiom is derived this absolute truth: that every firm aims always at maximizing its psychic profit. This may or may not involve maximizing its money profit. Often it may not, and no praxeologist would deny this fact. When an entrepreneur deliberately accepts lower money profits in order to give a good job to a ne’er-do-well nephew, the praxeologist is not confounded. The entrepreneur simply has chosen to take a certain cut in monetary profit in order to satisfy his consumption — satisfaction of seeing his nephew well provided. The assumption that firms aim at maximizing their money profits is simply a convenience of analysis; it permits the elaboration of a framework of catallactics (economics of the market) which could not otherwise be developed. The praxeologist always has in mind the proviso that where this subsidiary postulate does not apply — as in the case of the ne’er-do-well — his deduced theories will not be applicable. He simply believes that enough entrepreneurs follow monetary aims enough of the time to make his theory highly useful in explaining the real market.I do not mean to endorse here the recent strictures that have been made against the monetary-profit maximization assumption — most of which ignore long-run as opposed to short-run maximization. The curious idea that failure to pursue monetary goals is “irrational,” or refutes economics, is similar to the old notion that consumers were being irrational, or “uneconomic,” when they preferred to pay higher prices in stores nearer to them, or with a more congenial atmosphere.
We turn now to the Fundamental Axiom (the nub of praxeology): the existence of human action. From this absolutely true axiom can be spun almost the whole fabric of economic theory. Some of the immediate logical implications that flow from this premise are: the means-ends relationship, the time-structure of production, time-preference, the law of diminishing marginal utility, the law of optimum returns, etc. It is this crucial axiom that separates praxeology from the other methodological viewpoints — and it is this axiom that supplies the critical “a priori” element in economics.
First, it must be emphasized that whatever role “rationality” may play in Professor Machlup’s theory, it plays no role whatever for Professor Mises. Hutchison charges that Mises claims “all economic action was (or must be) ‘rational.’”Hutchison, “Professor Machlup on Verification in Economics,” p. 483. This is flatly incorrect. Mises assumes nothing whatever about the rationality of human action (in fact, Mises does not use the concept at all). He assumes nothing about the wisdom of man’s ends or about the correctness of his means. He “assumes” only that men act, that is, that they have some ends, and use some means to try to attain them. This is Mises’s Fundamental Axiom, and it is this axiom that gives the whole praxeological structure of economic theory built upon it its absolute and apodictic certainty.
Now the crucial question arises: how have we obtained the truth of this axiom? Is our knowledge a priori or empirical, “synthetic” or “analytic”? In a sense, such questions are a waste of time, because the all-important fact is that the axiom is self-evidently true, self-evident to a far greater and broader extent than the other postulates. For this Axiom is true for all human beings, everywhere, at any time, and could not even conceivably be violated. In short, we may conceive of a world where resources are not varied, but not of one where human beings exist but do not act. We have seen that the other postulates, while “empirical,” are so obvious and acceptable that they can hardly be called “falsifiable” in the usual empiricist sense. How much more is this true of the Axiom, which is not even conceivably falsifiable!
Postivists of all shades boggle at self-evident propositions. And yet, what is the vaunted “evidence” of the empiricists but the bringing of a hitherto obscure proposition into evident view? But some propositions need only to be stated to become at once evident to the self, and the action axiom is just such a proposition.
Whether we consider the Action Axiom “a priori” or “empirical” depends on our ultimate philosophical position. Professor Mises, in the neo-Kantian tradition, considers this axiom a law of thought and therefore a categorical truth a priori to all experience. My own epistemological position rests on Aristotle and St. Thomas rather than Kant, and hence I would interpret the proposition differently. I would consider the axiom a law of reality rather than a law of thought, and hence “empirical” rather than “a priori.” But it should be obvious that this type of “empiricism” is so out of step with modern empiricism that I may just as well continue to call it a priori for present purposes. For (1) it is a law of reality that is not conceivably falsifiable, and yet is empirically meaningful and true; (2) it rests on universal inner experience, and not simply on external experience, that is, its evidence is reflective rather than physicalSee Professor Knight’s critique of Hutchison’s Significance and Basic Postulates of Economic Theory. Frank H. Knight, “What is Truth in Economics?” Journal of Political Economy (February 1940): 1–32. ; and (3) it is clearly a priori to complex historical events.Professor Hutchison may have had me in mind when he says that in recent years followers of Professor Mises try to defend him by saying he really meant “empirical” when saying “a priori.” Thus, see my “Praxeology, Replay to Mr. Schuller,” American Economic Review (December 1951): 943–44. What I meant is that Mises’s fundamental axiom may be called “a priori” or “empirical” according to one’s philosophical position, but is in any case a priori for the practical purposes of economic methodology.
The epistemological pigeon-holing of self-evident propositions has always been a knotty problem. Thus, two such accomplished Thomists as Father Toohey and Father Copleston, while resting on the same philosophical position, differ on whether self-evident propositions should be classified as “a posteriori” or “a priori,” since they define the two categories differently.Thus, Copleston calls self-evident principles “synthetic propositions a priori” (though not in the Kantian sense) — synthetic as conveying information about reality not contained logically in previous premises; and a priori as being necessary and universal. Toohey virtually obliterates the distinctions and terms self-evident propositions synthetic — a posteriori, because, while being necessary and universals, they are derived from experience. See F.C. Copleston, S.J., Aquinas (London: Penguin Books, 1955), pp. 28 and 19–41; John J.H. Toohey, S.J., Notes on Epistemology (Washington, D.C.: Georgetown University, 1952), pp. 46–55. All this raises the question of the usefulness of the whole “analytic-synthetic” dichotomy, despite the prominence implicitly given it in Hutchison’s Significance and Basic Postulates of Economic Theory. For a refreshing skepticism on its validity, and for a critique of its typical use of dispose of difficult-to-refute theories as either disguised definitions or debatable hypotheses, see Hao Wang, Notes on the Analytic-Synthetic Distinction,” Theoria 21 (Parts 2–3, 1955): 158ff.
From the Fundamental Axiom is derived the truth that everyone tries always to maximize his utility. Contrary to Professor Hutchison, this law is not a disguised definition — that they maximize what they maximize. It is true that utility has no concrete content, because economics is concerned not with the content of a man’s ends, but with the fact that he has ends. And this fact, being deduced directly from the Action Axiom, is absolutely true.See Hutchison, “Professor Machlup on Verification Economics,” p. 480. Alan Sweezy fell into the same error when he charged that Irving Fisher’s dictum: “each individual acts as he desires,” since not meant as a testable proposition in psychology, must reduce to the empty “each individual acts as he acts.” On the contrary, the dictum is deducible directly from the Action Axiom, and is therefore both empirically meaningful and apodictically true. See Rothbard, “Toward a Reconstruction of Utility and Welfare Economics,” pp. 225–28.
We come finally to Mises’s ultimate heresy in the eyes of Professor Hutchison: his alleged logical deduction of “wholesale political conclusions” from the axioms of economic science. Such a charge is completely fallacious, particularly if we realize that Professor Mises is an uncompromising champion of “Wertfreiheit” not only in economics, but also for all the sciences. Even a careful reading of Hutchison’s selected quotations from Mises will reveal no such illegitimate deductions.Thus: “Liberalism starts from the pure sciences of political economy and sociology which within their systems make no valuations and say nothing about what ought to be or what is good or bad, but only ascertain what is and how it is.” Quoted by Hutchison, “Professor Machlup on Verification Economics,” p. 483n. Indeed, Mises’s economics is unrivalled for its avoidance of unanalyzed ad hoc value judgments, slipped into the corpus of economic analysis.
Dean Rappard has posed the question: how can Mises be at the same time a champion of “Wertfreiheit in economics and of laissez-faire” liberalism, a “dilemma” which leads Professor Hutchison to accuse Mises of making political deductions from economic theory?William E. Rappard, “On Reading von Mises,” in On Freedom and Free Enterprise, M. Sennholz, pp. 17–33.
The following passages from Mises give the clue to this puzzle:
Liberalism is a political doctrine. ... As a political doctrine liberalism (in contrast to economic science) is not neutral with regard to values and ultimate ends sought by action. It assumes that all men or at least the majority of people are intent upon attaining certain goals. It gives them information about the means suitable to the realization of their plans. The champions of liberal doctrines are fully aware of the fact that their teachings are valid only for people who are committed to their valuational principles. While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness ... abundance to poverty. It teaches men how to act in accordance with these valuations.Mises, Human Action, pp. 153–54; also see pp. 879–81.
Economic science, in short, establishes existential laws, of the type: if A, then B. Mises demonstrates that this science asserts that laissez-faire policy leads to peace and higher standards of living for all, while statism leads to conflict and lower living standards. Then, Mises as a citizen chooses laissez-faire liberalism because he is interested in achieving these ends. The only sense in which Mises considers liberalism as “scientific” is to the extent that people unite on the goal of abundance and mutual benefit. Perhaps Mises is overly sanguine in judging the extent of such unity, but he never links the valuational and the scientific: when he says that a price control is “bad” he means bad not from his point of view as an economist, but from the point of view of those in society who desire abundance. Those who choose contrasting goals — who favor price controls, for example, as a route to bureaucratic power over their fellow men, or who, through envy, judge social equality as more worthwhile than general abundance or liberty — would certainly not accept liberalism, and Mises would certainly never say that economic science proves them wrong. He never goes beyond saying that economics furnishes men with the knowledge of the consequences of various political actions; and that it is the citizen’s province, knowing these consequences, to choose his political course.
Many critics of Mises are attacking a caricature of what Mises called praxeology — which is simply logic applied to human choice, or action. Text version: "3 Ways the Critics Get Praxeology Wrong". Narrated by Chris Calton.
This audio from Judge Napolitano's introductory lecture at Mises University this week includes an introduction by Lew Rockwell, as well as a Question and Answer Period. Recorded on the campus of Auburn University on 24 July 2017.
Quarterly Journal of Austrian Economics 20, no. 1 (Spring 2017)
ABSTRACT: Despite the substantial difference in their monetary theories, Menger and Keynes agree in terms of stigmatizing the love of money. This paper attempts to demonstrate that the shared ethical judgment is defensible for both on the grounds of the same metaethical assumptions—the value theory of Franz Brentano. The paper will be structured in two main parts: I. Ethics. The first part justifies the common rejection of the love of money, at the ethical level. This classical position, as a matter of fact, is considered controversial: in the case of Menger, his criticism towards egoism seems not coherent with his alleged utilitarianism; in the case of Keynes, his disparaging remarks on the love of money as a disgusting morbidity seem in direct contradiction with his endorsement of capitalism. II. Metaethics. In the second part, the focus will be the Fitting Attitude Theory of value, namely with reference to Brentano. The objective will be to identify and discuss the Brentanian arguments by which Menger and Keynes defend their ethical rejection of the love of money.
KEYWORDS: Menger, Keynes, Brentano, fitting attitude theory, ethics, metaethicsJEL CLASSIFICATION: B13, E12, E14, Z19
Mises's Socialism is one of the great classics of 20th-century social science. It contains the famous calculation argument, refuting the possibility of socialism; but it also covers much more.
In our new online course, "Themes from Ludwig von Mises’s Socialism," Dr. David Gordon walks through the major themes of Mises's treatise. Students who complete the course will gain a good working knowledge of an essential work of the Austrian school.
As an enrolled student, you can watch lecture videos, review and download lecture materials, take quizzes, and utilize a full list of all readings.
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David Gordon joins Jeff Deist to consider the important philosophy—and philosophers—libertarians need to know. Starting with Mises's influences in Human Action, Dr. Gordon moves through the 20th century with a great discussion of John Rawls and Robert Nozick. He also suggests the books that Austro-libertarians need to read, even if they're primarily interested in politics or economics.
Our show this weekend features Overstock.com’s Patrick Byrne, who spoke at our event last weekend in San Diego. Byrne, the rare philosopher-capitalist, discusses the historical origins of liberty and explains the greatest threats to it that exist today.
(Address to the Mt. Pelerin Society, Brussels, September, 1974. Previously unpublished.)
The New Left of the late 1960s was an international phenomenon and one which manifested appropriately differing emphases in different countries. It is my impression that it was the American wing of the New Left that most often expressed a point of view with which a libertarian, or classical liberal, could have some sympathy. This situation is clearly connected with the relatively stronger American individualist heritage and the relative absence of a Marxist or even socialist tradition. In no area have the affinities between the New Left and libertarianism been more evident than in the theory of education, and it is in educational philosophy that the New Left in the United States continues even today to attract attention and to play an important role in public debate. What I propose to touch on in this brief talkAddress to the Mt. Pelerin Society, Brussels, September, 1974. The manuscript was marked "For Private Circulation Only." Previously unpublished. are the values and approaches which the New Left — at least in its American version — has in common here with the libertarian standpoint, as well as the points at which, in my view, it is open to criticism. The writers I shall be dealing with are: Ivan Illich, the author of a widely-read book entitled Deschooling Society; Everett Reimer, his friend and associate; Joel Spring; John Holt; and Paul Goodman, the outstanding thinker of the group and inspirer of nearly everyone else in the field.
That these New Left writers have anything at all to say of interest to libertarians may come as a surprise to some — especially to those who have in mind the European, not to say the German, part of the movement — but I think it is demonstrable already from this fact: that these writers are the first in many decades to have presented in a challenging way the demand that compulsory school attendance laws be abolished. This is a position which they all insist on vehemently. Holt pointing out the uselessness of all educational experimentation, of free schools, "individualized learning," etc., in a context of compulsory attendance: as he puts it, "When you threaten people with jail if they don't do what you want, the only thing you can find out is whether they like doing what you want better than going to jail." Moreover, their demand here is the outgrowth of a whole social philosophy and way of viewing human personality that has a good deal in common with the conceptions of such classical liberals as Wilhelm von Humboldt and John Stuart Mill. The crucial importance of activity which is self-initiated and whose ends are self-chosen, and the indispensability of freedom as the condition and context of such activity if such values as creativity, energy and joy in achievement are to be realized, are concepts integrally woven into the New Left approach. When Goodman attacks the current educational system, stating: "it is impossible to do creative work of any kind when the goals are pre-determined by outsiders and cannot be criticized and altered by minds that have to do the work, even if they are youngsters" — I think that the overtones of Humboldtian and even Hayekian ideas are very clear. In connection with this: the links between the ideas of freedom and laissez-faire are, as we know, close, and here, too, the New Left writers reflect elements of the older liberal view: in the idea, for instance, that order and structure inhere in free human interactions and need not be imposed from the outside; and in the notion that growing up is not a process we are called upon constantly to supervise and direct, but rather one that occurs quite naturally — what young people require is not so much "direction" and supervision, but, first of all, simply adult models that can be provided by us as a by-product of our living our own lives rationally and purposefully; and, secondly, to be left alone. So that, the by now well-known insistence of the New Left critics that the abolition of compulsory school attendance laws is the precondition for any worthwhile educational policy is, it seems to me, the tip of the iceberg of a social philosophy rooted in individualist values and an individualist philosophy of human nature.
The New Left position should be of interest to us in another respect, linked with what has just been said: the criticism of "education" (as it is currently understood) per se. Although the accusation to which these critics might seem to be most open, on a number of grounds, is that of "utopianism," they are, ironically, in many ways vastly more realistic than their left-liberal and social democratic opponents. This is particularly true in regard to their evaluation of schooling as it actually operates in the Western countries, as well as their appreciation of its necessarily limited value under any circumstances. While the supporters of the official policy justify the delirium of more and more "education;" while they would have us believe, for example, that the United States, which each year spends on schooling an amount about equal to the GNP of Great Britain, is, nonetheless, pathetically and indecently falling short of its bounden duty to provide an enormously more costly "education" to its young; while, in other words, those supporting the received views are caught up in a system of illusions the attempt to realize which would bankrupt even the United States, the New Left critics direct our attention to a few radical truths: that, for all people, most of what they learn is not learned in schools; that most really significant learning does not even require a teacher but is picked up casually in the course of functioning within environments that minimize anxiety and coercion; that "education" as currently understood — that is, that which one undergoes in schools at the hands of professional teachers — is at best by and large unnecessary for children of middle-class and upper-class parents and by and large harmful for children from lower-class families. All of these writers have been or are teachers, and the analyses they provide of what actually goes on in schools — together with their frequent insightful examples that resonate with truth and reality — have greatly contributed to de-mystifying the so-called process of "education." Most of us knew that the chief result of high-school English courses is to implant in most people an unconscious life-long antipathy to Shakespeare and that undertaking to inform half of the young people of the United States as to the thought and inner spirit of Descartes and Immanuel Kant is a game hardly worth the candle. The humanistic psychology and philosophy of education of the New Left critics brings us, I think, a long way towards understanding why this should be so.
The deadening, mechanistic quality of education as it exists today is already a blight upon society; and yet, as these writers emphasize, there is an incessant imperialism on the part of government educational bureaucracies, an attempt to extend "education" into more and more areas of life and over longer and longer periods of the individual's life. "All educators," Illich asserts, "are ready to push out the walls of the classroom, with the goal of transforming the entire culture into a school," and he adds that, "No one completes school — yet. It never closes its doors on anyone without offering him one more chance: at remedial, adult and continuing education." In this way, Illich, a former priest, proposes the analogy of the current educational establishment to the medieval Church, a suggestive analogy which he and Goodman often employ.
Because of their own special training and background, these writers are able to identify the costs involved in this delirium of ever-greater quantities of schooling — not merely the kind of costs economists tend to think in terms of, but the more subtle costs to the personality-types and general temper of society most of us would find desirable. Schooling, especially schooling under present conditions, brings with it what Illich calls a "hidden curriculum." As the first and most important adult institution (besides the family) with which children become familiar, schools are enormously influential in shaping their view of the human world. The hidden curriculum — the concepts, attitudes and roles that are instilled along with reading a writing (and generally more successfully than reading and writing) are of great significance. There is, for instance, "the myth that bureaucracies, guided by scientific knowledge, are efficient and benevolent." There is the idea that knowledge is what is acquired in the presence and under the supervision of a paid professional (which has obvious costs in terms of self-assurance and self-reliance). There is the expectation that "social entitlements depend on the rank achieved in a bureaucratic process." If the minds of young people are actually being molded in this way by the present educational system — and this seems like a reasonable enough interpretation — the New Left critics deserve credit for bringing it to public consciousness.
Moreover, these critics often direct attention to various issues of political economy surrounding education which a libertarian will not find particularly original but which are seldom broached in public debate. These would include the analysis of teacher-certification (licensing, really) as an attempt to restrict entry to the market; pointing out the obstacles presented by licensing in general and by trade-unions to opening alternatives to schooling for young people (although how compulsory schooling could be abolished and millions upon millions of teenagers thrown onto the labor market without a final reckoning with the unions and with minimum-wage laws is a problem never tackled by these authors); and, very interestingly, an emphasis, in good Benthamite and Manchesterite style, on the sinister class-interests of the tens of thousands of articulate professionals employed by the present system. Goodman refers to the "school monks" who profit by the system, "an invested intellectual class worse than anything since the time of Henry VIII," and says of the billions spent on schooling and of the proliferation of programs, bureaus and studies recommending still more programs and bureaus: "One suddenly realizes that here again is the Dead Hand of the medieval Church, that inherits and inherits and never dies."
One very important aspect of the political economy of the education system, as seen by the New Left, is its tie-in with state-capitalism, historically and at the present time. Joel Spring, in particular, has developed this point. Throughout the world, government education has always had very definite functions of political indoctrination and control. This is clearest, of course, in regard to the inculcation of nationalistic values and myths. In many cases — Latin America, for instance — it was the system of government education (together with conscription) that first created the sense of nationality among the subjects of various states. Spring demonstrates how in the United States, in the course of the twentieth century, the state-schools were the conduits for instilling the values of the corporate-state in new generations of young people. That is, as the social climate of opinion altered, around the turn of the century, to emphasize sociability, cooperativeness, and the subordination of the individual to group aims, rather than the more individualistic values that had previously prevailed, the schools were altered to reflect this change and to help bring about a new, more "up to date" American personality-type. Spring is here extending to the field of education the enormously suggestive interpretation of early twentieth century American history of such New Left historians as Gabriel Kolko, who sees it as the period of the cementing of the state-business alliance that has ruled America, in domestic and foreign policy, ever since. The shaping of personality along lines suitable for the smooth functioning of the modern corporation (Americans in the audience will remember that in elementary school we were given grades for "gets along well with others") was the chief requirement from the viewpoint of the newly-emerging system of state-capitalism; but more specific desiderata were not neglected, such as the exploitation of the schools through the grading and tracking system as a means of personnel-selection at taxpayers' expense. The fact that government education usually functions as a means of transferring wealth from the relatively poor to the relatively rich is often emphasized by these writers. There is doubtless a class-envy quality to their ideas here, a banking on unconscious hostility to the rich in general; but the fact that in this extremely important area, this particular conclusion of libertarian economists regarding the net result of most government programs has been given wide publicity by the New Left writers can only be to the good.
Turning now to the criticisms I would have of these authors: a major source of disagreement would involve their evaluation of the consumer society, which they see as linked up with the educational system in various ways. Here they are altogether negative; they look on the consumer society in the customary terms, as purely the result of a race for artificial status through possession of material goods, as a futile attempt to make good for hollow lives, etc., etc. It is a pity that someone like Goodman could not have devoted some of his unique powers of close observation of the facts of everyday life to developing the insight of the psychologist Gordon Allport, for instance, who found to his surprise that there is a genuine pleasure in driving a powerful car; or of the sociologist Raymond Ruyer, who noted likewise that shopping in a modern department store is often a genuinely pleasurable experience and that it is only the intellectual's auto-suggestion and self-hypnosis that could make him think otherwise. In any case, the rejection of the consumer society would be relatively harmless, or even useful, if it were limited to a cultural critique: it would then serve the purpose of promoting an active-performing rather than a passive-consuming attitude towards life. But with these writers, as with Galbraith, such an attack functions as a preliminary invalidation of the values and decisions of ordinary men and women, preliminary that is to the demand for the coercive re-allocation of the resources that nowadays go to producing the goods people want. (In order to ground this invalidation, they drive the notion of the omnipotence of advertising to absurd lengths.) Goodman, unfortunately, says that even more should be spent by the government on education (although not on schools) than is spent now, rather than that the money should be wasted on "piggish consumption;" and Illich, mixing contempt of the consumer society with the ecological fears and with notions of the exploitation of the Third World by the Western countries, even proposes sharp limitations on the amount that individuals and nations may consume — in other words, a vast system of (international) sumptuary laws.
Connected with this disagreement would be the central difference in outlook between the New Left and libertarianism: namely, in the appreciation or even basic understanding of the market. Illich, for instance, seems to believe that the public school system treats education as a commodity, and he contrasts this with a situation where the student's autonomy would be respected. Holt and some of the others rightly condemn the systematic attempts to demean the student that often occur in schools, to rob him of self-respect, to teach him that growing up means resigning himself to subjection to irrational and unnecessary authority. But they never ask why this is not the typical quality of encounters in supermarkets or bicycle shops, or why advertising, whatever we may think of the specific content of the message, at least projects the concept that the individual and his comfort and convenience are the be-all and the end-all of creation. The perception which Thomas Szasz has so brilliantly applied to psychiatry — namely, that a commercially-oriented free market structure in service professions will have enormously different consequences for the status and ultimately for the self-image of the person taking advantage of the service, from a structure in which the purchaser of the service is someone other than the consumer — this fact, although partially understood by these writers and implicit in their support of the educational voucher system, is never credited to the account of the free market and capitalism. More generally, as Samuel Britten has pointed out in Capitalism and the Permissive Society; there is little appreciation of the fact that many of the values which the New Left holds dear — such as the substitution for mass-culture of a more individualized culture, one that takes into account minority tastes and standards — is possible through an extension of the commercial or market principle: in this case, through pay-TV and cable-TV.
Worst of all, there is in these writers an indifference or hostility to the principle of private property altogether, a refusal to see the incompatibility, not merely of higher humane values but of civilization itself, with a state of affairs where the individual's property is at the mercy of the "need" of any passing stranger. There is an attitude, I think, that private property is too "rigid," too "exclusive," a kind of Rousseauian idea that it erects barriers to human warmth and fellow-feeling and that it must, therefore, be superseded, by force if necessary. To my mind, this attitude goes some of the way in justifying, as applied to them, what von Mises said of their left-anarchist precursors: that they propounded a social philosophy fit only for roaming bands of barbarians.
So that, in their approach to the economic order, the New Left critics are fundamentally flawed; and, in view of the importance of correct economic theory for any social philosophy, this is a serious defect indeed. But the lack of economic knowledge is a common enough failing among social philosophers; and it appears to me that, in the battle against the positivist bureaucratization of the world, the New Left can furnish us with useful allies, from whom we have much to learn.
Recorded at the Mises Institute's Strategies for Liberty event in San Diego, California, on 25 February 2017. Includes an introduction by Jeff Deist.
The Quarterly Journal of Austrian Economics
Vol. 19 | No. 2 | 214–222Summer 2016
Book Review
Bourgeois Equality: How Ideas, Not Capital or Institutions, Enriched the World
Deirdre McCloskeyChicago: University of Chicago Press, 2016, 787 pp.
Allen MendenhallAllen Mendenhall (allenmendenhall.com) is Associate Dean and the Director of the Blackstone Center for Law and Liberty at Faulkner University’s Thomas Goode Jones School of Law.
If it’s true that Wayne Booth inspired Deirdre McCloskey’s interest in the study of rhetoric, then it’s also true—happily, in my view—that McCloskey has refused to mimic Booth’s programmatic, formulaic methods and boorish insistence on prosaic succinctness. Bourgeois Equality is McCloskey’s third volume in a monumental trilogy that began with The Bourgeois Virtues (2006) and Bourgeois Dignity (2010), each published by the University of Chicago Press. This latest volume is a Big Book, alike in kind but not in theme to Jacques Barzun’s From Dawn to Decadence (2000), Camille Paglia’s Sexual Personae (1990), or Herald Berman’s Law and Revolution (1983) and Law and Revolution II (2006). It’s meandering and personal, blending scholarship with an essayistic style that recalls Montaigne or Emerson.
McCloskey’s elastic arguments are shaped by informal narrative and enlivened by her plain and playful voice. At times humorous, rambling, and deliberately erratic, she gives the distinct impression that she’s simply telling a story, one that happens to validate a thesis. She’s having fun. Imagine Phillip Lopate articulating economic history. McCloskey is, in this regard, a latter-day Edward Gibbon, adopting a mode and persona that’s currently unfashionable among mainstream historians, except that she’s more lighthearted than Gibbon, and unashamedly optimistic.
Writing with an air of confidence, McCloskey submits, contra Thomas Piketty, that ideas and ideology—not capital accumulation or material resources—have caused widespread economic development. Since 1800, worldwide material wealth has increased and proliferated; the quality of life in poor countries has risen—even if it remains unequal to that of more prosperous countries—and the typical human being now enjoys access to the food, goods, services, medicine, and healthcare that, in earlier centuries, were available to only a select few in the richest parts of the globe. The transition from poverty to wealth was occasioned by shifting rhetoric that reflected an emerging ethical consensus. The rhetorical-ethical change involved people’s “attitudes toward other humans” (p. xxiii), namely, the recognition of shared experience and “sympathy,” as Adam Smith stated in The Theory of Moral Sentiments. Attributing human progress to ideas enables McCloskey to advocate the norms and principles that facilitated economic growth and social improvement (e.g., class mobility and fluidity) while generating extensive prosperity. Thus, her project is at once scholarly and tendentious: a study of the conditions and principles that, in turn, she promotes.
She argues that commercialism flourished in the eighteenth century under the influence of ideas—such as “human equality of liberty in law and of dignity and esteem” (p. xxix)—that were packaged in memorable rhetoric and aesthetics. “Not matter, mainly, but ideas” caused the Great Enrichment (p. 643). In other words, “[t]he original and sustaining causes of the modern world […] were ethical, not material,” and they included “the new and liberal economic idea of liberty for ordinary people and the new and democratic social idea of dignity for them” (p. xxxi). This thesis about liberty and dignity is clear and unmistakable if only because it is repetitive. McCloskey has a habit of reminding readers—in case you missed her point the first, second, or fifty-seventh time around—that the causes of the Industrial Revolution and the Great Enrichment were ideas, not “narrowly economic or political or legal changes” (p. 470). She maintains, to this end, that the Scottish Enlightenment succeeded in combining the concepts of liberty and dignity into a desirable form of equality—not equality of outcomes, of course, but of opportunity and treatment under the law. And the Scottish model, to her mind, stands in contradistinction to the French example of centralized, top-down codification, command, planning, and design.
A perennial villain lurks in the pages of her history: the “clerisy,” which is an “appendage of the bourgeoisie” (p. 597) and often dubbed “the elite” in regular parlance. McCloskey calls the clerisy “the sons of bourgeois fathers” (p. xvii) and “neo-aristocratic” (p. 440). The clerisy includes those “artists, intellectuals, journalists, professionals, and bureaucrats” who resent “the commercial and bettering bourgeoisie” (p. xvi). The clerisy seeks, in different ways at different times, to extinguish unfettered competition with exclusive, illiberal, irrevocable grants and privileges that are odious to free society and offensive to the rights of average consumers. “Early on,” says McCloskey, referring to the period in Europe after the revolutionary year 1848, “the clerisy began to declare that ordinary people are misled in trading, and so require expert protection and supervision” (p. 609). The clerisy since then has been characterized by paternalism and a sense of superiority.
Because the clerisy is shape-shifting, assuming various forms from time to time and place to place, it’s a tough concept to pin down. The word “clerisy” does not appear in the book’s index to permit further scrutiny. By contrast, McCloskey’s general arguments are easy to follow because the book is separated into parts with questions as their titles; subparts consisting of one-sentence headings answer those questions.
In a massive tour de force such as this, readers are bound to take issue with certain interpretive claims. Historians will find McCloskey’s summaries to be too breezy. Even libertarians will accuse her of overlooking manifest wrongs that occurred during the periods she surveys. My complaints are few but severe. For instance, McCloskey is, I believe, either careless or mistaken to announce that, during the nineteenth and early twentieth century,McCloskey is vague about the period to which she refers, but the reader may infer, based on surrounding references to the nineteenth and twentieth centuries, that she is locating this trend in the period I have identified. “under the influence of a version of science,” in a territory that’s never specifically identified, “the right seized upon social Darwinism and eugenics to devalue the liberty and dignity of ordinary people, and to elevate the nation’s mission above the mere individual person, recommending, for example, colonialism and compulsory sterilization and the cleansing power of war” (p. xviii).
Let’s hope that it’s innocent negligence rather than willful distortion that underlies this odd, unqualified, categorical assertion. Adam Cohen’s Imbeciles (2016) and Thomas C. Leonard’s Illiberal Reformers (2016) describe how, in the United States, social Darwinism and eugenics were adopted primarily, though not exclusively, by the Left, not the Right. These recent books come on the heels of several scholarly treatments of this subject: Thomas M. Shapiro’s Population Control Politics (1985), Philip R. Reilly’s The Surgical Solution (1991), Joel Braslow’s Mental Ills and Bodily Cures (1997), Wendy Kline’s Building a Better Race (2001), Stefan Kuhl’s The Nazi Connection (2002), Nancy Ordover’s American Eugenics (2003), Christine Rosen’s Preaching Eugenics (2004), Christina Cogdell’s Eugenic Design (2004), Gregory Michael Dorr’s Segregation’s Science (2008), Paul A. Lombardo’s edition A Century of Eugenics in America (2011), and Alexander Minna Stern’s Eugenic Nation (2016). These represent only a small sampling.
Is McCloskey unware of these texts? Probably not: she reviewed Leonard’s book for Reason, although she did so after her own book reached press. At any rate, would she have us believe that Emma Goldman, George Bernard Shaw, Eugene Debs, Marie Stopes, Margaret Sanger, John Maynard Keynes, Lester Ward, and W. E. B. Du Bois were eugenicist agitators for the political Right? If so, she should supply her definition of “Right,” since it would go against commonly accepted meanings. On the matter of colonialism and war, self-identified members of the Old Right such as Albert Jay Nock, John Flynn, and Senator Robert Taft advocated precisely the opposite of what McCloskey characterizes as “Right.” These men opposed, among other things, military interventionism and adventurism. The trouble is that McCloskey’s muddying of the signifiers “Left” and “Right” comes so early in the book—in the “Exordium”—that readers may lose trust in her, question her credibility, and begin to suspect the labels and arguments in her later chapters.
Other undefined terms only make matters worse, ensuring that McCloskey will alienate many academics, who, as a class, are already inclined to reject her libertarian premises. She throws around the term “Romanticism” as if its referent were eminently clear and uncontested: “a conservative and Romantic vision” (p. xviii); “science fiction and horror fiction [are] … offshoots of Romanticism” (p. 30); “[Jane Austen] is not a Romantic novelist … [because] [s]he does not take Art as a model for life, and does not elevate the Artist to a lonely pinnacle of heroism, or worship of the Middle Ages, or adopt any of the other, antibourgeois themes of Novalis, [Franz] Brentano, Sir Walter Scott, and later Romantics” (p. 170); “Romanticism around 1800 revived talk of hope and faith and a love for Art or Nature or the Revolution as a necessary transcendent in people’s lives” (p. 171); “Romantic candor” (p. 242); “the late eighteenth-century Romantic literary critics in England had no idea what John Milton was on about [sic], because they had set aside the rigorously Calvinist theology that structured his poetry” (p. 334); “the nationalist tradition of Romantic writing of history” (p. 353); “Romantic … hostilities to … democratic rhetoric” (p. 510); “[i]n the eighteenth century … the idea of autonomy triumphed, at any rate among the progressive clerisy, and then became a leading Romantic idea, á la Victor Hugo” (p. 636); and “the Romantic conservative Thomas Carlyle” (p. 643).
To allege that the clerisy was “thrilled by the Romantic radicalism of books like Mein Kampf or What Is to Be Done” (p. xviii) is also recklessly to associate the philosophies of, say, Keats or Coleridge or Wordsworth with the exterminatory fantasies of Hitler and Lenin. McCloskey might have guarded against this misleading conflation by distinguishing German idealism or contextualizing Hegel or by being more vigilant with diction and definition. Her loose language will leave some experts (I do not profess to be one) scratching or shaking their heads and, more problematic, some non-experts with misconceptions and misplaced targets of enmity. One imagines the overeager and well-meaning undergraduate, having read Bourgeois Equality, setting out to demonize William Blake or destroy the reputation of Percy Shelly, about whom Paul Cantor has written judiciously.See, e.g., Paul Cantor (1997). It is both surprising and disappointing that McCloskey never references Paul Cantor in her book, not even in her chapters on Shakespeare. Cantor might have added some interesting nuance to McCloskey’s treatment of Dickens. See, e.g., McCloskey at pp. 156, 165, 274, 557, 591–592, 600, 626, and Cantor and Cox (2009) at pp. 50–52, 54–56, 61–62, 85–87, 90, 92–93. Wouldn’t originality, imagination, creativity, and individualism—widely accepted markers of Romanticism—appeal to McCloskey? Yet her unconditionally derogatory treatment of Romanticism—which she portrays as a fixed, monolithic, self-evident thing—undermines aspects of that fluctuating movement, period, style, culture, and attitude that are, or seem to be, consistent with her Weltanschauung.
But I protest too much. These complaints should not diminish what McCloskey has accomplished. Would that we had more grand studies that mapped ideas and traced influences across cultures, communities, and eras. McCloskey takes the long view, as we all should. Her focus on rhetoric is crucial to the future of liberty if, given the technological advances we have made, the “work we do will be more and more about decisions and persuading others to agree, changing minds, and less and less about implementation by hand” (p. 498). Equally significant is her embrace of humanomics—defined as “the story [of] a complete human being, with her ethics and language and upbringing” (p. xx)—which materializes in casual references to Henrik Ibsen’s plays, challenges to the depiction of John Milton “as a lonely poet in a garret writing merely to the starry heavens” (p. 393), analyses of Jane Austen’s novels, and portrayals of Elizabethan England. Her historical and narrative arc enables us to contextualize our own moment, with all of its troubles and possibilities.
Best of all, her book is inspiring and exhilarating and brimming with rousing imperatives and moving calls to action. “Let us, then,” she says at one point, “not reject the blessings of economic growth on account of planning or pessimism, the busybody if well-intentioned rationalism of some voices of the French Enlightenment or the adolescent if charming doubts of some voices of the German Romantic movement, fashionable though both attitudes have long been among the clerisy. As rational optimists, let us celebrate the Great Enrichment, and the rhetorical changes in freer societies that caused it” (p. 146). At another point she encourages her audience to guard against “both cynicism and utopianism” (p. 540), and elsewhere to heed “trade-tested cooperation, competition, and conservation in the right mix” (p. 523). These little nudges lend her credibility insofar as they reveal her true colors, as it were, and demonstrate that she is not attempting—as is the academic wont—to hide her prejudices and conceal her beliefs behind pretended objectivities.
Poverty is relative and, hence, permanent and ineradicable, despite McCloskey’s claim that we can “end poverty” (p. 8). If, tomorrow, we woke up and the wealth of each living person were magically to multiply twentyfold—even fiftyfold—there would still be people at the bottom. The quality of life at the bottom, however, would be vastly improved. The current manifestation of global poverty shows how far we as a species have advanced in the last few centuries. McCloskey is right: We should pursue the ideas that accelerated and achieved human flourishing, that demonstrably brought people out of distress and destitution. Hard sciences and mathematical models are insufficient in themselves to convey the magnitude and splendor of these ideas and their accomplishments. Hence we should welcome and produce more books like McCloskey’s that undertake a “rhetorical-ethical Revaluation” to both examine and celebrate “a society of open inquiry,” one which not only “depends on rhetoric in its politics and in its science and in its economy,” but which also yields intellectual creativity and political freedom (p. 650). In McCloskey’s approach, economics and the humanities are not mutually exclusive; rather, they are mutually illuminating and, in fact, indispensably and inextricably tied. An economics that forsakes the dignity of the human person and his capacity for creativity and aesthetics does so at its own peril and to its own disgrace. All economics is, at its core, humanomics. We could do without the latter term if we understood the former.
