The Nature and Origin of Rights, Part Two

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In part one of this two-part series of essays we explored the difference between treating social phenomena such as rights, obligations, rules, laws and conflicts as products of human interaction on the one hand and as products of explicit human construction on the other. In this second part we will proceed to explore precisely how the constructivist-rationalist approach to social phenomena came about and how devastating it can be to individual liberty when it infiltrates political philosophy. From this we can learn some important lessons when it comes to developing and shaping our own libertarian theory.

Generations after customary legal systems developed through social interaction, philosophers began to reflect upon this phenomenon, a reflection which, for Western purposes, began with the Ancient Greeks. In accordance with our view here, the purpose of this endeavour should not have been for philosophers to treat these matters as a tabula rasa on which to scribe whatever they thought was the most convincing and compelling case for a system of rules. Rather, it was to clarify that which was already occurring and to make explicit a conceptual framework that was already implicit. Indeed, as we stated earlier, this is common among most human endeavours – science, art, mathematics, economics, language and so on all flourished before we stopped to think about what we were actually doing in each of them. The fruit of this reflection was to distil from legal systems common elements such as conflicts, legal personage, property, rights, obligations, malum in se and some kind of understanding of natural justice. Thus, there existed principles that appeared to transcend expediency, self-interest, and the particular time and place, in spite of the fact that individual conceptions or realisations of those concepts differed. In other words, they were principles that were not just fashioned by leaders, intellectuals, or by “society” but spoke from some kind of universal plain. (This point should not be understood as a refutation of legal positivism. Rather, it simply says that the conceptual framework of legal systems – including the nature of a conflict and the rights and obligations that ensued – were not something that were designed and imposed).

However, this process of reflection and elaboration did not occur in a vacuum, and was (and still is) considered alongside a whole host of other philosophical problems such as knowledge, existence, morality, aesthetics, and so on. In the consideration of “the rules of conduct” there was a distinct overlap between what we might call political philosophy (broadly, what a person can be forced to do) and wider morality (that which a person should choose to do), an equivocation which has persisted to the present day. The process of identifying appropriate conduct – anything from morals, etiquette, manners, the attainment of beauty, happiness, and so on – always and necessarily involves elaborations on how rational actors should choose to behave with and towards non-rational beings/objects and towards other rational beings alike. When a proponent of certain moral rights and obligations overlaid these considerations onto the development of the understanding of legal rights (i.e. rights that could be enforced by violence) what resulted were systems of constructed conflicts, constructed rights and constructed obligations which never arose out of any interactions between individual parties.

If libertarians are to ever find the key that unlocks the door to a world of liberty, it is very important for them to understand the extent of the effects of this kind of endeavour and how it has served as the basis of countless numbers of despotic political theories. When someone constructs or proposes a system of rights and obligations and to prescribe legally enforceable rules of conduct, the result was not to engage in the process of “identifying” conflicts that exist between two other beings or objects; rather, it was to identify a conflict between himself and the particular person upon whom he claimed had an obligation. The conflict was a clash between the proponent’s values and the values of another or other individuals. In other words, the proponent sets himself up as the legally aggrieved party and bases the outcome of law and adjudication on some kind of a conflict between himself and somebody else who was behaving in a manner the proponent simply happened not to like.

Let’s say that there are three people Andrew, Bob and Charlie. Andrew and Bob are two people who live and interact in a society. Charlie, on the other hand, is a philosopher who looks upon the condition of A and B and decides for himself that Andrew owes a certain obligation to Bob. Let us say that, in order to create some kind of just and equitable society, Charlie declares that Bob should have the right to £100 of Andrew’s income every month. Andrew is therefore now burdened with an obligation of furnishing money to Bob, who now possesses the right to take this money from Andrew with the full backing of the force of law. However, the real right claimed in this situation is not by Bob. Andrew and Bob may have been perfectly happy before Charlie came along; Bob may have been content with his own income and coveted nothing that Andrew possessed. Rather, the real, substantive right is claimed by Charlie. It is Charlie who does not like the situation that Andrew and Bob are in – it is he who despises the existing property arrangements between the two. What Charlie is therefore claiming through his proposal is his right to go to court every time some action he does not like has occurred and to invoke his right to have this action stopped (or conversely to force an action that has been omitted). This desire of Charlie’s is masked in the language of providing justice and fairness for Bob, whereas Bob, in his own mind, never conflicted with Andrew at all and never had reason to invoke a right. The conflict originates wholly in Charlie’s mind.

This becomes clearer when Bob is not another competent adult but is, rather, an animal or an object. An object – let’s say a tree – as far as we know lacks any appreciation of ends, values and choices, and cannot understand any alternative situation as better, beneficial or valuable. Without being able to perceive value or any preference of ends the crucial element for the source of a conflict with another individual is missing. If there is no conflict then there are no rights and obligations. It is for this reason that we owe rights to rational beings who think, value, choose and act but we do not owe rights to non-rational beings and objects who are utterly devoid of these capacities. If, therefore, Charlie comes along and says “This tree has a right to not be cut down” and that, consequently, Andrew has an obligation to not cut down the tree, it is clear that the real conflict over the state of the tree is not between Andrew and the tree; it is, rather, between Andrew and Charlie. The tree has no capacity to care whether it is remains standing, is cut down, or is burnt to the ground. It has no values, no choices, no ends. Rather, it is clear that the person who values the tree remaining upstanding is Charlie. Charlie is seeking, by declaring a pseudo-right for the tree, a real right for himself to have his values vindicated and for Andrew to yield to these values. In short, Charlie wants to force Andrew to comply with what he, Charlie, simply wants him to do.

Usually, theories such as those of Charlie do not confine themselves to individual cases such as that of Andrew and Bob, or Andrew and some object. Rather, Charlie is normally the proponent of a much wider theory of social behaviour as he perceives a conflict between his values and the values of practically everybody else. In other words, he is claiming his right to force everyone else to conform to his grand vision of society. There can be no greater example of this kind of reconstruction of sociological concepts than that furnished by Karl Marx through his espousal of the so-called exploitation theory. Marx analysed the voluntary capitalist/employer relationship according to the equivalence of its surface phenomena with those of previous non-voluntary relationships such as serfdom, explaining the motivations, mechanics, and outcomes of this relationship with a series of fictions such as the harmony of class interests and distortions of several tenets of classical economics. From this, his labour theory of value leads to the conclusion that employer’s profit is “surplus value” appropriated from the labourers. Marx himself was careful to explain his theory as a scientific, economic theory that must be properly refuted in a scientific manner. However it is clear that he is inviting the specifically ethical conclusion that profit is theft, a conclusion to which his followers so willingly succumbed. The question of whether Marx’s scientific conclusions were the slave of his political preoccupations rather than vice versa is debatable. Either way, however, we can see that the effect of Marx’s de facto reinvention, his deliberate reconstruction, of the concept of theft was to urge the establishment of a property order that he desired – the abolition of the private ownership of the means of production – rather than that desired by everyone else. In short, he invented a conflict between two great swathes of the population that was not in any way perceived by the parties themselves. This theory, this constructivist intrusion into social phenomena, went on to enslave half of the globe for nearly a century and resulted in the deaths of tens of millions of people. This trait or technique of reconstruction was not limited to Marx, however. Indeed, pretty much every significant contribution to socialist theory which denigrated the capitalists and entrepreneurs as thieves and parasites was made by middle class onlookers and observers; the working class themselves did not seek any right to protection from any alleged “theft”. So too did the backlash against the conditions of industrial workers in the nineteenth century receive its main championship from middle class intellectuals such as Charles Dickens, Lord Salisbury and Sidney and Beatrice Webb – busybodies who fought for people’s so-called rights without ever stopping to think whether or not those people wanted them. This is not to say, of course, that workers – the constructed rights holders – would not have willingly championed the apparent invocation of “their” rights. After all if someone comes along saying you can effectively have your cake and eat it you are hardly going to complain. This can be seen clearly today with the advocacy of minimum wages. Employees are lulled into thinking that there can be higher, nominal wages and plenty of jobs to go round whereas economic theory tells us that floors on wage rates are likely to lead to a shortage of available jobs and, hence, unemployment. If, however, you understand the concept of demonstrated preference – an “Austrian” insight that informs us that people’s valuations are revealed by how they act and not what they say – you would realise that their actual valuations were otherwise and they are, in fact, perfectly happy to accept full employment with lower wage rates, or “poor” working conditions. Anything they say otherwise amounts to little more than wishful thinking or whimsical dreaming of an alternative but unrealisable reality.

It is true, of course, that constructivist political theories may be motivated by a genuine concern for and desire to help people. But whether this is true or not any political theorist is rarely honest enough to say that his vision simply imposes his values upon everyone else. Usually this imposition is disguised through a convolution of pseudo-concepts and dogmas, the “exploitation theory” in Marx probably being the most prominent. Other noteworthy examples are the so-called “original position” and “veil of ignorance” in John Rawls. People in the real world do not want the kind of ethics that Rawls espouses so he has to invent a fictional world with fictional situations and fictional motivations in which they do. Indeed Rawls is blatant enough to admit, in A Theory of Justice, that he fashions these pseudo-concepts in such a way as to give him the answer that he wants. Such reconstructions and reinventions are evident, though, in pretty much all collectivist philosophies in which society is deemed to have “failed” to direct its resources in ways demanded by the theory’s proponent. It is evident too in all claims of so-called “market failure” – that the choices of purposefully acting individuals have gravely decided to devote their resources to some feeble end rather than to something “better” and “higher” that exists in the mind of the proponent. Furthermore the imposing party is never starkly identified as being the proponent himself, but, rather, his proxy the state (even if the goal is, like that of Marx, an eventual withering away of the state). It is the state which is tasked with bringing the ends desired by the proponent into being so that what results is that the state itself becomes the true rights holder and everyone else is obliged to succumb to the state’s self-enforcement of its right to bring about the proponent’s vision. Any people who happen to benefit from this, although they may be described as “legal rights holders” (for example those who have a “right” to claim state unemployment and sickness benefits), do not possess any real, fundamental rights at all but are, rather, incidental beneficiaries. In modern democracies, Charlie, the philosopher from our example earlier, is not any one individual but is, rather, the majority, who claim the right to force everyone else to adhere to that which they want (assuming, of course, that democracies really do enact the ends sought by the majority, which is highly doubtful). This majority may have a revolving membership from issue to issue or from election to election but the principle is the same as when that which is desired and imposed upon everyone else originates in the mind of a single person such as Charlie.