REFERENCES
Barzun, Jacques. 2000. From Dawn to Decadence: 500 Years of Western Cultural Life, 1500 to the Present. New York: HarperCollins.
Berman, Harold J. 1983. Law and Revolution: The Formation of the Western Legal Tradition. Cambridge, Mass.: Harvard University Press, 2003.
——. 2006. Law and Revolution II: The Impact of the Protestant Reformations on the Western Legal Tradition. Cambridge, Mass.: Harvard University Press.
Braslow, Joel. 1997. Mental Ills and Bodily Cures: Psychiatric Treatment in the First Half of the Twentieth Century. Berkeley and Los Angeles: University of California Press.
Cantor, Paul. 1997. “The Poet as Economist: Shelley’s Critique of Paper Money and the British National Debt,” Journal of Libertarian Studies 13, no. 1: 21–44.
Cantor, Paul, and Stephen Cox, eds. 2009. Literature and the Economics of Liberty. Auburn, Ala.: Ludwig von Mises Institute.
Cogdell, Christina. 2004. Eugenic Design. Philadelphia: University of Pennsylvania Press.
Cohen, Adam. 2016. Imbeciles. London: Penguin Press.
Dorr, Gregory M. 2008. Segregation’s Science. Charlottesville, Va.: University of Virginia Press.
Kline, Wendy. 2001. Building a Better Race. Berkeley and Los Angeles: University of California Press.
Kuhl, Stefan. 2002. The Nazi Connection. Oxford: Oxford University Press.
Leonard, Thomas C. 2016. Illiberal Reformers. Princeton: Princeton University Press.
Lombardo, Paul A. 2011. A Century of Eugenics in America. Bloomington, Ind.: Indiana University Press.
McCloskey, Deirdre. 2006. The Bourgeois Virtues. Chicago: University of Chicago Press.
——. 2010. Bourgeois Dignity. Chicago: University of Chicago Press.
Ordover, Nancy. 2003. American Eugenics. Minneapolis: University of Minnesota Press.
Paglia, Camille. 1990. Sexual Personae: Art and Decadence from Nefertiti to Emily Dickinson. New Haven, Conn.: Yale University Press.
Reilly, Philip R. 1991. The Surgical Solution. Baltimore: Johns Hopkins University Press.
Rosen, Christine. 2004. Preaching Eugenics. Oxford: Oxford University Press.
Shapiro, Thomas M. 1985. Population Control Politics. Philadelphia: Temple University Press.
Stern, Alexander Minna. 2016. Eugenic Nation. Berkeley and Los Angeles: University of California Press.
Quarterly Journal of Austrian Economics 19, no. 2 (Summer 2016)
If it’s true that Wayne Booth inspired Deirdre McCloskey’s interest in the study of rhetoric, then it’s also true—happily, in my view—that McCloskey has refused to mimic Booth’s programmatic, formulaic methods and boorish insistence on prosaic succinctness. Bourgeois Equality is McCloskey’s third volume in a monumental trilogy that began with The Bourgeois Virtues (2006) and Bourgeois Dignity (2010), each published by the University of Chicago Press. This latest volume is a Big Book, alike in kind but not in theme to Jacques Barzun’s From Dawn to Decadence (2000), Camille Paglia’s Sexual Personae (1990), or Herald Berman’s Law and Revolution (1983) and Law and Revolution II (2006). It’s meandering and personal, blending scholarship with an essayistic style that recalls Montaigne or Emerson.
McCloskey’s elastic arguments are shaped by informal narrative and enlivened by her plain and playful voice. At times humorous, rambling, and deliberately erratic, she gives the distinct impression that she’s simply telling a story, one that happens to validate a thesis. She’s having fun. Imagine Phillip Lopate articulating economic history. McCloskey is, in this regard, a latter-day Edward Gibbon, adopting a mode and persona that’s currently unfashionable among mainstream historians, except that she’s more lighthearted than Gibbon, and unashamedly optimistic.
The Quarterly Journal of Austrian Economics
Vol. 19 | No. 2 | 131–148Summer 2016
Economic Indulgences: Old and New Debates on Welfare and Freedom
David CowanDavid Cowan (david.cowan@bc.edu) is a visiting scholar at Boston College. The Henry Hazlitt Memorial Lecture was sponsored by Hunter Lewis.
Henry Hazlitt Memorial LectureAustrian Economics Research ConferenceLudwig von Mises InstituteAuburn, AlabamaMarch 31, 2016
INTRODUCTIONIn this lecture, I will look at a debate in the 1960s between Frank Knight, the subject of my new book (2016) in Palgrave Macmillan’s Great Thinkers in Economics series, and Henry Hazlitt, memorialized by this lecture. I will look at the dispute they had on welfare, freedom and power, which was an important debate then and now. I will take Knight’s observations and apply them to today’s debate on inequality, and what I suggest are the economic indulgences referenced in my lecture title.
FRANK KNIGHTFrank Knight was a curmudgeonly character, who I dare say, in our politically correct and overly-sensitive age, would not last long, and certainly would never make tenure, because as we know tenure means never having to say you’re sorry. Knight was not the kind of debater or discussant easily given to flights of fancy or expressing misgivings. I assume at least a passing acquaintance with Frank Knight on the part of this audience, but perhaps a lamentably short intellectual biographical note is in order. Within the economic world today he is chiefly noted for the notion of Knightian uncertainty featured in his first book Risk, Uncertainty and Profit, establishing his reputation in the pantheon of economic thinkers on a book that was essentially his Ph.D. thesis. Knight was brought up in a conservatively theological home, which was also a Republican household. His early undergraduate work was actually at evangelical colleges in the neighboring state to this one, he attended colleges in Tennessee. In spite of all this, he grew up to have distaste for much organized religion, though he attended the Unitarian church for much of his life.
Aside from being “kicked out” of Cornell’s Philosophy Department and a couple of stints at the State University of Iowa, Knight spent his academic career at the University of Chicago. He inspired an almost cult-like devotion among his students at Chicago, leading his students (which included most notably Milton Friedman, James Buchanan and George Stigler) to say there is no God but Frank Knight is his prophet. Knight was a co-founder of the “Chicago School” of Economics, but he was a teacher more than a theorist or producer of books. It is because Knight was essentially a teacher and a critic that he did not pen the major volumes one might have hoped for. Buchanan, who became a long-time friend and a Nobel Prize winner, notes in the foreword to the 1982 edition of Freedom and Reform that Frank Knight was a critic, and apart from Risk, Uncertainty and Profit his work “can be interpreted as a series of long book reviews.” His work is thus scattered across a host of economic journals in essay form standing on the base of his first and major work Risk, Uncertainty and Profit, published in 1921. What ideas he had were stated, restated and then refashioned multiple times in various essays. Hence to synthesize his work, which I have attempted to do in my own book (2016), means working through the remainder of his writings comprised of essays, lectures and book reviews, the most notable being collected in the single volumes of The Economic Organization (1933), The Ethics of Competition and Other Essays (1935), The Economic Order and Religion, with T.W. Merriam (1945), Freedom and Reform (1947), On the History and Method of Economics (1956), and lastly Intelligence and Democratic Action published in 1960.
Knight himself described his “social function” as one of “exposing fallacies, nonsense and absurdities in what was passed off as sophisticated scientific discourse.” (Knight, 1982 [1947], p. xi) His relevance as a great economic thinker for us today, apart from Knightian uncertainty and his status as a founding father of the Chicago School, can be stated in a threefold sense. First, he is arguably one of the most interdisciplinary of economists, and thus provides a basis on which thinkers can discuss economic issues from their own disciplines. Second, he raised issues that are prevalent in the latest stages of capitalism, and the issues we currently face and will continue to face in the future. Lastly, he was an economic realist who knew the weaknesses and strengths of capitalism, so while remaining a supporter of capitalism as the best system, he also addressed the limitations and difficulties thrown up by this imperfect way of organizing our economic affairs without overthrowing what he saw as an ultimately workable system. In pursuing this agenda, Knight found himself in a number of fights, specifically with Keynes and the Austrians, with protracted arguments in the 1930s with Friedrich Hayek. In many respects I would typify these not as full scale arguments, but instead boundary disputes, somewhat akin to members of the same club or union fighting over the rules of association. Which brings me to the boundary dispute that is the subject of this lecture, the one between Knight and Henry Hazlitt.
KNIGHT ON HAZLITT, APRIL 1966The journalist Hazlitt and the academic Knight had a short but fractious relationship in print, which started from the lecture podium at Mont Pelerin and was waged via the pages of the journal Ethics. For his part, Hazlitt thought Knight’s attack on him was one quite unprovoked on his side. Having initially fired a salvo or two at Hazlitt from the podium, Knight committed his more sustained attack to print in an essay published in April 1966, entitled “Abstract Economics as Absolute Ethics.” In the essay, he offered a critique of Hazlitt’s book The Foundations of Morality (1964). Knight refers to the work as a polemic, at the heart of which lie two chapters entitled “The Ethics of Capitalism” and “The Ethics of Socialism.”
Knight started out by stating that Hazlitt’s book demonstrated good workmanship and the makings of a good treatise on socio-political ethics. A kind of condescending “could do better” is the tenor of his remarks. This is because he surmised that Hazlitt’s work contained many of the faults he believed that defenders of capitalism tend to have, namely that it was the kind of oversimplified, extremist propaganda that ignored changing theory and practice. Hence, he wrote, Hazlitt’s work failed to deal with the complexity of modern society and defeated the purpose of the argument.
Knight outlines the content of the chapters as they apply to ethical rules, and turns to the question of justice, which he says is settled for Hazlitt by John Bates Clark’s argument in his 1899 book The Distribution of Wealth, with its thesis “that ‘Free competition tends to give to labor what labor creates, to capitalists what capital creates, and to the entrepreneur what the coordinating function creates…. [It tends] to give each producer the amount of wealth that he specifically brings into existence.’” This argument, Knight quickly points out, is fallacious for three reasons. First, there is only a general tendency, he says, to remunerate each productive agent. Second, society does not consist entirely of producers. Lastly, producers are not “economic men.” Apart from the key factors of economic capacity, labor power, and managerial skill and property ownership, Knight points out that production also involves a large portion of “luck.” Hence, individual production “is due much more to biological and social inheritance, for which the individual is not responsible, than to the individual’s past efforts.” Knight concludes that Hazlitt simply applies the principle of production too broadly.
Knight then turns to the ethical argument. Hazlitt summarizes capitalist ethics as a system of freedom, justice and productivity, which Knight argues cannot be precisely defined, besides which distributive justice has a number of meanings. The real point Knight wants to make is against Hazlitt’s individualist ethic, which he argues is individualistic to an extreme; to the point he never even mentions the family (Knight, 1966, p. 166). Knight goes on to say ethically one must “condemn the unfairness of an unequal start in the competition of life” and this “inequality inheritance” he argues tends to increase with each succeeding generation (Knight, 1966, p. 166).
It is this notion of “inequality inheritance” that is at the heart of the welfare question for Knight, and of course at the heart of notions of injustice tackled by many a socialist pamphleteer who wants to overthrow the capitalist system. Yet, to have socialism instead of capitalism is to replace business with politics, and Knight explains that many of the features most objected to in “capitalism” are in general similar in politics, though in his view “very obviously worse” (Knight, 1966, p. 168). They are very much alike in that functionaries in direct control inevitably have, he explained, “much arbitrary power and get their positions chiefly by competitive persuasion, or simply by accident.” Rivalry, which he calls an instrumentally irrational motive, “is more natural to men than rational co-operation.” Although it permeates both, Knight states this competitive persuasion takes the form of propaganda in politics and sales activity in business.
They do, however, also differ. Firstly, no-one has the power or effective freedom to form a state or jurisdiction, while there is some, albeit limited power, to start a business enterprise; obviously for Knight, limited by access to investment, skills, inheritance, and so on. Second, people are born into a state and family, but in capitalism they can choose membership among many organizations, and so for instance a laborer has a wide choice of employers to work for.
In pursuing our choices we seek better conditions, and Knight explains that when social groups seek better conditions, which they feel are rightfully theirs, their efforts can create social problems since social changes that benefit some can lead to a worsening situation for others. This can lead to a conflict between freedom and progress. For this reason, social conflict is not necessarily the oft-stated problem simply of order. It becomes a problem of power, and I will return to this later, but first let’s see how Hazlitt responded to Knight.
REPLY TO KNIGHT OCTOBER 1966For his part, Hazlitt (1966) said, “Space does not permit me an examination of Knight’s own obscure pronouncements, though they seriously need one.” He does, however, offer up a defense against Knight, with the opening salvo of calling Knight’s original attack at Mont Pelerin “a strange performance.” Hazlitt stated he did not recognize the opinions attributed to him by Knight in the written assault. He rebuts a number of the points Knight made, and explains that his book as a whole is neither polemic, nor are the two chapters Knight singles out at the heart of the book. Contrary to Knight, Hazlitt explained the heart of the book is the much earlier chapter 6 on “Social Cooperation,” although the same could be said he suggests of chapters 7 and 8, or even the conclusion, bur certainly not the chapters Knight singled out. He also rebuts a number of specific points; including the ones I have drawn attention to earlier. These are not important to go through, and I suspect they are simply a case of an academic and a practitioner talking past each other.
Hazlitt set out what he considered to be the essential justice of the capitalist method of distribution. As Knight noted, Hazlitt was drawing on The Distribution of Wealth by John Bates Clark (1908 [1899]). The central thesis Clark put forward was the point I quoted earlier, and merits repeating here, that “free competition tends,” a word Hazlitt italicizes, “to give to labor what labor creates, to capitalists what capital creates, and to entrepreneurs what the coordinating function creates…[It tends] to give each producer the amount of wealth that he specifically brings into existence” (Hazlitt, 1966, p. 60). This is the point Knight called fallacious. Hazlitt points out that Knight is at pains to make the qualification that this is a tendency, but as Hazlitt’s italics demonstrate, this qualification is in the original quote. To which Hazlitt adds that in his own book he explained certain qualifications were necessary, and he was well aware Clark’s thesis had been contested. However, he suggested much is overlooked in the dispute with Clark, and what he wanted to do was to correct this by drawing our attention to three matters.
First, Clark was rebutting the Marxian argument that capitalism systemically exploits labor and robbed the workman of his produce. He argued that Clark in fact proves that the capitalist method of distribution is not inherently unjust, which many people believe to this day, and he states that this falsehood has given rise to “unrest, resentment, demagogy, revolutions, and wars that now threaten to destroy not only “capitalism” but civilization itself.” Second, Clark in Hazlitt’s view demonstrated the tendency of the competitive market system to give to each what they create and this is in accord with the most generally accepted principle of distributive justice, at least in the first instance of economic reward for labor. He explained there is then nothing to stop people to redistribute their wealth voluntarily, and indeed capitalism does nothing to hinder or discourage charity and generosity. What is problematic is the attempt to coerce by means of a socialist or equalitarian rule a redistribution that ignores effort or efficiency, and destroys incentives and production. True justice, Hazlitt argues, is not achieved through a “leveling down.” Lastly, Clark was not really describing a purely economic system in his description of capitalism and its consequences, rather he was describing a legal system that protects property rights, promotes free labor, markets and wages, enforces contracts and regulates against fraud, violence and other illegalities.
Hazlitt argued capitalism evolved over centuries and had a moral origin. The evolution of capitalism, unlike the socialist and communist revolutions, was never instantaneous or expedient. And so the real oversimplifiers (and recall this is what Knight called Hazlitt) are those who contend ethical and legal considerations are irrelevant in judging capitalism. So, after an interesting passage of defense, Hazlitt returns to Knight and concludes ”I find Knight’s article rambling, fuzzy, and full of inconsistencies. Even after a second or third reading I cannot decipher.” (Hazlitt, 1966, p. 61). On this criticism, I certainly experienced Hazlitt’s sense of a terrain that was rambling and difficult, but I hope for my reader’s sake I have successfully deciphered his work.
KNIGHT’S RESPONSE OCTOBER 1967Exactly one year later, Knight’s response to Hazlitt’s defense was published, with the telling title “A Word of Explanation” (1967a). Knight does not attempt a formal rejoinder, he says, rather a clarification. While he notes the odd touché or two with Hazlitt, he responds by clarifying rather than admitting a defeat on the point. This is a little like when an Englishman says “with the greatest respect” and then proceeds to insult you. So having said, with the greatest respect, Knight states that the major fault with Hazlitt’s book is the “constant harping on co-operation,” which Knight argued was never defined and neglected its opposite, rivalry. For his part, Knight thought of cooperation as implying freedom and “discussion” as a means of reaching free agreement. Knight concluded his rejoinder by accusing Hazlitt of making sweeping statements of half-truths; and, I should point out here that Knight himself was accused of the same crimes by his own critics at various points during his career. He goes on to say, “I regret my critique being so negative; but some clearing away, even of rubbish, often precedes building; and social construction is a complex and hard problem. If Hazlitt-style propaganda is politically effective, I dread the consequences for the better society that might be had through wiser policies” (Knight, 1967a, p. 85). His last word in these exchanges is “And anyhow, blessed are they to whom all things are simple; and in pudd’nhead Wilson’s adage, it’s differences of opinions that makes hoss-races” (Knight, 1967a, p. 85).
Having looked at the demarcation dispute between Knight and Hazlitt, we can delve a little deeper into Knight’s notion of cooperation, which has the three aspects of welfare, freedom and power. There is not sufficient time to go in depth into each of these, but I would like to highlight some of the key points of each.
WELFAREAt the core of Knight’s conception of welfare “is the premise that economic welfare must not be identified with aggregate (i.e. allocative) economic efficiency. Rather, welfare must be seen as the sum of economic freedom, the balance of economic power, and economic efficiency” (Nash, 1998, p. 161). He also offered an argument that the outcomes of imperfect competition reflect the relative power imbalances in an industry, and these outcomes are fundamentally unfair. We can extrapolate from this the general conclusion for all markets that unconstrained self-interest will not always lead to fair outcomes, or outcomes beneficial for society as a whole. This is a challenge to the “invisible hand” of Smithian economic thinking, and provides an alternative notion of perfect competition to orthodox economics, critical to which is Knight’s conception of economic welfare.
Thus, in looking at welfare, Knight draws our attention to the relationship between the ‘economic’ and ‘moral’ domains of our society, arguing that self-interest cannot maximize the value of the aggregate ‘social welfare function.’ (Nash, 1998, p. 165). He refused to separate the intellectual from the moral pursuit of understanding society, nor could he accept there was a way of having widespread agreement on the goals of social policy. The idea that social and economic thinking can achieve the best ends for society is not an idea agreeable to him. The problem we face in social policy-making is one of values, not of facts, he argued, and social problems arise through conflict caused by the mere assertion of opposite claims. In a market society, a price theory amounts to a value theory because price is the means by which we arrive at agreement between individuals in exchange. Yet, we have higher wants and goals of conduct with which to test our values, rather than simply having a system that accepts and satisfies wants.
We see in his analysis how Knight used his “economics” and “social philosophy” combined to help us understand the human predicament. If we simply look at the competitive system as a wants-satisfying system, then we will see into a mirror that reflects back who we are rather than what are our highest ideals. Knight argued that the social order we have may gratify us, but it also shapes our wants, and hence our system must be judged ethically by the type of character it encourages and forges in the people within this social order, since giving the public what it wants “usually means corrupting popular tastes” (Knight, 1935, p. 49). The problem emerges, however, that price is the measure of efficiency and reflects what the people really want, through their free choice in the market, while also leading to the corruption of public taste. Yet, who is to say what is in good taste? Is this not simply liberal elitism? In the conclusion to my book Economic Parables: The Monetary Teachings of Jesus Christ (2007), I make the point that the economy is like a mirror. If we look into the mirror and think we look a little ugly then smashing the mirror is not going to make us look any prettier. The problem is not the system, it is us.
FREEDOMPut plainly, for Knight economics is about freedom. Knight’s essays in Freedom and Reform were collected and published in 1947, essentially as a sequel to the 1935 The Ethics of Competition, and again on the initiative of some of his former students. The major theme of the work, as the title implies, is freedom, but the reference to reform makes this very much a Knightian expedition, as he sought to mount an attack on any superficial grasp of freedom, and root it in some deep economic and philosophical soil. If we think of freedom in terms of laissez-faire then Knight, in his major essay Laissez-Faire: Pro and Con (1967b), explained that the relationship between laissez-faire and government control cannot arise outside of an economic and political order operating under market conditions. He argued it is absurd to draw strict battle lines between laissez-faire and “planning.” He explained that humans are social animals, and social life sets many limits to freedom, which includes social and welfare issues. He also explains that laissez-faire has been rapidly modified down the ages by political regulation, but how far this change will go he suggests is a question for prophets. The point remains: we need to recognize the necessity of a democratic political order and its inherent limitations on freedom.
Certainly, Knight is in the business of supporting the market, but this means addressing the significant challenges faced by capitalism in respect to freedom and equality, and there are many aspects of inequality to consider in the Knightian view. He accepted inequality as an inevitable outcome of freedom, even if at times it leads to unfortunate outcomes for some. The past is very much a foreign land in Knight’s view, making freedom he wrote an “historical anomaly. A few generations ago the opposite was the case; conformity and obedience were moral norms of social life” (Knight, 1960, p. 112). Complaints about inequalities, big business and monopolies are for Knight borne out of a romanticism, and he argued this is not the way to confront the real economic problems we face, though he is by no means denying the seriousness of the problems that exist. What is essential for Knight is that such romantics need to see freedom as the core sentiment, if we are fully to understand economic society.
POWERUltimately—and this is at the heart of Knight’s welfare approach—social policy must deal with power and weakness as well as freedom. He finds Hazlitt’s conception of freedom problematic and ignorant of the problems of weakness and rivalry. He argued that Hazlitt failed to address adequately the relations between freedom and power, and this is related to his treatment of equality and inequality. A proper treatment would recognize that “serious inequality of power, especially economic power, limits the effective freedom of the weaker party, and, if extreme, destroys it, making him helpless”(Knight, 1960, p. 174). Freedom thus effectively depends on power, which is power an individual possesses with meaningful content only insofar as the person has means and effective freedom to exercise their power, which for half the normal population means little, as they have no such power or means.
As noted, people will aspire to improve their position, which they will do by improving their wealth and income and by gaining distinction and power, and they will do this in any way open to them. This means using whatever power they possess to persuade and influence. To get influence they must get attention, which is what people want anyway, and he says it is at “this point that social rivalry is most acute, and free society often seems to be mostly a phenomenon of competitive “screaming” for notice in one connection or another”(Knight, 1960, p. 173). Such attention-seeking, he says, refined people find repugnant, while the Marxists would hope their dictatorship would educate this out of human nature.
Hazlitt’s individualism, in Knight’s view, ignored these problems of power, weakness, rivalry and inequality. For Knight, “the family, not the individual, is the effective unit in society, because he explained “differential inheritance—particularly of wealth—entails an unequal start in the competition of life, which violates fundamental individualistic ethics”(Knight, 1960, p. 174). Knight typifies Hazlitt’s approach as an ideal of a primitive society or small tribal groups with face-to-face interaction, and he operated under what Knight called a “cheerful assumption” that if society let men be they will cooperate rationally based on known rules. In contrast, Knight has a somewhat Augustinian view of human nature, and as such believed something akin to original sin militates against any such hope. In contrast, Knight’s understanding is that people—to be moral—must change themselves and then by mutual understanding change the world. This is what he means by discussion. This is also a very theological approach to the problem, found in conservative and Augustinian schools of theology. To paraphrase Luther, you can try and rule the world with the Gospel, but you better fill it with real Christians first. In other words, we remain in a world of conflicted values.
So, what kind of discussion of values can we have? Perhaps we can conclude that Knight fails on his own terms, because as he himself states, people are “screaming” for attention for their cause, and whatever change results is likely to be disagreeable to others. He is certainty right about the screaming, though goodness knows what he would make of today’s presidential primaries or the attempts to pull down monuments of the past because of racial politics. Knight is not against change, and he certainly does not want to see things stay as they are. Neither is he a progressive.
A WORLD OF INDULGENCE IN NEED OF COOPERATIONIn concluding this lecture, I want to set out in a Knightian way how we can come to terms with the moral question of modern capitalism. In the Knightian view, there is inevitability about inequality and the conflict between various desires. The problem of equality and inequality lies at the confluence of welfare, freedom and power. We see inequalities in developed nations and emerging nations. We see different levels of poverty. There is not sufficient time to go into the nuances of these differences. It must suffice to say when we think of extreme poverty in Africa, for instance, the causes are similar to our own—it is more a matter of scale. The problems of Africa, and the contradictions of wealth and poverty on that continent, reflect the same root cause I am about to unpack in drawing this conclusion. Just as capitalism brought many out of poverty in the west, so it can in Africa and elsewhere. The nations cry out for a legal and political system complementary to capitalism and technical assistance, but are at the mercy of corruption and skewed property rights.
All of which brings me to today and the problem I identify of indulgences, of which there are many, but I will unpack the main kinds. I suggest we live in an era of emotionalism, or emotional indulgence, where what one thinks is less important than expressing what one feels. Rationality does not trump giving offense. This emotionalism leaves many people in a spiritual search in the economy and in this search they are looking for easy ways, looking for indulgences. I borrow the term indulgences from the turning point of the medieval period that led to the Reformation, and a new age of enlightenment. As we all know, Martin Luther railed against the selling of indulgences in the Western Catholic Church as an easy morality, a forgiveness of sins without conforming to God’s will. It was merely the buying of a certificate.
Today’s indulgences come in the form of cash till receipts for free trade and organic produce, as people scream out the “gotcha” examples of extreme poverty in Africa and environmental damage caused by “big business.” It comes in the form of Occupy Wall Street and other protests, as they point the finger at the bankers and financiers. It comes in the form of celebrities campaigning for a better world and against capitalist greed, which naturally they do as CEOs of their own multinational businesses. It comes in the form of the runaway sales of the book on capital and inequality, by French economist Thomas Piketty. All these instances admirably demonstrate I suggest that the specter of inequality is never far away in the consciences of the Left, but very distant in terms of solving the actual problem of inequality.
For what is inequality? If we listen to Knight, it just is. It is unavoidable. We can do something about inequality in a limited sense, but only through discussion and cooperation. Perhaps the instances I just suggested are Knightian discussions. After all the celebrities and protesters are all discussing the problem aren’t they? Well, yes, but in a somewhat self-serving way. They are long in talking and “caring” about the problems, but well short of a realistic solution. The challenge is to solve the problem, which is why Knight argued passionately in favor of capitalism. It helps far more than it hinders, a reversal of the Leftist view, so we need a balance or nuance in our understanding of capitalism if we are to make the world a better place, and even then we are unlikely to make it a better place for everyone due to human nature.
If we take the working class of which Marx wrote so passionately, it has improved its lot greatly. Indeed, in his own terms many of the working class has become bourgeois. This change is a process of embourgeoisement, though this was reportedly dismissed for good by sociologist John Goldthorpe back in 1963. But the world has changed a great deal since Goldthorpe was writing. The “working class” today takes foreign holidays, owns property and even goes to the opera on occasion. The definition of poverty today is more related to how many cars or TVs you have, rather than subsistence. More significantly, poverty today is more defined by desire, in terms of satisfaction of wants and social aspirations, than needs. What we have to some extent is an inequality in satisfaction of desires rather than needs, though again I hasten to point out that middle classes and liberal protesters seem to have their desires satisfied by taking to what they see as the high moral ground. It is because the problem is one of desire that resentment has been breeding amongst the middle classes, especially since the 2008 recession.
The reality is that in terms of income, the poor have benefitted from the creation of wealth under capitalism; this is its great strength. We have all seen the graph of income as flatlining from the exit to the Garden Eden until the 1750s, and then moving on a steep upward curve ever since. While communists under Stalin and Mao were being executed, the poor in the western economies were buying their own homes. During the time of communism, however, intellectuals and leftists could always pretend there was an alternative. Their economic theorists could posit alternative universes. The fall of communism, and the victory of the market, appeared to show there is only one economic system—albeit flawed—but as Knight argued it is flawed because it is a system that deals with scarcity amongst flawed humanity. This system may have triumphed, and poverty may have changed, but what has not changed is the socialist bourgeois guilt over the continuing presence of the poor; hence the popularity of the Piketty book and the crowds at Occupy Wall Street gigs as they contemplate their own difficulties. Though, as I stated just now, I suspect the problem has much more to do with resentment than guilt.
Whatever it is, guilt or resentment, the fall of communist and socialist systems due to capitalist economic change, and I would add the inevitable impact of reality, has broken apart Marxism, socialism and communism. However, they have not disappeared altogether. There may be a systemic breakdown, but the same instincts remain, and these instincts are dispersed in the shattered pieces that remain in the range of causes and groups that challenge the basic assumptions of capitalism in much the same way as these grand movements tried to do. Yet, while they are dispersed, they are not freely blowing in the wind. They have become part of the capitalist system itself. To which I may add there is a significant market for these causes. Radical chic sells.
There is another indulgence, which you can find on both sides of a narrative about the ills of capitalism. On one side, we have the “social responsibility” executives, who have both the wealth and the salve for their consciences. They jostle for attention alongside the Wall Street protesters I mentioned who seem to have the time, technology and money to camp on the streets instead of working or looking for work. This is a far cry from the working classes that needed to break apart their chains; it seems they are the workers who simply prize open their wallet. Thus, the problem of inequality is a middle class problem. Of course, there has always been an air of the snob around the left, a middle class enclave that looks down at the working class as their own personal playground. This thought came to me recently, on another continent, when I heard a Corporate Social Responsibility person say how they wanted to visit poor areas, to see how “real” people live in the particular country we were visiting. It seems the Left has to travel further distances, and expand their carbon footprint, to fulfill their fantasy of how the poor live in need of their help. The so-called “anti-capitalists” and “anti-globalization” camps that periodically spring up, oddly in times of recession, are the modern day kibbutz for the spoiled to search for meaning in their own life. They still imagine a life of the greedy boss and the despoiled and alienated worker.
Such a view is out of touch with reality. Companies today are focused on employee engagement, because recognizing the engaged and interested worker is more productive. This is the antidote to alienation. Indeed, alienation is not the preserve of the factory worker or the low-paid. Many people in the workplace and in society feel this way. Managers and government bureaucrats alike can feel alienated from the workplace or the goals of the business as well. They too can be trapped by the mortgage or the sense that they lack advancement. The path to better engagement is dialogue, connecting people to each other in the workplace in a common cause, not trying to find reasons to divide them. Ultimately, in searching for our material satisfaction, we ought to be questioning what we are searching for beyond the economy not just within it. Before we get carried away with this, however, we have to recognize that whatever our search, and whatever our role in the economy, it is curbed by human nature, both ours and others’. As Jean-Paul Sartre said, hell is other people.
Of course none of this is very romantic. It is essentially a question of power. In the economy people can feel powerless, and the same may be said of our political system, both points made by Knight. It is wonderful that the market economy has moved so many out of poverty and low incomes, but it seems that we are a generation that remains in search of spiritual meaning. Our material status does not answer the spiritual problem, except perhaps in the mundane terms of retail therapy. It is simply the other side of a coin. To use again Marx’s famous image, we can see this as the switching of one set of chains for another. The historical move we have seen is the freeing of the chains of poverty for vast swaths of the population only to find themselves feeling chained by the materialism and indulgences of our age. This is what is revealed by the middle class recession we witnessed these past few years, because the working class has become middle class in relative terms and a larger middle class, overextending and indulging itself through debt and property speculation, got caught out by the inevitable force of economic gravity and resent the impact. After all, when house prices were going up I don’t recall anybody ever complaining to me how much their home is “worth,” so why complain on the way down? What suffered was their desire and expectations, and this impacted their pocket and consciences.
No matter how successful our economy, or even if humanity triumphed in the way the Left dreams, the problem will not be solved on material terms. Our economy is a reflection of our human condition. It puts numbers on what we truly care about, and this has to be the starting point of any moral understanding of the economy. Knight is correct. We do need to face the brutal reality of inequality, and we ought to recognize the inheritance deficit and help others to have a start in life, but what policies and social attitudes are necessary to tackle these is the question. There also needs to be a point where we say enough is enough, and not allow the emotionalism to dictate economic policy, which has two impacts in terms of how we might cooperate to tackle inequality and social welfare. First, we need to educate people better in fundamental economics at school so we can have better informed and more realistic discussion about economic matters, which will make cooperation more informed. We obsess about teaching God and sex, so why not money? Second, we need to turn away from the emotionalism of our times and recover the enlightenment idea that we are not simply sentient creatures; we are creatures of thought. Cooperation is a rational activity, not an emotional one, and indeed emotions tend to get in the way of cooperation. The curmudgeonly Knight may have set a high bar on this point, perhaps too high, but I fear we will make little progress politically or economically in these times if this attachment to emotionalism does not change in favor of economic realism.
REFERENCESClark, John B. 1899. The Distribution of Wealth: A Theory of Wages, Interest, and Profits. New York: Macmillan, 1908.
Cowan, David. 2007. Economic Parables: The Monetary Teachings of Jesus Christ, 2nd ed. Downers Grove, Ill.: InterVarsity Press.
——. 2016. Frank H. Knight: Prophet of Freedom. New York: Palgrave Macmillan.
Goldthorpe, John. 1963. The Affluent Worker: Political Attitudes and Behavior. Cambridge: Cambridge University Press.
Hazlitt, Henry. 1964. The Foundations of Morality. Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1998.
——. 1966. “A Reply to Frank Knight,” Ethics 77, no. 1: 57–61.
Knight, Frank. 1921. Risk, Uncertainty, and Profit. Boston: Houghton and Mifflin.
——. 1933. The Economic Organization. Chicago: University of Chicago Press.
——. 1935. The Ethics of Competition and Other Essays. New York: Harper.
——. 1947. Freedom and Reform. Indianapolis, Ind.: Liberty Fund, 1982.
——. 1956. On the History and Method of Economics: Selected Essays. Chicago: University of Chicago Press.
——. 1960. Intelligence and Democratic Action. Cambridge: Harvard University Press.
——. 1966. “Abstract Economics as Absolute Ethics,” Ethics 76, no. 3: 163–177.
——. 1967a. “A Word of Explanation,” Ethics 78, no. 1: 83–85.
——. 1967b. “Laissez-Faire: Pro and Con.” Journal of Political Economy 75: 782–795.
Knight, Frank, and Thornton W. Merriam. 1945. The Economic Order and Religion. New York: Harper.
Nash, Stephen John. 1998. Cost, Uncertainty, and Welfare: Frank Knight’s Theory of Imperfect Competition. Brookfield, Vt.: Ashgate.
Quarterly Journal of Austrian Economics 19, no. 2 (Summer 2016)Henry Hazlitt Memorial Lecture
In this lecture, I will look at a debate in the 1960s between Frank Knight, the subject of my new book (2006) in Palgrave Macmillan's Great Thinkers in Economics series, and Henry Hazlitt, memorialized by this lecture. I will look at the dispute they had on welfare, freedom and power, which was an important debate then and now. I will take Knight’s observations and apply them to today’s debate on inequality, and what I suggest are the economic indulgences referenced in my lecture title.
The Journal of Libertarian StudiesAn Interdisciplinary ReviewVolume 22 (2010–2011)Alfred G. CuzánRevisiting "Do We Ever Really Got Out of Anarchy?"
Gerard CaseyReflections on Legal Polycentrism
Jan KrepelkaA Pure Libertarian Theory of Immigration
John BrätlandAn Austrian Reexamination of Recent Thoughts on the Rise and Collapse of Societies
Carl JakobssonThe Negative Homesteading Theory: Rejoinder To Walter Block on Human Body Shields
Thomas E. Woods, Jr.The Neglected Costs of the Warfare State: An Austrian Tribute to Seymour Melman
Walter BlockLibertarianism is Unique and Belongs Neither to the Right nor the Left: A Critique of the Views of Long, Holcombe, and Baden on the Left, Hoppe, Feser, and Paul on the Right
Gustavo MarquésA Critique of the Austrian Approach to Holistic Concepts
Albert Esplugas and Manuel LoraImmigrants: Intruders or Guests?: A Reply to Hoppe and Kinsella
Brian SheaSolidarity Forever: The Power Invested in Worker Collectives Under United States Law
Carl WatnerThe Territorial Assumption: Rationale for Conquest
Edward FeserReply to Block on Libertarianism is Unique
Andrew YoungFreedom and Prosperity in Liechtenstein: A Hoppean Analysis
Gene CallahanIs There a Distinct and Valid Libertarian Form of Historical Understanding?
Kenneth Michael WhiteHow the Peace Was Lost: Ignoring the Presidential Oath in 1964 and 2002–2003
Alexandre PadillaShould the Government Regulate Insider Trading?
Laurent CarnisTwo Irreconcilable Theories of Justice: Social Engineering vs. Ethics of Property
Ludwig van den HauweGary Becker on Free Banking
Ludwig van den HauweJohn Maynard Keynes and Ludwig von Mises on Probability
Robert DanneskjöldFree Rider Problems in Insurance-based Private Defense
Walter BlockTerri Schiavo
Walter BlockIlliberal Libertarians: Why Libertarianism is Not a Liberal View, and a Good Thing Too; Reply to Samuel Freeman
Walter BlockHow Not to Defend the Market: A Critique of Easton, Miron, Bovard, Friedman and Boudreaux
Walter BlockHoppe, Kinsella and Rothbard II on Immigration: A Critique
Walter BlockThe Human Body Shield
Walter BlockRejoinder to Murphy and Callahan on Hoppe's Argumentation Ethics
Walter BlockRejoinder to Kinsella and Tinsley on Incitement, Causation, Aggression and Praxeology
Walter BlockToward a Libertarian Theory of Guilt and Punishment for the Crime of Statism
Walter BlockReview of The Myth of the Rational Voter: Why Democracies Choose Bad Policies by Bryan Caplan
Walter BlockReply to Hellmer on Sweatshops
Walter BlockAnarchism and Minarchism; No Rapprochement Possible: Reply to Tibor Machan
Walter BlockRejoinder to Hoppe on Immigration
[Originally published May 2016]
Although it is sometimes imagined that a world based on gift-giving rather than market exchange would be a world without scarcity or want, we are still left with the problem of manufacturing and producing complex goods that require markets to allocate resources.
Moreover, if we remember that the act of gift-giving requires both the giver and the recipient to agree to the exchange, we quickly find that the situation is more complex than we initially thought.
Both Donor and Receiver Must Agree A gift is an unconditional transfer of an economic good from one person (the donor) to another person (the beneficiary). In the case of a service, the donor agrees to provide the service to the beneficiary, and the latter accepts to receive it as a gift.
If it is truly a gift in the real sense, the good is freely given and the decision to abandon the good comes with no strings attached. For the donor, it is not the fulfillment of an obligation, and it cannot be claimed as a right by the beneficiary. In particular, it is not a remuneration for some economic good provided by the beneficiary to the donor. To be sure, in practice, there are lots of cases of “false gifts” in which a transfer of property rights has some of the characteristics of a true gift, but not all of them.
It is necessary that both sides agree to it. If both sides agree, then the beneficiary benefits, but the donor benefits too.
This seems to be a matter of course as far as the beneficiary is concerned. After all, he receives an economic good without any payment, which is why he is called the beneficiary. However, it is important not to fall into what we might call the materialistic trap in interpreting the gift. The beneficiary benefits, not because someone else is willing to gratuitously provide an economic good to him. He benefits because he prefers to receive this good rather than to forego it. It is well known that gifts can be rejected, and that some gifts should be rejected. It is not because the Greeks offered their wooden horse on the beach to the Trojans that the latter were someone impelled or obliged to accept it. The Trojans took it because they believed to be better off owning the horse, erroneously as it turned out.
There is Value in the Act of Giving or Receiving a Gift In other words, what makes a gift a gift is not its suitability for that and that use or enjoyment (its “use value”), not the fact that other people find it desirable (its “exchange value” or market price), but the fact that the prospective beneficiary finds it desirable and therefore agrees to receive it. He gratuitously receives the object proposed to be given to him, be it a service, or be it the property rights to a commodity. But what makes him truly a beneficiary, and what makes the object a gift, is the personal value of the gift. By agreeing to accept it, he demonstrates his preference to be provided with the gift, rather than to forgo it. He demonstrates that he thinks himself to be better off, thanks to the gift, than he would otherwise have been.
The donor benefits, too. If Smith gives a five-dollar bill to a beggar, then he thereby demonstrates that he, Smith, prefers that the beggar, rather than Smith himself, own the banknote. Now, this sounds as though Smith were somehow “interested” in making this gift, which in turn would insinuate that the gift is not really gratuitous because Smith himself stands to benefit from it. Well, in a wider sense Smith is interested, but that does not per se make his gift any less gratuitous.
Smith does benefit from the gift-making. This is why he agrees to make the gift. To non-economists this assertion might sound shocking, but it should not. There is no human action that does not employ some means to attain some higher-valued end. The reason why man acts is always the desire to improve the state of affairs, that is, to bring about a state of affairs that he prefers to the state of affairs that would have existed without his action. There is no exception. But this does not imply a contradiction with the gratuitous nature of Smith’s act. He was not obliged to give the bill, and the beggar was not entitled. Therefore his act was gratuitous in the full sense of the word.
The Role of Market Prices in Gift-Giving Let us move on to a final observation on the economics of gifts. Gifts can be produced through more or less lengthy processes and involving the cooperation of many people. In other words, the decision to make a gift is not necessarily made at a moment’s notice, as when we encounter a beggar at a street corner. Gifts can also be planned in advance. They can be prepared, not only in the sense that the gift-making decision be planned, but also in the sense that the economic good that is to be donated, is especially produced to be donated.
Is it imaginable that all production processes be geared toward gift-making? Each person would no longer sell his products, but give them away; and he would in turn benefit from the gifts made by other people. Could the entire economy be a pure gift economy of this sort? As we know from the analysis of communism, this could be attempted, but it would come at a heavy price. A pure gift economy would by definition be an economy without exchange, and thus without market prices. Yet market prices provide guidance to produce one type of good (yielding higher revenue) rather than another (yielding lower revenue); and they provide guidance not to use certain goods because they cost too much to buy.
In a pure gift economy, this guidance would no longer exist. It would have to be replaced by a great sense of judgment and great discipline on the part of all members of society. Clearly, such qualities are exceedingly rare and, what is more, they would not be rewarded in a pure gift economy and would therefore not be cultivated in such a setting. It is out of the question to organize a comprehensive division of labor on the little judgment and on the little discipline that could be mounted by just a few virtuous people.
Producing Future Gifts Is Complex and Difficult Moreover, even if these people were not few but many, a pure gift economy would still suffer from a formidable impediment. As Ludwig von Mises taught us, without exchange and market prices it would be impossible to organize the division of labor within lengthy and complex roundabout-production processes. Good judgment might be sufficient to devise an overall plan for the satisfactory cooperation between a few shoe-makers and butchers without the interposition of prices and exchange. But good judgment is at a complete loss to evaluate the relative (and often changing) importance of computer programs, drilling equipment, operations research, and other goods that are removed from our immediate experience.
A static economy serving few people with very short supply chains might be organized as a gift economy, if the producers are inspired by brotherly love and mutual trust. As soon as any one of these conditions is absent, as soon as love and trust are lacking; as soon the economy involves thousands, millions, and billions of people; as soon as supply chains grow long and complex; as soon as technological and other conditions change fast and frequently, a pure gift economy is out of the question. The productivity of labor in such an economy would be exceedingly small as compared to what we know it to be in a developed market economy.
What is Europe? It seems that no rigorous answer can be provided. Europe is not exactly a continent. It is not a political entity. It is not a united people. The best definition, in fact, may be that Europe is the outcome of a long historical process that engendered unique institutions and a unique vision of what men ought to be. The idea that men ought to be free from violent government interference. Europe has no founding fathers. Its birth was not orchestrated but completely spontaneous. Its development was not imposed by armies and governments but was the voluntary product of clerics, merchants, serfs, and intellectuals who were seeking to interact freely with each other. Europeans were united by their freedoms and divided by their governments. In other words, Europe was built against States and their arbitrary restrictions, not by them.
After the fall of the Roman Empire a period of political anarchy followed where cities, aristocrats, kings, and the church all competed with each other. Therefore, as Dr. Ralph Raico noted in his article “The European Miracle,”
Although geographical factors played a role, the key to western development is to be found in the fact that, while Europe constituted a single civilization — Latin Christendom — it was at the same time radically decentralized. In contrast to other cultures — especially China, India, and the Islamic world — Europe comprised a system of divided and, hence, competing powers and jurisdictions.
In other words, over the centuries, a long evolution of the institutions gave birth to personal liberty. Although the European aristocracies and states were restricting freedom, they were forced to grant more autonomy to their subjects, for, if they did not, people were opting out by migrating or using black markets. As Leonard Liggio puts it, after 1000 A.D.:
While bound by the chains of the Peace and Truce of God from looting the people, the uncountable manors and baronies meant uncounted competing jurisdictions in close proximity. ... This polycentric system created a check on politicians; the artisan or merchant could move down the road to another jurisdiction if taxes or regulation were imposed.
Europe was where the road to freedom began. It was in Europe that the values of individualism, liberalism, and autonomy rose from history and gave humanity a sense of progress that no civilization had ever experienced to such an extent before. Unfortunately, the values and institutions that made Europe great vanished under the pressure of political centralization, nationalism, statism, socialism, and fascism in the nineteenth and twentieth centuries. Today, however, a new danger looms over Europe — the European Union.
The European Institutions Against the Free MarketContrary to what is often said, the European Union has nothing to do with peace, freedom, free trade, free capital and migration movement, cooperation, or stability. All this can very well be provided in a decentralized system. The European Union is nothing more than a cartel of governments that tries to gain power by harmonizing the fiscal and regulatory legislation in every member State. Article 99 of the Treaty of Rome (1957) clearly states that indirect taxation “can be harmonized in the interest of the Common Market” by the European Commission. As for Article 101 of the same Treaty, it explicitly restrains regulatory competition “where the Commission finds that a disparity existing between the legislative or administrative provisions of the Member States distorts the conditions of competition in the Common Market.”
Since the very beginning, with the creation of the European Coal and Steel Community (ECSC) in 1951, the European institutions were more planning agencies than anything else. Indeed, the coal and steel industries at the time were mostly nationalized and the goal of the ECSC was to coordinate governments’ activities in these two sectors, not to liberalize activity. The fact that the ECSC was not about free trade but about government planning was known by everybody at the time. It was Robert Schuman, the French minister of foreign affairs, who proposed in his declaration of 9 May 1950, that the Franco-German coal and steel production be placed under a common High Authority within the framework of an organization in which other European countries could participate. Also, the ECSC created for the first time European anti-trust legislation, which as Austrians know, is nothing less than government planning in the name of an erroneous vision of what competition is. Even the Treaty of Rome (1957), the basis of the EU as we know it, despite enacting the free movement of goods, capital, and persons, remains a highly statist treaty. Indeed, it is often forgotten that among other things, the Treaty of Rome created a “European Investment Bank,” a “European Social Fund,” the highly protectionist “common agricultural policy,” the “common transport policy,” and reinforced European anti-trust legislation. Therefore, if in the short and medium run, the Treaty of Rome, by breaking the neck of protectionism, was a boon for the European economy, it created institutions that could easily expand their regulatory power in the future, and that is exactly what they did.
Many free marketers support the European Union on the ground that even if their regulations are bad, they are still far better than those produced by our very prolific national governments. Such a line of argument, often used in more socialist countries such as France, is sheer nonsense. It is the equivalent of saying: “I don’t mind being robbed twice because the second thief will be much nicer to me.” The question is not how to make “better” regulations but how to expand free trade.
Europeanism: True and FalseIn 1946, F.A. Hayek wrote a pathbreaking article named “Individualism: True and False” where he distinguished two different individualist intellectual traditions. One, as Hayek calls it, is “true individualism,” based on evolutionism, the idea that institutions and individuals’ behaviors are not planned consciously but are rather the result of a spontaneous process. True individualism follows the tradition of the Scottish Enlightenment. False individualism, on the contrary, is based on extreme rationalism and solipsism. False individualism is based on the idea that society, freedom, and markets, can be planned and should be planned. This false individualism is the heir of the 1789 and — even more clearly — of the 1793 French Revolutionaries.
These two sorts of individualism are today at the root of two different sorts of Europeanism. True Europeanism admits that most of what made Europe was not planned but rather spontaneous. The implications are that we ought to have as much decentralization as possible for Europe to continue to strive and to safeguard human liberties. On the other hand, false Europeanism thinks that Europe can only truly become Europe if planning by common political institutions exists. False Europeanists believe that the only alternative is between Nation States and the European Union. Their defense of a centralized European political entity is based on the erroneous idea that political centralization is positively linked to the process of civilization because society, law, markets, prosperity, and the “European spirit” ought to be designed by rulers. Europe during the Middle Ages, those thinkers say, lacked trade integration because it lacked political unification. It follows that we must be grateful today for the existence of the European Union. In their narrative, economic progress took place only when “Europe” slowly began to develop new trading alliances that combined some aspects of military protection with something akin to a free-trade area. But this version of history is very far from the truth. In the Middle Ages for instance, the lex mercatoria, the law of merchants, was purely private. Furthermore, the protective tariffs were mostly ignored anyway by Europeans. Smuggling was so widespread that England in the late Middle Ages should be in fact considered as a nation of smugglers rather than a nation of merchants. As Murray Rothbard noted in Conceived in Liberty:
Too many historians have fallen under the spell of the interpretation of the late nineteenth-century German economic historians (for example, Schmoller, Bucher, Ehrenberg): that the development of a strong centralized nation-state was requisite to the development of capitalism in the early modern period. Not only is this thesis refuted by the flourishing of commercial capitalism in the Middle Ages in the local and non-centralized cities of northern Italy, the Hanseatic League, and the fairs of Champagne. … It is also refuted by the outstanding growth of the capitalist economy in free, localized Antwerp and Holland in the sixteenth and seventeenth centuries. Thus the Dutch came to outstrip the rest of Europe while retaining medieval local autonomy and eschewing state-building, mercantilism, government participation in enterprise — and aggressive war.
Thus, the idea that a centralized authority, in our case the European Union, is necessary for free trade is pure fantasy, It is false Europeanism. Its constructivist approach has prevailed in European institutions since the beginning. For example, one of the goals advanced by the Treaty of Rome was to “create markets” through a unified European Anti-trust legislation. Similarly, the official justification of the Common Agricultural Policy introduced in 1962 was to create a unified agricultural market. But markets do not need States or treaties to exist and they certainly do not need the European Union.
The parallel between false Europeanism and false individualism is also relevant when it comes to their respective imperialistic tendencies. Whereas the French revolutionaries wanted to invade Europe to impose their “universal values” through force, the European Union does not tolerate, in the name of Europe, independent States that do not want to submit to Brussels. Switzerland, for instance, is forced by the European Union to adopt countless regulations concerning food safety and gun ownership. If the Swiss confederation does not comply with many provisions of European law, the European Union threatens to cut Switzerland’s access to the single market.
The most incredible political success of the European Union zealots is their constant shaming of those who refuse to submit to a European hegemonic super-State. But we must understand that only so-called “Euro sceptics” can truly be pro-Europe. Only “Euro sceptics” can be loyal toward the history and liberal values of their continent. In other words, the European Union is a highly anti-European institution.
We Need DecentralizationOn June 23, 2016, the British will vote on whether they want to stay in the EU or not. If the NO vote wins, it might be the end of the European Union as we know it. Historically, Britain played a major role in the maintenance of a fairly decentralized European order. Whether it was with Napoleonic France, or the German 2nd Reich, or Nazi Germany, it has always been Britain that ultimately helped to break up the hegemonic endeavors of empires on continental Europe. The question is, then, will Britain play its historical role this summer against the imperialistic European Union? We should consider any attempt to establish a more decentralized system with more competition between States as a boon for Europe and the Europeans. To be sure, the Nation-States must be dismantled, but not if it means the creation of an even bigger European Leviathan. It is, on the contrary, the regionalists and independence movements that must be supported, whether it is Scotland, Catalonia, or Corsica. The European miracle can be revived only through extreme political decentralization. What history teaches us is that Europe is greater than the individuals that compose it only insofar as it respects liberty. Insofar as it is controlled or directed by a monolithic and central political authority or by bellicose Nation-States, Europe is limited by the inability of Europeans to escape the arbitrary restrictions of their governments.
In my previous column, I noted both the fallacy that libertarianism is inherently “atomistic” as well as the scientific fact that while morality — such as the Golden Rule, may be applied universally — human cooperation and empathy are not. We are hemmed in by “Dunbar’s number” which limits the number of social relationships any one person can have at any given time to approximately 150.
The question left before us is what societal arrangement does such a nature best lend itself to. Karl Marx envisioned a future that would be “From each according to his ability, to each according to his need.” But as the biologist E.O. Wilson cleverly noted of communism, “Wonderful theory, wrong species.” Yes, what works well for ants doesn’t so much for human beings.
Violence and State PowerHumanity’s natural state is that of small tribes that have little or no contact with each other. When they do come into contact, the results have generally been bloody. It would be making the “naturalistic fallacy” to argue that because this is our natural state that we should thereby live in it. Indeed, as Steven Pinker has pointed out, studies of hunter-gatherer societies show them to be extraordinarily violent. He quotes the work of the archaeologist Lawrence Keeley, showing that for eight separate tribal societies, the percentage of male deaths caused by warfare “… range from 10 percent to almost 60 percent.”The Blank Slate, p. 57.
Furthermore, some of the unfortunate side effects of this mental limit are racism and xenophobia and contrary to many leftist, pseudo-agrarian fantasies, these are actually more acute in such tribal societies. As Robin Dunbar, Louise Barrett, and John Lycett note,
In many, if not most, such societies, the word which refers to members of the tribe is usually best translated as “men” or “humans”; those who belong to all other tribes are, by extension, considered to be “not-men.”Evolutionary Psychology, p. 199.
Steven Pinker credits the growth of the state as a method to tame such violence. We’ll leave aside any debate between anarchism and minarchism for now, but Pinker’s claim is highly suspect. R.J. Rummel’s estimates for the number of people governments have murdered (not including war) during the twentieth century alone came out to 262 million! At the very least, this should make it obvious that any sort of totalitarian or oligarchical government is not the best way for human societies to be structured.
To his credit, Steven Pinker does support strongly limiting the state’s power. He emphasizes how liberalizing economic policy was a major factor in the reduction of world violence, particularly people thinking more like a (classically liberal) economist, “That sets [them] in opposition to populist, nationalist, and communist mindsets that see the world's wealth as zero-sum and infer that the enrichment of one group must come at the expense of another.”The Better Angels of Our Nature, p. 664.
Of course he credits many other things, including, as many others have, democracy.
Democracy Can Not Be Applied UniversallyWhile democracy is certainly preferable to totalitarianism, it falls back to many of the same fallacies regarding universalism that the Left has made regarding human nature.
Indeed, what if we had a worldwide democratic government that somehow — however unlikely — maintained strong democratic institutions in spite of facing no competition from other states? Would the Chinese voters simply bow to the whims of the global majority, if it was contrary to the interests of the Chinese voters? Or more likely, given their population, would the voters in the United States bow to the will of Chinese voters?
Democracy may be a useful tool, but its best application is at the local level where the individual vote actually means something. Unfortunately, many proponents of democracy see it as something that it is clearly not; a method for universal cooperation. Given that the research has clearly shown such universalizable cooperation is a utopian fantasy, what does that make democracy?
Violence or Voluntary Exchange?Cooperation is a great thing, but it has only been shown to work in small groups. All that’s left with regards to large group interactions is force or exchange. So democracy, on a large scale, is merely people voting on if, when and how to use force against each other.
It’s for this reason that so-called anarcho-syndacilism or anarcho-communism would fail. As Murray Rothbard pointed out,
All of the left-wing anarchists have agreed that force is necessary against recalcitrants. But then the first possibility means nothing more nor less than Communism, while the second leads to a real chaos of diverse and clashing communisms, that would probably lead finally to some central Communism after a period of social war. Thus, left-wing anarchism must in practice signify either regular Communism or a true chaos of communistic syndics. In both cases, the actual result must be that the State is reestablished under another name. It is the tragic irony of left-wing anarchism that, despite the hopes of its supporters, it is not really anarchism at all. It is either Communism or chaos.
It should be no surprise that any such examples were short-lived, usually existed at a time of war where a clear opponent could rally people together and were not nearly as pleasant as many of their proponents seem to believe. The Paris Commune executed some hundred priests and clergymen and as Bryan Caplan puts it, the Spanish Anarchists of the 1930s carried out “… large-scale murders of people believed to be supporters of the Nationalists.”
Of course, the list of sins of official governments is much, much longer (the French government killed many more people than the Commune during that conflict). But the few examples help prove the rule of anarcho-syndacilism inherent flaws. It should further be noted that many similar experiments were tried in the United States in the nineteenth century with little success, even on a relatively small scale. Here’s Jonathan Haidt’s description of the anthropologist Richard Sosis’s work on the subject,
… [Sosis] examined the history of two hundred communes founded in the United States in the nineteenth century. Communes are natural experiments in cooperation without kinship. Communes can survive only to the extent that they can bind a group together, suppress self-interest, and solve the free rider problem. … For many nineteenth-century communes, the principles were religious; for others they were secular, mostly socialist … just 6 percent of the secular communes were still functioning twenty years after their founding.The Righteous Mind, p. 298.
The religious communes did better, with 39 percent still going after twenty years. But that still leaves a lot to be desired. And remember, these were small-scale communes filled with people from a similar culture who joined voluntarily, not large states with millions and millions of people of different cultures spread across a large geographic region.
While there’s no libertarian objection to such communes, they simply do not represent a universalizable system to emulate. On a large scale, we are simply left with the three choices that Frederic Bastiat so aptly pointed out;
- “The few plunder the many2. Everybody plunders everybody.3. Nobody Plunders anybody.”The Law, p. 19.
No matter how you organize society, people will arrange themselves into shifting, but relatively stable small groups. Families and kin will generally care more for each other than strangers and so on. While “othering” of any sort is an obvious concern when coming to the conclusion that human beings naturally form small groups and see the others as outsiders. I can see no better way to soften these relations than by engaging in mutually beneficial trade. It may not be utopian, but it’s certainly better than using force (be it through tyranny or democracy) to bring other people and groups into line with one’s own desires.
The State Supplants Local-Based CooperationIt should also be noted that there is a great irony in the government for being labeled as an institution to bring about the community such “atomistic” libertarians oppose. In the early twentieth century, vast numbers of workers belonged to various mutual aid societies that provided assistance when needed, medical and other services as well as a sense of comradery. Mutual aid societies, just like all sorts of businesses, churches, charities, and social groups, represented just another example of human’s ability to self-organize.
However the mutual aid societies were short-lived. The large expansion of the welfare state in the 1960s all but supplanted these voluntary institutions with the cold, faceless bureaucracies no rational person could describe as communal.
What about family? This is certainly one of the least atomistic arrangements that exist. Well, after the government implemented welfare and supplanted the traditional role of the father, family formation, divorce, and illegitimacy rates skyrocketed. In 1960, out-of-wedlock births made up about 6 percent of the total. Today, they are over 40 percent.
And the strain put on military families and communities when the government decides to go to war should be self-evident.
The best way to evaluate the strength of communities are various tools to measure what is called social capital (basically social networks buttressed by trust, reciprocity, and cooperation). Robert Putnam has found that most forms of social capital began to precipitously decline after the implementation of The Great Society programs of the 1960s. For example, he finds that membership in voluntary associations “… peaked in the early 1960’s, and began the period of sustained decline by 1969.”Bowling Alone, p. 55.
While Putnam believes the welfare state actually ameliorated the fall of social capital, the timing seems unlikely. Charles Murray, another social scientist, has made the case that happiness and social capital are built on four virtues; industriousness, honesty, marriage, and religion. And the government interferes with each to varying degrees. For example, welfare dependency reduces industriousness and incentivizes family breakdown and a lack of family formation. This argument certainly fits better with the timeline and what we know about human nature.
This is especially true given that force is not a good means to build a cooperative society and the government uses little more than force.
No, the government destroys a sense of community and pits groups of people against each other. Human societies organize naturally through voluntary means, just as libertarians have predicted. And furthermore, a market economy based on mutually beneficial trade is the only way yet found for multiple groups of disparate and overlapping “tribes” or groups of “Dunbar’s numbers” to live peacefully and prosperously in a large, interconnected, and complex modern society.
Libertarianism doesn’t often attract attention from The Atlantic, but a recent article, “The Information Revolution’s Dark Turn,” features philosopher Alistair Duff who attacks libertarianism in general, and Murray Rothbard specifically. Unfortunately, the article misrepresents libertarianism, but does so in a superficially plausible way. Many critics of libertarianism, I suspect, view it in the same way the article does.
The article is an interview of Alistair Duff, who teaches information society and policy at Edinburgh Napier University. Duff is interested in the information revolution in Silicon Valley, and he thinks that people who work there are too anti-statist.
Duff says of libertarianism, “I think it’s a mistaken philosophy.”
I have read [Robert] Nozick’s Anarchy, State, and Utopia, and Murray Rothbard’s Ethics of Liberty, and Milton Friedman’s Capitalism and Freedom — I’ve read it all, and it’s a flawed philosophy. The ultimate value is not liberty: It is justice. Liberty has to fit within the context of social justice. And where it violates justice, I’m afraid justice trumps liberty.
Libertarianism says that freedom is the paramount value. But I don’t think that’s the case. I’m a follower of John Rawls, the great Harvard political philosopher, and in his Theory of Justice, he makes clear that justice is the paramount virtue in political life.
It should incorporate a great deal of freedom, including some inalienable freedoms, but you cannot trump justice with liberty in the way Tim Cook is doing.
In brief, according to Duff, libertarians think that freedom is the highest value, but justice is in fact more important.
Readers might expect me to say that Duff is mistaken: freedom outranks justice; but this would not be a good way to proceed. To do so would be to accept the way Duff characterizes libertarianism, and it would be wrong to do so.
At first sight, one might think that Duff was correct. After all, Murray Rothbard says “Libertarianism does not offer a way of life; it offers liberty, so that each person is free to adopt and act upon his own values and moral principles. Libertarians agree with Lord Acton that ‘liberty is the highest political end’ — not necessarily the highest end on everyone's personal scale of values.” Further, Rawls says, “Justice is the first virtue of social institutions, as truth is of systems of thought.” (A Theory of Justice, 1st edition, p. 3)
Isn’t this exactly the contrast that Duff has set forward? Libertarians rank liberty first: supporters of Rawls think that justice outranks liberty. What could be clearer?
We Need the Correct Theory of JusticeThe contrast that Duff draws in fact rests on a false assumption. As libertarians see matters, liberty and justice are not separate values that need to be ranked. Rather, “liberty” refers to the system it supports of rights based on self-ownership and property rights, and precisely this system is “justice” as libertarianism characterizes it. The difference between libertarians and Rawls concerns the correct theory of justice, not whether “justice” or “liberty” has greater importance. Rothbard makes this vital point clear in his discussion of Isaiah Berlin, who did speak of “liberty” unmoored from other values. He writes, “Berlin’s fundamental flaw was his failure to define negative liberty as the absence of physical interference with an individual’s person and property, with his just property rights broadly defined.” (The Ethics of Liberty, p. 216) Nozick takes exactly the same position. Anarchy, State, and Utopia offers an alternative to Rawls’s theory: it is not an endeavor to elevate liberty above justice in the hierarchy of values.
Duff may have gotten the wrong idea about libertarianism because when he thinks of “justice,” he has in mind his own view. He says, “There is massive inequality, which is unacceptable. Inequality should not be so great that it crystallizes into class distinctions — master-servant relations — and I think you have that in Silicon Valley, to some extent.” It’s certainly right that libertarianism doesn’t value equality of income and wealth, but this is not a rejection of justice. Duff cannot see that his view of justice is not the only one on offer. By the way, why Duff thinks that inequalities of wealth lead to master-servant relations is not obvious. Are the employees of Silicon Valley companies who earn less than the billionaire owners of these firms the “servants” of these owners? Why think that?
Duff might respond to the line of criticism I have suggested by saying, “So what! Even if libertarianism does have a theory of justice, it’s the wrong one. Rawls’s theory is better.” If Duff were to say that, though, he would have to argue for the superiority of Rawls’s theory to the libertarian one. It would not suffice merely to dismiss libertarianism for preferring liberty to justice. Duff’s tactic is no more than a rhetorical trick.
Duff’s Odd Notions of JusticeThere is another questionable claim in Duff’s interview. In a statement I have already quoted, he says that “public life should incorporate a great deal of freedom … but you cannot trump justice with liberty in the way Tim Cook is doing.” He is talking about Cook’s refusal to obey the FBI’s demand that Apple engineer software to help unlock the iPhone of one of the San Bernardino shooters. Duff is adamant on this matter. He says, “I’m with the state on that, absolutely. I think Tim Cook is out of his mind. It’s a clear case where the state’s rights prevail over the right of individual privacy, and I say that as an advocate of privacy. We’ve got to get common sense on privacy, not fanaticism.”
It is difficult to see why Duff regards Cook’s position as one that unduly prefers liberty to justice. Rawls’s theory, which Duff favors, doesn’t directly address conflicts of this sort between liberty and national security. Why, then, does Duff take what is at stake to be a conflict between liberty and justice? Perhaps Duff would appeal to Rawls’s discussion of conscription (A Theory of Justice, 1st edition, pp. 380ff.), but in the absence of a fuller account by him, his claim is baffling.
Duff says about libertarian theory that he has “read it all,” but he has not done so very carefully and thoughtfully.
One of the most persistent — and fallacious — argument against the libertarian or laissez-faire position is that libertarianism is an “atomistic” and “selfish” philosophy that denies the obvious truth that human beings are a “social species” who long for a strong sense of community.
Perhaps David Masciotra’s semi-coherent rant best illustrates this line of thinking as libertarianism is a political program that “eliminates empathy” and “denies the collective.” That it is in “Opposition to any conception of the public interest and common good, and the consistent rejection of any opportunity to organize communities in the interest of solidarity” and is nothing but a “… rejection of all rules and regulations, and the belief that everyone should have the ability to do whatever they want.” To sum up, “It is infantile naïveté.”
Voluntary Relationships Are Extremely ValuableMost good straw men are as self-evidently true as they are irrelevant. While it may be true that some libertarians want so much to be left alone that they would prefer to be left alone by not just the government but, well, everyone. The vast majority of people — including libertarians — understand quite well that human beings are a social and communitarian species. Libertarians simply believe human beings can self-organize and that it should be left to the individual which communities he or she will join and on what terms.
While a deontological argument could pretty much end there, critics will once again point to the scientific fact that human beings are a social animal and that a “selfish” value system at odds with our nature is a utopian (or maybe dystopian) fantasy.
While libertarians focus on the primacy of the individual, that focus does not in any way necessitate atomism. The plethora of libertarian gatherings and meet-ups should prove that by itself. Nor does it infer selfishness (although Ayn Rand — who explicitly denounced libertarianism, but is often associated with libertarianism — might argue this point). Selfishness and altruism are not mutually exclusive. As the psychologist Robert Wright describes, “Love … makes us want to further the happiness of others; it makes us give up a little so that others (the loved ones) may have a lot. More than that: love actually makes this sacrifice feel good.”The Moral Animal, p. 341. The famous self-help guru Dale Carnegie made the same observation,
Every act you have ever performed since the day you were born was performed because you wanted something. How about the time you gave a large contribution to the Red Cross? Yes, that is no exception to the rule. You gave the Red Cross the donation because you wanted to lend a helping hand; you wanted to do a beautiful, unselfish, divine act.How to Win Friends and Influence People, p. 43.
People can be selfless, sure, but they do so in a selfish way.
Not All Human Relationships Are the SameThis goes beyond a simple misunderstanding of libertarian theory, though. These critics, usually from the Left, have confused the science on human empathy and altruism. In fact, libertarianism is probably the only philosophical framework that can rectify human nature with the modern world in a peaceful way. The mistake stems from attempts to universalize humanity’s natural social instincts. This can be illustrated by an interview Steven Pinker discusses between Zach De La Rocha and Noam Chomsky,
[De La Rocha]: Another unquestionable idea is that people are naturally competitive, and that therefore, capitalism is the only proper way to organize society. Do you agree?
Chomsky: Look around you. In a family for example, if the parents are hungry do they steal food from the children? They would if they were competitive. In most social groupings that are even semi-sane people support each other and are sympathetic and helpful and care about other people and so on. Those are normal human emotions. It takes plenty of training to drive those feelings out of people’s heads, and they show up all over the place.Quoted in The Blank Slate, p. 246.
Chomsky’s mistake is so self-evidently ridiculous it almost beggars belief. He is effectively drawing an equivalence between someone’s own children and some guy that person has never met on the other side of the planet. Does it really take “plenty of training” for someone to care more about their own children than strangers? As Steven Pinker notes,
Unless people treat other members of society the way they treat their own children, the answer is a non-sequitur: people could care deeply about the children but feel differently about the millions of other people who make up society. The very framing of the question and answer assumes that humans are competitive or sympathetic across the board, rather than having different emotions toward people with whom they have different genetic relationships.The Blank Slate, p. 247.
Indeed, Adam Smith noticed this very thing back in the eighteenth century when he wrote,
Let us suppose that the great empire of China, with all its myriads of inhabitants, was suddenly swallowed up by an earthquake, and let us consider how a man of humanity in Europe, who had no sort of connexion with that part of the world, would be affected upon receiving intelligence of this dreadful calamity. He would, I imagine, first of all, express very strongly his sorrow for the misfortune of that unhappy people, he would make many melancholy reflections upon the precariousness of human life, and the vanity of all labours of man, which could thus be annihilated in a moment. He would too, perhaps, if he was a man of speculation, enter into many reasonings concerning the effects which this disaster might produce upon the commerce of Europe, and the trade and business of the world in general. And when all this fine philosophy was over, when all the humane sentiments had been once fairly expressed, he would pursue his business, take his repose or his diversion, with the same ease and tranquility, as if no such accident had happened. The most frivolous disaster which could befall him would occasion a more real disturbance. If he was to lose his little finger to-morrow, he would not sleep to-night; but, provided he never saw them, he will snore with the most profound security over the ruin of a hundred millions of his brethren, and the destruction of that immense multitude seems plainly an object less interesting to him, than this paltry misfortune of his own.The Theory of Moral Sentiments, pp. 126–27.
While we were all shocked and saddened by the tsunami in Indonesia in 2004, the earthquake in Haiti 2010, the tsunami and subsequent nuclear meltdown in Japan in 2011 as well as every other such tragedy, how many people do you know that actually lost any sleep over it?
Scientists explain this selective empathy through either kin selection for family (they share our genes) or reciprocal altruism, which develops friendships; both of which are lacking to strangers and even most acquaintances. So while tragedy abroad comes off to most as an unfortunate curiosity, we have all seen, and likely know, of people taking extreme risks or making huge sacrifices to help people they know, love and care about. Siblings will donate kidneys or part of their liver to each other; parents will take absurd risks to save their children and the like. Yes, strangers can do these things too sometimes. Occasionally there will even be an anonymous kidney donation from a living donor, but it’s quite rare. Indeed, the usual activism expressed at the suffering of strangers is to press the retweet button or to join some group that furthers one’s own self-identity.
The Limits of Human RelationshipsThis would further explain why the pop stars and movie stars are elevated so high in technological societies. It’s not like the average pop star is thousands of times more talented than those that “didn’t make it.” Indeed, the exact same song that makes it to the top of the charts would usually be lost in obscurity if released by a “no name” artist. And we know this without any doubt because the same few people who write pop songs do so for many different pop stars. What happens is that individuals can only keep track of so many different people at once and thereby pick only a select few artists to care about. People associate music or movies they like with that celebrity and despite not knowing the person personally, that celebrity basically becomes a one-way “friend” of sorts.
Much of this may seem quite obvious, but it underlies the fact the human beings are neither purely competitive nor purely cooperative. Even within competitive institutions, there is a substantial amount of cooperation. Other than commission-based industries, virtually all companies rely first and foremost on internal cooperation to fulfill a competitive aim. Businesses even have to cooperate with each other, for example, when it comes to outsourced vendors and suppliers. The term “Co-opertition” has even been coined to describe this phenomenon.
As noted above, the mistake the Left makes when criticizing libertarianism is to mistake humanity’s cooperative instincts as universal. There’s something called Dunbar’s number that notes that human beings can only comfortably maintain approximately 150 stable relationships. There has been some bickering amongst various psychologists about whether the number is actually 100 or 250 or thereabout, but there is basic unanimity that the general thesis is true.
Malcolm Gladwell described in his book The Tipping Point that the company W.L. Gore and Associates discovered by trial and error that social problems started occurring in any building that housed more than 150 people and thus reorganized to avoid such problems. Many other companies have started doing the same. Indeed, most groups, from social clubs to military units and the like tend to cluster around this number or even smaller. Even studies on social media have found that Dunbar’s number holds true. Yes, you may have more than 150 Facebook friends, but how many of those are really, truly friends?
A study in Nature looked at how people played the prisoner’s dilemma (a game that rewards cooperation, but only if all parties cooperate). As Christopher Allen describes, they created,
100 independent simulations with group sizes ranging from 2 to 512, and then [executed] each simulation 1,000 to 2,000 times. Each generation of the "players" was allowed to evolve different strategies of cooperation vs defection, the classic successful strategy being Tit for Tat. They would then evaluate the percentage of players who had cooperative strategies.
If punishment of defections was ruled out, they discovered that over the 1,000+ generations of the simulation that the rate of cooperation quickly crashes, such that at the group size of 8 a little over 50% cooperation evolved, and for groups that are larger than 16 none cooperate.
In essence, the evidence shows the humans either evolved or were created as a tribal species. And this fact is found in the typical group sizes of hunter-gatherer societies that still exist today. As Maria Konnikova notes, “The average group size among modern hunter-gatherer societies (where there was accurate census data) was 148.4 individuals.”
Indeed, the evidence even indicates that this general phenomenon is true across all primates. As Robin Dunbar, Louise Barrett, and John Lycett note,
… a series of studies … showed that relative neocortex volume correlates with various measures of social complexity across primates … [and] Humans fit this primate relationship between group size and neocortex size surprisingly well.Evolutionary Psychology, p. 114–16.
For most monkeys and apes, their “Dunbar’s number” for group size falls between five and 50.
So while human beings are not naturally atomistic, group cohesion, and cooperation are not univeralizable as many on the Left believe (or at least, want to believe). Of course we should treat everyone we come across — be it family, friend, or stranger with decency and respect. But, if naturally-cohesive human groups are small, as the scientific evidence clearly shows, then what sort of societal arrangement would best suit our species in the complex, modern would our minds are clearly not designed for? One governed by a massive state apparatus, or one of more localized, federated communities?