Unfortunately, and of more direct relevance to libertarians, none of this changes with libertarian and proto-libertarian theories that are themselves motivated chiefly by the desires of their proponents – that the free market will rapidly increase societal wealth by more than we can imagine; that it makes for an affluent and prosperous society; that humanity will achieve its greatest, hitherto unimaginable endeavours, etc. These theories usually have the benefit, unlike collectivist theories, of actually being able to accomplish their aims. However, their weakness lies in the fact that they accept the same basic premise as all the other theories, which is that the desirable goal is that which is posited by the proponent of the theory. All of these proto-libertarian theories set up the wellbeing of “society” as the ultimate aim; freedom of the individual is only the means of achieving society’s betterment. By defining liberty in this way, no genuine, fundamental rights are conferred upon the individuals and they are flimsily contingent upon their contribution to the goal. In other words, the possibility, however unlikely, is left open that if the goal could be achieved through some way other than the free market then these rights and freedoms could be withdrawn. For example, if we discovered, by magic, a way to make central planning the most conducive method of generating economic progress then any libertarian theory which promoted freedom based on its ability to raise the standard of living would crumble to dust. Yet no doubt most libertarians would say that one possesses a right not to be murdered or stolen from regardless of whether such acts would increase or decrease the number of yachts we can each buy. The more basic problem, however, is why should conflicts be recognised with reference to any goal espoused by the proponent of a theory rather than with reference to all of the millions of goals and purposes that individuals strive to achieve? Man is a social animal, as the well-worn phrase goes, but he only participates in social co-operation to the extent that he feels he derives a benefit from it, whether this is material or simply a desire for companionship and friendly relations. Society, the growth of the division of labour, increasing capital accumulation and a rising standard living are the result of each individual person fulfilling his individual purposes through social co-operation; they are not the initial purpose themselves. Such a point is often countered by the argument that people should promote society if they wish themselves to flourish. Ludwig von Mises, for example, speaks of “rightly understood interests” which, in a footnote, he describes as “interests in the long run”, an ethical goal later adopted by his colleague Henry Hazlitt – interests which can only be fulfilled by preserving social co-operation under the division of labour. Although this is a far cry from imposing upon people their own lofty ends as other philosophies are wont to do, it overlooks the fact that people have a variety of localities and time spans, short and long, in mind for their own individual purposes. A person could be completely and utterly educated about the effects of the free market and totally convinced that these effects would be true. Yet it would not be inconsistent for him to still desire goals that we would regard as evil but would not have a destructive effect upon “society” (killing a single individual, or individuals based upon a common characteristic such as skin colour for instance); nor could anyone stop him from desiring goals that are detrimental to “society” only in the long run, perhaps after the particular individual himself has died; still further, however, he could have goals that confer a benefit in the short term and a detriment in the longer term, even to himself (such as smoking, for example) and he may be perfectly happy with this situation. And finally, he may desire goals even in the short run such as greater equality, and reduced affluence and materialism that are completely contrary to ends created by the free market. At the extreme, ecological fundamentalists pretty much want to decimate the entirety of the human race, including themselves, in order to preserve the sanctity of the natural world. Hence one cannot, in these instances, even invoke the golden rule or dismiss them as cases of special pleading.

None of this should be understood as a denigration of proto-libertarian theories which are often, on their own terms, entirely correct and certainly add moral weight to a case for freedom. They do, however, lack moral decisiveness. They are reduced to confronting collectivist theories with arguments about which purpose is better (or which means for fulfilling an agreed purpose are better), and only, at the very least, give the appearance of recognising that the real problem is, in fact, how to reconcile all of the billions of purposes of individual people.

It is true that if we were to refrain from indulging in any constructivist ideology which create rights and obligations fashioned by their proponent then this would not, in and of itself, be sufficient to generate strictly libertarian rights. One also has to explain why, for example, when a conflict is genuinely perceived by individual people, it must be answered in favour of the original property owner. But ascribing rights only to those who seek the valuable ends that their invocation brings about – a province exclusively of rational actors – considerably narrows the field by revealing competing theories for what they really are – the forced distribution of property according to ends valued by the proponent, together with the subordination of all of the billions of desires and purposes of individual people to the desires and purposes of the proponent.