Is innovation slowing? Will it stop? A new paper by one Jonathan Huebner in the awesomely-named journal Technological Forecasting & Social Change argues that innovation is slowing, indeed it’s halved in the past hundred years.
Because Huebner is a physicist, he naturally looks for abstract and generalizable reasons. These take him to dark places: he worries that technology has an “economic limit” or perhaps that our brains have a limit we’re bumping against. He concludes, “The rate of innovation reached a peak over a hundred years ago and is now in decline. This decline is most likely due to an economic limit of technology or a limit of the human brain that we are approaching.”
A central problem with Huebner’s theory is that economics is not physics. Because people have brains, we come to do things, or come to believe things, in clusters or “cascades.” And these cascades depend on being personally influenced, personally incentivized, or personally forced.
Economies aren’t smooth machines; they’re lumpy things, influenced by particular individuals with particular motivations and desires using particular resources.
Comparing with the Golden Age of InnovationThe biggest lump in Huebner’s comparison is that he’s comparing today to a period known popularly as the “Gilded Age” and which met its end under particularly suspicious circumstances.
The term “gilded” is a journalistic slander for what’s more naturally called our “Golden Age.” Why Golden? The pace of innovation in the last part of the nineteenth century should dazzle even a jaded iPhone-waving, Tinder-swiping hover-boarder. A partial list reads: electricity, telegraph, automobile, flight, steam turbine, moving pictures, wireless communications, broadcasting, plastics. We went from whale oil to kerosene then gas cooking. From Pony Express to telegraph then wireless broadcasting nationwide. The Golden Age reads straight out of sci-fi. Indeed, for all the gee-whizzery of today, I’d argue it’s quite debatable whether we even match these three decades from 1870 to 1900.
Progress Stymied by the Progressive EraWhat makes the “Golden Age” doubly interesting is that it didn’t just dribble away. No, it ran into that great world-striding ideology: the Progressive Era. It was an era that promised a “scientific” reorganization of society, with one of their first priorities to tame the rampant beast of runaway capitalism; to replace the Law of the Jungle with a humane version that would take care of everybody.
Concretely, the reformers aimed to domesticate corporations using a never-ending stream of regulations, backed by criminal prosecution for disobedience. This leash replaced the traditional control on corporate irresponsibility of tort law. The change from tort to regulation transformed the US system into one where companies become something between a felon on parole and the domesticated pets of government. Taxes were raised, sure, but the main mechanism was constraining business through regulations, fiat commands, and forced cartelizations such as the FDA, FCC, Federal Reserve, and hundreds of industry-specific regulators tasked with “rationalizing” competition in their fiefdoms.
The result of this taming of business was, not shockingly, less innovation. After all, those rampant corporations weren’t doing all that innovation out of kindness, or to advance the torch of civilization. They were doing it so the greedy bastards could get rich. In a free market, the quickest way to make a fortune is to build a better mousetrap and sell it to the world. Edison, Carnegie, Rockefeller responded to incentives, making unimaginable advances so they could be rich.
Once these great innovators were tamed by regulatory micro-management and ever-increasing burdens, they start to settle down to a more-comfortable life. In many cases they switched their innovation investments into investing in regulations themselves. Milking what they got, buying further innovation-hobbling rules and cartels to feather their nests, instead of disrupting industry after industry.
Essentially, the Golden Age ended in a classic protection racket, trading protection for the leash.
The disruptors were tamed.
And, naturally, innovation collapsed. It wasn’t gone, but it was cut empirically by half. Giving us Huebner’s data in which — a zooming 1870s eventually ground down into a progressive slog. Innovation continues, to be sure, since we can stand on the shoulders of giants. But there’s nothing remotely like the TopHat Singularity of the 1870s.
With that narrative, I’ll dig into each of Huebner’s particular concerns.
There’s No Such Thing as An Economic Limit to InnovationFirst, the “economic limit” to technological change. There’s absolutely no economic reason for a limit to technology in terms of either speed or an end-point. Because technology is akin to creating new recipes — new ways to combine inputs into output. Given there are a quadrillion potential sandwich combinations at Subway, there are clearly more potential technological recipes than atoms in the galaxy. Meaning there is effectively no limit to creativity. There’s no sneaky hidden economic mechanism that stomps on the brakes when we’re innovating “too fast.”
Nor have we used up our brains. Because the number of potential technology “recipes” is so large, we’ve gone from exploiting the equivalent of a single grain in the Sahara in 1870 to perhaps 1.3 grains in the Sahara today. The percent of possible innovations we’ve exploited in those interceding 145 years is, in the grand scheme, nothing.
I don’t blame Huebner for the pessimistic mistake. Indeed, it’s very common. I think this is so for two reasons: first is undervaluing the relationship of policy and innovation. And second is simply perspective. For example, is a hundred people a lot or a little? If you’re used to crowds of thousands then one hundred is lonely. And if you’re expecting three people for dinner, hundreds of people is quite a crowd.
Similarly, is it a crazy sci-fi world we’re spinning in, or are we trudging along in a pathetically primitive state, barely above the chimps? It depends what you expected. Most observers look at the past and say “Wow.” If, however, we look at the missed potential — if we extrapolate from the Golden Age — it’s easy to be embarrassed by today’s technology. It becomes easy to see that it’s not natural limits to economics or brains that’s holding us back. It’s simply bad policy. Policies that burden startups, harass and tax innovation, even outlaw it. We haven’t killed the Golden Goose yet. But we’re working on it.
Without the Progressives, Where Might We Be Today?So where are we today? Working off Huebner’s numbers, the regulatory state has managed to kill off about half of innovation. This is fairly catastrophic when you run the numbers. Had the rate of innovation continued at Gilded-Age rates, and if innovation is proportional to productivity, I think a reasonable estimate is we’d be something north of five times richer today (based on post-war BLS numbers, extrapolating to 1900).
Five-fold GDP would be something like $200,000 per person. In other words, we’d be looking at the purchasing power of six-figure salaries for waitresses, janitors, or music teachers. Most people would retire at thirty-five to create art or sip margaritas in Tenerife. Perhaps we’d have had the internet by the 1940s and personal robots by the 1970s. Perhaps today we’d already be post-illness and death. I’ll refrain from dwelling on the hundreds of millions of loved ones, including my own, that we’ve lost to the reformers’ tech-slaughter and just leave it there.
So it’s important to keep in mind what we’ve lost with all that quashed innovation.
Despite the harm, the future is not entirely bleak: half-killed innovation is still, in historical perspective, quite good. Innovation continues, just not at the torrid pace it did before the regulators got their thrones. Indeed, the world economy has been growing around 3 percent per capita for decades now, which is quite spectacular when viewed in context. This growth, however, has largely come from simply adopting rich-country tech — an obvious freebie, albeit many countries were previously too badly run to even manage that.
Meanwhile, rich countries themselves are growing at about 1 percent per capita, which is actually quite pathetic considering our sabotaged Golden Age.
Still, we can’t just sit back. Given our 200-year run of technological growth, it’s easy to take it for granted that tech improves like the sun shines or the seasons change. But history is littered with Golden Ages that turned to dust. Typically because governments destroyed the economic incentives for innovation: from taxing and burdening producers — the late Roman Empire is a dramatic example — to outright bans on innovation like Ming China, which shutdown China’s economic miracle for a good 500 years.
And these Golden Ages all die the same way, and the way that we’re gradually strangling ours: ever-heavier burdens on the innovators, ever-tighter circles left open for innovation. We’ve bucked that trend in a few areas, most spectacularly with the Internet, where Bill Clinton set a precedent for hands-off treatment in the 1990s that has been impressively, if imperfectly respected since.
It is wrongly accepted by many liberals (i.e., libertarians) that most, if not all, social problems can be “solved by the market.” But clearly, the “market” cannot magically solve our problems. Let it be clear that there is no doubt that the best way to have social progress is to have a free market economy. However, free markets are not solutions to problems, per se, but are rather what gives us the opportunity to find our own solutions to our own problems by finding the most valuable way to serve one another. For example, Frédéric Bastiat famously wrote in The Law that: “At whatever point of the scientific horizon I start from, I invariably come to the same thing — the solution of the social problem is in liberty.”
By speaking about the virtues of the market, we tend to forget that markets do not have virtues, only people do. As Murray Rothbard once wrote, “it is overlooked that the ‘market’ is not some sort of living entity making good or bad decisions, but simply a label for individual persons and their voluntary interactions. … The ‘market’ is individual acting.”
The “What Should Government Do?” BiasDuring each crisis, politicians and intellectuals systematically presume that “we should do something.” Thus, when liberals emphasize the importance of not violently intervening in the free market order because of the harmful, but yet unseen, consequences of state intervention, they are often accused of favoring inaction. This is a misconception of the liberal argument.
The free market is not superior because it offers solutions. It is superior because its basis is freedom, a freedom that is used by individuals to find new ways for them that are in harmony with the interests of their fellow men. Of course, there are many problems and abuses with the market, but entrepreneurs — if not prevented from entering the marketplace by governments — seek to solve these problems in the pursuit of profits. Through these entrepreneurs, the market is a process that tends to satisfy the most urgent, not-yet-satisfied, needs of the consumers.
To be clear, liberalism — used here to denote the philosophy of laissez-faire — should not be considered as being the utopian opposite of socialism. It is not a magic recipe that guarantees perfect solutions at all times and for all things. Socialists like to imagine that liberals believe the market can cure every ill. In other words, they think liberalism is a mirror reflection of socialism. It is not. True liberalism does not promise perfection, it does not even promise a solution. There will always be problems. Our goal should be to find the best way to improve the situation, not to achieve an ideal world of fantasy.
When a social problem arises and somebody asks a liberal what must be done, he instinctively argues that “we” should free the markets, that “we” should liberalize, or that “we” should commit to deregulation.
But those proposals are not solutions to our problems at all, they are just a necessary step in the process of setting people free to solve problems. By pretending that “the market” is the solution that “we” should adopt, many liberals are victims of the top-down fallacy and deny the polycentric nature of markets. By calling “the market” a solution, we create the illusion that the free market is just another kind of government policy where the rulers offer us a solution. But the real solutions are offered by free individuals, by the free innovator, the free worker, the free capitalist, and the free entrepreneur.
Solutions to problems are not offered by the market, they are offered on the market. As development economist William Easterly brilliantly writes:
The “what should we do?” industry does not show any signs of going out of business soon. It gives us public intellectuals something to do and it gives politicians something to recommend. Much more positively, it does engage the very welcome idealism of altruists who want to make the world a better place. But the Sustainable Development Goals may be the best demonstration yet that action plans don’t necessarily lead to action, “we” are not necessarily the right ones to act, and that there are alternative routes to progress. Global progress has a lot more to do with the advocacy of the ideal of human freedom than with action plans.
Thus, free markets are a sort of meta-solution. They are the solution to the problem of finding solutions. And it is striking that liberalism might be the only political philosophy that does not have a blueprint for an ideal society.
The “Market Provides Incentives” MythAs the market is not a solution, the market does not give incentives. Leading institutional economists Acemoglu and Robinson, in their celebrated 2012 book Why Nations Fail, focused mainly on “incentives.” Whereas they — moderately — praise capitalism as an “inclusive institution,” they criticize “extractive institutions” because they “fail to protect property rights or provide incentives for economic activity.” They also write:
As institutions influence behavior and incentives in real life, they forge the success or failure of nations. … Bill Gates, like other legendary figures in the information technology industry … had immense talent and ambition. But ultimately responded to incentives.
There is no doubt that Why Nations Fails is, for the most part, a good book. However, Robinson and Acemoglu’s appraisal of incentives seems to be problematic. First of all, they assume that institutions should give “incentives.” But this is a constructivist fallacy, to use Hayek’s concept. It implicitly supposes that some external force should direct human actions.
Furthermore, it gives too much importance to top-down approaches. Acemoglu, like many other economists, seems to think something — e.g., the government — should incentivize. But what does it mean to say that government, property rights, or institutions give you an incentive? In fact, when wrongly used, the term “incentive” seems to invoke determinism. This is why Acemoglu writes that people “ultimately responded to incentives,” as if a mysterious force called incentives was influencing the choices each one of us make.
Incentives are not something that can be understood as being independent of individuals, they are purely subjective. An incentive can only be understood as the correct discovery of an individual’s own subjective preferences in order to lead him to act as you wish. Therefore incentives are not something you can “give,” it is something you have to discover.
The free market does not “provide” an incentive to work, it lets you work freely. The free market does not “provide” an incentive to invest, it lets you use your savings in order to make a profit by serving the consumer. There is no such thing as a god called “market” that will furnish you some incentive to be productive. However, the market is the best institutional framework to create harmony between the plans of a vast number of individuals — hence the title of Frédéric Bastiat’s magnus opus Economic Harmonies.
Because they are free, different individuals can understand each other’s preferences and exchange. Only in this way do people “give an incentive” to each other in order to commit to exchange and enhance their situation. Therefore, institutions do not provide incentives, people do. The sentence “the market provides incentives” contains the same problem as the sentence “the market is the solution.” It is just not so. The market is merely an institutional framework in which people can make plans freely. As Hayek says in a famous rap song “the question I wonder is who plans for who, do I plan for myself, or I leave it to you? I want plans by the many, not by the few.”
ConclusionThe modern state can be defined as the institution that pretends to have the monopoly of solutions to social problems. But since the state operates like a monopoly, it behaves like a monopoly and therefore exploits the very people it is supposed to serve. In fact, proponents of government action imply that the members of the civil society are not able to find their own solutions nor able to identify what the problems are. But the most competent men do not need the state to answer our problems, they just need freedom. When a problem arises, the right question is not “what can the government or the market do,” the right question is “what can I do.”
The government is taking away basic freedoms granted under the Constitution. This helpful guide gives a clear vision of what your rights are and how you can protect them.
In order to truly understand the freedoms we have as people of the United States, we must fully comprehend our Constitution and the reasons why our Founding Fathers devised it. If we don’t, we’ll never fully grasp the danger that lurks today of losing those freedoms to an ever-growing government and its lack of accountability. As a nationally recognized expert on the U.S. Constitution, Judge Andrew P. Napolitano states in simple Q&A format the meanings behind our Constitution and exposes areas that are in jeopardy of unequivocal compromise. He addresses hard-hitting questions such as, What are the limits to government power in a free society? Are your rights guaranteed? What forces have collaborated to destroy personal freedom? and many more. Seeing, studying, and examining these issues will illuminate the unconstitutional realities of the government’s role today.
In this second edition of his seminal study, Alejandro Chafuen covers the economic writings of the Late Scholastics working in the tradition of St.Thomas Aquinas, those whom J. Schumpeter called the first economists. Writing long before Adam Smith, they wrote on private property, trade, monetary theory and policy, value, price, entrepreneurship, the state, and much more, anticipating the insights of the Austrian School. In many ways, these Continental theorists were more advanced than the British Classical School. The second edition (the first edition was called Christians for Freedom) is much expanded and improved to become not only an important book on the history of thought but a crucial study in the development of the Austrian School. There is no more comprehensive account available.
In fact, Thomas Woods's book on Catholic social teaching surpasses any other book ever published in this genre. Rather than merely recount what has been said, he subjects the corpus to a relentless examination, highlighting contradictions and missteps, while praising the good. Even for those not particularly interested in Catholic teaching, this book is an outstanding elucidation of economic science in light of moral concerns. He covers wages and labor, money and inflation, trade and the division of labor, entrepreneurship and development, and the meaning of a range of concepts such as price and value.
Of particular interest is Professor Woods's primary target: not so much the social-gospel left but the Catholic right, which argues against free enterprise and laissez-faire with surprising intensity. By taking on these critics of the market, as versus easier leftist targets, he has set for himself the most difficult task of providing a corrective concerning economics to those who are most attached to Catholic teaching on faith and morals and yet are dogmatically attached to various forms of government intervention designed to shore up morals and faith.
He shows that market economics is not contradicted by binding Catholic teaching but rather supported by it.
This is a "new" book by Ludwig von Mises, the first of a series of lecture transcripts drawn from careful notes taken by Bettina Bien Greaves in the summer of 1951. It features Mises in a role in which we do not usually find him, not as a writer but as a speaker of enormous erudition and power.
There are nine lectures in this book: Economics and its Opponents; Pseudo-Science and Historical Understanding; Acting Man and Economics; Marxism, Socialism, and Pseudo-Science; Capitalism and Human Progress; Money and Inflation; The Gold Standard: Its Importance and Restoration; Money, Credit, and the Business Cycle; and The Business Cycle and Beyond.
We find Mises commenting on matters one usually doesn't find in his others books, such as the impact that Plato had on the classical world, the place of Rousseau in history, the role of liberalism on the Continent as versus England, the impact of Poincare and Einstein, as well as passing comments on everything from banking debates of the 19th century as well as the role of ideology in modern life.
This sweeping book is a systematic treatment of the historic transformation of the West from limited monarchy to unlimited democracy. Revisionist in nature, it reaches the conclusion that monarchy, with all its failings, is a lesser evil than mass democracy, but outlines deficiencies in both as systems of guarding liberty. By focusing on this transformation from private to public government, the author is able to interpret many historical phenomena, such as rising levels of crime, degeneration of standards of conduct and morality, the decline in security and freedom, and the growth of the mega-state.
In addition, Hoppe deconstructs the classical liberal belief in the possibility of limited government and calls for an alignment of anti-statist conservatism and libertarianism as natural allies with common goals. He defends the proper role of the production of defense as undertaken by insurance companies on a free market, and describes the emergence of private law among competing insurers.
The author goes on to assess the prospects for achieving a natural order of liberty. Informed by his analysis of the radical deficiencies of social democracy, and armed with the social theory of legitimation, he forsees secession as the likely future of the US and Europe, resulting in a multitude of region and city-states. Democracy-The God that Failed is a brilliant and unflinching work that will be of intense interest to scholars and students of history, political economy, and political philosophy.
Taking a close look at the dense fabric that our government weaves between war, state power, and economics, this collection of essays reveals the growing authority—and corruption—of the American state. Covering topics from the Lyndon Johnson presidency to the provocatively titled article “Military-Economic Fascism” on the military-industrial-congressional complex, it argues that the U.S. government consistently exploits national crises and then invents timely rhetoric that limits the rights and liberties of all citizens for the benefit of the few, be they political leaders or various industrialists in the areas of defense and security. As its title suggests, this book presents a clear narrative of trends and events—from the United States’ entry into World War II to the origins of income tax—causing individuals to question whether those in power are truly blind to the effects and causes of their policies.
Higgs tersely describes the state as 'the most destructive institution human beings have ever devised.' The charge is supported by a massive array of data and a narrative of the process by which the U.S. government has preempted an ever-increasing portion of its citizens' resources and rolled back their liberty.
Twelve-term Texas Congressman, Presidential candidate, and #1 New York Times bestselling author Ron Paul returns with a highly provocative treatise about how we need to fundamentally change the way we think about America's broken education system in order to fix it.
Whether or not you have children, you know that education is vital to the prosperity and future of our society. Yet our current system simply doesn't work. Parents feel increasingly powerless, and nearly half of Americans give our schools a grade of "C". Now, in his new book, Ron Paul attacks the problem head-on and provides a focused solution that centers on strong support for home schooling and the application of free market principles to the American education system. Examining the history of education in this country, Dr. Paul identifies where we've gone wrong, what we can do about it, and how we can change the way we think about education in order to provide a brighter future for Americans.
Walter Block has assembled thirty chapters defending behavior that is probably offensive to most Americans, such as dwarf tossing and stereotyping, and many that are downright illegal, such as dueling and smuggling. Plus, he's provided us with humorous cartoons at the end of many chapters. The bottom line message in Freedom in All Realms: Defending the Undefendable is that the true test of our commitment to personal liberty doesn't come when we permit others to engage in those peaceable, voluntary acts with which we agree. It comes when we permit others to engage in peaceable, voluntary acts we find offensive. (Walter E. Williams)
What is fundamentally wrong with government today? In Against Leviathan, economist and historian, Robert Higgs, offers an unflinching critical analysis of government power in all its aspects: welfare, warfare, regulation, spying, and its imposition on personal liberties.
Against Leviathan combines an economist's analytical scrutiny, an historian's respect for the facts, and a refusal to accept the standard excuses and cruelties of government officialdom. Topics include Social Security, the paternalism of the FDA, the "War on Drugs", the nature of political leadership, civil liberties, the conduct of the national surveillance state, and governmental responses to a continuing stream of "crises," including domestic economic busts and foreign wars both hot and cold.
Against Leviathan is a thorough and penetrating critique, and a significant contribution in this current time of crisis and unchecked expansion of government power, and a worthy successor to the author's seminal treatise Crisis and Leviathan.
These seventy-six essays, organized under the headings of Christianity and War, Christianity and the Military, Christianity and the Warfare State, and Christianity and Torture, have one underlying theme: the relation of Christianity to war, the military, and the warfare state. If there is any group of people that should be opposed to war, torture, militarism, and the warfare state with its suppression of civil liberties, imperial presidency, government propaganda, and interventionist foreign policy it is Christians, and especially conservative, evangelical, and fundamentalist Christians who claim to strictly follow the dictates of Scripture and worship the Prince of Peace.
Although many of these essays reference contemporary events, the principles discussed in all of them are timeless: war, militarism, the warfare state, and especially the proper Christian attitude toward these things.
This volume has collected the best of the best of early economic thought, and thereby has rooted economics in the broadest range of history dating back centuries before the Industrial Revolution.
Represented here are: William Walwyn, Pieter de la Court, Josiah Cilde, Pierre Nicole, Nicholas Barbon, Dudley North, Andrew Fletcher, John Trenchard, Bernard Mandeville, Daniel Defoe, Voltaire, Montesquieu, Anne-Robert-Jacques Turgot, Jean-François Saint-Lambert, Ferdinando Galiani, Étienne Bonnot de Condillac, among many other thinkers both famed and unfamiliar.
Dr. Paul writes that to believe in liberty is not to believe in any particular social and economic outcome. It is to trust in the spontaneous order that emerges when the state does not intervene in human volition and human cooperation. It permits people to work out their problems for themselves, build lives for themselves, take risks and accept responsibility for the results, and make their own decisions. It is the seed of America.
This is a comprehensive guide to Dr. Paul's position on fifty of the most important issues of our times, from Abortion to Zionism. Accessible, easy to digest, and fearless in its discussion of controversial topics, Liberty Defined sheds new light on a word that is losing its shape.
Do you have doubts about American wars abroad? Do you worry about their cost, the drain in American resources, the resentments they foster abroad, the death and destruction they bring on all sides? Do you have a sense that these are not truly consistent with the American spirit of commerce and friendship?
People who think this way are made to feel unpatriotic or even traitorous. It turns out, however, that this point of view has a long and glorious history in the United States. It is called the anti-militarist tradition. It grew out of the founding period when a small group of principled people fought back a giant military empire to win their independence.
The history begins in the founding period and continues until after the Second World War, showing how the rise of the warfare state always meant a diminution of liberty at home. He celebrates those who resisted at every step and demonstrates how their prediction all came true though their warnings went unheeded.
Perhaps the most valuable part of this book is its demonstration that the Second War World was not some kind of unusual exception in the history of American warfare; it was the fulfillment of the ambitions of an increasingly imperialist policy. He redeems the anti-war coalition from claims that it was unpatriotic and shows that they were right to warn and warn again against foreign entanglements and their consequences.
Ekirch was a great historian and this book provides an incredible wealth of knowledge and documentation to show that the anti-militarist tradition in the United States was and is robust, freedom-loving, and correct time and again.
After many years of being out of print, this classic treatise from the brilliant political philosopher De Jouvenel (1952) provides an answer to a critical question: what is morally wrong with the idea of political management of incomes? Nearly every state in the world attempts to curb excess riches and boost the well being of the poor, and does so through a variety of programs that involve taxation and regulatory regimentation.
Yes, it generates disincentives to work but the author here deals with a more fundamental moral issue: to what extent and in what ways does redistribution compromise individual freedom and build the power of the state? It is in the transfer of power from people to government that the real problem with income management rests. De Jouvenel makes a devastating case against the most accepted of modern forms of economic intervention.
The Western genre has long been associated with right-wing and libertarian politics, and is said to promote individualism and free-market economics. In a new look at the Western, however, Ryan McMaken shows that the Western is in fact often anti-capitalist, and in many ways, the genre attacks the dominant ideology of nineteenth-century America: classical liberalism.
The classical Westerns of the mid-twentieth century often feature wealthy capitalist villains who oppress the cowardly and defenseless shopkeepers and farmers of the frontier. The gunfighter, a representative of the law and order provided by the nation-state, intervenes to provide safety and justice. In addition to attacks on capitalism, the Western attacks other prized values of the bourgeois middle classes including Christianity, education and urbanization.
McMaken examines these themes as used in the films of John Ford, Anthony Mann, and Howard Hawks. These pioneers of the classical Westerns are then contrasted with later innovators such as Sergio Leone, Sam Peckinpah, and Clint Eastwood. Also included are discussions of the role of the Little House On The Prairie series, Victorian literature, and the nature of crime on the historical frontier. With a foreword by Paul A. Cantor.
Political philosophy is dominated by a myth, the myth of the necessity of the state. The state is considered necessary for the provision of many things, but primarily for peace and security. Gerard Casey argues that social order can be spontaneously generated, that such spontaneous order is the norm in human society and that deviations from the ordered norms can be dealt with without recourse to the coercive power of the state.
Casey presents a novel perspective on political philosophy, arguing against the conventional political philosophy pieties and defending a specific political position, which he identifies as 'libertarian anarchy'. The book includes a history of the concept of anarchy, an examination of the possibility of anarchic societies and an articulation of the nature of law and order within such societies. Casey presents his specific form of anarchy, undergirded by a theory of human action that prioritises liberty, as a philosophically and politically viable alternative to the standard positions in political theory.
Alcohol abuse and heavy tobacco use are two of the leading causes of death in the United States. It seems rather ludicrous to advocate the outlawing of drugs and not the outlawing of alcohol and tobacco. (p. 11) Vance writes from a viewpoint that will surprise many readers. He himself does not condone the use of dangerous drugs. To the contrary, he is a Christian and a Bible scholar of considerable note and he regards their use as sinful. "As an adherent to the ethical principles of the New Testament, I regard drug abuse to be a vice, a sin, and an evil that Christians should avoid even as they avoid supporting the government's war on drugs" (p. 79).
If Vance takes this view of drug use, why is he so adamant that people have the right to consume these drugs? His answer will be of interest to all students of moral theology. He holds that Christians can with perfect consistency uphold the distinction between vices and crimes, with only the latter an appropriate area for forcible suppression.
Here Eugen von Böhm-Bawerk--Mises's teacher and a huge figure in the history of thought--explains and argues for the subjective theory of value, the theory of marginal utility, and their relationship to price.
This book was originally published in German in 1886 as an elaboration on Menger--driving home points concerning value as against every non-Austrian point of view.
He completely demolishes not only the labor theory but also the value theory that rests on claims of aggregate economic value or social worth. In so doing, he clarifies points that Menger himself hadn't entirely spelled out. He also outlines for the first time in this article the modern marginal productivity theory of factor pricing.
The author covers the nature and origin of value, the measurement of value, the value of complementary goods, the scientific significance of subjective value, and the theory of objective exchange value.
This seminal treatise in the history of ideas demonstrates what has come to be known as the Higgs thesis: that government grows in periods of crisis, for example, war and depression. He demonstrates this with a detailed look at twentieth century economic history.
Higgs's thesis is so compelling that it has become the dominant paradigm for understanding the so-called ratchet effect: government grows during crisis and then retrenches afterwards, but not to the same level as before.
This book is absolutely essential for anyone who seeks to understand the dynamics of government growth and the loss of liberty.
The first full week of 2016 has been an eventful start to the year.
In Oregon, the Federal government’s control over most of the American west continues to cause issues with ranchers — even though they themselves enjoy benefits from the arrangement. On Tuesday, President Obama continued the bipartisan assault on gun rights with an argument reliant on inflated statistics. Meanwhile, Rand Paul finds Mises, Bernie Sanders still hasn’t learned that price controls are bad, and Americans are voting with their feet for lower taxes.
On the global stage, China’s unsustainable economy continues to show signs of weakness, while new data shows Krugman is still very wrong about Europe, and socialism has done funny things to Venezuelan exchange rates.
We also took a moment to consider the legacy of Murray Rothbard twenty-one years after his passing. Luckily the ideas of Rothbard, Mises, and the rest of the Austrian school have never been more widely spread, in large part due to the work of a new generation of scholars that have come through the Mises Fellowship program.
Our latest Mises Weekends focuses on the Switzerland referendum on 100 percent reserve banking. Our friend Claudio Grass, managing director of Global Gold in Switzerland, joins Jeff Deist to give his thoughts. Who’s behind the referendum? How have the Swiss public reacted? Does it have a chance?
Jeff and Claudio offer comprehensive analysis you won’t get anywhere else.
And in case you missed any of them, here are this week’s featured Mises Daily articles and some of our most popular articles at Mises Wire:
Why Austrians Are Not Neoliberals by Philipp BagusAre We Headed for Another Bust? by Frank Shostak"Paradise for an Austrian Researcher" by David Sanz BasVenezuela's Bizarre System of Exchange Rates by Emiliana Disilvestro and David HowdenEnd Injustices Now, Not Later by Gary GallesOn Gun Control, Obama Looks like Reagan and Bush by Ryan McMakenRand Paul Echoes Mises on Money by Tho BishopOregon and the Problem of Federal Lands by Ryan McMakenRemembering the First World War: the Centennial of the 1916 Slaughters by T. Hunt TooleyGuns Don't Cause Suicide by Ryan McMakenThe Basic Lessons of Keynesian Economics by Joseph SalernoPolice Departments Overflowing with Extra Time, Money by Ryan McMakenWould President Sanders Repeal Dodd-Frank? by Tho BishopCensus Data Shows People Are Fleeing High-Tax States by Ryan McMakenMost Market Criticism is Simply Poor Science by Per BylundMurray Rothbard by David GordonA Call to Activism from the Late Margit von Mises by Jeff DeistRothbard's Legacy, 21 Years Later by Ryan McMakenCultural Marxism Explained in 7 Minutes by Joseph SalernoPaul Krugman is Still Wrong on Europe by Louis RouanetHow The Feds Got All That Western Land (and Why It's a Problem) by Ryan McMaken
Merry Christmas and Happy Holidays from everyone here at the Mises Institute!
As an exciting year comes to a close, we want to thank all of our incredible members that allow us to do the work we do in advancing Austrian economics, freedom, and peace.
In honor of the season, John Denson joined Jeff Deist for a special episode of Mises Weekends to discuss the Christmas Truce. This incredible moment during World War I, often completely ignored by historians, is a wonderful celebration of the human spirit — even in the darkest of times. We hope you and yours will enjoy this extraordinary testament of the power of the Christmas season.
And in case you missed any of them, here are this week’s featured Mises Daily articles, some of our most popular articles at Mises Wire, and some holiday selections from the Mises archive:
Half of Britain Wants To Leave the EU by Ryan McMakenWhy Capitalists Are Repeatedly "Fooled" By Business Cycles by Frank ShostakGet More Bang for Your Buck by Jeff DeistThere's No Such Thing As a Neutral Government by David GordonPoland, Free Markets, and the Eurozone by Mateusz MachajA Will To Peace by John V. DensonIn Defense of Scrooge by Michael LevinA Capitalist Christmas by Dale SteinreichSimple Economic Truths for Entrepreneurs by Per Bylund
Murray Rothbard had long dreamed of a fellowship program at the Mises Institute where students could work on research with the help of Austrian economists. In the twenty years since Rothbard’s death, the Mises Institute has worked with hundreds of graduate students to build a new generation of scholars.
David Sanz Bas was a Mises Fellow during 2010 and 2011. He is now the Dean of the School of Social Science and Law at Catholic University of Avila, Spain. He obtained his PhD in Austrian Economics at University Rey Juan Carlos in Madrid under Mises Institute Senior Fellow Jesús Huerta de Soto.
Apply for a Mises Fellowship.
MISES INSTITUTE: How did you first become familiar with the Mises Institute?
DAVID SANZ BAS: When I started my bachelor in economics, I considered myself a Marxist. By chance, when I was twenty (it was 2004), I had the opportunity to read Carl Menger’s Principles of Economics. This book made a deep impression on me and, after a lot of thinking and more reading, I became an Austrian.
By that time, I had become interested in activism, and, in 2005, some friends and I founded an online forum where we discussed and debated lively topics on economics, defense, history, political options, environmentalism, etc. We did this with random online socialists, libertarians, neocons, fascists, and hippies. Through this, I discovered the Mises Institute and its website, and I liked it a lot. I was so surprised by all the online resources that I found there. They were good ammo for my struggle!
A few years after, in 2009, the Mises Institute awarded Jesús Huerta de Soto (who by that time was my PhD advisor) the Gary G. Schlarbaum Prize for Liberty. The Institute organized an impressive event in Salamanca called “The Birthplace of Economic Theory” where, among other things, Jesús Huerta de Soto received his award. It was the first time the Mises Institute did an event outside of the US. I volunteered as staff to help the attendants to this conference. During this event, I had a chance to meet many people from the Mises Institute. They were very nice to me and they told me that I could apply to get a scholarship and become a Fellow at the Mises Institute. I applied immediately and I got accepted. I was very excited!
The following year, in 2010, I was awarded with a scholarship from the Mises Institute. I am very indebted to the Institute! Being a Fellow at the Mises Institute has been one of the greatest honors (if not the greatest) that I have received.
MI: Why did you decide to pursue an academic career?
DSB: Because I wanted to devote my entire life to looking for the Truth. I think that it is our human nature to try to look for it. This is one of the most important reasons why humans have reached their current level of development.
In this regard, being an academic is a privilege, because your job consists, basically, of learning new things as a researcher and as a university professor. If you have this eagerness, you will be very happy as a Fellow at the Mises Institute because all the people there share this desire!
MI: What was your favorite part of being a Fellow?
DSB: For me the Mises Institute is like an ”Austrian monastery.” While I was there, I felt isolated from the real world, relaxed, without any worry and with all the resources I needed to carry on my research. In a way, the time stops and you become an ”Austrian monk.” For me the Mises Institute is a real paradise for an Austrian researcher.
With this I do not want to suggest that being a Fellow is boring: seminars, BBQs, racquetball and basketball matches, parties in houses organized by professors and staff of the Mises Institute, chess tournaments, games, occasional weekend trips, etc. People (professors, staff, and the other Fellows) are very friendly and there is a good atmosphere. If you are a social person, you will have a great time with a lot of laughs and funny moments.
However, as a Fellow, you cannot forget that the Mises Institute is a serious research center and you are part of its researcher body. You have to become an “Austrian monk” and pursue and accomplish your academic aims! If not, your stay at the Mises Institute loses its meaning.
MI: What benefits for your academic career have you received thanks to your time at the Mises Institute?
DSB: There have been many.
First of all, I did a lot of research and academic work while at the Institute, and I was able to finish my thesis and to write several papers.
I feel that the quality of the scientific research that I did in Auburn was better than what I could have done in my home, Spain. It is not only because I had more time to focus on my research, or because of the amazing library that the Mises Institute has; also, it is because I received a lot of feedback from the other Fellows and from the professors, including Joseph Salerno, Mark Thornton, and Tom Woods. I was able to do this both in organized seminars where I presented my research, and in private conversations with them. These enriched my work a lot!
The contacts I made during my stay were another remarkable benefit that I received. Actually, I think it is necessary to have good contacts with other scholars to become a good scholar yourself. Other scholars are very important in doing joint research, solving academic doubts, and sharing the joys and frustrations of scholarly work, among other things. In this sense, the Mises Institute Fellowship program is a perfect opportunity to make contacts.
Also, as a Fellow, you will learn many new things thanks to the weekly seminars, the Mises University, and the Rothbard Graduate Seminar, all of which occur during your time as a Fellow.
Besides, the Mises Institute is a reputable research center. In this regard, being a Fellow lets you add a line in your CV, and that is always something good.
Finally, if you are not from an Anglo-Saxon country, you will improve substantially your English level. English is the ”Latin of our times” and any good researcher will have to master it.
MI: What advice would you tell to a new Fellow?
DSB: Being a Fellow it is also a great responsibility. You cannot forget that all the costs are paid by private donors.
The Mises Institute aims to promote a free society and, as we know, economic resources are always scarce (especially for the defenders of free market ideas). In this regard, if you receive a scholarship, you have to think of the honor because you were chosen over another researcher.
Therefore, please, seize this unique opportunity by working hard and being thankful!
[This article appears in the November–December 2015 issue of The Austrian.]
Peter Simpson is a distinguished classicist and philosopher, known especially for his work on Aristotle’s ethics and politics. (He is also, by the way, a mordant critic of Leo Strauss and his followers.) In Political Illiberalism, he poses a fundamental challenge to philosophical justifications of modern liberalism, culminating in the vastly influential Political Liberalism (1993) of John Rawls. Though Simpson cannot be classed as a libertarian, his bold arguments will be of great use to all of us who, like Lew Rockwell, are Against the State.
According to a familiar tale, states before the inception of liberalism in the seventeenth and eighteenth centuries were fatally flawed. They sought to impose on their subject populations a political and religious orthodoxy. The Protestant Reformation brought some progress, but all too often, control by the monarch replaced dominance by the Catholic Church. Premodern illiberal states “taught and imposed on society a distinctive view of the good life. … Those who disagreed with this view of religion imposed by the state had to be resisted or expelled or incarcerated or killed.”
What was the distinctive contribution of liberalism? According to this view, the state must not rule on the basis of what Rawls calls a “conception of the good.” By this he means a comprehensive view of the good life for human beings. Religions are prime examples of conceptions of the good, but not the only ones. The all-embracing theory of life taught in Soviet Russia in the glory days of Lenin and Stalin would be a secular example of what liberalism deplores and seeks to eradicate.
Instead, liberals maintain, the state must remain neutral in the battle between such competing conceptions of the good. People must be allowed to work out their own salvation, religious or secular, as their own consciences dictate.
The recent Rawlsian account of liberalism rests itself on a notion of a neutral core of morality … which all such visions [of the good] are supposed to be able to accept and live by. … The core morality sets down conditions of respect and tolerance that, while permitting each person to pursue their vision as they wish, forbids them so to pursue it so they forcibly prevent others from pursuing other visions.
What is wrong with that? Is it not simple common sense? Who can reject freedom of conscience? Simpson exposes a crucial weakness in this seemingly impregnable argument for liberalism. The supposedly neutral state does not ensure freedom of conscience. It itself imposes its own ideology, namely liberalism, on everyone. The state is not an impartial umpire, standing above competing conceptions of the good: it is a powerful and malevolent force.
The paradox is that while liberalism claims to free people from the oppression of states that impose on everyone the one true doctrine espoused by the state, liberalism itself imposes on everyone such a doctrine: namely liberalism itself. … All those in professedly liberal states who, for whatever reason, do not accept the liberal doctrine, or are suspected of not doing so, become enemies of the state. … The liberal state has proved itself as ruthless against its opponents as any illiberal state is supposed to have done.
Even if Simpson’s argument is right, though, is there not an obvious objection he must confront? Is it not better to have a “neutral” state, which at least professes the ideal of freedom of conscience, than an avowedly ideological state that openly demands conformity?
Simpson has a brilliant response to this objection. The state is not necessary at all. To the contrary, he says, the state is an invention of the modern world. In what sense is this true? Simpson has in mind Max Weber’s famous definition of the state as an organization that claims a monopoly on the legitimate use of force.
Note, too, the novelty of this idea, for what Weber brings to our attention … is the difference between what existed before and what exists now. Before the modern emergence of the state, no institutional structure had a monopoly of coercive enforcement.
In past times, people to a large measure protected their persons and property by their own efforts.
One sign of the accuracy of Weber’s definition [of the modern state] is the absence of organized police forces in the pre-modern world. … The functions we now depute exclusively to the police were performed previously by the citizens, who relied on themselves and their relatives and friends for the enforcement of rights and for defense and protection.
In the face of the tyrannical contemporary state, Simpson places special emphasis on the private ownership of guns.
Weapons of self-defense … and nowadays primarily guns, belong naturally to the family. … By the situation of present times, the first defense is against the state. … Weapons, therefore, naturally belong in the hands of the people, and it is intrinsically unjust for any higher authority to confiscate or forbid them.
The monopoly state, supposedly needed to protect us, harms rather than benefits us. The record of the state is no better in foreign affairs. The modern liberal state has brought death and destruction, far more than it has protected us from foreign invaders.
One cannot even say that it was the totalitarian and not the liberal version of the state that caused total war. In the world wars of the twentieth century that were fought between liberal and totalitarian states, the liberal states caused at least as much death and destruction as the totalitarian ones, and these liberal states also pursued war when the totalitarian ones would have preferred peace. … So how, then, is liberalism better as regards war, since all systems will fight when they think they must? The only difference seems to be that liberalism will fight total wars, while most of these other systems will not be able to, which is an argument against liberalism and the state, not for them.
In his account of the rise of the state and the ideology that purports to justify it, Simpson brings to the fore the philosophy of Hegel, who remarked that the state “is the march of God in the world.” I would add to Simpson’s fine discussion that Hegel, incredibly, regarded the decline of the “divided conscience,” when the Church was an independent source of authority apart from the monarch, as a part of the growth of freedom. Now people were “free” to obey the state, without the distraction of a competing authority.
Simpson applies his anti-state perspective to American history. He does not view the Constitution with favor. Its adoption was a coup for centralizers and a blow against the dispersal of power.
The Constitution, therefore, makes two different changes [from the Articles of Confederation] at the same time: from a league to a national government and from a congress of delegates to a congress of individuals whose collective power, because it is the coercive power of the state and because in extremis it is unlimited, amounts to autocracy or despotism.
Simpson highlights to great effect the warnings of the Anti-Federalists against the potential for tyranny inherent in the Constitution.
The Anti-Federalists knew far more about political realities than the Federalists did, or at least that the Federalists admitted (for one may suspect that the actual results that the Ant-Federalists foresaw and feared were foreseen and perhaps in part welcomed by the Federalists).
As mentioned earlier, Simpson is no libertarian; and Austrians and libertarians will differ with some of his remarks about the economy. It is all the more remarkable, then, that Simpson’s views on the state converge so substantially with views that we at the Mises Institute have long defended. In our efforts to do so, we now have the help of the arguments of this original thinker and distinguished scholar.
I’d like to speak today about what political correctness is, at least in its modern version, what it is not, and what we might do to fight against it.
To begin, we need to understand that political correctness is not about being nice. It’s not simply a social issue, or a subset of the culture wars.
It’s not about politeness, or inclusiveness, or good manners. It’s not about being respectful toward your fellow humans, and it’s not about being sensitive or caring or avoiding hurt feelings and unpleasant slurs.
But you’ve heard this argument, I’m sure. PC is about simple respect and inclusiveness, they tell us. As though we need progressives, the cultural enforcers, to help us understand that we shouldn’t call someone retarded, or use the “N” word, make hurtful comments about someone’s appearance, or tolerate bullies.
If PC truly was about kindness and respect, it wouldn’t need to be imposed on us. After all, we already have a mechanism for the social cohesion PC is said to represent: it’s called manners. And we already have specific individuals charged with insuring that good manners are instilled and upheld: they’re called parents.
Political Correctness DefinedBut what exactly is PC? Let me take a stab at defining it: Political correctness is the conscious, designed manipulation of language intended to change the way people speak, write, think, feel, and act, in furtherance of an agenda.
PC is best understood as propaganda, which is how I suggest we approach it. But unlike propaganda, which historically has been used by governments to win favor for a particular campaign or effort, PC is all-encompassing. It seeks nothing less than to mold us into modern versions of Marx’s un-alienated society man, freed of all his bourgeois pretensions and humdrum social conventions.
Like all propaganda, PC fundamentally is a lie. It is about refusing to deal with the underlying nature of reality, in fact attempting to alter that reality by legislative and social fiat. A is no longer A.
To quote Hans-Hermann Hoppe:
[T]he masters … stipulate that aggression, invasion, murder and war are actually self-defense, whereas self-defense is aggression, invasion, murder and war. Freedom is coercion, and coercion is freedom. … Taxes are voluntary payments, and voluntarily paid prices are exploitative taxes. In a PC world, metaphysics is diverted and rerouted. Truth becomes malleable, to serve a bigger purpose determined by our superiors.
But where did all this come from? Surely PC, in all its various forms, is nothing new under the sun. I think we can safely assume that feudal chiefs, kings, emperors, and politicians have ever and always attempted to control the language, thoughts, and thus the actions of their subjects. Thought police have always existed.
To understand the origins of political correctness, we might look to the aforementioned Marx, and later the Frankfurt school. We might consider the work of Leo Strauss for its impact on the war-hungry think tank world. We might study the deceptive sloganeering of Saul Alinsky. We might mention the French philosopher Foucault, who used the term “political correctness” in the 1960s as a criticism of unscientific dogma.
But if you really want to understand the black art of PC propaganda, let me suggest reading one of its foremost practitioners, Edward Bernays.
Bernays was a remarkable man, someone who literally wrote the book on propaganda and its softer guise of public relations. He is little discussed in the West today, despite being the godfather of modern spin.
He was the nephew of Sigmund Freud, and like Mises was born in Austria in the late nineteenth century. Unlike Mises, however, he fortuitously came to New York City as an infant and then proceeded to live an astonishing 103 years.
One of his first jobs was as a press agent for President Woodrow Wilson’s Committee on Public Information, an agency designed to gin up popular support for US entry into WW1 (German Americans and Irish Americans especially were opposed). It was Bernays who coined the infamous phrase “Make the World Safe for Democracy” used by the committee.
After the war, he asked himself whether one could “apply a similar technique to the problems of peace.” And by “problems,” Bernays meant selling stuff. He directed very successful campaigns promoting Ivory Soap, for bacon and eggs as a healthy breakfast, and ballet. He directed several very successful advertising campaigns, most notably for Lucky Strike in its efforts to make smoking socially acceptable for women.
The Role of “Herd Psychology”Bernays was quite open and even proud of engaging in the “manufacturing of consent,” a term used by British surgeon and psychologist Wilfred Trotter in his seminal Instincts of the Herd in Peace and War published in 1919.
Bernays took the concept of herd psychology to heart. The herd instinct entails the deep seated psychological need to win approval of one’s social group. The herd overwhelms any other influence; as social humans, our need to fit in is paramount.
But however ingrained, in Bernays’s view the herd instinct cannot be trusted. The herd is irrational and dangerous, and must be steered by wiser men in a thousand imperceptible ways — and this is key. They must not know they are being steered.
The techniques Bernays employed are still very much being used to shape political correctness today.
First, he understood how all-powerful the herd mind and herd instinct really is. We are not the special snowflakes we imagine, according to Bernays. Instead we are timorous and malleable creatures who desperately want to fit in and win acceptance of the group.
Second, he understood the critical importance of using third party authorities to promote causes or products. Celebrities, athletes, models, politicians, and wealthy elites are the people from whom the herd takes its cues, whether they’re endorsing transgender awareness or selling luxury cars. So when George Clooney or Kim Kardashian endorses Hillary Clinton, it resonates with the herd.
Third, he understood the role that emotions play in our tastes and preferences. It’s not a particular candidate or cigarette or a watch or a handbag we really want, it’s the emotional component of the ad that affects us, however subconsciously.
What We Can Do About ItSo the question we might ask ourselves is this: how do we fight back against PC? What can we do, as individuals with finite amounts of time and resources, with serious obligations to our families, loved ones, and careers, to reverse the growing tide of darkness?
First, we must understand that we’re in a fight. PC represents a war for our very hearts, minds, and souls. The other side understands this, and so should you. The fight is taking place on multiple fronts: the state-linguistic complex operates not only within government, but also academia, media, the business world, churches and synagogues, nonprofits, and NGOs. So understand the forces aligned against you.
Understand that the PC enforcers are not asking you, they’re not debating you, and they don’t care about your vote. They don’t care whether they can win at the ballot box, or whether they use extralegal means. There are millions of progressives in the US who absolutely would criminalize speech that does not comport with their sense of social justice.
One poll suggests 51 percent of Democrats and 1/3 of all Americans would do just that.
The other side is fighting deliberately and tactically. So realize you’re in a fight, and fight back. Culturally, this really is a matter of life and death.
We Still Have Freedom to ActAs bad as PC contamination may be at this point, we are not like Mises, fleeing a few days ahead of the Nazis. We have tremendous resources at our disposal in a digital age. We can still communicate globally and create communities of outspoken, anti-PC voices. We can still read and share anti-state books and articles. We can still read real history and the great un-PC literary classics. We can still homeschool our kids. We can still hold events like this one today.
This is not to say that bucking PC can’t hurt you: the possible loss of one’s job, reputation, friends, and even family is very serious. But defeatism is never called for, and it makes us unworthy of our ancestors.
Use humor to ridicule PC. PC is absurd, and most people sense it. And its practitioners suffer from a comical lack of self-awareness and irony. Use every tool at your disposal to mock, ridicule, and expose PC for what it is.
Never forget that society can change very rapidly in the wake of certain precipitating events. We certainly all hope that no great calamity strikes America, in the form of an economic collapse, a currency collapse, an inability to provide entitlements and welfare, energy shortages, food and water shortages, natural disasters, or civil unrest. But we can’t discount the possibility of these things happening.
And if they do, I suggest that PC language and PC thinking will be the first ornament of the state to go. Only rich, modern, societies can afford the luxury of a mindset that does not comport with reality, and that mindset will be swiftly swept aside as the “rich” part of America frays.
Men and women might start to rediscover that they need and complement each other if the welfare state breaks down. Endless hours spent on social media might give way to rebuilding social connections that really matter when the chips are down.
More traditional family structures might suddenly seem less oppressive in the face of great economic uncertainty. Schools and universities might rediscover the value of teaching practical skills, instead of whitewashed history and grievance studies. One’s sexual preferences might not loom as large in the scheme of things, certainly not as a source of rights. The rule of law might become something more than an abstraction to be discarded in order to further social justice and deny privilege.
Play the Long GameI’m afraid it might not be popular to say so, but we have to be prepared for a long and hard campaign. Let’s leave the empty promises of quick fixes to the politicians. Progressives play the long game masterfully. They’ve taken 100 years to ransack our institutions inch by inch. I’m not suggesting incrementalism to reclaim those foregone institutions, which are by all account too far gone — but to create our own.
PC enforcers seek to divide and atomize us, by class, race, sex, and sexuality. So let’s take them up on it. Let’s bypass the institutions controlled by them in favor of our own. Who says we can’t create our own schools, our own churches, our own media, our own literature, and our own civic and social organizations? Starting from scratch certainly is less daunting than fighting PC on its own turf.
ConclusionPC is a virus that puts us — liberty loving people — on our heels. When we allow progressives to frame the debate and control the narrative, we lose power over our lives. If we don’t address what the state and its agents are doing to control us, we might honestly wonder how much longer organizations like the Mises Institute are going to be free to hold events like this one today.
Is it really that unimaginable that you might wake up one day and find sites with anti-state and anti-egalitarian content blocked — sites like mises.org and lewrockwell.com?
Or that social media outlets like Facebook might simply eliminate opinions not deemed acceptable in the new America?
In fact, head Facebook creep Mark Zuckerberg recently was overheard at a UN summit telling Angela Merkel that he would get to work on suppressing Facebook comments by Germans who have the audacity to object to the government’s handling of migrants.
Here’s the Facebook statement:
We are committed to working closely with the German government on this important issue. We think the best solutions to dealing with people who make racist and xenophobic comments can be found when service providers, government, and civil society all work together to address this common challenge.
Chilling, isn’t it? And coming soon to a server near you, unless we all get busy.
We are now living in a post-ZIRP world. On Wednesday, Janet Yellen announced that the Federal Reserve will increase the target Federal Funds rate from 0.00-0.25 percent up to 0.25-0.5 percent. While Wall Street approved of the move, Ryan McMaken notes, “The fact that this is being labeled such a large change underscores just how fragile the current economic ‘recovery’ is.” Indeed, the new Fed target would itself have been unprecedentedly low if it had occurred prior to 2008. Bottom line, the Fed still hasn’t learned its lesson on interest rates.
What does this mean going forward? Well, while Austrians have long been calling for higher interest rates, the Austrian business cycle theory makes clear that any transition to what was once considered the monetary status quo is likely to cause economic pain. As Robert Murphy illustrates in his response to advocates of Market Monetarism:
[A]fter a credit-fueled boom, the precise timing of the crash will probably occur when the central bank “tightens. … Ultimately, the only way to prevent painful busts is to
Mises Weekends this week features a lecture from Dr. Murphy on what makes the Austrian approach to economics stand apart: its focus on human action.
It's this foundation in methodological individualism that has made Austrian economics an indispensable part of a consistent defense of liberty. If you’re interested in building upon your understanding of praxeology and the economic insights of Menger and Mises, this is an episode you won’t want to miss.
And in case you missed any of them, here are this week’s featured Mises Daily articles and some of our most popular articles at Mises Wire:
Why Doctors Are Entrepreneurs by Dr. Michel AccadThe Dreary Utopia of the Socialists by David GordonLudwig von Mises Is Winning by Tho BishopDid "Tight" Fed Policy Cause the Financial Crisis? by Robert MurphyTechnology and Government Shouldn't Mix by Benjamin M. WiegoldNo, There’s No Economic Case for the Minimum Wage by Per BylundAre Entrepreneurs Naturally Talented, or Just Hard Workers? by Matt McCaffreyThe Diabolical Side of ZIRP by Mark ThorntonMises Institute Ranked 9th Most Influential US Think TankMises Brasil Parabéns Pelo Trabalho Bem Feito! by Joseph SalernoTrue Money Supply Growth Rises Slightly to Eight Percent in November by Ryan McMakenLudwig von Mises is the Most Searched Economist in Brazil by Tho BishopThe Fed Still Hasn't Learned Its Lesson on Interest Rates by Troy VincentStudents Forget About Keynes In The Summer by Jonathan NewmanWith Few Gun Laws, New Hampshire Is Safer Than Canada by Ryan McMakenThe Stock Market Reacts to the Fed’s Interest Rate Hike by Randall G. HolcombeFed (Slightly) Raises Target Fed Funds Rate After Seven Years by Ryan McMakenSEC Approves Patrick Byrne’s Plan to Issue Stock Via Blockchain by Tho BishopThe Absurdity of Negative Interest Rates by Paul-Martin FossCato on the Basic Income by David GordonMartin Shkreli To Learn a Hard Lesson? by Ryan McMakenThe Bill of Rights: The Only Good Part of the Constitution by Ryan McMakenThe Fed Can Do Real Damage Without Even Trying by Jonathan NewmanSo Much for "Rules-Based" Policy at the IMF by Paul-Martin Foss
As a young man Alexander Hamilton once wrote, “There is a certain enthusiasm in liberty, that makes human nature rise above itself, in acts of bravery and heroism.” While it is tragic that Hamilton would grow up to advocate all sorts of government policies contrary to liberty — America would be better off had he read Cantillion — there is a power in these words that has always resonated with me.
No man better embodies this heroic nature of liberty than Ludwig von Mises.
My favorite example of Mises’s legendary dedication to his principles is his experience during WWI.
Even though he was already an accomplished scholar, his masterpiece Theory of Money and Credit was published in 1912, the Great War brought Mises to the field of battle. As a commanding officer of an Austrian artillery regiment, Mises and his men were tasked with defending the Northern Front of the Austro-Hungarian Empire from the marching Russians.
Not only were Mises and his men outnumbered, but manning the cannons meant being the prime targets of Russian fire. The result was horrific. As Guido Hülsmann details in Mises: Last Knight of Liberalism, “In the first few weeks and months of the war, almost no day went by that did not see entire [Austrian] batteries (about 100 men each) and even regiments (about 500) being wiped out.”
Mises and his men held the line and the Russians were driven back in December of 1914.
After receiving honors for his actions on the battlefield, First Lieutenant Ludwig von Mises was extended an invitation to join a team of fellow economists on the Viennese war council. Though glad to be away from the canons of war, Mises was horrified by what he found — his nation’s greatest minds, men who knew better, becoming apologists for a bureaucratic government seeking to tighten its grip on the economy.
Writes Hülsmann:
Montesquieu once said that although one had to die for one’s country, one was not obliged to lie for it. This seems to have been Mises’s maxim too. He had already demonstrated his readiness to give his life for his country. Now he showed his will to honor the truth even if it brought him in conflict with powerful opponents. ... Mises argued that, “from a purely economic standpoint,” the case for free trade and against protectionism was unassailable.
The power of the argument ... made it impossible for the war party to ignore Mises. Trouble lay ahead.
The trouble came in the form of orders to return back into combat. The government’s message was clear — Mises needed to go. Not for the last time, his decision to stand firm in his defense of liberty put his very life in danger.
Luckily for us all, Mises survived the war and went on to live a life that fundamentally altered the world. He overcame the Nazis, academic blacklists, and the personal hardships that tends to haunt any man who refuses to sacrifice his principles.
While some like Milton Friedman viewed Mises intransigence as a burden to Mises’s influence, I believe his example is vital to the resurgence of Misesian thought today.
We see this on the streets of Brazil, where earlier this year young Brazilians took to the streets demanding “Less Marx, More Mises”! Thanks to the work of people like Helio Beltrão, Mises is now the most popular economist in the country.
We see this in China, where translations of Mises and fellow Austrians have made it into the hands of students and scholars. Even Murray Rothbard is openly discussed in influential circles.
We see it in the incredible growing international network of young Austrian scholars, complete with university programs dedicated to Austrian insights in topics such as entrepreneurship.
Though it rests far away from the halls of power, and apart from any larger political machine, the Mises Institute stands today the most influential libertarian organization in the world, a testament to the power of Mises’s ideas and a commitment to stay true to principle.
Though there is still much to be done, we should never lose sight of the gains we have made — nor lose hope for the future.
In the words of Lew Rockwell:
Mises never tired of telling his students and readers that trends can change. What makes them change are the choices we make, the values we hold, the ideas we advance, the institutions we support.
Unlike Mises, we do not face obstacles that appear hopelessly high. We owe it to his memory to throw ourselves completely into the intellectual struggle to make liberty not just a hope, but a reality in our times. As we do, let us all adopt as our motto the words Mises returned to again and again in his life. “Do not give in to evil, but proceed ever more boldly against it.”
For as little as $7 a month, you can become a Sustaining Member of the Mises Institute and be a part of this movement. Together, we can follow Mises’s example and change the world.
Jason Brennan, a remarkably prolific libertarian political philosopher, has a good eye for the essence of an argument. He puts this ability to effective use in Why Not Capitalism? In the book he challenges the defense of socialism in Why Not Socialism? by G.A. Cohen, whom Brennan rightly considers “the leading Marxist philosopher — and one of the leading political philosophers, period — of the past 100 years.”
At first, one might think that arguments in political philosophy over the merits of socialism and capitalism have no importance. If by socialism one means collective ownership or control of the means of production in a large-scale economy, there is nothing to debate. Mises and Hayek showed with the socialist calculation argument that socialist planning “cannot work, even if people were motivated to make it work, because planners do not have a workable substitute for prices.” If socialism cannot work, what is the point of comparing its ethical merits with its capitalist rival? Unless we desire economic chaos, socialism must be rejected and the free market affirmed.
Mises viewed matters in exactly this way. Before his calculation argument, the most effective challenge to socialism appealed to incentives. If people were not allowed to profit from their productive endeavors but were instead subjected to egalitarian imperatives, they would lack motivation to work. Socialism was incompatible with human nature. Mises thought that socialists could answer that the limits of current human nature might be overcome. They could not respond in this way, he thought, to the calculation argument. Once we grasp that socialism is impossible, there is no further room for philosophical discussion.
Cohen recognized the force of the economic argument that socialism cannot work, though he implausibly hoped that future developments in technology might alter the situation. He did not agree, though, that this renders otiose comparison of the ethical merits of socialism and capitalism. We can ask, “If socialism is unrealizable, is this a matter for regret? Is socialism ethically better than capitalism?” Cohen says that it is, and this is what in Why Not Socialism? he endeavors to show. Cohen believes that “even if socialism were infeasible, it would remain intrinsically desirable and the best way for us to live together.”
Cohen carried out his ambitious project by telling a story. It portrays people on a camping trip, who view their excursion as a common enterprise. They share in the work of the trip according to their abilities and do not demand extra benefits because of greater talent. Equality and community are their governing values. “The principle of socialist equality of opportunity eliminates all inequalities resulting from undeserved advantages or disadvantages … the campers also abide by a socialist principle of community. The campers care about one another, and care that they care about one another.”
Not so under capitalism. Here self-interest rules: people produce for the market in order to earn a profit, and the more profit the better. The drive to accumulate, not equality and community, governs society. Cohen would apply to capitalism Wordsworth’s familiar lines: “The world is too much with us, late and soon; Getting and spending, we lay waste our powers. … We have given our hearts away, a sordid boon!”
Brennan accepts the ground on which Cohen has laid out his challenge. Ideal theory, i.e., asking what is best without regard to feasibility, is indeed relevant, and Cohen’s question is a good one that does not go away when one accepts that socialism cannot be put into practice.
Precisely in the domain of ideal theory, though, Cohen has fallen into error. He compares socialism as an ideal with actually existing capitalism. Community and equality are more valuable than greed; hence the superiority of socialism to capitalism. This will not do, counters Brennan. Ideal socialism must be compared with ideal capitalism, not actually existing capitalism. “The problem is that Cohen is not comparing like to like. … It’s not that interesting if an idealized version of one type of regime ends up being better than a non-idealized, realistic version of another type of regime.”
To bring home the force of his objection, Brennan ingeniously parodies Cohen’s argument. He constructs a capitalist utopia, which he calls the Mickey Mouse Clubhouse Village. The residents of the village pursue creative projects, which often involve the use of private productive property, as they see fit. If, as a result of these projects, some are wealthier than others, this arouses no envy. The villagers are not selfish, but devoted to one another’s welfare. If someone is in need, his neighbors will rush to his assistance. He contrasts his utopia with actually existing socialism, characterized by mass murder and brutal dictatorship. Is not capitalism far better than socialism?
This, it needs to be said, is not Brennan’s actual argument for capitalism; it is, as already mentioned, a parody. It brings out very well the flaw in Cohen’s argument; to compare an ideal system with a non-ideal system is fallacious. Ideal must be compared with ideal, and real system with its counterpart real system.
What is the result of such comparison? Brennan holds that capitalism wins on both counts: its ideal is better than the ideal of socialism; and, to descend to the real world, the issue does not admit of doubt at all.
I think that Brennan is right: his village is indeed better than Cohen’s camping trip. But why should we think so? It may be that he wants us to take it as intuitively obvious that his ideal is better. One has only to consider the two ideals carefully to see which one gains the victory. If this is his line of thought, I should certainly assent to its conclusion; though Cohen would no doubt demur.
I suspect, though, that Brennan wishes to go beyond an appeal to moral intuitions; and, if I have correctly understood what he has in mind, I am not sure he is right. He may be arguing in this way: “My utopia includes the good features of Cohen’s and other goods as well. Just as in Cohen’s camping trip, the residents of my village care about one another and value community. But to altruism, creativity is added: the residents are devoted to their individual projects and pursue them without let or hindrance. On the principle that more goods are better than fewer, so long as the goods do not interfere with each other, is not my utopia better?”
Here Cohen would likely respond that Brennan’s utopia does not include all the values he deems of supreme importance. True enough, the residents of the village are devoted to each other; but they do not insist on equality. To the contrary, they willingly accept inequality, if such be the outcome of their various creative projects. For Cohen, though, the value of creative work is subordinate to the goods of equality and community, as he makes clear in his discussion of choice of jobs in his magnum opus, Rescuing Justice and Equality. If you are really committed to equality, he thinks, you may not always be able to engage in the work you like best. Again, I much prefer Brennan’s values to Cohen’s; but the argument from inclusion does not show that Brennan is right.
I suspect, though, that Brennan would give more weight to another argument. He has been much influenced by the third part of Robert Nozick’s great work Anarchy, State, and Utopia; and like Nozick, he stresses that the free market utopia is a “‘framework’ in which many different utopias could co-exist in peace and mutual respect.” Within this framework, groups of people are free to organize as they wish, so long as they commit no rights violations. If so, then a different version of the argument from inclusion shows the superiority of Brennan’s utopia. In it, those who agree with Cohen on the place of solidarity and equality in the hierarchy of values would be free to form a community as they deem best. Those who do not accept Cohen’s values would form communities of their own, in multifarious ways. Once more, then, does not the capitalist utopia include all the goods of Cohen’s, as well as others?
But again Cohen would not be satisfied. He does not think people should be forced to accept his egalitarian values; but, if they do not, he thinks that they will have chosen wrongly. Faced with the meta-utopia of Nozick and Brennan, he would say that all those not resident in an egalitarian community should forthwith join one.
Those of us who do not share Cohen’s intuitions will of course disagree; and I think that we can go further. Is Cohen’s ideal egalitarian system better than capitalism in the actual world? The latter should be characterized not as totally driven by the desire to accumulate, as Cohen’s Marxist myth has it, but rather by a mix of motives. The question will not here be pursued, but I am convinced the answer is that it is not. Cohen’s utopia strikes me as a most unpleasant place in which to live, with people constantly looking over their shoulders, lest they surpass others in wealth; but readers must judge for themselves.
Not content with one argument against Cohen, Brennan offers another; here he follows the political theorist Sharon Krause. Why should we think that the ideal system Cohen depicts has anything to do with socialism? In socialism, the means of production are centrally owned; but this tells us nothing about the values that prevail under this arrangement. In particular, socialism must not be equated with “moral virtue or community spirit.” (Brennan’s utopia escapes a parallel observation, because in it, individuals are explicitly allowed to own productive resources.) If so, Cohen has not succeeded in showing that, from the viewpoint of ideal theory, socialism is better than capitalism. He has not compared capitalism with an alternative economic system, whether ideal or actual. If this is right, Cohen has failed to show the moral superiority of socialism to its capitalist rival; but neither has Brennan shown, by his comparison of the Mickey Mouse Clubhouse Village to Cohen’s camping trip, that ideal capitalism is better than ideal socialism. Brennan has described an ideal capitalist system, but it has not been compared to a socialist alternative. On this construal, Brennan’s portrayal of the village is best taken as a challenge to practitioners of socialist ideal theory to construct an ideal that is both better than the village and recognizably socialist.
Finally, it is worth pointing out that Cohen has wrongly converted an advantage of capitalism into its prime defect. In a famous passage from The Wealth of Nations, quoted by Brennan, Adam Smith says that “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” Smith’s point was that the free market does not depend on benevolent behavior. Altruism is a scarce resource, and the market can function well even if it is in short supply. In trying to make a profit, capitalists produce what people want. Cohen unfathomably is repelled by this, wrongly taking it to be an endorsement of greed.
Why Not Capitalism? is an outstanding contribution to political philosophy. It will delight libertarians and will instruct socialists willing to read it with an open mind, though I fear that their number will be few.
The world waits to see if next week is finally the week that the groundhogs at the Fed announce their long-anticipated interest rate hike. Can the economy survive whatever small bump the Fed deals out? Perhaps, but any temporary stability doesn’t change the inherent instability of our current monetary regime. Even with today’s technology, central planners can’t predict the future or know the “optimal quantity of money.” Only by returning to true sound money, and a proper appreciation for the market, will true, sustainable prosperity emerge.
In honor of the twenty-fourth anniversary of the collapse of the Soviet Union, we have a special guest on the latest episode of Mises Weekends, Dr. Yuri Maltsev. A Mises Senior Fellow and a Soviet economist during the Gorbachev era, Maltsev shares his thoughts on the West’s enduring love affair with socialism. He and Jeff also discuss its political consequences in regard to Obama, Trump, and the Bernie Sanders phenomenon. This is an interview you won’t want to miss.
And in case you missed any of them, here are this week’s featured Mises Daily articles and some of our most popular articles at Mises Wire:
Piketty Is Wrong: Markets Don’t Concentrate Wealth by Louis RouanetWhy Gold-Backed Money Doesn’t Bring Booms and Busts by Frank ShostakEnd the Sugar Tax Now by Gary GallesGovernment Debt Is Not Like Private Debt by Simon WilsonNo, "Big Data" Can’t Predict the Future by Per Bylund"Capitalism" Destroyed Itself? by Matt McCaffreyBlowing Up the Death Star Didn’t Destroy Economy, Building It Did by Tho BishopMan, Economy, and Beer: Rothbard-Themed Gastropub Opens in ConnecticutArticle Submission Guidelines for Mises DailyIndia’s Failing Gold Monetization Scheme: Seizure Imminent? by Paul-Martin FossViva Venezuela ... But Not Yet by Carmen Elena DorobățGun Control Fails: What Happened in England, Ireland, and Canada by Ryan McMakenTranscript: Ask David Gordon AnythingTop Ten Most-Read mises.org Articles in NovemberGerman translation of "PC is Control, Not Etiquette"Thanks, Janet Yellen: Homeownership in US Falls to 25-Year Low by Ryan McMakenWhy the No-Fly-List Gun Ban Is a Terrible Idea by Tho BishopBubble Watch: No-Down-Payment Jumbo Mortgage Makes a Comeback by Paul-Martin Foss
What does one need to know about politics? In some ways, Albert Jay Nock has summed it all up in this astonishing book, the influence of which has grown every year since its publication.
Read by Jock Coats.
Download the complete audiobook (7 MP3 files) here. This audiobook is also available on Apple Podcasts, Google Podcasts, Soundcloud, and via RSS.
Rothbard proposes a once-and-for-all escape from the two major political parties, the ideologies they embrace, and their central plans for using state power against people. Libertarianism is Rothbard's radical alternative that says state power is unworkable and immoral and ought to be curbed and finally abolished. Read by Jeff Riggenbach.
Download the complete audiobook (17 MP3 files) here. This audiobook is also available on Soundcloud, Apple Podcasts, Google Podcasts, and via RSS.
The holiday weekend gave way to a tumultuous week full of significant and somber headlines. Here are three stories we've been following closely:
On Monday, the IMF announced that they will include the Chinese yuan in the SDR's basket of currencies. When James Rickards appeared on Mises Weekends in September, he discussed the interest of financial elites in making the SDR the new reserve currency of the world. This week, he reminded us, “The decision to include the yuan in the SDR is a political decision, not an economic one.”
Meanwhile in Brazil, facing a collapsing economy and months of street protests, impeachment charges were announced against President Dilma Rousseff. While the serious challenges facing Brazil go far beyond a single politician, the work of Helio Beltrão and Mises Institute Brazil offers hope for a freer future.
Lastly, Wednesday's tragic shooting in San Bernardino is already being exploited by the Obama administration and others on the left for a renewed push for gun control. Of course it is government, not gun ownership, that makes Americans less safe. As Jeff Deist noted following the attacks in Paris, "when state intelligence and security agencies fail spectacularly, their budgets and personnel increase. Nobody gets fired, nobody apologizes."
Our Mises Weekends guest is Łukasz Dominiak, a professor at Nicolaus Copernicus University and a former Mises Fellow, he joins Jeff to discuss the recent elections in Poland. The media characterized those elections as a triumph for the right-wing, and dismissed large street protests as xenophobic nationalism. But the truth as Łukasz explains is quite different: it's a strange mix of both left and right politics in a country that is not afraid to embrace its Catholic roots and its cultural identity.
And in case you missed any of them, here are this week's featured Mises Daily articles and some of our most popular articles at Mises Wire:
The Problem With "Rules-Based" Monetary Policy by Tommy BehnkeCan the US Dollar Face Down the Chinese Yuan? by James RickardsHow Money Disappears in a Fractional-Reserve Money System by Frank ShostakWe Must Be "Opportunists" In Dismantling the State by Joseph SalernoWill Brazil Impeach Rousseff? by Bruno Gonçalves RosiBorders Closing Across Europe: Norway Joins In by Ryan McMakenHunger and War in WWI Germany: Remembering the Slaughter of Pigs by T. Hunt TooleyTranscript: Jim Rickards on Currency WarsBrazil: Big Government, Small Wages by Ryan McMakenA Behind the Scenes Look at the November Jobs Report by Jonathan NewmanRothbard on Libertarian Populism by Jeff DeistHow Governments Can Manipulate Murder Rates by Excluding "Terrorist" Killings by Ryan McMakenIncentives, Ideology, and Climate Change by Peter G. KleinExtreme Poverty Worldwide Has Plummeted as Market Economics Has Spread by Ryan McMakenIn the 19th Century, Non-Citizens in the US Could Vote in 22 States and Territories by Ryan McMakenRobert Wenzel on the Cato Monetary Conference by David GordonThe November-December Issue of 'The Austrian' Is Now Online
With Google’s dominance in the online search engine market we entered the Age of Free. Indeed, services offered online are nowadays expected to be offered at no cost. Which, of course, does not mean that there is no cost to it, only that the consumer doesn’t pay it. Early attempts financed the services with ads, but we soon saw a move toward making the consumer the product. Today, free and unfree services alike compete for “users” and then make money off the data they collect.
Data has always been used, but what’s new for our time is the very low (or even zero) marginal cost for collecting and analyzing huge amounts of data. The concept of “Big Data” is taking over and is predicted to be “the future” of business.
There’s a problem here, and it is the over-reliance on the Law of Large Numbers in social forecasting. Statistical probabilities for events may mathematically converge to the mean, but is it applicable in the real world? The answer is most definitely yes in the natural sciences. Repeated controlled experiments will weed out erroneous explanations or causes to phenomena, at least assuming we’re good enough at separating and controlling those causes.
What about the social sciences? In this age of scientism, as Hayek called it, we’re told “Big Data” will completely transform production, logistics, and sales. The reason for this is that vendors can better target customers and even foresee what they might want next. Amazon.com does this on their web site in crude form, where they make suggestions based on your purchase history and what others with similar purchase histories have searched for. Sometimes it works, and sometimes it doesn’t.
There is some regularity to our interests and behavior. All of us are, after all, human beings — and we’re formed in certain cultures. So one American with interests x, y, and z may have other interests similar to another American who also has an interest in x, y, and z.
Human Behavior Is UnpredictableBut similarity is not the same thing as prediction. Amazon.com’s suggestions or the highly annoying ads following you around web sites are useful methods for sellers because they can somewhat accurately identify what not to offer. Exclusion of very low-probability interests increases the probability for suggesting something that the person behind the eyeballs focusing on the computer screen may be interested in.
To use as prediction, however, exclusion of almost-zero probability events is far from sufficient. Indeed, prediction requires that we are able to accurately exclude all but one or a couple highly probable outcomes. And we have to be able to rely on that these predictions turn out to be true. Otherwise we’re just playing games, and so we’re making guesses. Sure, they’re educated guesses (because we’ve excluded the impossible and almost-impossible), but they’re still games and guesses.
Where Big Data FailsSpeaking of guesses, Microsoft’s Bing search engine, which powers the Windows digital assistant Cortana among other things, has produced a prediction engine with the purpose of predicting sports and other results. They rely on very advanced algorithms and huge amounts of collected data.
Amazingly, they did very well initially and predicted the outcomes of the World Cup perfectly. So maybe we can use Big Data to get a glimpse of the future?