We can see therefore that the greatest threat to liberty throughout history has been the redefinition and reconstruction of ideas and concepts that had a sociological origin. Concepts such as rights have been twisted and distorted from serving as vindications of the ends sought by individual people to serving as vindications of the ends sought by the authors of grand visions of society, visions which have, when implemented, resulted in poverty, destitution and societal degradation. In some ways this is just a more subtle version of the more explicit redefinition of a host of other concepts. A liberal used to be the equivalent of a libertarian; today, wearing such a badge would declare oneself as a socialist. If one is now a free trader, one is actually in favour of managed trade. Liberty is now social democracy, and so on. Even what is “human” has been redefined, through the exploitation of sub-categories such as races and ethnic or language groups, in order to justify ethnic cleansing or genocide on the grounds that the victims are “sub-human” or “vermin”. All of these are simply starker versions of the same constructivist methodology – the attempt to change the underlying reality of concepts to suit their own purposes. To embrace this kind of constructive rationalism, as Hayek called it, is of the same ilk as empiricism and positivism when applied to the social sciences – gross epistemological errors which vastly expand the scope of plausible social theories and lend credence to all manner of attempts at social engineering.

What can we, then, as libertarians learn from this when attempting to develop our own political theory? The most important lesson is that libertarianism is limited to distilling, from the phenomenon of social rules, basic, formal characteristics of these rules rather than their substantive content when they are concretised into actual legal rules that prevail in society. We might call these conclusions high-level political principles and concepts, an order higher than the actual legal rules that we are required to follow in our everyday lives. Some of the conclusions that we can draw legitimately are as follows:

  • Social rules arise to resolve conflicts born out of scarcity of means for attaining ends;
  • That rights and obligations apply to rational actors who possess the qualities of perceiving value, thinking, preferring, deciding, and acting to bring about a more favourable state of affairs;
  • Non-rational actors do not possess rights and obligations – they possess no ability to display moral choice nor the capacity to consciously prefer an alternative state of affairs; key requirements for rights – a perceived conflict and the ability to choose an alternative state of affairs – are therefore missing.

We are not going to proceed to justify these observations here, something which we have already done in an earlier series of essays on the scope of morality. Our concern here is to emphasise that these observations arise out of a reflective process upon the nature of social rules – we are attempting to describe a reality that is already there and not to construct circumstances that are new. When, having made and reflected upon these observations, we continue to define the uniquely libertarian content to social rules this too must also be stated in purely formal terms:

  • A rational actor has the right to own the matter that constitutes his body;
  • A rational actor has the right to own private property;
  • Consequently, no rational actor may invade, physically, the body or property of another.

Again, we will not attempt to justify these conclusions and will simply assume that, as libertarians, we all hold them to be true. Here, however, comes the crunch. What cannot be done is for pure, libertarian theorising to flesh out these formal rules with substantive content. In other words, we cannot, through theory alone, determine which situations are conflicts that need to be resolved. We cannot, by mere philosophising, identify precisely which beings are rational actors and are subject to rights and obligations, nor do we know precisely which actions are aggressive and which are perfectly peaceful. These questions are and always will be the product of the individual values, desires and the resulting perception of scarcity that arises when the means for fulfilling these values clash with those of someone else, factual situations which cannot be determined a priori. In most cases, the obviousness and typicality of aggressive behaviour answers the question for us. For example, stabbing another person in the heart is almost always an aggressive act whereas sitting motionless in your living room chair is not. It would be a mistake, however, to assume that these conclusions are determined by theorising. It is only because the ends that people seek through scarce, physical means clash when one is stabbed by another, and it is only because they do not clash when you sit quietly by yourself in a chair that we know stabbing someone is aggressive behaviour and that sitting alone is not. Whether there is such a clash of ends can only be determined by real people acting in the real world. If we lived in a bizarre world where stabbing another person was perfectly acceptable and everyone was, in fact, happy to receive a brutal stabbing then this would not be aggressive behaviour.

All of this becomes clearer when we consider borderline cases or cases where a typically aggressive act consists of the same kind of behaviour as an aggressive act. For example, the light from a person’s living room window that shines onto neighbouring properties at night is probably not aggressive behaviour, yet if the person was to illuminate his property like Times Square then it probably is. However, both acts consist of basically the same thing – light beams emanating from one person’s property onto another’s. So why is the first act peaceful whereas the second act is aggressive? How bright do the lights have to get before non-aggressive behaviour becomes aggressive? The answer is because nobody, typically, perceives any interference with their own property when you merely have your living room lights on at night, whereas they probably would perceive such an interference if you were to coat your house in flashing, neon lights. Again, the distinction between one and the other rests on the ability of humans to fulfil their ends with the property in question. If each person can go about his business in the belief that he is not being interfered with by another then there is no aggression, even though we may each be experiencing acts which are of a similar, but diminished nature to aggressive acts. Ethics are the product of human action (or, rather, interaction), and all human values that motivate this action appear in discrete concrete, steps – not infinitely small, indiscrete steps which can only be measured by scientific instruments. For example, if I am thirsty and to resolve this thirst I drink 0.00001% of the water in a small glass it is not very likely that I would feel myself to be 0.00001% less thirsty then I was before. Rather, after having imbibed such a useless and imperceptibly small quantity of water I am still, in my mind, fully thirsty and am in exactly the same position as I was before even though, scientifically speaking, the quantity of water in my body has increased. Given that ethics also depend upon human valuations it is no surprise that ethical distinctions are neither surgically precise nor infinitely small.

Is it the case, then, that libertarians are all at sea when it comes to determining the practical questions of precisely which acts are aggressive and which situations are conflicts that are resolved by libertarian rights? Can a libertarian justice system develop no jurisprudence whatsoever concerning which situations are unlawful and which are not? It is true, as we argued in an earlier series on libertarian legal systems, that courts must look to the actions of the parties in order to determine their values and intentions when judging the particular incident at hand. Actions, however, cannot be judged in a void. Rather, they are always interpreted according to their customary, conventional and social context. Over time, as a legal system develops, we can understand readily that the situations which come before courts or adjudicators again and again will be of the same ilk. In other words, courts will come to realise that certain situations are typically viewed by people as aggressive and other situations are not. It is this that provides for them the key to concretising the political principles we outlined earlier – that is, the right to self-ownership and to private property – into substantive legal rules that prescribe the precise situations that violate these principles. Let us take, for example, the deliberate killing of another individual. Although it is, in a hypothetical world, perfectly possible for everyone to be perfectly happy to be killed, our experience and the experience of the court in the real world informs us that in the vast majority of instances people do not, in fact, wish to be killed. Therefore, killing someone is, at the very least, presumed to be an aggressive act in all instances and (if it has been established beyond a reasonable doubt that the defendant killed the victim) the burden falls on the defendant to adduce otherwise. In other words, the victim of a typically aggressive act does not need to prove to the court that the act in this particular situation was aggressive. Let us take, as a further for example, an alleged theft. People, typically, do not want their things to be stolen. If B asserts that C stole from him an item of property the court will hold that this act was prima facie aggressive if B can establish a prior title. However, if C can produce evidence of a superior title, such as a valid receipt for the goods that he took, then he rebuts the presumption.

It is for this reason that acts which consist of minute but generally innocuous physical invasions upon another individual’s person or property are not considered to be aggressive in all instances, even when one party genuinely feels as though his property has been invaded. Earlier we mentioned the case of light from a lounge lamp emanating from a window onto another person’s property. This happens to all of us; if we look out of our windows at night onto the street we can see dim lights from all the other houses. Most people do not give this a second thought as it does not interfere with their ability to use their own property. If, therefore, someone came before the court and alleged that such an act was aggressive, the court is likely to reject the claim simply because certain types of minor and virtually imperceptible physical invasions are deemed to be socially acceptable. And if the plaintiff has a particular susceptibility to the minor invasion then the burden should fall upon him to protect himself from it, and not upon someone else who is simply going about his daily business.

Other legal rules will be designed to sift out genuine conflicts from mere grievances after the fact. One of the justifications for statutes of limitations is that the elapse of an extended period time before initiation of a lawsuit is evidence of the fact that there was no real conflict. For example, if noise emanates from a neighbour’s property onto my own and I choose not to pursue a case against the neighbour within a certain amount of time stipulated by the court then the court may conclude that this elapse of time is evidence that that the noise was not perceived by me as invasive and I am not entitled to recover damages (such a fact may also be construed as evidence that I have granted an easement right to my neighbour to continue making the noise, so that not only can I not recover damages for the previous noise but that the neighbour can go on being noisy also – but this is a separate issue).

Legal rules begin to lose a degree of steadfastness and certainty where it is difficult for the court to establish objectively the relationship between the parties. One of the most pertinent examples in this regard is the crime of rape. The conflict inherent in rape is the lack of consent to sexual intercourse by the penetrated party. Yet establishing objectively whether such consent was either present or absent is fraught with difficulty because lawful sex and unlawful rape often emerge from similar circumstances and consist of the same physical act. Because of the traumatic and, often, life changing results for both a genuine plaintiff on the one hand and a falsely accused defendant on the other, any evidential rules that are determined are likely to be heavily contentious. Yet it is here where the influence of the shifting sands of the social context are most visible. When society was heavily patriarchal and placed a moral responsibility upon females to uphold their sexual virtue, the burden was upon the victim of an alleged rape to prove to the court that she had not consented to the sexual act. Indeed, at one point the law did not even recognise a forced, sexual act as rape if it took place between husband and wife. Nowadays, however, after women have gained a greater degree of social equality with men, we can see at least a creeping movement that places an increasing amount of the evidential burden on the accused to establish that consent was, in fact, present, rather than on the alleged victim to establish that it was absent. In other words, while the concept of rape as an aggressive act has remained in place, the precise legal rules surrounding it have changed as the social, customary and conventional context has changed.