No, not so. The Bing teams are learning a lesson only Austrians and, more specifically, Misesian praxeologists, seem to be alone in grasping: that there are no constants in human action, and therefore that predictions of social phenomena are impossible. Pattern predictions, as Hayek called them, may not be impossible, but predictions of exact magnitudes are. For instance, we can rely on economic law (such as “demand curves slope downward”) to estimate an outcome such as “the price will be lower than it otherwise would have been,” but we can’t say exactly what that price will be.
When it comes to sports, reality shows and other competitions between individuals or teams, the story is exactly the same. The team with a better track record doesn’t always win. Why? They have objectively performed better than the other team, perhaps exclusively so, but this doesn’t say anything about the future. We’re not here referring to the philosophical doubt as in “will the sun shine tomorrow?” (maybe something changes completely the sun’s ability to shine during the night).
The Social Sciences Are DifferentIn the social sciences we’re dealing with complex phenomena. Action and, especially, its outcome is the result of a complex system of social interaction, psychology, and much more. Are the players in both teams as motivated and focused as they were before? Did anything in their personal lives affect their mindsets or psyches? How do the players within their teams and players in other teams react on each other before and during the game? A team with a poor track record can upset a team with an objectively better track record; this happens all the time. Sometimes for the sole reason that the better team underestimates the worse team, or because the underdog feels no pressure to perform and therefore plays less defensively.
Bing’s prediction engine struggles with this, just as we would predict. As Windows Central reported recently, the prediction engine had its “worst week yet” picking only four of fourteen winners in the NFL. Overall, its track record was approximately two-thirds right and one-third wrong (95–53). It’s definitely better than tossing a coin, but pretty far from actually predicting the results.
In other words, if you’re placing bets you may want to use the Bing prediction engine. That is, unless you have the type of tacit, implicit understanding of what’s going on that the engine is missing. Maybe you can beat it, or maybe not. In either case, you cannot count on coming out a victor each and every time.
The reason for this is that the outcome simply cannot be predicted perfectly — or even close to it. Even the players themselves cannot predict who’ll win a game, but they may have inside information about whether their own team seems motivated and focused. It is not a perfect method, however, and it certainly cannot be scientific.
Even with Big Data there’s no predicting of social events — there’s only guessing. Yes, guessing with access to huge amounts of data is easier, at least if the data is reliable and relevant. But a good guess is not the same thing as a prediction; it is still a guess, and it can be wrong. Winning every time requires luck.
In thinking about strategies for abolishing or radically diminishing government, many libertarians are led astray by using a false dichotomy. The State, they say, can either be smashed in one swift, fell blow or it can be rolled back gradually according to a predetermined plan. These are, they say, the only two alternatives.
There are a number of problems with framing the issue in these terms. First and foremost, demolitionism is not a strategy but an adolescent fantasy. It is the product of the idle musings of zealous young converts to libertarianism. The means and goals of demolitionism cannot even be coherently stated. Is it supposed to be the aim of demolitionists to cause the State to vanish literally overnight or in the time it takes for politicians, bureaucrats, and military leaders to pack up and clear out of their offices or be forcibly marched out and jailed? And what actions are the demolitionists supposed to undertake to induce the proprietors of the State apparatus to simultaneously abandon it? Are demolitionists counting on a brilliant propaganda campaign to cause a spontaneous conversion to libertarianism among legislators, judges, and members of the executive branch, etc.? Or will demolitionists incite a populist tax revolt and possibly a mutiny among the lower ranks of the armed forces that puts an abrupt end to the State? The entire notion of abruptly overthrowing a State — especially one as powerful, entrenched, and beloved (or at least tolerated) by the vast majority of its subject-citizens as the United States — is so fantastical that it is difficult to believe that any libertarian would defend the position.
In fact the demolitionist position is a straw man. It is set up to make the gradualist strategy appear to be the only reasonable one. It is difficult to identify one notable modern libertarian thinker who has ever endorsed demolitionism as a strategy.
What Rothbard Really SaidNow someone may respond that Murray Rothbard, in his article, “Do You Hate the State?” posited a distinction between what he called “gradualists” and “abolitionists.” But here he was not distinguishing among strategies but intellectual and emotional attitudes toward the State. He thus described the “abolitionist,” whether anarchist or minarchist, as “a ‘button pusher’ who would blister his thumb pushing a button that would abolish the State immediately, if such a button existed.”
Rothbard went on to point out, however, “the abolitionist also knows that alas, such a button does not exist, and that he will take a bit of the loaf if necessary — while always preferring the whole loaf if he can achieve it.” Note Rothbard’s emphasis on the word “not.” So although Rothbard was an abolitionist who passionately detested the State as “a plundering and bestial enemy” of mankind, he emphatically rejected demolitionism as a realistic strategy. Attitudinally, the opposite of the abolitionist button pusher, for Rothbard, is the Chicago-school efficiency adviser who views the State as merely a less efficient arrangement than the free market economy for supplying all or — for the minarchist — most “public goods.”
The Friedmanite (Milton or David) efficiency enthusiast harbors no great hatred for the State, which is, after all, providing society with necessary goods and services, albeit at higher costs than competitive markets would.
We Must be “Opportunists”If not the absurd and fruitless program of demolitionism, then, what is the realistic alternative to the gradualist strategy? Before we can answer this question, we must take a closer look at gradualism.
According to one recent gradualist article, gradualism has two essential features. First, it seeks to “roll back” the state “step by step” rather than “leaping right from the status quo to the minimal state or a stateless society.” According to this way of thinking, this strategic posture enables libertarians to build coalitions with non-libertarian groups that share a common goal of curtailing or eliminating government interventions in a particular area, e.g., the drug war or the minimum wage, but may not accept the overarching libertarian goal of abolishing the State or radically minimizing its power and scope.
But almost no libertarian — least of all the abolitionist — would deny that collaborating with groups with otherwise differing political agendas on issues of common concern is strategically sound when it is likely to reduce State intervention.
It is the second feature of the gradualist position that presents a serious problem and renders it useless and even counterproductive. This is the idea that rolling back the State must be guided by an overriding moral principle that government programs ought to be eliminated in a specific sequence designed to protect the most impoverished among those exploited by the State from an abrupt loss of the political subsidies and privileges they may receive.
At this point, the problem with the gradualist strategy becomes immediately evident. Gradualists presuppose that they can plan the order in which interventions can be eliminated a priori without reference to socio-political reality. But this is a utopian program, in the bad sense of wishful thinking. In the real world, we can only seize opportunities to dismantle the State as they are presented to us in the inexorably unfolding events of historical reality. What we may call “opportunism” is the strategy of jumping on and exploiting every opportunity to hack away at the State, regardless of the nature of the opportunity or the existing structure of other interventions. The opportunist therefore seeks neither to demolish the State overnight nor to follow a fanciful, a priori plan for its “humane” rollback. Rather he aims to dismantle the State as rapidly as possible by standing ready to take full advantage of opportunities to cut back the State as they ripen amid the ceaseless and uncertain flux of social, economic, and political circumstances.
The defining feature of gradualism is, then, not the willingness to compromise on tactics, tone down extreme rhetoric, and cooperate with non-libertarian groups whenever it is likely to result in the elimination of government programs. In fact, these measures are the very essence of opportunism. No, the essential element of gradualism is the ahistorical ethical imperative that dictates a definite order in which State interventions must be done away with. The difference between opportunism and gradualism can be illustrated with the following example.
Let us suppose a critical mass of middle-class taxpayers becomes deeply resentful of the entire witch’s brew of the State’s “safety net” programs for the poor and it suddenly becomes politically feasible to eliminate them root and branch. Assuming that the minimum wage and occupational licensure laws remain firmly in place, the gradualist, if he were consistent, would have to forgo this chance to roll back the State.
In sharp contrast, the opportunist, of course, would approve and eagerly promote the elimination of these programs, happily modulating his anti-statist rhetoric and joining with non-libertarian groups to form a united front in favor of their abolition
It should now be clear that the strategy of opportunism goes hand in hand with the attitude of abolitionism. The opportunist would move as swiftly as possible toward his goal of abolishing his hated enemy the State, constrained only by scarcity of means and the pace of development of concrete social and political conditions.
Corporate Welfare Is a Realistic TargetBefore concluding, I want to emphasize that I do not see a realistic opportunity of getting rid of social welfare programs in the foreseeable future. There is, however, a clearly rising tide of resentment by the productive middle class against corporate welfare, especially in the form of bailouts and privileging of huge financial institutions by the Federal Reserve.
Many members of Congress are also deeply skeptical of the recent performance of the Fed and its cozy relations with the banking system. They no longer meekly accept the Fed’s mantra that it requires “independence from politics” — that is, freedom from Congressional oversight — in order to pursue an effective monetary policy. In fact in July the Senate passed a highway bill that included a provision to cut the annual “dividend” that all member banks have received from the Fed since its inception. The bill passed despite the strenuous objections of the Fed and the bank lobby. Earlier this month the House overwhelmingly passed an alternate highway bill that would permanently liquidate the Fed’s “surplus fund,” which currently contains $29 billion.
This presents libertarian abolitionists with a golden opportunity to align with Tea Party activists and politicians and left-wing populists and community groups to strike a blow against crony capitalism by promoting a proposal to transform the Fed from a clique of wayward and unaccountable bureaucrats into a branch of the Treasury subject to Congressional appropriations and oversight.
International trade grabbed headlines this week with Monday’s announcement that twelve governments have reached agreement on the Trans-Pacific Partnership. While it should be of no surprise to see the news celebrated in the editorial pages of the Wall Street Journal or the Council of Foreign Relations blog, it is unfortunate even libertarian organizations are praising the agreement.
Of course, this is not the first time alleged defenders of lassiez-faire have endorsed intergovernmental agreements that enhance the power of the state. Ferghane Azihari and Louis Rouanet put TPP in historical context in Wednesday’s Mises Daily:
Murray Rothbard opposed NAFTA and showed that what the Orwellians were calling a “free trade” agreement was in reality a means to cartelize and increase government control over the economy. Several clues lead us to the conclusion that protectionist policies often hide behind free trade agreements, for as Rothbard said, “genuine free trade doesn’t require a treaty.”
Dr. Ed Stringham takes on the notion that government is necessary at all for markets and trade to thrive in his new book Private Governance. He joined Jeff Deist to discuss his work on the latest episode of Mises Weekends. Listen as Jeff and Ed destroy the argument that markets rely on government to protect property rights, mediate contracts, and numerous other excuses interventionists make in defense of the state.
In case you missed any of them, here are articles from this past week’s Mises Daily and Mises Wire:
The TPP and the Trade Rhetoric by Carmen Elena DorobățTPP: The Latest Assault on Free Trade by Ryan McMakenRothbard: Gun Regulation Explained by Murray RothbardIn Policy Debates, Can Economics Trump Ethics? by Matt McCaffreyThe Future Is Decentralized by Patrick ByrneNo More "Free Trade" Treaties: It's Time for Genuine Free Trade by Ferghane Azihari and Louis RouanetThe Menace of Egalitarianism by Lew RockwellFashionable Prohibition for Modern Lawmakers by Ryan McMakenIn Brazil, Free-Market Ideas Rise as the Economy Falls by Antony P. MuellerMissed last Saturday’s Mises Circle? Watch Jeff Deist, Tom DiLorenzo, Tom Woods and Lew Rockwell tackle the threat of political correctness.
The costs of centralizing information are higher than people understand. Until they have worked in actual organizations that have missions like fighting a war or making a profit, people tend to underestimate just how expensive it can be to centralize information.
If our mental picture of the world is like the pointy-haired manager in the Dilbert cartoons, we’ll tend to favor institutions where knowledge comes from the knowledge frontier, and is then moved to the central office where the managers sit and cogitate. The managers then push stupid orders back to the frontier.
And that pretty much describes the way collectivists want to organize the world. They don’t want there to be peer-to-peer consent because they think they can save a bunch of time and cost if everything can be centralized.
Hayek understood this well, especially in his 1945 article “The Use of Knowledge in Society.” This article influenced Thomas Sowell’s work in his books A Conflict of Visions and Knowledge and Decisions. And all of these works influenced me.
Thanks to the works of Hayek and Sowell, I’ve come to appreciate that whether we’re talking about business or social matters, life is all about avoiding the costs of centralizing information to some higher power that then spits orders out.
How To Build Enduring Organizations that Use Decentralized InformationI know the last thing I want to be is the Dilbert manager who sits in the corner and thinks he has all the answers. I know the smart people are on the front lines; the smart people with the ideas; the smart people who understand the marketplace and customer. So my job is building institutions that let that distributed intelligence express itself. So, in my businesses, I have built various mechanisms that let innovation come from the front lines, from customer agents, from people in marketing.
I want an institution that can let the knowledge of 2,000 colleagues form the new ideas, and their colleagues can work together to decide how to use the knowledge.
I want a system to crowdsource innovation. The wisdom of crowds is smarter, and more consistently intelligent, than any single person.
As owner I must sometimes say “I think you got that wrong, I have to veto you.” And by its nature, sometimes, employees, for legal reasons, can’t know everything about the company. But for the most part, I can let the company run, and by giving the employees what they need, they just get smarter and smarter, and do more and more.
There’s a field that evolved in the last seven years called Enterprise 2.0. The idea is to use online technology to keep organizations flat and to avoid hierarchy — and people collaborate through technology. A very simple example of this model is Wikipedia, and closely related to this is a field called “idea management.” Think of it as a super-sophisticated suggestion box in which people are making suggestions and other people are seeing their suggestions. People then vote others’ suggestions up and down. For example, suppose 200 ideas get proposed over a two-month period. Using idea management, we then have the crowd decide the best ten. And then we have the crowd rank them and decide which are best and which we should put capital into.
Here’s another example: at the end of last year, I knew I wanted to give my employees a $4 million raise. They had many suggestions including changes to the 401k, an addition of day care services, or just a simple pay raise. I gave their ideas to the accounting department to figure out what each one would cost. We put a price tag on each one, and I gave the list back to the 2,000 employees. They ranked each, and we ended up with a ranking, and we went down from the top, until we got to $4 million.
So more and more decisions are being made in our company, not by me, but by our people in general. The philosophy underlying this all comes from Hayek and Mises — the true knowledge among our colleagues is all out there.
I’ve got the staff that can figure out what each option will cost. But the truth is I don’t know which one is going to work, but I have found that when I turn that over to the group, the result is more intelligent than the executive group can do or what I can do by myself.
Why We Have Centralized Government InstitutionsNaturally, this has applications far beyond some private companies. When we look at government in Washington, or what’s happening on Wall Street, we see so much centralization. But really, our goals should be to eliminate and overcome these central institutions.
And in recent years we have gained powerful new tools to do this, and most significant among those is the block chain, which is the software behind Bitcoin. But it’s so much bigger than just Bitcoin.
I’m not sure that even in our pro-freedom movement, that people are understanding the significance of the block chain. I discussed the topic at length in Wired, but even more important was a recent article in Politico in which my work with the block chain was featured, as was the central problem of consensual exchange in the marketplace.
This is where the block chain is most useful and revolutionary. It helps us to overcome the problem of mutual trust in exchange, which will in turn make many of our modern central institutions unnecessary.
So what is this problem of trust in mutual exchange? Well, if I have a camel and you’re going to give me a gold coin in exchange for it, I have to trust that you did not debase this coin.
Certain groups will then attempt to develop a business model that can address this problem. For example, an organization (i.e., a monarch) that has a monopoly on violence in some area can monetize this monopoly by saying “I will mint gold coins and put my face on them, and if anyone tries to debase those coins, I’ll kill him.”
That’s just a business model, and we happen to call that business model “government.”
So the question is: can we just have consensual exchange, or do we have to pick some central institution that we can trust, so we don’t have to trust each other?
There are, of course, many other examples of the usefulness of central institutions in exchange. If we want to buy and sell land, and we don’t trust each other, we can use a central institution called a land title office, which will ensure that the sellers actually own the land they’re selling. Governments all across the world are involved in this every day. And as Hernando de Soto discussed in his book The Mystery of Capital, it is difficult to have capital formation when you don’t know for sure who owns what.
So, throughout human history, we have relied on these central institutions to help us overcome this problem of trust in exchange.
But, as we know, there are problems that arise from these systems, as well.
Decentralizing Wall StreetNot all of these central institutions are what we call government. Yes, many of these institutions are run by guys in two-piece suits in Washington. And some are run by guys in black robes. Some are done by people with badges and guns. But many of them are done by guys in three-piece suits on Wall Street.
Wall Street, however, is not immune to fraud and abuse, and this problem is often made worse by centralization. But most people don’t know how these central institutions work.
When you watch a movie, for example, you know there are things going on behind the scenes, and you probably assume the same is true for Wall Street. But on Wall Street, that behind-the-scenes stuff works a lot differently than you think it does.
Unbeknownst to many, Wall Street now relies on central institutions that were created in the 1970s all allegedly with the purpose of accomplishing what’s called “settlement” which is the process through which securities actually change hands in exchange for payment.
These central institutions were created to replace the old “stock-jobbers” who carried around sacks of stock certificates in the old days, but who couldn’t keep up with the tripling of trading volume that occurred during the 1960s.
So we now have these central institutions that handle the problem of settlement by controlling the flow of information and the stocks themselves. But new problems have arisen as a result. As of 2008, for example, it was quite possible that Merrill Lynch was sending you a statement at the end of the month saying you own 100 shares of IBM, and other people saying the same thing. But back at Merrill Lynch, they only had 100 shares. They were telling five different people they had 100 shares.
On most days that won’t make a difference. But deep down that’s a game that looks a lot like fractional reserve banking.
And as a result, the system was being looted, and just like if someone practiced fractional reserve banking and wasn’t telling anyone, someone could loot that vault and take advantage of investors for a long time before anyone noticed.
And just in general, this is what happens when you have centralized institutions.
Getting Rid of CentralizationThe key to overcoming the problems in these central institutions is the block chain. Because, with the block chain, for the first time, we no longer need these central institutions for settlement, or for guaranteeing the value of coins, or for land titling. All of these functions can be replaced by a transparent public ledger that is safe from tampering, and which can make value and ownership clear and open for everyone. This is information that is decentralized, and is not controlled by any central organization. We don’t need central institutions to control or protect this information anymore. Using the block chain, we can disrupt all these systems — and much more, too — and the institutions behind them. In turn, this spreads decision-making and the use of knowledge to a much larger number of people and institutions. The advantages of decentralization that are already being employed in private companies can then be felt society-wide.
In other words, with the block chain, we liberals — those of us who have been fighting authoritarianism, whether it’s socialism or fascism or “social justice-ism,” for 500 years — just got “the bomb” in this fight. It’s something new.
And this is why the block chain and I got so much attention in response to that recent Politico article. I was told that the article was being talked about all over Washington. And they were talking about it because these institutions that are threatened by the block chain have finally figured out that they’re in trouble.
The CEO of JPMorgan, Jamie Dimon, for example, wrote a letter to shareholders in April that basically freaked out over the block chain. He told shareholders that “Silicon Valley is coming to eat Wall Street’s lunch.” Since he did that, everybody on Wall Street in the last three months — it seems every day, there is a new announcement coming from another corporation — whether UBS, Credit Suisse, Morgan Stanley, saying “we have to study this and get involved.”
But it’s too late for them. A year and a half ago, we started on this, and we’ve been very aggressive about developing new systems that can challenge these old central institutions.
I’m not doing this because I want to create a new monopoly. On the contrary, I want to create a bomb to blow up these central institutions.
Whether it’s a single company, or a stock exchange, or an entire society, we know — thanks to Hayek — that information is best used when it’s not centralized and when it’s not being monopolized by some central institution. We know that flat and non-hierarchical systems use information best. I’ve tried to do that with my own company because it works better that way. And society at large will work better as well, if we can get rid of these old institutions and hierarchies. New innovations like the block chain can make this possible.
We knew when the internet was being created, that it was going to cause profound changes. But this new invention and the crypto revolution is going to be more significant than the internet itself.
THE AUSTRIAN: How did you first become familiar with the Mises Institute?
Back in 2009, in my second year of undergraduate studies, I took an elective course in comparative economic policies. It happened to be taught by Vlad Topan, the president of the Ludwig von Mises Institute Romania, and a senior lecturer at my university. The syllabus contained readings from Mises and Rothbard, such as Economic Policy: Thoughts for Today and Tomorrow, and What Has Government Done to Our Money?, and a long list of links to the Mises Institute website. Until that day, I had seriously doubted my choice of major, but this fortunate encounter changed everything. I began to read the website regularly, and listen to the lectures, and economics finally started to make sense. Later that year, Vlad gave me my first copy of Human Action. That’s how it all started.
MI: Why did you decide to pursue an academic career?
CED: A career in education was on the radar from the beginning of my undergraduate courses. I had been influenced by my father, who had tried to leave Romania as a young man and study philosophy abroad, but was not able to because of the communist regime. And after I read Mises and Rothbard, who have repeatedly stressed the importance of ideas and economic education, I really wanted to make my own contribution to this goal, just like Vlad had done for me with that class. Now I believe I have made the right decision. I greatly enjoy teaching, and interacting with students is perhaps the most exciting part of the job. But I have also been fortunate to meet outstanding professors who have shown me how rewarding research can be.
MI: What convinced you to apply to become a Mises Fellow?
CED: The fellowship was a tremendous opportunity to work for a few months at the Mises Institute, and to read economic literature that was otherwise unavailable. Most importantly, it was a great chance to do research under the supervision of professors Joseph Salerno and Mark Thornton, as well as meet the rest of the Mises Institute’s faculty during the Rothbard Graduate Seminar and Mises University. So I did not have to think twice before applying, I knew that it was too good an opportunity to miss. Even so, when I arrived here for the first time in 2011, I was overwhelmed by the warmth and care of the staff, and by how quickly we all became good friends. Each year I have been a Fellow has been one of the most important and formative experiences, both professionally and socially.
MI: What was your favorite part of being a Fellow?
CED: The benefits of the fact that Professor Salerno’s office is just down the hall, and that his door is always open for the fellows cannot be stressed enough. He has this great capacity to understand your ideas even before they have become clear to you, and he can guide your research with just the right reading recommendations. We also had weekly research seminars where all the Fellows would present their ongoing work, and bounce around ideas, and we were fortunate enough to read and discuss Professor Salerno’s working papers. By the end of the summer, we could tell that our research process had become more structured, more focused, and even that we had new energy for new projects. No other academic experience has had this kind of impact on my development.
MI: What topics do you now focus on in your academic work?
CED: So far, I have done most of my research in international trade, both on theory and policy. And through the collaboration with Professor Guido Hülsmann (at the University of Angers, France), whom I met at the Mises Institute during my fellowship and who became my PhD adviser, my work has gradually expanded to incorporate monetary theory and international finance. For example, my PhD thesis analyzes the Cantillon effects of inflation in a global context, looking into the impact of monetary policies on trade, finance, and the distribution of wealth. I also currently work as a lecturer in international business at Coventry University in the UK, where I teach my students about international trade, globalization, and the challenges of operating in global markets. But in general, wherever my particular research interests take me, I always return to Mises’s works in search for the grounding framework.
MI: How have your experiences with the Mises Institute affected your plans for the future and future academic work?
CED: Through the summer fellowships, and the mentorship of Professors Salerno and Hülsmann, the Mises Institute has become my intellectual alma mater. The support network of peers and faculty that the Institute makes available every year, through its resident fellowships and conferences, was crucial to my academic efforts as a student, and now as a teacher. I learned what good research is, and how to strive to achieve it. I learned what a good teacher should be, and I can only hope to be half as good as my teachers. I am humbled and grateful by every renewed opportunity to be part of this wonderful community of scholars.
A decade ago, no one had ever been told to “check your privilege.” Now it commands an appreciable “market share” in academia and social justice rhetoric. But it does so despite sharply opposed interpretations of its meaning. In fact, its expanded footprint is partly because of its ambiguity.
It Could Be an Invitation to DebateIn a sense, “check your privilege” largely amounts to “check your premises” behind your views, and many are willing to recognize that such a reminder can be useful in advancing conversations about social issues.
However, I question whether people are so bereft of concern for, or understanding of, one another that they need repetitive “check your privileges” reminders that imply they would believe more accurately and act more effectively if only they were more empathetic. I tend to agree with Adam Smith, in The Theory of Moral Sentiments, that:
How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it ... we often derive sorrow from the sorrows of others.
Further, repeatedly sermonizing to fix people as a way of “uplifting” them becomes little more than nagging, and any insight it may add gets crowded out. In the same way, repeatedly invoking “check your privilege” tends to destroy its usefulness leaving increased irritation and disharmony.
But the Phrase Could Simply Mean “Shut Up”And when does “check your privilege” become code for “be quiet” rather than “evaluate your premises”? “Check your privilege” is about shutting down discussion when the user is making the assertion that you are hopelessly confused in your understanding, and that your opinions amount to aggression (whether “micro-” or “macro-”). This position was wellarticulated decades ago by Robert Heinlein, in The Moon is a Harsh Mistress:
Where do you start explaining when a man’s words show there isn’t anything he understands about [a] subject, [but] instead is loaded with preconceptions that don’t fit facts and [he] doesn’t even know …?
The assertion of your hopeless confusion then becomes the basis for claims that, unless you are a member of some accepted victimized class, you must be part of the oppressor class. Therefore, as Max Borders put it,
Your rights and opinions are invalid and you have no real complaints or suffering because you belong to X group. Or, more to the point, you are obligated to pay because people who look like you in some ways did bad things at some point.
In other words, others assert that they don’t need to listen to you, much less respect your arguments.
The Ad Hominen AttackThat leap involves several logical failings. Included in that list is the idea that any guilt for what was true of some members of an arbitrarily defined class or group (rather than treating people as the individuals they are) at some point in time passes on to every current and future member of that class or group. In addition, it incorporates the ad hominem fallacy that because you are judged as bad or part of an oppressor class, your argument is false, while conversely, their self-defined goodness and non-oppression means theirs must be true, both of which are unrelated to the logical validity of an argument.
Given that “check your privileges” could mean either “remember to be empathetic, so we can better understand and help” or “we can disregard your beliefs and violate your rights,” how can we tell which one is intended?
Where confusion reigns, to better understand and help requires the confusion to be replaced with clear, accurate understanding. That, in turn, requires a serious, ongoing “give and take” conversation.
However, when “check your privilege” is used to preemptively cut off conversation by stopping those who disagree from any chance to be heard, much less to rebut their demonization and targeting, no improvement in either empathy or results can result. So the key to evaluating “check your privilege” is to ask what would be entailed if it was intended to advance such a serious conversation.
How Real Dialogue HappensImportantly, any conversation would not stop at “watch your privileges.” It would only begin there. By itself, the phrase says you are wrong in your understanding or views, but it leaves how completely unspecified, beyond having something to do with membership in some allegedly dominant or privileged group. Stopping the conversation there leaves “check your privileges” as an insult, without any ability to clarify understanding or reduce disagreements or disharmony.
Progress toward better understanding and results would require several more steps.
It would start by precisely specifying what faulty premises, assumptions, or arguments someone supposedly holds, either included or excluded inappropriately. Then it would explain why it is inappropriate for the issue being considered. It would lay out the correct or appropriate premise that would take its place and articulate the reasons why.
Building on that foundation, it would show how the “new and improved” premises would change one’s conclusions. Consequently, it would lay out the appropriate remedy based on the alternative analysis. In the process, it would have to explain how the proposed remedy cannot be explained solely on a narrowly self-interested “more for me” basis, completely apart from the argument offered, as part of laying out the new special privileges that would be created for those put forward as victims. It would also have to explain how others will be affected in order to address the asserted problem, including whether there would be coercive impositions on members of the supposedly dominant or victimizer class who had nothing to do with the “sins of the fathers.”
When “check your privilege” means think more carefully about others circumstances, which may be far different than yours, and to be empathetic, it can be useful in advancing our potential for mutual understanding. But it has to be only the beginning of a much farther-reaching discussion to bear fruit — a discussion which, carefully and earnestly pursued, would lead us back to the self-ownership and voluntary arrangements of liberty.
In contrast, when “check your privilege” is used as a magic phrase to peremptorily end “social justice” discussions, it is the assertion of a special privilege for some to be allowed to define themselves as white hats and those who disagree as black hats, without ever having to make a real argument. It also allows users to turn it into an epithet of social demonization to try to impose their “solutions,” always at the expense of the supposed black hats. In the process, it undermines social cooperation by undermining the rights upon which it is built.
In the early nineteenth century, Bastiat posed the story of a young man who throws a brick through the window of a baker’s shop. We’re told that this may have a bright side — that the baker must now pay a glazier to fix the window, who will then use that income to spend elsewhere, creating a ripple effect that benefits many.
Such thinking is reminiscent of what would later be used to justify the logic behind the Keynesian multiplier. Keynes would later write in the General Theory, “Pyramid building, earthquakes, even wars may serve to increase wealth.”
The Opportunity Cost of Fixing ThingsAs many readers already know, such logic fails to take into account the opportunity cost of the broken window. Had the window not been broken, the baker wouldn’t have paid the glazier, but maybe he would’ve spent the money on a pair of shoes instead. The shoemaker would then have income to spend elsewhere, and the same multiplier would take place — but society would be better off by exactly one window.
Before diving into the modern real-world evidence that substantiates Bastiat’s brilliant essays, it’s important to distinguish between income and wealth. Destruction may boost income in the short run, but reduce a society’s net amount of wealth (the purpose of production in the first place). To play off an interesting piece by Ryan Young in the American Spectator, Suppose we have a small island, whereas all wealth is in the value of homes, personal property, business properties, and infrastructure, with a value of $10 million. Now let’s say that economic growth is slow, many are unemployed, and aggregate wealth is projected to increase to $11 million next year.
Next, a violent natural disaster occurs, destroying the nation’s entire stock of wealth. Since economic growth was slow and many were unemployed, everyone on the island directs their attention to rebuilding from the disaster, and within a year, everything is back to normal. In the statistics, GDP is boosted by $10 million — ten times higher than it would’ve otherwise risen, yet the wealth of society remains unchanged.
Such a scenario is reflective of what occurs in the short run. In May of 2012, Paul Krugman highlighted Japan’s superior first quarter economic growth relative to other nations, attributing it to increased government spending following the tsunami in 2011. But as Young noted, this doesn’t take into effect that natural disasters have on a nation’s stock of wealth.
The “Benefits” of Deadly CyclonesNow, onto the real-world evidence. Published in the National Bureau of Economic Research, economists Solomon M. Hsiang and Amir S. Jina looked at the long-run economic effects of environmental catastrophe, focusing on destruction from cyclones in particular. Nearly seven thousand cyclones that occurred from 1950–2008 were studied. The conclusions were that the worse the disaster, the worse long-run economic growth suffered. According to their data, “fifteen years after a strike, GDP is 0.38 percentage points lower for every 1 m/s of wind speed.”
While I constructed an example earlier where destruction would have positive effects on income in the short run, such effects disappear when the short run becomes the long run. Their research also found that a disaster in the 90th percentile reduced incomes by 7.4 percent two decades after. This led the authors to reject the “creative destruction” hypothesis in regards to natural disasters.
Defenders of the supposed blessings of destruction also have to take into account another variable: the value of human life. Following an earthquake in May of 2008 that killed 80,000 in the Sichuan Province, the Chinese government’s State Information Center found a silver lining: economic growth would be boosted by an additional 0.3 percent that year due to money spent on rebuilding the devastated region. Even assuming that this growth wasn’t offset by slower growth in the long run, it’s still not a viable plan. Economic growth in China was 18.1 percent in 2009, growing by nearly five trillion yuan from the year prior. Assuming that the Chinese government is correct and 0.3 percent of that was attributable to rebuilding from the disaster, this means that GDP was boosted by roughly 5,300,000 yuan for each death, or roughly $860,000. To put that in perspective, the Environmental Protection agency in the US sets the value of a human life at $9.1 million, while the Food and Drug Administration pegs that figure at $7.9 million.
The purpose of Bastiat’s essay on the broken window was to illustrate the concept of opportunity cost at a minor level, focusing on a minor act of vandalism. As we’ve seen from real-world evidence, the opportunity cost of destruction is seldom society being worse off by only a single window, but much worse when we take into account the long-run effects it has on income and wealth, and human life.
The great economist Frédéric Bastiat would have turned 214 today. His contributions to liberty have been many, but while so many advocates of free markets focus on The Law, there is another book that represents his legacy even better: Economic Sophisms. This short work of essays epitomizes perhaps his most important contribution: using taut logic and compelling prose to bring the dry field of economics to hundreds of thousands of laymen.
Bastiat did not, generally, clear new ground in the field of economics. He read Adam Smith and Jean-Baptiste Say and found little to add to these giants of economic thought. But Bastiat possessed a keen wit and a clear, pithy writing style. His writings have become immensely popular. One-hundred-and-fifty years after his death, essays like “A Petition” are still circulated as an effective counter to progressive economics.
Bastiat makes three central contributions in Economic Sophisms. First, he reminds us that we should care about the consumer, not just the producer. Second, he dismantles the argument that there are no economic laws. Third, and more generally, he is one of the few politicians and writers who thought with his head, not with his heart. Bastiat used logic to clearly lay out the consequences of political actions instead of hiding behind good intentions.
Surplus, Not ScarcityEconomic Sophisms expresses a common theme over and over again: we should craft policies that focus on consumers, not on producers.
When Bastiat uses these phrases, it can be easy to misinterpret him. Keynes, writing 100 years after Bastiat, hijacked the terms. But Bastiat wasn’t a Keynesian. When he discusses how consumption is the end goal of the economy, what he means is: having goods (which benefits consumers) is more important than making goods (which benefits producers). Put another way, producers prefer scarcity, because it drives up prices. Consumers prefer surplus for the opposite reason.
Producers advocate all sorts of methods for reducing the total quantity of goods (theirs excepted, of course). Producers seek to tax goods from other countries that compete with their own. They outlaw machines that would replace them. Producers even favor policies like burning food to drive up food prices, a policy that caused much starvation when it was enacted in the United States during the Great Depression. Consumers, by contrast, prefer abundance. They are happiest when they have a plethora of goods to choose from at a low price.
Bastiat points out that we are all consumers, including the producers. The man who produces railroads also uses his wages to buy goods. One can imagine a world with no producers, a paradise in which man’s every need is fulfilled by nature or a benevolent God. But one cannot imagine a world with no consumption. In such a world, man would not eat or drink, have clothing or buy luxuries. Consumption, and quality of life, is the essential yardstick to measure a society’s economic prosperity.
When we enact producer-backed measures like tariffs, Bastiat argues, we favor producers’ interests over consumers’. We show that we’d rather have scarcity than surplus. Taken to its logical extreme, such a policy is absurd. Would anyone truly argue that total scarcity is preferable to having plenty?
The Principle of No PrinciplesIn Bastiat’s day, it was fashionable to claim that no real principles exist. X may cause Y, but a smaller X needn’t cause a smaller Y; it could cause Z instead, or A. Today, we see the same logic: people who claim, for instance, that a minimum wage hike to $100 would kill jobs but that a hike to $10.10 would somehow create them.
In essay after essay, Bastiat destroys this myth. Economics is not a foggy morass where up is sometimes down, left can be right, and there are no absolute truths. Economics is not like nutrition, where a glass of wine can heal while two gallons can kill.
In economics, a cause will produce a correlational effect, regardless of how large the cause is. If small X causes small Y, large X causes large Y. A minimum wage hike to $100 will kill many jobs; a minimum wage hike to $10.10 will still kill some. The effect does not vary, only the size of it.
Indeed, one of Bastiat’s most common argumentative tools is reductio ad absurdum, or carrying a concept to its logical conclusion. Opponents of mechanization want to force railroads to stop at one city and unload goods, thereby generating work for the porters? Very well, says Bastiat. Why not have them stop at three cities instead? Surely that would generate even more work for the porters. Why not stop at twenty cities? Why not have a railroad composed of nothing but stops that will make work for the porters?
By carrying concepts to their logical conclusion, Bastiat provides a firm antidote to the fuzzy thinking of protectionist advocates.
Think with Your HeadIn Bastiat’s time, just as today, it was popular to think with one’s heart. “We must do something!” went the rallying cry; never mind the consequences. Good intentions were enough.
Make-work, for instance, has always been a favorite policy of those who think with their hearts. They see men and women unemployed and demand government take action. Often, this action takes the form of impeding human progress: using porters instead of railroads, for instance. The initial consequence, for the porters, is positive: more end up employed. But Bastiat recognizes that such policies, while they may protect the porters, harm the economy as a whole. They raise prices and create scarcity.
Bastiat looked at more than just the direct consequence of an action. He examined all the outcomes, using taut chains of logic to demonstrate how each policy would impact those whom he was most focused on — the consumer.
Bastiat’s LegacyBastiat did not invent any new economic tools or schools of thought. But the clear logic with which he thought through economic ideas, and the clear and witty prose with which he lambasted those who did not do so, have made him one of the most popular economic figures of all time.
Bastiat’s ideas in this text have been borrowed, rehashed, and republished for over 150 years. His insights have been appropriated by dozens of prominent thinkers. Most famously, Henry Hazlitt based Economics in One Lesson largely on the essays in Economic Sophisms. As we make note of his 214th birthday, perhaps we should raise a toast to the man whose ideas — in all their adopted formats — have done so much for the cause of liberty.
The positivist ideas dominant among economists led them to agree that, as stated by the motto of the Econometrics Society, “Science is prediction.” We are surrounded by forecasts about numerous economic indicators. “Experts” reveal the rate of growth with .1 percent precision as if they were reading the oracle or seeing the future in chicken entrails.
In the nineteenth century, people used to believe everything which was written in the newspapers. With time, they became more skeptical and began to question what has been considered as a reliable source of information. After that came television. Images have real power over the minds, but after a while, people began to mistrust the news and exercise their critical judgment. Oddly however, government statistics and economic predictions are held as truths since they exist and people only too rarely question the figures.
But if we can’t trust the government to produce safer rail travel or more affordable health care, why should we trust it to produce better economic predictions? Why would things be different for statistics and predictions?
Let’s Be Optimistic!The case of France is instructive on these matters. Indeed, the French Ministry of Finance‘s growth rate predictions, published each year, have a very poor record. These predictions are important since they are used to estimate government revenue for the following year. If the numbers are made up, then how can the parliament vote on the budget wisely? The government has steadfastly predicted the French GDP every year since 1999 and has recorded an average error of 1.03 percentage points — a meaningful gap when dealing with GDP.
In the last fifteen years, the French government has been overly optimistic thirteen times. This is not surprising when the predictions are subject to constant manipulation by politicians. Some highly ranked officials in the Ministry of Finance still remember the tragicomic episode when, during the summer or 2010, the then Minister of Finance Francois Baroin, had to meet with President Nicolas Sarkozy at Fort Brégançon, the French Camp David. Baroin submitted the 2011 growth rate forecast which was 1.2 percent. “We cannot announce 1.2%, it’s too low, let's say 1.5%” declared the minister to his team just before meeting with Sarkozy. President Sarkozy unsatisfied with the numbers as well, and with the stroke of a pen said: “we will do 2%!” Lucky for them, the growth rate that year was 1.7 percent. But even when it significantly misses the mark, the government always wins by manipulating the numbers. Who will remember the fake predictions in six months?
Private organizations and the European Commission, which are less susceptible to direct political pressure, perform only slightly better in predicting the French GDP figures. For example, the “Centre de Prévision de l’Expansion” has committed an average error of 0.75 percentage points for the 1999-2014 period.
The Problem with Mathematical ModelsAlthough some private sector forecasters have more of a talent for guesswork than their public sector counterparts, the very assumption that we can compute predictions through “complex mathematical models” is flawed. Why, first of all, is the margin of error never published? Indeed, rather than giving a point estimate, would it not be more coherent to use a range? Second, to make forecasts, you need to make assumptions about how the economy works. If your assumptions are wrong, “sophisticated mathematical models” won’t fix that.
As Mark Thornton put it, “The dominance of positivism in economic methodology encourages economists to worry less about the logical consistency of their models and to concentrate more on the development of models that exploit historical data in making predictions.” Moreover, Austrian economists remind us that the future is always uncertain. If we could know the future with certainty, there would be no place for human action. Austrians are therefore skeptical about predictions. Ludwig von Mises claimed that economic theory can help us to make only qualitative predictions but cannot be used to produce quantitative predictions:
Economics can predict the effects to be expected from resorting to definite measures of economic policies. It can answer the question whether a definite policy is able to attain the ends aimed at and, if the answer is in the negative, what its real effects will be. But, of course, this prediction can be only “qualitative.” It cannot be “quantitative” as there are no constant relations between the factors and effects concerned. The practical value of economics is to be seen in this neatly circumscribed power of predicting the outcome of definite measures.
And Hazlitt wrote in his November 22, 1948, column in Newsweek:
The economic future, like the political future, will be determined by future human behavior and decisions. That is why it is uncertain. And in spite of the enormous and constantly growing literature on business cycles, business forecasting will never, any more than opinion polls, become an exact science.
There’s Nothing Wrong with Predictions, ThoughOnly good economic theory can enable us to analyze the facts and help us make valid predictions. Richard Cantillon made correct predictions about John Law’s Mississippi Bubble system based on sound economic theory, and he made a fortune as a result. But good economics does not need complex mathematical models. Often, economists who were critical about the use of math in economic science were nonetheless excellent forecasters. For example, Yves Guyot, the great classical French economist was strongly opposed to the mathematization of economic science and criticized Léon Walras on this ground. However, he was the best in making economic predictions. Even Schumpeter, in History of Economic Analysis, was forced to admit that:
as businessman or politician, I should have consulted Guyot — who was a wizard at practical diagnosis — rather than Pareto in order to be enlightened on, say, the prospects of employment or of metal prices in the next six months.
Of course, Schumpeter denigrated the so-called “lack of scientific inspiration” of the French Classical school of economics — the close relative of the Austrian school of economics. It is however ironic that the “good economists” Schumpeter is speaking about — i.e., Pareto and Léon Walras — are those economists who developed very elegant mathematical models which are completely unable to give us any practical knowledge about what happens in the real world. Equations won’t tell us anything about how individuals act and therefore about how the economy works. If one wants to make good predictions, one has to master the basic laws of human action. Only then does it become possible to interpret correctly numbers and empirical facts.
Is there a greater tragedy imaginable than that, in our endeavour consciously to shape our future in accordance with high ideals, we should in fact unwittingly produce the very opposite of what we have been striving for? — F. A. Hayek
Most of us “know” that eating too much saturated fat (which includes red meat, dairy products, and eggs) raises our cholesterol levels and puts us at risk for heart disease. While we’re at it, we should greatly cut down on the salt too. These lessons are reinforced in our health classes and what the media has been telling us for decades. After all, this is the consensus reflected in the “Dietary Guidelines for Americans” issued by the United States Department of Agriculture (USDA) and backed up by allegedly solid, objective science from the National Institutes of Health (NIH). As extra reassurance, the Food and Drug Administration (FDA) will use its regulatory authority to crack down on trans fats, the worst villain of them all.
Despite the appearance of a seemingly united front in the war on obesity, sharp dissent over sound nutrition policy is silently bubbling beneath the surface. It may be a sign of the times that fundamental challenges have come to the forefront and are becoming increasingly accepted. Growing numbers of scientists are expressing public skepticism toward the federal government’s official low-salt guidelines. Back in February of this year, the government’s top nutrition panel withdrew its nearly forty-year-old warning on restricting cholesterol intake and grudgingly concluded that “available evidence shows no appreciable relationship between consumption of dietary cholesterol and [blood] cholesterol.”
The Health Consensus UnravelsIn one of the Wall Street Journal’s top-shared op-eds of 2014, investigative journalist Nina Teicholz threw down the gauntlet on the mainstream diet guidelines on fat:
“Saturated fat does not cause heart disease” — or so concluded a big study published in March in the journal Annals of Internal Medicine. How could this be? The very cornerstone of dietary advice for generations has been that the saturated fats in butter, cheese and red meat should be avoided because they clog our arteries. For many diet-conscious Americans, it is simply second nature to opt for chicken over sirloin, canola oil over butter.
The new study’s conclusion shouldn’t surprise anyone familiar with modern nutritional science, however. The fact is, there has never been solid evidence for the idea that these fats cause disease. We only believe this to be the case because nutrition policy has been derailed over the past half-century by a mixture of personal ambition, bad science, politics and bias.
Teicholz elaborates upon her thesis in her eye-opening, best-selling book The Big Fat Surprise: Why Butter, Meat and Cheese Belong in a Healthy Diet. With over 100 pages of footnotes and an extensive bibliography, it is clear that Teicholz has done her homework. In her nine-year investigation, she extensively reviewed the scientific literature and interviewed many of the key personalities in government, private industry, and advocacy groups who played influential roles in crafting official nutrition policy. While many people might be tempted to blame “the nefarious interests of Big Food,” Teicholz came to discover that the “source of the our misguided diet advice … seems to have been driven by experts at some of our most trusted institutions working towards what they believed to be the public good.”
The Rise of the Government ExpertCivic-minded Americans are generally familiar with Dwight D. Eisenhower’s famous warning in his farewell address to “guard against the acquisition of unwarranted influence … by the military-industrial complex.” Yet, there is another passage that deserves equal if not greater attention. Against the backdrop of the Cold War, numerous intellectuals were conscripted to become part of Leviathan, silencing their proper roles as critics of power:
Today, the solitary inventor, tinkering in his shop, has been overshadowed by task forces of scientists in laboratories and testing fields. In the same fashion, the free university, historically the fountainhead of free ideas and scientific discovery, has experienced a revolution in the conduct of research. Partly because of the huge costs involved, a government contract becomes virtually a substitute for intellectual curiosity. … The prospect of domination of the nation’s scholars by Federal employment, project allocations, and the power of money is ever present — and is gravely to be regarded.
Yet, in holding scientific research and discovery in respect, as we should, we must also be alert to the equal and opposite danger that public policy could itself become the captive of a scientific-technological elite.
There is no better example of “public policy … becom[ing] the captive of a scientific-technological elite” than with what happened with nutrition research and health policy. Ironically, the story of how saturated fat became demonized began in the Eisenhower years. After President Eisenhower suffered a heart attack, Washington policymakers became alarmed by the disease that was suddenly striking the ruling elite. After going into “Do Something!” crisis mode, it wasn’t long before they came under the sway of experts who offered easy answers. One such individual was Dr. Ancel B. Keys, the originator of the hypothesis that saturated fat causes heart disease. Keys went on to exercise perhaps the greatest influence in the “history of nutrition” through professional and personal dominance.
Opponents of the saturated fat–heart disease hypothesis included accomplished scientists George V. Mann and E.H. “Pete” Ahrens, who voiced many legitimate criticisms. But in the end, they were no match for the unprecedented changes rammed through by Keys and his sidekick Jeremiah Stamler. Through their efforts, these two men and their supporters blurred the line between objective scholarship and political advocacy. It wasn’t long before most skeptical nutrition researchers were browbeaten into submission, relegated to sidelines, or otherwise drowned out as the zeitgeist ultimately shifted in favor of Keys’s hypothesis and preferred solutions.
Dogma is a term that is usually associated with fundamentalist religions. But unfortunately, even scientists who are supposedly trained to think critically and independently are not immune to groupthink, the temptations offered by political prestige, and the limits of what’s “acceptable” as dictated by funding. Despite the shortcomings of various studies that appeared to provide a solid scientific backing, the saturated fat–heart disease hypothesis became a dogma when it was formally institutionalized within the US government’s public health bureaucracies. This was thanks to Keys’s relentless advocacy and intimate relations he established with the American Heart Association (AHA). The influence of the AHA over nutrition policy cannot be overstated. In fact, the “AHA and NIH were parallel, entwined forces from the start.” As the two main organizations responsible for setting the agenda and distributing millions in funds for cardiovascular research, it was increasingly difficult to “reverse course and entertain other ideas” even as the saturated fat diet–heart disease hypothesis continued to disappoint because it “had become a matter of institutional credibility.”
Congress and “Big Food”To make matters worse, Congress became directly involved during the 1970s in the question of what the American people ought to eat. Teicholz explained how the Beltway culture allowed for bad ideas to take hold and stay entrenched (as anyone who has worked there can attest to):
With its massive bureaucracies and obedient chains of command, Washington is the very opposite of the kind of place where skepticism — so essential to good science — can survive. When Congress adopted the diet-heart hypothesis, the idea gained ascendancy as an all-ruling, unassailable dogma, and from this point on, there has been virtually no turning back.
Big Food manufacturers and lobbyists descended onto Washington and set up the Nutrition Foundation to funnel millions into research and thus were “able to influence scientific opinion as it was being formed.” Not surprisingly, “the promotion of carbohydrate-based foods such as cereals, breads, crackers, and chips, was exactly the kind of dietary advice large food companies favored.” These foods ended up receiving glowing endorsements from the official government nutrition elite. Despite what some might expect, meat and dairy interests’ lobbying efforts paled in comparison. Carbs and polyunsaturated fats (vegetable oils) were overwhelmingly favored over saturated fats. Consumption of red meat became increasingly demonized as new studies highlighted supposedly detrimental health consequences. Left-wing environmental movements also picked up steam during this time. In the name of “sustainability,” these campaigns and their advocates urged the reduction if not the complete elimination of meat from one’s diet.
The Data Doesn’t Say What Congress Thinks it SaysThroughout the book, Teicholz reviews the scientific literature by critically examining the hard data, not abstracts or executive summaries (the only sections most policymakers and researchers alike will ever read), and repeatedly points out various methodological flaws and limitations. In particular, she takes care to emphasize that epidemiological studies can show only an association between two elements, but “could not establish any casual connection.” Only clinical trials in carefully controlled settings could establish cause. Shockingly, almost all the early studies that were cited to support Keys’s hypothesis were epidemiological. The famous Seven Countries Study directed by Keys himself was an epidemiological study that appeared to show a strong correlation between consumption of saturated fat and heart disease deaths across international populations. Teicholz pointed out many confounding variables such as the fact that Keys examined the Mediterranean region in the aftermath of World War II. During this period, people were impoverished and ate abnormal diets. In addition, Teicholz revealed that Keys conducted some of his surveys during Lent (no meat for the faithful!) along with some other egregious examples of cherry-picking to fit his preferred narrative. Other prominent studies all suffered from similar defects. The Framingham Heart Study originally announced that high total cholesterol was a reliable predictor for heart disease, but a follow-up study thirty years later called those results into question.The Israeli Civil Service Study mentioned worshiping God lowered the risk of a having heart attack! Even with their weaknesses, these studies were repeatedly cited and the idea that saturated fat leads to heart disease continued to build into conventional wisdom.
Having studied anthropology, I was delighted that Teicholz highlighted glaring “paradoxes” by digging out several examples of indigenous populations that ate almost all meat and animal fat such as the Inuit and the Masai yet had virtually no recorded cases of heart disease, obesity, or any of the chronic diseases of Western civilization (that is until they added sugar and refined carbs to their diet). In her analyses of the clinical trials meant to establish cause and effect, she noted a disturbing caveat that came up repeatedly but was often buried: namely, following low-saturated fat diets did not extend overall lifespan. Speaking of clinical trials, it is worth mentioning the Women’s Health Initiative (WHI), which enrolled 49,000 women in 1993 and aimed to validate the benefits of a low-fat diet once and for all. Here are the final disappointing results as summarized by Teicholz:
[A]fter a decade of eating more fruits, vegetables, and whole grains while cutting back on meat and fat, these women not only failed to lose weight, but they also did not see any significant reduction in their risk for either heart disease or cancer of any major kind. WHI was the largest and longest trial ever of the low-fat diet, and the results indicated that the diet had quite simply failed.
As Teicholz moved toward the present day state of affairs, she cites the work of award-winning science journalist Gary Taubes and a few brave, unorthodox researchers including Stephen D. Finney and Jeff S. Volek, who challenged the taboo against red meat and fat. Thanks to high-profile pieces in Science and the New York Times as well as a comprehensive book, Good Calories, Bad Calories, Taubes was more responsible than anyone in reopening the debate that carbohydrates, not fat, are the drivers of obesity and other chronic diseases. Even as more people today become aware of the deleterious effects from consuming high amounts of refined carbs and sugars, the permanent damage has been done thanks to the long-standing bias toward the saturated fat–heart disease hypothesis. Official policymakers embraced this view, advocacy groups added fuel to the fire, and restaurants and cafeterias altered their menus. Millions of Americans changed their eating patterns and avoided meat, cheese, milk, cream, and butter. In the end, the results are not pretty:
Measured just by death and disease, and not including the millions of lives derailed by excess weight and obesity, it’s very possible that the course of nutrition advice over the past sixty years has taken an unparalleled toll on human history. It now appears that since 1961, the entire American population has, indeed, been subjected to a mass experiment, and the results have clearly been a failure. Every reliable indicator of good health is worsened by a low-fat diet. … Despite more than two billion dollars in public money spent trying to prove that lowering saturated fat will prevent heart attacks, the diet-heart hypothesis has not held up.
By the end of the book, it seemed very clear that almost everything Uncle Sam told us about the “dangers” of saturated fat is completely wrong. That being said, it is past time to demolish the USDA food guide pyramid. Let Teicholz’s exposé serve as a warning when political crusaders and their bureaucratic allies are allowed to force top-down solutions on everyone without ever having to face accountability for their mistakes no matter how egregious.
The economics profession today continues to face mounting criticism for its failure to predict and explain economic crises.
According to Austrian school critics of Keynesian and neoclassical methods, this failure is in large part due to a foolish determination to bring into economics the mathematical precision of the physical sciences. To achieve this precision, neo-classical economists disproportionately focus their inquiry on global measures of economic activity: gross national product, aggregate demand, global supplies of money, goods, or labor, and other variables that lend themselves to quantification and numerical modeling. Lost in mainstream economic analysis is the attention due to the individual economic actor who, by virtue of his or her power of self-determination, is ill-suited for the equation or the graph.
A similar love affair with quantitative methods has rapidly taken over the medical field over the last several decades. As in mainstream economics, equations and predictions can only come about when one turns one’s attention away from the individual patient to focus instead on the aggregated group, or population, as the prime target of analysis and intervention. Thus, population medicine is an apt term to describe the discipline that seeks to mathematize medical practice by caring not for the patient in particular, but for the patient on average, globally, or in the abstract.
For the promoters of population medicine, the individual clinical interaction is of no interest. It is dismissed as quaint, anecdotal, and inconsequential to a proper understanding of health issues. Instead, the data of interest are those garnered from large epidemiological studies and clinical trials. From such research, one can derive “risk factors” for disease, elucidate the “determinants of health,” and promote prescriptive measures in wide swaths.
A Key to Centrally Planning Health CareAdvancing the convenient fiction that whatever is good for the group must be good for the individual, population medicine has become an indispensable framework of analysis for the central planning of health care. Accordingly, government agencies can now avail themselves of the findings of this discipline to decide which services, drugs, and interventions should be paid for and promoted, and which must be deemed unnecessary or even fraudulent. The decisions can thus be rendered under cover of “scientific proof.”
An example of activities promoted by population medicine is the “risk calculation,” which doctors are expected to embrace, or else face penalties for practicing outside of the desired norm. Risk calculation involves inputting a handful of patient factors — age, weight, cholesterol, blood pressure, and the like — into a formula to obtain the patient’s “personal risk” of dying or suffering a specific outcome in the future. Based on this mathematical insight, an intervention is prescribed. A patient can thus enjoy the privilege of being treated like a number not just figuratively, but quite literally.
Needless to say, the architects of population medicine overlook that the concept of “personal risk” is rather devoid of meaning, as statistician Richard von Mises explained many decades ago. Willful or naïve, this oversight is turning medicine into an enormous risk management enterprise aimed at solving an impossible game of health optimization.
According to the wisdom of population medicine, for example, to be healthy is to confine our weight, our blood cholesterol, or our blood sugar to an ever-more narrow range of “normal values” defined — and repeatedly revised — not on the basis of any physiological reality, but by the will of committees of medical technocrats. With each new revision in the definitions of what constitutes a “normal” blood pressure, blood cholesterol, or blood sugar, millions of hapless citizens whose numbers happen to fall outside the desired range are instantly turned into patients, to the great delight of the pharmaceutical industry.
And it’s not just anthropomorphic variables which are so narrowly defined. What we eat, how much we drink, how long we sit, and how fast we move are all of interest to population scientists eager to show us the narrow path to healthy living measured in precise servings per meal, ounces per day, hours per week, or miles per minute.
The scientific advice, unfortunately, does not always lead to a healthy outcome. A population-wide push to discourage consumption of saturated fats, for example, led to a population-wide increase in the consumption of carbohydrates, and thus may have unwittingly played a role in the obesity epidemic of the last twenty years. At the very least, lifestyle fads advocated through the bullhorns of population medicine are undoubtedly causing epidemics of food and exercise neuroses.
Population medicine ambitiously aims to improve the health of entire nations. To do so, it proceeds to sketch an ever-more quantified but all-the-more unrealistic portrait of the human being, to be analyzed by those who enjoy directing medical care from the remote comfort of their academic or governmental chairs.
GDP purports to measure economic activity while largely divorcing itself from the quality, profitability, depth, breadth, improvement, advancement, and rationalization of goods and services provided.
For example, even if a ship — built at great expense — cruised without passengers, fished without success, or ferried without cargo; it nevertheless contributed to GDP. Profitable for investors or stranded in the sand; it added to GDP. Plying the seas or rusting into an orange honeycomb shell; the nation’s GDP grew.Starting in December of 1991, the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce emphasized gross domestic product (GDP) over that of gross national product (GNP) as a measurement of production within the U.S. The difference between GNP and GDP lies in the treatment of income from foreign sources: GNP measures the value of goods and services produced by U.S. nationals, while GDP measures the value of goods and services produced within the boundaries of the U.S., regardless as to the nationality of ownership. For purposes of this article, the differences between each measurement are unimportant and therefore “GDP” is utilized synonymously with GNP.
Stated alternatively, GDP fails to accurately assess the value of goods and services provided or estimate a society’s standard of living. It is a ruler with irregular hash marks and a clock with erratic ticks.
As proof, observe this absurdity: in 1990, Soviet GDP equaled half of US GDP, according to the 1991 CIA Factbook. No one visiting the Soviet Union in 1990 would believe their economy came close to 50 percent of the quality and quantity of the goods and services produced in America. GDP-defined production may have been strong, but laying roads to nowhere, smelting unusable steel, and baking barely edible breads stretches the definition of “production.” And this describes the goods which were actually produced. There is no accounting for the opportunity cost of forfeited essential goods and services.
How can this be? Why does GDP poorly reflect economic size and vitality? The blame largely resides with three fallacious concepts embedded within GDP “measurements”:
(1) intermediate goods (e.g., steel) must be eliminated to avoid “double counting”;(2) government expenditures consist of viable economic activities; and(3) imports should be netted against exports.
The Overstatement of ConsumptionWhich transactions should be included within GDP? Since most products consist of other products, GDP architects attempt to avoid “double counting” transactions by largely including only final goods and services produced. By their methods, the production of a car is counted (as an increase in inventory), but the metal, rubber, and plastic purchased in its creation is not. But the rules behind what makes a transaction “final” are arbitrary. The logic could just as easily justify including the sale of an automobile to a consumer and disregarding its previous production. In addition, any “final” transaction during a given time period does not necessarily include intermediate goods produced in that same time period: metal, rubber, and plastic purchased today will likely be for a different car produced or sold in a different (future) time period.
Regardless as to the arbitrary nature of determining final sales and notwithstanding the problem of temporally matching intermediate goods with their associated final sales, the exclusion of certain “intermediate” transactions simply excludes massive volumes of economic activity. Thus, GDP understates the economy as a whole while grossly overstating its consumption component relative to business investment. A better measure of overall production was employed in 2014, after years of urging from Mark Skousen, when the US Commerce Department began publishing Gross Output which incorporates intermediate transactions. Using Gross Output, the commonly cited statistic of consumption accounting for 70 percent of all economic activity quickly falls to a mere 40 percent.
The Treatment of Government Expenditures as ProductiveIf GDP purports to measure economic activity which benefits society, the inclusion of government expenditures is dubious. GDP “produced” in the Soviet Union is no different than GDP “produced” by any government — the difference is but one of scale. All government spending is to some degree malinvestment, for as Murray Rothbard noted:
Spending only measures value of output in the private economy because that spending is voluntary for services rendered. In government, the situation is entirely different ... its spending has no necessary relation to the services that it might be providing to the private sector. There is no way, in fact, to gauge these services.
The absence of voluntary action renders prices impotent, and without true price discovery, benefits cannot be ascertained. This does not mean all goods and services provided by government would cease to exist; rather, some production (e.g., hospitals, schools, roads, etc.) would revert to the private sector. To the extent government expenditures for goods and services would be produced by the free market, the true government contribution to GDP may be positive but overstated (it currently approximates 20 percent of US GDP). A more accurate depiction of economic activity would reduce if not eliminate the contribution of government expenditures. Or perhaps, as Rothbard argued, the higher of government receipts or expenditures should actually be deducted from GDP since “all government spending is a clear depredation upon, rather than an addition” to the economy.
The Problems of Subtracting Imports from ExportsAs Robert Murphy has noted several times, the netting of imports against exports in determining GDP seriously understates the contribution of trade to overall economic activity. To wit, an economy which exports $1 and imports $1 will have the same GDP contribution (zero) as one which exports $100 billion and imports $100 billion. Obviously, the latter economy would be far worse off with the sudden cessation of trade.
A fixture of GDP is the mercantilist mentality of treating exports positively and imports negatively. Why are exports additive to GDP while imports are deductive? If the goal of GDP is to measure the goods and services provided to people within a geographic region, imports — not exports — are the benefit. Exports are but payment for imports. The problem and confusion arises because the GDP calculation unrealistically excludes other forms of payment: it should make a difference if imports are funded with increasing debt levels or if funds are accumulated from previous years of compensated exports. If China converted over $1 trillion in US debt instruments into imports of American goods and services, its people benefit today, but under GDP accounting, the negative impact of imports would offset greater consumption and/or government spending (the increase in GDP was previously realized in the years during which exports created a trade surplus).
GDP is Designed to Advance the Keynesian AgendaSimon Kuznets (1901–1985) revolutionized econometrics and standardized measurements of GDP, with his research culminating in his 1941 book, National Income and Its Composition, 1919–1938. While not a Keynesian per se, the nature and timing of his research fueled the Keynesian revolution since central planning requires economic statistics. As Murray Rothbard noted:
Statistics are the eyes and ears of the bureaucrat, the politician, the socialistic reformer. Only by statistics can they know, or at least have any idea about, what is going on in the economy. Only by statistics can they find out ... who “needs” what throughout the economy, and how much federal money should be channeled in what directions.
GDP’s faulty theoretical underpinnings and politically motivated acceptance distort the performance and nature of an economy while failing to satisfactorily estimate a society’s standard of living. In fact, Kuznets partially understood this. In his very first report to the US Congress in 1934, Kuznets said “the welfare of a nation [can] scarcely be inferred from a measure of national income.” Yet the blind usage of GDP persists. That its permanence and persistence only serves the Keynesian policies of greater consumer spending, increased government expenditures, and larger exports through currency debasement should not be considered coincidental. Unfortunately, the resulting economic stagnation, debt accumulation, and price inflation are as inevitable as they are predictable.
When Mother Teresa used her Nobel Prize money to fund services for the poor, she was exhibiting "self-interest," but not selfishness. Like virtually everyone else, she used her property to achieve an end she valued, but which benefited others as well, writes Gary Galles.
This audio Mises Daily is narrated by Robert Hale.
In A Short History of Man, I try to explain three of the most momentous events in the history of mankind.
First, I explain the origin of private property, and in particular of ground land, and of the family and the family household as the institutional foundations of agriculture and agrarian life that began some 11,000 years ago, with the Neolithic Revolution in the Fertile Crescent of the Near-East, and that has since — until well through the late nineteenth century — come to shape and leave an imprint on human life everywhere.
Second, I explain the origin of the Industrial Revolution that set off around 1800, only some 200 years ago in England. Until then and for thousands of years, mankind had lived under Malthusian conditions. Population growth was constantly encroaching on the available means of subsistence. Every productivity increase was “eaten up” quickly by an expanding population size such that real incomes for the overwhelming bulk of the population were held down constantly near subsistence level. Only for about two centuries now has man been able to achieve population growth combined with increasing per capita incomes.
And third, I explain the parallel origin and development of the State as a territorial monopolist of ultimate decision-making, i.e., an institution vested with the power to legislate and tax the inhabitants of a territory, and its transformation from a monarchic State, with “absolute” kings, to a democratic State with “absolute” people, as it has come to the fore in the course of the twentieth century.
While this could suffice as an introduction and the reader could proceed directly to the following chapters, a few additional remarks may be in order for the philosophically minded reader.
Until the early twentieth century, the following would have been classified as sociological studies. But with the rise and increasingly dominant influence attained in the course of the twentieth century by the empiricistpositivist-falsificationist philosophy, the term sociology in the meantime has acquired a very different meaning. According to the empiricist philosophy, normative questions — questions of justice, of “right” and “wrong” — are not scientific questions at all — and consequently most of modern, “scientific” sociology, then, is dogmatically committed to some variant of ethical relativism (of ‘anything goes’). And the empiricist philosophy categorically rules out the existence of any non-hypothetical, non-falsifiable, or synthetic a priori laws and truths — and accordingly modern sociology is dogmatically committed also to some variant of empirical relativism (of ‘everything is possible,’ of ‘you can never be sure of anything,’ and ‘nothing can be ruled out from the outset’).
My studies are and do everything a “good empiricist” is not supposed to be or do; for I consider the empiricist- positivist philosophy wrong and unscientific and regard its influence especially on the social sciences as an unmitigated intellectual disaster.
It is demonstrably false that ethics is not a science, and that no universal principles of justice exist and no “true” (non-arbitrary) criterion of distinguishing moral progress from decline. And it is likewise demonstrably false that no universal and invariant laws of human action and interaction exist, i.e., no laws of what is and is not possible and of what can and cannot be successfully done in human affairs, and no non-arbitrary criterion of judging actions as correct and successful or incorrect and faulty solutions to a given problem or purpose.
As for the second, ‘positive’ claim, it is contradicted by the entire body of Classical Economics. Classical Economics, reconstructed, refined, and further advanced during the “Marginalist Revolution,” in particular by its Viennese branch, founded by Carl Menger (1840–1921) with his Principles of Economics (1871) and culminating with Ludwig von Mises (1881–1973) and his unsurpassed Human Action (1940), and by what has since become known as Austrian economics, provides the intellectual material for a grand, comprehensive system of non-hypothetically true laws of human action, of praxeology — the logic of action — and of praxeological laws.
Any explanation of historical events must take praxeology — and specifically Ludwig von Mises — into account, and it is the “empiricists” who are insufficiently empirical in their work. In denying or ignoring the underlying praxeological invariants and constants in their observations of the social world, they fail to see the forest for the trees.
And as for the first, ‘normative’ claim, it is contradicted by the entire body of private law, in particular the law of property and contract, that grew up in response to the continued occurrence of interpersonal conflict regarding scarce resources. From the old ‘natural law’ tradition of the Stoics, through Roman law, to Scholastic law, to the modern, secular ‘natural rights’ tradition, a body of law and of scholarly literature on matters of law had emerged by the nineteenth century, that should put any ethical relativist to shame.
Buried for a long time under mountains of positivist legal rubbish, this tradition has been rescued and reinvigorated, refined, and rigorously reconstructed in our time above all by Murray N. Rothbard (1926–1995), most notably in his Ethics of Liberty (1981), into the most comprehensive system of natural law and the political philosophy of libertarianism. Any normative evaluation of historical events and developments that aspires to the rank of science, i.e., that claims to be more than an arbitrary expression of taste, must take account of libertarianism, and of Murray Rothbard in particular.
Hence, to indicate the method guiding my studies in the history of man, the subtitle of my little book: An Austro-Libertarian Reconstruction.
The events in human history that I want to explain are not necessary and predetermined, but contingent empirical events, and my studies then are not exercises in economic or libertarian theory. They will have to tell history as it really was and take account of all known facts. In this regard, I do not claim any originality. I do not unearth any unknown facts or dispute any established findings. I rely on what others have established as the known facts. But the facts and the chronology of events do not contain their own explanation or interpretation. What distinguishes my studies is the fact that they explain and interpret the history of man from the conceptual vantage point of Austro-Libertarianism: with the background knowledge of praxeology (economics) and of libertarianism (ethics). They are conducted in awareness of the non-hypothetical or aprioristic character of the laws of praxeology and of ethics and the fact that such laws impose strict logical limitations on what — which one — explanation or interpretation, of all conceivable explanations and interpretations of some given historical data set, can be considered at all possible and possibly (hypothetically) true (and so be scientifically admissible), and which ones can and must be ruled out instead as impossible and impossibly true. History, then, is rationally re-constructed, i.e., with the knowledge that every possibly true empirical explanation and interpretation must be in accordance not only with the ‘data’ but in particular also with praxeological and ethical law, and that every explanation or interpretation at variance with such laws, even if apparently ‘fitting the data,’ is not only empirically false but not a scientifically admissible explanation or interpretation at all.
The history so reconstructed and retold is to a significant extent revisionist history, opposed not only to much or even most of what the dominant leftist “mainstream” has to say on the matter, but, owing to the emphasis placed in my studies on human inequalities and in particular on unequal cognitive abilities and psychic dispositions, opposed also to much pronounced and proclaimed in this regard by some circles of “politically correct” and “progressive” so-called “cosmopolitan” establishment-libertarians.
Thus the first momentous event in the history of man, the Neolithic Revolution, is reconstructed as a cognitive achievement of the first order and a great progressive step in the evolution of human intelligence. The institution of private land ownership and of the family and the practice of agriculture and animal husbandry is explained as a rational invention, a new and innovative solution to the problem faced by tribal hunters and gatherers of balancing population growth and increasing land scarcity.
Similarly, the Industrial Revolution is reconstructed as another great leap forward in the development of human rationality. The problem of balancing land and population size that had been temporarily solved with the original invention and subsequent spread and worldwide imitation of agriculture had to eventually re-emerge. As long as the population size increased, per capita incomes could be increased only if and for as long as productivity increases outstripped population growth. But steady productivity increases, i.e., the continuous invention of new or more efficient tools for the production of ever more, new or better products, requires a continuously high level of human intelligence, of ingenuity, patience, and inventiveness. Wherever, and as long as such a high level of intelligence is lacking, population growth must lead to lower — and not to higher — per capita incomes. The Industrial Revolution, then, marks the point, when the level of human rationality had reached a level high enough to make the escape from Malthusianism possible. And the escape is reconstructed as the result of the “breeding,” over many generations, of a more intelligent population. Higher intelligence translated into greater economic success, and greater economic success combined with selective marriage- and family-policies translated into greater reproductive success (the production of a larger number of surviving descendants). This combined with the laws of human genetics and civil inheritance produced over time a more intelligent, ingenious and innovative population.
Lastly, while the Neolithic and Industrial Revolutions are reconstructed as correct and innovative solutions to a persistent problem: of a population size encroaching on living standards, and hence as great intellectual advances, the third momentous event to be explained is the invention of the State. The State is a territorial monopolist of ultimate decision-making and its successive transformation from a monarchic to a democratic State, is reconstructed as the outcome of a sequence of cumulative intellectual — moral and economic — errors and as a step back in the development of human rationality and a growing threat to the achievements attained with the Industrial Revolution. Per construction, the State cannot achieve what it is supposed to achieve. It is supposed to produce justice, i.e., to uphold and enforce the law, but with the power to legislate the State can — and inevitably will — break the law and make law in its own favor and so produce instead injustice and moral corruption. And the State is supposed to protect the property of its subjects from foreign invasion, but with the power to tax its subjects it can — and inevitably will — expropriate the property of these subjects not, obviously enough, to protect them and their property, but to ‘protect’ itself and its expropriations against any so-called “invader,” foreign or domestic. As an “expropriating property protector,” i.e., as a fundamentally “parasitic” institution, the State can never help but will always hinder in the production of wealth and so lower per capita incomes.
In combination, then, with the following studies I hope to make a small contribution to the old tradition of grand social theory and render the long course of human history from its very beginnings to the present age more intelligible.
Market relationships are constantly criticized as selfish or greedy, with rewards to selfishness rendering them ethically damaging. As Friedrich Hayek put it, “the belief that individualism approves and encourages human selfishness is one of the main reasons why so many people dislike it.” However, that charge is false.
Markets do involve self-interested people jointly advancing their goals, often without even knowing one another, but pursuing one’s self-interest is not the same as being selfish.
People Have Diverse InterestsEconomists assume that individuals are self-interested. That simply means that there are some things each person cares about; some ends matter more to them than to others. Its consequence is that each person would prefer command over — i.e., the power to decide about the use of — more resources rather than fewer, because that allows us to advance whatever ends we value more effectively than we could otherwise. But valuing command over the disposition of more resources is not a monomaniacal focus on oneself.
Hayek understood this confusion, writing that:
If we put it concisely by saying that people are and ought to be guided in their actions by their interests and desires, this will at once be misunderstood or distorted into the false contention that they are or ought to be exclusively guided by their personal needs or selfish interest, while what we mean is that they ought to be allowed to strive for whatever they think desirable.
If all a person cared about was limited to himself or herself, that person’s self-interest could be equated with selfishness. But if someone cares about anything or anyone else beyond themselves, then this differs from selfishness in several important ways.
When Mother Teresa, for example, used her Nobel Prize award to build a leprosarium, she was acting in a self-interested manner, because those resources were used to advance something she cared about. But she did not act in a selfish manner.
Free Markets Force Cooperation On the Truly SelfishAnother way of characterizing the distinction is that while selfish people are self-interested (they care about themselves), to be self-interested carries no implication of selfishness. And self-interest, whether selfish or not, is what allows social cooperation to be enhanced, and others benefited, by voluntary market behavior. That is why even if someone involved in markets was selfish, it does not follow that markets made them more selfish, nor that markets expand the realm of selfishness in human affairs.
To illustrate, assume Stan is completely selfish. Provided that the property rights of others are respected, Stan can only induce others to voluntarily cooperate with him in furthering his plans by making them better off than would their alternatives. He cannot coerce them. So despite caring nothing about others, Stan acts to advance their interests as the means to advancing his own. That is the miracle described in Adam Smith’s invisible hand metaphor. Even if someone was selfish, he still has incentives to benefit others by better cooperating with them and improving their options.
We Can’t Ignore the Good People Do With Their MoneyThe “selfishness” criticism of market behavior is also enabled by focusing analytical attention only on the market exchanges taking place. In such a narrow view, there is no analytical difference between selfishness and self-interest, allowing people to simply overlook evidence disproving universal selfishness. However, if we consider people’s behavior beyond a microscopically narrow focus on market exchanges, we see vast evidence for non-selfish behavior, from caring for families and friends, to giving hundreds of millions of hours and hundreds of billions of dollars to charity, to random acts of kindness. Virtually everyone exhibits some generosity. And the potential for manifesting individuals’ generous spirits is expanded, not contracted, by the mutual benefits markets provide.
Adam Smith put this issue well in The Theory of Moral Sentiments, arguing that:
How selfish so every man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.