What we can see from all of this is that courts and legal systems in a libertarian world would at no time design or construct concepts such as conflicts and aggression, nor would they pronounce from on high which acts are aggressive and which situations are conflicts. Rather, their jurisprudence is moulded by (ultimately) centuries of cases that have come before it, cases that are motivated by the real perception of conflicts by real, individual people attempting to fulfil their ends with the scarce means available. Although a latecomer born into a libertarian society after many generations would see only a plethora of rules seemingly dictated to him from a single source, their origin is, in fact, the heterogeneous, and decentralised values held all of the individual people that make up and have made up that society.

In addition to determining the distinctions between aggressive and non-aggressive acts, another area where this line of thinking comes into play is the distinction between beings which have rights and those which do not. As we outlined earlier, a being has rights if it is a rational actor, that is it is able to undertake actions that are motivated by thought, desire and choice as opposed to actions that are motivated wholly by the laws of physics or by instinct. The existence of rights is impossible in a situation where both the desire and ability to bring about alternative outcomes with the scarce means available is absent. With such an absence, the determination of outcomes is solely a product of might and inertia – the stronger force always winning – simply because there is no impetus to bring about any alternative. This is all that strict libertarian theory has to say about the matter. However, the question of precisely which beings are rational beings and thus enjoy rights cannot simply be a product of theory. It may be plainly obvious to see that a fully grown human adult, as a thinking, desiring, choosing and rational being will clearly be a rights holder while a dead plank of wood clearly will not be. But we only know this precisely because, at some point in history, the earliest humans experienced interpersonal scarcity and each consciously recognised certain possessions as belonging to him in order to meet his ends. Indeed, the most likely way in which we each recognised another human being as a rational entity that should possess rights is whether or not that being made an appeal for these rights to be upheld as this, itself, is a rational action to devote means towards ends. At first this was most likely made tacitly or through body language, aided by our empathy from being in exactly the same position as our neighbour. It is from this earliest seed that entire systems of rights and obligations between individual humans grew. No one at any point commanded from on high that “X has rights, Y does not have rights” and so on. Rather, because of our shared quality of acting rationally, our status as rights holders was enforced from the bottom up as we each sought to progress our lives by directing scarce resources to the uses that satisfy us the most. This brings into the foreground the question of marginal cases such as foetuses, children and higher primate animals. Let us take, for example, abortion. Libertarians are often chided for not having an agreed “solution” to the issue of abortion (as if everyone else is blessed by such agreement). Yet, as we have argued here, this disagreement is not one that is inherent in libertarian theory. Libertarian theory tells us only the qualities that a being has in order to enjoy rights. In an earlier essay, which focussed exclusively on the issue of children and abortion the present author suggested that this question must always be answered in the negative in regard to these beings – that it is so obvious that foetuses and very young children are incapable of acting rationally that they would only come to possess rights, probably in a graduated fashion, as they age. Yet whatever support could be mustered for such a position, it is not strictly a conclusion of libertarian theory. In contrast to this initial conclusion we went on to discuss in a second essay an alternative view which could also, in accordance with libertarian theory, grant rights to children. These questions – whether a particular being such as a foetus possesses those qualities – concerns the application of libertarian theory, not the theory itself. This application will also vary according to the social context, just as the precise acts which can be categorised as aggressive are dependent upon this context. A clear example of this is the changing nature of the rights of children. Even if we admonish the statist intervention into the family unit and the ridiculous and irreconcilable one-size-fits-all cut offs for when children can carry out such acts such as having sex, driving or drinking alcohol, it is tempting to say that it is obvious that children must be regarded as independent, human beings who at least have some rights. In other words, the rights of infants are a universal an immutable fact, independent of time and place. However, this could not be further from the truth. In pre-industrial, agrarian societies where the main economic unit was the family, children were regarded as little more than the property of their parents and their chief worth was their economic value, with any rights they had subsumed by the welfare of the family unit. Although research produced by scholars since the 1960s has indicated that child rearing was not brutal and parents did make sacrifices for their children to maximise their welfare such as care during sickness, the general attitude is hardly unsurprising in an epoch of extreme poverty characterised by persistent hunger, malnutrition and an infant mortality rate as high as one third of babies born. Indeed, we can surmise that telling a mother that she may legally kill her child may have been greeted with an acknowledged, if reluctant acceptance if there simply wasn’t enough food to eat and if the consumption of whatever resources were available was prioritised towards the able bodied population. The more familiar view of children as having an independent identity that accorded them certain rights was born during the Renaissance and the Enlightenment, along with the romanticised view of childhood as an “age of innocence”. However, thoughts during this time were far from uniform. On the one hand, there was the nurturance or caretaker view which was, at its earliest, espoused by John Locke, and Thomas Spence’s “The Rights of Infants”, one of the first pamphlets to specifically consider the issue, is subtitled “Imprescriptible Right of MOTHERS to such a Share of the Elements as is sufficient to enable them to suckle and bring up their Young” (emphasis in the original). This work is written as a plea from the mothers of children to the aristocracy. In other words the rights advocated were of the mother to demand from the gentry the wherewithal to nurture her infant from the produce of the land and were not directly held by the child. The alternative view, that children have much more independent rights, became augmented and subsumed by the onset of industrial society (in which children often worked in factories and down mines), and the backlash of the middle class intelligentsia against the “squalid” and “destitute” conditions of industrial workers generally, a backlash that was itself subsumed by the descent into socialism and communism. Of course, what truly abolished child labour was not a call for children’s rights, but the fact that adults could produce enough wealth for a child to survive and flourish without the latter having to work. The right of a child not to labour and, instead to be supported by its parents, are, like any positive obligations, wholly dependent on there being enough wealth to accomplish this. Thus the specific rights, and to whom they applied, were very much a product of the socioeconomic context. For the sake of completion, we might as well mention that the development of children’s rights in the twentieth century has, unsurprisingly, been welded to the growth of the state and all of its catastrophes and calamities. The Declarations of the Rights of the Child, the precursor to the modern UN Convention on the Rights of the Child which is, as of this day, enshrined in international law, was drafted by Eglantyne Jebb, the founder of the charity Save the Children that was set up to alleviate the starvation and poverty of German and Austrian children as a result of the First World War, a war which would not have occurred without imperialism, state militaries, the drive to autarky, central banking, and so on. The creation of the welfare state and the subsequent disintegration of the family it has caused, together with government provision of education, have all served to make the rights and conditions of children a public affair.