And far from endorsing narrow selfishness, he concluded that “to restrain our selfish, and to indulge our benevolent affections, constitutes the perfection of human nature.” In other words, our self-interest includes the development of our benevolent nature. The so-called father of economics rejected the selfishness market critics insist they are built upon both as a general presumption and as part of a good human life.
It is clear that market participants cannot be adequately characterized as motivated by greed. So what explains such false attacks? The attacks come when some people think their preferences should override the preferences of property owners and owners’ control of their own property. Yet, they are unable to get the owners’ voluntary consent. So such owners and ownership must be demeaned, and then self-defined reformers can impose their preferences on owners without noticing it puts their own greed on obvious display.
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THE AUSTRIAN: Why did you decide to apply for and attend Mises University?
AARON ENSLEY: Honesty compels me to admit that my primary motivation for attending Mises University was to receive the final “seminar” credit that I needed to graduate from the University of Detroit Mercy. However, independent of this credit, I was in fact eager to attend Mises University because I was familiar with many of the speakers and very much looked forward to hearing them speak and getting the opportunity to meet them personally.
TA: What effect has your work with the Mises Institute had on your academic career?
AE: Although I still have and frequently reference the many pages of notes I took while attending Mises University, I would say that I probably learned more from the Mises University podcasts that I often listened to while operating a small business (a lawn mowing service). Don’t tell my graduate professor this, but without question, I learned more about economics by listening to podcasts while mowing lawns than I ever could have in school. Over the course of a few years, I listened to hundreds of podcasts and audiobooks on a variety of special topics that pertain to Austrian methodology and economic history. However, it is worth noting that I probably would not have listened to so many of these podcasts if the speakers were not so entertaining (e.g., Tom Woods, Walter Block, Joe Salerno, and Charles Adams). Also, these podcasts not only gave me a more robust understanding of subjects like American history, anarcho-capitalism, entrepreneurship, and tax history, but the speakers usually cited other books and articles that I would often look into later. To say it plainly, the Mises Institute became a Pandora’s box of excellent resources that I reference often.
TA: How has your knowledge of Austrian economics impacted your work as an economics instructor?
AE: I have had the unique privilege of working for institutions that are explicitly supportive of Austrian economics, so unlike many other instructors, I am generally free to teach Austrian economics as the primary methodology for my economics courses (of course, I do discuss other schools as well).
I may be a bit unique to the “academic world” in that I have never considered myself an academic, but more of a “free-market evangelist” that had a revelation of how markets work and I have been eager to share this knowledge with others ever since. When I began teaching at Northwood University and later at Brookfield Academy, I probably had more passion than book-smarts, but I had a good foundation and a broad understanding of the importance of free enterprise, limited government, and entrepreneurship, which caused me to focus mostly on the fundamental concepts in micro, macro, and international trade. Although I now teach Advanced Placement economics courses as well, I still use Austrian economics and its methodology (praxeology) as the foundation for the courses, even though some of the AP content deviates from what I might like to emphasize (e.g., calculating elasticity, cost curves, the Lorenz Curve, etc.). I generally find that once students are presented with Austrian ideas that make sense, they tend to see how much more useful Austrian economics is than the more modern focus of the economics discipline, which is often illogical and not particularly useful.
TA: What reaction have you received from students to the Austrian method of analyzing the economy?
AE: Students who have a natural curiosity and desire to learn generally enjoy my classes and appreciate the methodology used to analyze the economy. I always let students know in advance that my class will not likely be what they are expecting (they are always prepared for the worst). I also let them know that I disliked the first two economics courses that I took when I was an undergraduate because the subject was presented through the lens of graphs, rather than through the lens of logic or philosophical reasoning, but I learned to love it once I had a teacher that presented the latter methodology. This generally sets students at ease and I have received a lot of feedback that indicates that they did in fact appreciate my methodology. More importantly, I believe that the students who leave my class will forever see the world differently and will have an appreciation for what freedom really means as it pertains to our standard of living and overall well-being.
If you want to see what many of my students have said about my courses, I would encourage you to take a look at some of my student reviews at RateMyProfessor.com.
TA: You recently invited Mark Thornton to Wisconsin to participate in a discussion on drug prohibition. Can you tell us more about it?
AE: I serve on the board of directors for the Wisconsin Forum (WisconsinForum.org), a nonprofit free-market advocacy group based in Milwaukee. At my suggestion, we invited Dr. Thornton to address the members and guests of the Wisconsin Forum at a dinner event (we generally do this five times a year). Dr. Thornton delivered excellent content on drug and alcohol prohibition and we were very glad he came. I also arranged for him to speak to our upper school students at Brookfield Academy, but at the last minute, there was some concern (and perhaps panic) from the administration that some of the students might misinterpret Dr. Thornton’s presentation and then the school would have a problem with parents.
As a result, Dr. Thornton modified his talk and focus to alcohol prohibition, rather than drugs. The message is the same whether you are talking drugs, alcohol, commerce, or money: the market works better without government intervention.
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IntroductionThis piece published as a working paper in 1986 by the Mises Institute, Auburn, Alabama, in response to a methodological controversy that arose during that period. David Gordon wrote this piece in 1986 as a Postdoctoral Fellow at the Social Philosophy and Policy Center at Bowling Green State University.Most of my readers, not yet enlightened by the wisdom of hermeneutics, probably believe that the aim of economics is to discover true propositions about the external world. Exactly which members of the set of true propositions fall within economics, as against other disciplines, has occasioned much dispute. The Austrian approach, expounded in the classics Human Action of Ludwig von Mises and Man, Economy, and State of Murray N. Rothbard, is characteristically broad; it places economics within a wiser science of human action, praxeology, whose theorems are held to follow logically from "apodictically" true axioms.
But Austrians are of course not the only economists who believe in the external world: the neoclassicals, however freely they allow unrealistic hypotheses, have no doubt that a real world exists outside their equations, against which they propose to measure the predictions ensuing from their version of economic theory.
Recently, however, a group of "market-process" economists, mainly to be found at George Mason University in Virginia, believe themselves to have transcended objectivist assumptions about method. Precisely how they think they have achieved this great leap forward we shall have a great deal to say later on; but as a rough preliminary idea of what these economists have in mind, in their view it is not the case that the principal tool of economics is deductive logic unbound to time or place. The false idol of rationalism has now been overthrown: in its place stands hermeneutics, a relatively new Continental style of philosophy whose insights, it is claimed, have much to teach economists. Of these new methodologists, Professor Don Lavoie, hitherto best known for his excellent studies of socialist calculation, ranks foremost; and, in the section of this essay dealing with economics, I shall be principally concerned with his work.
It is not an analysis of Professor Lavoie's papers, however, that confronts us as our initial task. Rather, I propose first to give a brief exposition of hermeneutics. After this discussion, the reader will be in a position to evaluate the claims of the new methodologists that the discipline of economics requires drastic overhaul. I shall be especially concerned with the claim of Lavoie and his associates that a new, consensual way of practicing economics has by the grace of hermeneutics been vouchsafed to us. I shall also, in this section, contrast hermeneutics with Austrian economics in the style of Mises and Rothbard, to the entire advantage of the latter.
Before we begin, one caveat. I am not an economist, and it is not my aim to instruct those more qualified than I in the intricacies of their own discipline. Quite to the contrary, I wish to suggest to economists that they not abandon their carefully wrought science for the products of "vain imaginations."
I"Hermeneutics," as used here, does not designate the science of Biblical interpretation, the most common meaning of the word in ordinary usage. The term here refers more generally to the study of interpretation—of texts first of all and by extension of human action. The movement's principal work is the massive and erudite Truth and Method, by the German philosopher Hans-Georg Gadamer.Hans-Georg Gadamer, Truth and Method (New York: The Seabury Press, 1975). The work appeared in German as Wahrheit und Methode in 1960. A number of other philosophers, e.g., Juergen Habermas and Paul Ricoeur, are honored names in the camp of hermeneutics: each of these thinkers, and others who might be listed, has his own peculiar variant of "the truth delivered unto the saints."Habermas has often been a forceful critic of Gadamer. It is Gadamer's work, however, that has remained most central to the movement, and I shall confine my exposition, with one exception, to his position: the differences, e.g., between Gadamer's hermeneutics and Paul Ricoeur's "hermeneutic phenomenology," let alone more flamboyant views of similar ilk such as the post-structuralism of Jacques Derrida, will not here detain us.
The exception to which I referred above is however a major one. If it is Gadamer who "sitteth at the right hand of the Father," it is Martin Heidegger (1889–1976), under whom Gadamer studied at the University of Marburg in the 1920s, who is the Father Himself of the new movement. The basic concepts of hermeneutics derive in their entirety from the work of this controversial German thinker, and I fear it is his philosophy that we must first examine.
I say "fear" because to understand Heidegger is no small task. Here, e.g., is a key passage from his most famous work, Being and Time (1927), setting forward his approach to interpretation: "Dasein's kind of being thus demands that any ontological Interpretation which sets itself the goal of exhibiting the phenomena in their primordiality, should capture the Being of this entity, in spite of this entity's own tendency to cover things up. Existential analysis, therefore, constantly has the character of doing violence whether to the claims of the everyday interpretation, or to its complacency and its tranquilized obviousness. While indeed this characteristic is especially distinctive of the ontology of Dasein, it belongs to any interpretation, because the understanding which develops in Interpretation has the structure of a projection."Martin Heidegger, Being and Time (eds. and trans. Jon Macquarrie and Edward Robinson (New York: Harper, 1962), p. 359. "Dasein" in ordinary German means "existence."
Though such pellucid prose of course speaks for itself, perhaps a translation into English will not be considered altogether amiss. Heidegger's point here, and throughout much of Being and Time, is in essence a simple one. Whenever anyone sees an object, Heidegger thinks, he sees it against a background. Essential to this notion of background is that, by contrast with what one directly sees, one is aware of the background only indistinctly: to become fully aware of it requires a special act of attention that will often make us view things in a different way from that characteristic of our ordinary, inattentive life. (By Heidegger's principle, note that becoming aware of the background to an act of perception can itself take place only against a further background.)
Heidegger applies his view of perception against a background not only to seeing ordinary physical objects but to any sort of knowledge of the world. Understanding what someone says, or, more to our present point, what a text means, takes place only against a background, itself knows only in a indistinct fashion--unless, once more, one directs a further act of attention to it.
I have so far spoken of acts of perception or understanding, cases in which someone, e.g., is looking at a table or reading a manuscript. But cases of this sort are not in Heidegger's opinion basic. It is not as impartial spectators, gazing upon a world utterly distinct from ourselves, that we first see or understand things. On the contrary, it is only because we act within the world, a world that each of us shares with other human beings, that we can think.
Professor Dagfin Follesdal, in one of the best essays on Heidegger's thought, has set forward this point in much clearer in terms than Heidegger himself managed to do in his long career: "It has commonly been held that practical activity presupposes that I have some idea of what is likely to happen if I do this or that. Heidegger rejects this. He regards our practical ways of dealing with the world as more basic than the theoretical. Things in the world are primarily experienced as ready to hand?as tools and equipment that are used by us. They are what they are in virtue of the position they have within the full context of human activity, with its pattern of means and ends."Dagfin Follesdal, "Husserl and Heidegger on the Role of Actions in the Constitution of the World" in Essays in Honour of Jakko Hintikka (Dordrecht: D. Reidel, 1979), p. 371.
As the reader will no doubt have already noted, Heidegger's thought here has many affinities with the pragmatism of John Dewey, with its impatient dismissal of metaphysical speculation in isolation from practice (Richard Rorty has recently attracted considerable attention for his stress on Heidegger's affinities with American pragmatism). Like Dewey, the German philosopher had no stomach for Descartes' problem of how we know an external world exists. To raise a question of this sort is to presuppose, in utter variance from the truth, that thinking exits apart from the world.
Heidegger soon turned from the somewhat humanistic emphasis of Being and Time. (Exactly. when the turn took place, and how great were its effects, are much controverted topics among Heidegger scholars.) He took to calling the context in which human action takes place Being (sometimes in his very late writing written if crossed-out form): the context of action now appeared not, as before, as a mere background but as an independent force that periodically revealed itself and at other times withdrew. Since the pre-Socratics, Western philosophy has taken place during one on the withdrawals—"forgetfulness of Being" serves as a leitmotif in. Heidegger's complex interpretations of texts ranging from Heraclitus to Nietzsche. (The latter was "that last great metaphysician of the West," whose radicalism paved the way for, the overthrow of metaphysics which Heidegger deems his own work to have carried out.)
To explain the nature of the "forgetfulness of Being" is a task our purposes here fortunately do not require. Very roughly, Heidegger contends that human beings in the modern world think they can control everything they try to make the world a conscious human creation, ignoring the context in which their activities occur. (As this context is Being, one can anticipate that trouble lies ahead.) The desire to control everything underlies both philosophy since Descartes and modern technology. The decline really began earlier, however, with the replacement of the pre-Socratic grasp of truth as "revealing" or "uncovering" (aletheia) with the notion of truth as correspondence. Not even Plato and Aristotle retained the full insight of the pre-Socratics, and by the time of Aquinas "ontotheology" had replaced true thinking.
I very much hope the reader has been unable to understand the preceding paragraph (still better, the preceding two pages). My principal aim has been, by administering a mild dose of Heideggerian thought (though I could not bring myself to do so entirely in the Master's idiolect), to show the utter irrelevance of any of it to questions of economic theory method. So far as I am aware, Heidegger nowhere suggests that any scientific proposition is because it is involved in the forgetfulness withdrawal of Being. Aside from interpreting modern science (in which he would no doubt include economic theory) as an aspect of the technological view of the world, he leaves it strictly alone. Heidegger's philosophy may be true false, as I suspect, too indeterminate to be either it has nothing to say to the economist.
Here an objection might be raised. If everything depends for its meaning on context, then is it not required that we regard the alleged theorems of economics in their context, rather than as apodictic propositions in the style of Mises and Rothbard? Not in the least. Heidegger has attempted to show that his sort of "truth as revealing" underlies and makes possible the prepositional truth used in science: he does not contend that his sort of philosophy serves to invalidate science. (Nor does he claim that economics cannot form part of science.) At most, he suggests in some of his later essays, e.g., The Question Concerning Technology, that stress upon technical achievement has gone too far. (earlier in his career, he had looked to the Nazis for an alternative to an over-technolized world.) But, once more, he never claims that his philosophy makes questionable any proposition of economics. "The demand curve slopes downward and to the right" this is true, whatever one makes of the identity of identity and difference, Gestell, Ereignis, and other Heideggerian marvels.
Some might object that even if Heidegger is irrelevant to economics, Gadamer is not. It is after all Gadamer and not his teacher to whom the new methodologists appeal. Yet when we turn to Gadamer, the situation that confronts us has not changed. Once again, as we shall now see, what we face is a difficult-to-understand philosophy having no relevance to economics, and claiming none.
I must once again begin with an apology. Although students of Heidegger were not required to imitate the oracular style of their mentor, and some, e.g. Karl Loewith and Hans Jonas, have managed from time to time to lapse into intelligibility, Gadamer is on this count firmly in the mainstream. He himself notes that "my friends had invented a new scientific measure, the 'Gad,' which designated a settled measure of unnecessary complications."Hans-Georg Gadamer, Philosophical Apprenticeships (Cambridge, MA: MIT Press, 1985), p. 71.
We have, though, one advantage. With our prior look at Heidegger, the main elements of Gadamer's thought, if not fully comprehensible, are at least recognizable. Gadamer adopts virtually all of the main positions of Heidegger, though to a large degree he downplays their radical break with previous philosophy. Instead of Heidegger's innovation of the pre-Socratics, Gadamer offers us interpretations of past philosophers, principally Plato, Aristotle, and Hegel, highlighting these thinkers' anticipations of Heidegger.
As I have said, the main themes should by now be familiar. Once again, interpretation can take place only against a context. This context brings in the much vaunted hermeneutic circle." A statement in a text makes sense only against the background of the rest of the text in which it is embedded. But the whole text, similarly, can be grasped only by reference to the statements composing it. In order to interpret a text, then, there must be a constant oscillation between part and whole, statement and context.
The context within which an interpretation takes place is not confined to the text itself. The text also exists with a context (Gadamer here remains true to a basic Heideggerian principle) and Gadamer accordingly holds that a text can be understood only within the framework of a certain tradition. The nature of the tradition that lies behind a particular text unfortunately resists full articulation. To think otherwise is to fall into the trap of reasoning in the metaphysical mode, against which Heidegger has so often warned us. The content of a tradition cannot be fully stated in propositions: it must be grasped in an act of empathetic insight.
We are not yet done with context. So far, we have discussed the background of meaning of particular statements in a text, and the background—i.e., tradition—underlying a particular text. But what about the interpreter? He too, Gadamer thinks, exists with a context. Everyone approaches a text from a particular horizon or perspective: this consists of certain assumptions about being and values. Of course, these assumptions cannot be fully articulated: the specter of rationalism once more looms if we attempt to define our assumptions independent of the context within which they exist.
What, then, is the interpreter to do? As Gadamer explains in Truth and Method the key to the mystery lies in the philosophy of art. (Need one say that Gadamer's aesthetics are Heideggerian? The latter's essay "The Origin of the Work of Art" contains the essentials of Gadamer's more extended treatment.) Someone who wishes to understand a work of art should not attempt to reduce it to a series of quasi-mathematical axioms. Instead, one needs to grasp the art object in its being. By contemplating the work, one in effect merges with it. What results from a successful act of insight is not, however, an understanding of the work as it is in itself. Instead, one's own perspective fuses with the context of the work. We now have a new interpretation in which the respective contexts of the work and its interpreter cannot be disentangled. To do so is neither desirable nor possible.
Exactly this same process of a "fusion of horizons" takes j place when one is interpreting a text. Like the English philosopher R.G. Collingwood, who in his Autobiography that statements have meaning only if we see what question they aim to answer, Gadamer believes that one can interpret a text only if one engages in a dialogue with it. The process of question-and-answer by which we attempt to negotiate the hermeneutic circle cannot be grasped other than by insight. The very title of his Truth and Method is intended to hint at his belief that truth cannot be confined with the limits of formalized methods.
If the reader finds this sort of thing illuminating, he has many happy hours in store for him in hundreds of pages of murky prose. But for our purposes the same question that we asked about Heidegger's philosophy can appropriately be posed here: what has any of this to do with economics? Gadamer, we have seen, has j certain not-very-clear views about how philosophical and literary texts should be interpreted. But economists are not engaged in the business of interpreting philosophical texts: whether Gadamer is on target in his chosen field or not, he passes the economist by. So far as I am aware, Gadamer does not dispute this verdict. He presents his hermeneutics not as a substitute for the sciences, but as a separate type of knowledge. (Admittedly, he does at times suggest that sort of insight exceeds in importance the technologizing reason of science.) If there is a science of economics, in the sense deprecated by Professor Lavoie and his colleagues, Gadamer has nothing to say against it.
The situation, I suggest, would be the same were we to consider the vast output of Paul Ricoeur. His involved studies of phenomenology, symbolism, Freudian psychoanalysis, metaphor, and narrative theory in history and literature leave the economic theorist exactly where he was before. Those who challenge this conclusion are invited to explain how Ricoeur's philosophical views mandate a particular view of economic method. (Ricoeur has, unlike Heidegger and Gadamer, written many essays on political and social themes, from a viewpoint sympathetic to socialism; but he does not to my knowledge address problems of economic theory in them.)
IIThe main theme of my exposition of Heidegger and Gadamer is that, so far as economists are concerned, neither philosopher has anything to say. This conclusion entirely differs from the view of hermeneutics held by the new "market process" methodologists. In this section, I shall consider their reasons for thinking that hermeneutics is indeed of relevance to economics. My aim in the previous section was largely expository: here it is critical.
A defender of hermeneutics as applied to economic theory might be taken as advancing one of two theses: (i) Even if hermeneutics does not rule out the existence of a scientific, non-hermeneutical economics, it makes room for a hermeneutic style of economics. Austrian economics in particular is, and ought to be, an example of this kind of economics. (ii) Even if the hermeneutic philosophers do not extend their doctrine to economics, hermeneutics has in fact definite implications for it. Economics not only can be, but must be a hermeneutic discipline. To repeat, thesis (i) permits hermeneutics in economic theory: thesis (ii) requires it. In what follows, I shall endeavor to show that thesis (ii) is false. So far as (i) is concerned, I shall oppose its second part: Professor Lavoie and his associates have not shown that Austrian economics is or should be based on the "science of interpretation." So far as the first part of (i) is concerned, namely that a hermeneutical economics is possible, it will be time enough to examine it when it is produced. I shall in what follows concentrate most of my fire on (ii), the stronger thesis.
Professor Lavoie maintains that the conclusion of r hermeneutics apply not only to the interpretation of philosophical texts but to economics as well. The models of economics cannot, as positivists suppose, be tested against the facts, taken in some purely objective, value-free sense. "Facts are theory-laden and have to be understood as answers to questions. Some prior perspective, an interpretive framework of some kind, must be used to try to 'make sense' of any alleged fact, and to determine its significance.Don Lavoie and Jack High, "Interpretation and the Costs of Formalism," unpublished ms., p. 3.
As we would expect from our discussion of Heidegger and Gadamer, the theories in question cannot be fully articulated. Those active in a particular discipline recognize, in a way they cannot fully state, whether a proposed theory is a good one.
Intuitive insight is indispensable in recognizing good theories: these cannot be generated by an algorithm. The appeal to insight does not end with the discovery of new theories. Quite to the contrary, theories are tested by their success in achieving consensus. A good economic theory is one that succeeds in persuading economists of its acceptability: to search for a more objective standard is futile.
I trust it will not be thought unduly critical to begin by asking: why should we believe any of this? Consider any of the elementary propositions of economics, e.g., the law of diminishing marginal utility or the law of supply and demand. On what values do either of these principles depend? What perspective underlies them? Why are they not, as they appear to be, simple deductions from certain axioms rather than dependent on the economist's "tacit knowledge" for their truth? Lavoie does not tell us, nor does he show what perspective or horizon lies behind any other proposition of economics. Instead, we are told that Gadamer has established this, Richard Berstein has shown that, etc. ("Shown" seems to be taken as a synonym for "stated.") Surely when controversial propositions are advanced, we are owed arguments for their truth. What we get instead is a list of names of continental philosophers and their American sympathizers.
The issue I have raised above goes beyond the mere claim that Professor Lavoie has failed to advance arguments for his views. I offered counterinstances to the claim that all economic theories are true only in relation to a certain perspective or I horizon. Further, these same examples appear to falsify the claim that economic laws rest on economist's "tacit knowledge": their derivation, to be found in any elementary textbook, appears to be straightforward and explicit. Nor does it appear that their truth depend on consensus: they are agreed upon because they are seen to be true, not regarded as true because they are agreed upon. Does Lavoie dissent?
The counterexamples to Lavoie's subjectivism are not limited to a few instances. It seems to me a serious weakness of the paper under discussion that it nowhere confronts the claim of Mises and Rothbard to have established a science of human action based upon logical deduction from self-evident axioms. Instead, the hermeneutical position is contrasted with mathematical economics as practiced by the neoclassicals. Are these the sole positions worthy of consideration? If one wishes to contend that all truth in economics is relative to a value-laden perspective, one has the obligation to show what is wrong with the body of economic analysis that at least prima facie is not so dependent.
It will not do in reply to refer to other Austrian I economists whose positions place them closer to the hermeneutics camp, e.g., F.A. Hayek and Ludwig Lachmann. (One might point, e.g., to the genuine parallels between Gadamer's defense of prejudice and Hayek's criticism of "constructive rationalism"). Regardless of the other economists' ideas, the claims of Mises and Rothbard (not to mention other economists such as Bohm-Bawerk who proceed through deductive argument) need to be met by the hermeneuticists.
Perhaps they would reply that Austrian economics, even as practiced by Mises and Rothbard, depends on interpretative acts of understanding that are irremediably subjective. We shall consider this in more detail in our discussion of (i) below; but at least or! the surface the contention seems false. One does, on the Mises-Rothbard view, have to know from the "inside" what action means. But everything else is logically deduced from the axiom that human beings action (together with the subsidiary postulates). Further, the concept of action itself certainly does not appear one whose grasp depends on a merely subjective horizon or on adherence to certain values. If this is denied, what is the horizon on which this concept depends?
But what of the arguments of the hermeneutical philosophers themselves? If I am right, Heidegger and Gadamer did not employ their philosophies directly to challenge conventional scientific method. But can we not do this for them? If truth, as Heidegger thinks, is a process of revealing from a context that ever remains partially hidden, why does this not apply to economic truth? Why do not Gadamer's hermeneutic circle and fusion of horizons require economics to be other than value-free and objective?
We must revert to a point we have made already against Professor Lavoie. No arguments for any of the theses mentioned above are to be found in the works of the hermeneutical philosophers. Instead, we are treated to oracular pronouncements and learned historical disquisitions, neither of which constitutes argument. I cannot expect those well-disposed to the new movement to take my word for this: instead I ask only that the skeptic examine for himself the main works of Heidegger and Gadamer with this point in mind.
But we may, I think, go further. The propositions in question appear, like many varieties of relativism, to be unassertible on their own terms. If truth depends on a hidden context from which it cannot be detached, on what context does this very statement depend? Or, if its truth can be grasped regardless of its context, why cannot other propositions be likewise detached from their context? And if the contextual thesis is linked to a context, why should we adopt the perspective (what is it?) on which it depends?
Again, the hermeneutic circle falls before the same objection. Is the circle itself dependent on some fuller whole for its understanding? If it may be understood independently of other propositions, why may not other propositions be understood by themselves? If it cannot be so understood, what are we discussing? And is the statement that all factual statements are value-laden itself value-laden? Further examples are left as exercises for the reader.
I find especially objectionable the new methodologists' claim that the criterion for truth in economic theory is consensus among economists. First, what if economists fail to agree on the consensus standard? Is the standard by its own terms invalid? Further, since the great majority of economic theorists favors the positivists and mathematical methods the hermeneuticians oppose, does not the consensus criterion require them to abandon their view and join, if they can, the neoclassical majority? Finally, if the question confronting us is "What theories should economists adopt?" it is hardly a very good answer to say, "They should adopt the theories they agree on." Precisely what is in question is which theories and methods they ought to agree on.
Perhaps the hermeneuticians could at this point weaken their claims and say that at least some, though not necessarily all, propositions of economics are perspectival and value-laden. After all, is it not the case that scientists sometimes accept or reject theories on intuitive grounds, using tacit knowledge? I have no wish to deny that they do so. But Lavoie's methodological view seems dependent on the stronger position that scientists not only use tacit knowledge, but could not, if they wished, state their reasons explicitly. To take the example Lavoie and High offer, why could not scientists state in detail the reasons that lead them to reject astrology? The very existence of The Skeptical Inquirer, which they themselves cite, appears evidence that scientists could do so. The fact that in science some hypotheses are assigned such low prior probabilities that they get little consideration is no proof of the perspectival or "tacit knowledge" approach. I freely confess, however, that I have not shown that no proposition of economics is value-laden or true only from a perspective. I have contended only that the hermeneuticians have given us no reason to believe these things. It is up to the hermeneuticians to give us some examples of economic propositions that can be grasped only intuitively, from a value-laden perspective. Further, suppose some proposition could be known only tacitly. It need not by that fact be value-laden.
Here Lavoie and company reply with a bold stroke. They claim (part of) Austrian economics is precisely what we have demanded. Lavoie and High compare the Austrian approach to competition with the neoclassical. In the Austrian view, they point out, entrepreneurs operate under conditions of Knightian uncertainty. No one has full information on what prices will clear the market, and everywhere judgment and tacit knowledge are the order of the day. This is indeed so, but our authors have confused a theory with its subject matter. That the actors studied by a theory used tacit knowledge to deal with conditions of imperfect information need not itself be a proposition known only through subjective hunches. Just as the study of insane people need not consist of mad propositions, the study of actors using imperfect knowledge need not resemble its subject matter.The fallacy here is analogous to the "fallacy of imitative form" often discussed by Yvor Winters in his criticism of poetry. I do not see that Lavoie and High have in the slightest undercut the Mises-Rothbard view that the propositions of economics that deal with subjective values are themselves objectively true. Thesis (i), insofar as it applies to Austrian economics, is unproved. There is no objective science of entrepreneurship, but the entrepreneur and the economist are two very different persons.
Our show this weekend features William Boyes, Director of Arizona State University's Center for the Study of Economic Liberty. Boyes was in Auburn last week presenting a keynote speech at our Austrian Economics Research Conference. In his talk, Boyes gives the perspective of someone who has been a Keynesian in mainstream academia, but who is now a dedicated Austrian.
The Murray N. Rothbard Memorial Lecture, sponsored by Helio Beltrão. Recorded at the Austrian Economics Research Conference at the Mises Institute in Auburn, Alabama, on 14 March 2015. Includes an introduction by Joseph T. Salerno.
The Lou Church Memorial Lecture, sponsored by the Lou Church Foundation. Recorded at the Austrian Economics Research Conference at the Mises Institute in Auburn, Alabama, on 12 March 2015.
The following studies try to explain three of the most momentous events in the history of mankind.
First, I explain the origin of private property, and in particular of ground land, and of the family and the family household as the institutional foundations of agriculture and agrarian life that began some 11,000 years ago, with the Neolithic Revolution in the Fertile Crescent of the Near-East, and that has since—until well through the late nineteenth century—come to shape and leave an imprint on human life everywhere.
Second, I explain the origin of the Industrial Revolution that set off around 1800, only some 200 years ago in England. Until then and for thousands of years, mankind had lived under Malthusian conditions. Population growth was constantly encroaching on the available means of subsistence. Every productivity increase was “eaten up” quickly by an expanding population size such that real incomes for the overwhelming bulk of the population were held down constantly near subsistence level. Only for about two centuries now has man been able to achieve population growth combined with increasing per capita incomes.
And third, I explain the parallel origin and development of the State as a territorial monopolist of ultimate decision-making, i.e., an institution vested with the power to legislate and tax the inhabitants of a territory, and its transformation from a monarchic State, with “absolute” kings, to a democratic State with “absolute” people, as it has come to the fore in the course of the twentieth century.
While this could suffice as an introduction and the reader could proceed directly to the following chapters, a few additional remarks may be in order for the philosophically minded reader.
Until the early twentieth century, the following would have been classified as sociological studies. But with the rise and increasingly dominant influence attained in the course of the twentieth century by the empiricist-positivist-falsificationist philosophy, the term sociology in the meantime has acquired a very different meaning. According to the empiricist philosophy, normative questions—questions of justice, of “right” and “wrong”—are not scientific questions at all—and consequently most of modern, “scientific” sociology, then, is dogmatically committed to some variant of ethical relativism (of ‘anything goes’). And the empiricist philosophy categorically rules out the existence of any non-hypothetical, non-falsifiable, or synthetic a priori laws and truths—and accordingly modern sociology is dogmatically committed also to some variant of empirical relativism (of ‘everything is possible,’ of ‘you can never be sure of anything,’ and ‘nothing can be ruled out from the outset’).
My studies are and do everything a “good empiricist” is not supposed to be or do; for I consider the empiricist-positivist philosophy wrong and unscientific and regard its influence especially on the social sciences as an unmitigated intellectual disaster.
It is demonstrably false that ethics is not a science, and that no universal principles of justice exist and no “true” (non-arbitrary) criterion of distinguishing moral progress from decline. And it is likewise demonstrably false that no universal and invariant laws of human action and interaction exist, i.e., no laws of what is and is not possible and of what can and cannot be successfully done in human affairs, and no non-arbitrary criterion of judging actions as correct and successful or incorrect and faulty solutions to a given problem or purpose.
As for the second, ‘positive’ claim, it is contradicted by the entire body of Classical Economics. Classical Economics, reconstructed, refined, and further advanced during the “Marginalist Revolution,” in particular by its Viennese branch, founded by Carl Menger (1840–1921) with his Principles of Economics (1871) and culminating with Ludwig von Mises (1881–1973) and his unsurpassed Human Action (1940), and by what has since become known as Austrian economics, provides the intellectual material for a grand, comprehensive system of non-hypothetically true laws of human action, of praxeology—the logic of action—and of praxeological laws.
Any explanation of historical events must take praxeology—and specifically Ludwig von Mises—into account, and it is the “empiricists” who are insufficiently empirical in their work. In denying or ignoring the underlying praxeological invariants and constants in their observations of the social world, they fail to see the forest for the trees.
And as for the first, ‘normative’ claim, it is contradicted by the entire body of private law, in particular the law of property and contract, that grew up in response to the continued occurrence of interpersonal conflict regarding scarce resources. From the old ‘natural law’ tradition of the Stoics, through Roman law, to Scholastic law, to the modern, secular ‘natural rights’ tradition, a body of law and of scholarly literature on matters of law had emerged by the nineteenth century, that should put any ethical relativist to shame.
Buried for a long time under mountains of positivist legal rubbish, this tradition has been rescued and reinvigorated, refined, and rigorously reconstructed in our time above all by Murray N. Rothbard (1926–1995), most notably in his Ethics of Liberty (1981), to the until now most comprehensive system of natural law and the political philosophy of libertarianism. Any normative evaluation of historical events and developments that aspires to the rank of science, i.e., that claims to be more than an arbitrary expression of taste, must take account of libertarianism, and of Murray Rothbard in particular.
Hence, to indicate the method guiding my studies in the history of man, the subtitle of my little book: An Austro-Libertarian Reconstruction.
The events in human history that I want to explain are not necessary and predetermined, but contingent empirical events, and my studies then are not exercises in economic or libertarian theory. They will have to tell history as it really was and take account of all known facts. In this regard, I do not claim any originality. I do not unearth any unknown facts or dispute any established findings. I rely on what others have established as the known facts. But the facts and the chronology of events do not contain their own explanation or interpretation. What distinguishes my studies is the fact that they explain and interpret the history of man from the conceptual vantage point of Austro-Libertarianism: with the background knowledge of praxeology (economics) and of libertarianism (ethics). They are conducted in awareness of the non-hypothetical or aprioristic character of the laws of praxeology and of ethics and the fact that such laws impose strict logical limitations on what—which one—explanation or interpretation, of all conceivable explanations and interpretations of some given historical data set, can be considered at all possible and possibly (hypothetically) true (and so be scientifically admissible), and which ones can and must be ruled out instead as impossible and impossibly true. History, then, is rationally re-constructed, i.e., with the knowledge that every possibly true empirical explanation and interpretation must be in accordance not only with the ‘data’ but in particular also with praxeological and ethical law, and that every explanation or interpretation at variance with such laws, even if apparently ‘fitting the data,’ is not only empirically false but not a scientifically admissible explanation or interpretation at all.
The history so reconstructed and retold is to a significant extent revisionist history, opposed not only to much or even most of what the dominant leftist “mainstream” has to say on the matter, but, owing to the emphasis placed in my studies on human inequalities and in particular on unequal cognitive abilities and psychic dispositions, opposed also to much pronounced and proclaimed in this regard by some circles of “politically correct” and “progressive” so-called “cosmopolitan” establishment-libertarians.
Thus the first momentous event in the history of man, the Neolithic Revolution, is reconstructed as a cognitive achievement of the first order and a great progressive step in the evolution of human intelligence. The institution of private land ownership and of the family and the practice of agriculture and animal husbandry is explained as a rational invention, a new and innovative solution to the problem faced by tribal hunters and gatherers of balancing population growth and increasing land scarcity.
Similarly, the Industrial Revolution is reconstructed as another great leap forward in the development of human rationality. The problem of balancing land and population size that had been temporarily solved with the original invention and subsequent spread and worldwide imitation of agriculture had to eventually re-emerge. As long as the population size increased, per capita incomes could be increased only if and for as long as productivity increases outstripped population growth. But steady productivity increases, i.e., the continuous invention of new or more efficient tools for the production of ever more, new or better products, requires a continuously high level of human intelligence, of ingenuity, patience, and inventiveness. Wherever, and as long as such a high level of intelligence is lacking, population growth must lead to lower—and not to higher—per capita incomes. The Industrial Revolution, then, marks the point, when the level of human rationality had reached a level high enough to make the escape from Malthusianism possible. And the escape is reconstructed as the result of the “breeding,” over many generations, of a more intelligent population. Higher intelligence translated into greater economic success, and greater economic success combined with selective marriage- and family-policies translated into greater reproductive success (the production of a larger number of surviving descendants). This combined with the laws of human genetics and civil inheritance produced over time a more intelligent, ingenious and innovative population.
Lastly, while the Neolithic and Industrial Revolutions are reconstructed as correct and innovative solutions to a persistent problem: of a population size encroaching on living standards, and hence as great intellectual advances, the third momentous event to be explained is the invention of the State. The State is a territorial monopolist of ultimate decision-making and its successive transformation from a monarchic to a democratic State, is reconstructed as the outcome of a sequence of cumulative intellectual—moral and economic—errors and as a step back in the development of human rationality and a growing threat to the achievements attained with the Industrial Revolution. Per construction, the State cannot achieve what it is supposed to achieve. It is supposed to produce justice, i.e., to uphold and enforce the law, but with the power to legislate the State can—and inevitably will—break the law and make law in its own favor and so produce instead injustice and moral corruption. And the State is supposed to protect the property of its subjects from foreign invasion, but with the power to tax its subjects it can—and inevitably will—expropriate the property of these subjects not, obviously enough, to protect them and their property, but to ‘protect’ itself and its expropriations against any so-called “invader,” foreign or domestic. As an “expropriating property protector,” i.e., as a fundamentally “parasitic” institution, the State can never help but will always hinder in the production of wealth and so lower per capita incomes.
In combination, then, with the following studies I hope to make a small contribution to the old tradition of grand social theory and render the long course of human history from its very beginnings to the present age more intelligible.
Hans-Hermann HoppeIstanbul, January 2015