It is not, therefore, a matter for theorists to determine from on high whether or not specific beings such as very young children or foetuses should have rights and what these rights, precisely, will be. In other words, libertarian theory does not demand that children and foetuses, nor any other specific being, have rights. Rather these rights, if they exist, will be generated from the bottom up and will depends very much on the customary, conventional and socioeconomic context. We explained in detail how a modern libertarian legal system may approach the question of the rights of children in this manner in our second essay dedicated to the topic and we will not repeat this in detail here. But we can mention briefly that a series of legal presumptions is likely to govern these rights. There is likely to be at least a legal presumption that a child is a rational being when it comes to the right to bodily integrity (so that a child may not be legally killed); further legal presumptions will grant further rights to children (i.e. to enter contracts, to drink, marry, enter employment, etc.) either at ages where the court has previously found children to be generally competent for these acts, or at ages or milestones which are important in the social context, such as the Bar Mitzvah in a Jewish community. One unique aspect of a libertarian legal system, however, is that these milestones need not be concrete or set in stone as the state makes most of them today. It may well be open to the child, or to another individual, to rebut the presumption. If, say, there is a legal presumption that a child cannot enter a contract of employment below the age of thirteen, a child below this age may contest any challenge to a prospective contract if he (or the prospective employer) can demonstrate to the court’s satisfaction that he made this decision in the manner of an adult – i.e. it was a rational choice to better his life. There should be no danger of a perpetual, enforced childhood in state run schools if the child is uniquely mature enough to seek a better life for himself. Conversely, if a child is mentally impaired the rebuttal may work the other way with the parents or guardians establishing before the court that, at a presumed age, the child is still not competent to undertake certain acts in his or her own right. Abortion may be more difficult but we can suggest, for example, that if advances in medical science reduce the amount of time for which a pregnancy has to elapse before the foetus is considered viable then the law may regard the foetus as a whole, legal person much sooner that it previously did. If and when we have the technology and are able to establish communication with some of the higher functioning animals, these too may be regarded as rights holders in at least limited circumstances. To repeat again, however, this discovery of certain animals as rights holders would be made as a result of the recognition of these animals as independent, rationally acting beings. The rights will be dependent upon what these animals want because we discover that they are able to want, to desire, to choose different outcomes and to act accordingly. Contrast this to the current statist enforcement of so-called “animal rights” from the top down. These rights are not really animal rights at all – they are the rights of certain people who claim to care about animals enforcing how they believe other people should act vis-à-vis animals. The benefit gained from a vindication of any of these “rights” exists in their minds, not in the minds of the animals.

This, then, is a suitable concluding note to emphasise from what this series of two, rather long, essays. That these phenomena – rights, obligations, conflicts, aggression and so on – serve to regulate the desires of individual, rationally acting beings, a regulation that is necessary to resolve the perception of scarcity that exists in these people’s minds. The existence and content of rights is driven by this impetus. Rights are not designed or constructed from on high by an intellectual in an ivory tower, nor are those who benefit from them assigned by a politician. Any attempt to design rights is akin to treating to individuals as pieces on a grand chess board – pawns in a game of shaping society according to what the intellectual or politician wants. Our conception of rights here is focussed firmly on vindicating the individual and, while it may appear as a limitation upon libertarian theory to answer certain precise and practical questions, ultimately strengthens it.


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The Nature and Origin of Rights, Part One

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There is nothing that highlights more the uphill struggle faced by libertarians than an old joke which is directed at the economics profession in general:

How many economists does it take to change a lightbulb? None – the market will take care of it.

Unlike our statist counterparts, as proponents of the free market we have no precise design for the solutions of particular issues and problems. We do not have an energy plan, a transport plan, a housing plan or a healthcare plan. Rather, we believe that freely acting individuals, endowed with private property rights, will find the solutions that utilise the scarce resources that we have in the most efficient way possible. Indeed, when asked the (almost tiresome) question “who will build the roads?” we don’t, strictly, know that a free market will produce any roads whatsoever. There may, in fact, be some better transport solution that compulsory government road funding prevents us from discovering. This is, in fact, the entire point of the free market – that there is no grand, overarching plan with particular solutions that are imposed upon everyone else from on high. Moreover, any kind of centralised plan or desire for the government control of goods and services has always presupposed the existence of industries and products, such as roads, that were invented by freely acting individuals.

This key aspect of the free market – a complete lack of centralised design of products, services and entire industries – is not limited to the substantive configuration of resources. Rather, as we shall attempt to argue at length in this two-part series of essays, it extends also to the very concepts and institutions that uphold a free market order – in particular, laws, rights, property, non-aggression. Part of the question we wish to explore here, then, is if we, today, had to the opportunity to sweep aside the entire mantra of statist oppression, would the institutions that we put in its place be subject to some kind of design by libertarians or would they also be subject to some kind of decentralised action by freely acting individuals? In other words, would we come along and say “this individual has rights”; “this object is property”; “this act is aggression”? More potently, however, we need to explore whether the nature and origin of concepts such as rights, property, aggression, and conflicts lend themselves to some kind of conscious design or whether they depend upon the behaviour of freely acting individuals in order for their true meaning to be realised. Once we have determined this we will be able to conclude whether it is only by recognising the dependence of these concepts upon freely acting individuals that a genuine libertarian society be built.

Some readers will recognise that we are following here a line of epistemological thinking propounded by F A Hayek, mostly in Law, Legislation and Liberty, as to the appropriate use of rationalism in understanding and framing societal institutions – i.e., is our rationality, our ability to reason and to act purposefully, better suited to constructing and designing social institutions, or rather, are these institutions instead the product of some kind of “spontaneous order”? If the answer is the latter then the focus of our rational endeavours should be to gain comprehension, insight and understanding into elements of human interaction that have already been built and not to recreate these elements anew.

Let us begin with some simple examples in order to illustrate what we mean by this. The first example we shall use is language. Any language that we speak is a complicated thing, with lots of different words and lots of different rules for using those words. However, language itself and the very vast majority of specific languages were not invented explicitly by anyone. Rather, they grew up through millennia as a result of individual people striving to communicate ideas to each other. The meanings of words but also the concepts of sentences and grammar also developed without any centralised plan and before anyone acknowledged consciously the precise forms and structures they were using. For example, if, years ago, one of the first humans said “I will throw this ball”, neither he nor his partners in dialogue would have known explicitly that he was using a subject, a verb and an object to create what we now call a sentence. If he elaborated and said “I will throw this red ball” he would not have known that he just inserted what we now call an adjective. Yet anyone he spoke to would have understood the ideas that he was trying to communicate in the sentence. Moreover, if he tried to say something like “ball thrown I red” those listening to him would probably recognise that he was talking utter nonsense – but they would not necessarily be able to say precisely why this sentence is wrong. Indeed, even the idea behind concepts such and nouns and verbs probably never even entered these people’s minds – in the same way that they do not explicitly enter the minds of the vast majority of people who communicate through language today. It was only after many centuries of languages being used and developed that linguists came along in order to study the phenomenon of language systematically and to develop the rules and concepts of grammar, writing and speech. Yet, crucially, the role of the linguist or grammarian was not to invent or design these rules, or to reconfigure language as a whole. Rather, his role was to gain insight and understanding into a process that already existed – to gain rational comprehension of a phenomenon that was of no single human’s construction. For example, an adjective is a particular concept that concerns the use of words in order to describe nouns. For example, a red ball; a tall boy; an old lady. By calling these words adjectives the linguist did not invent the concept of an adjective. Rather, the concept itself already existed as a phenomenon of human interaction for which the linguist only provided a label for us to identify it and distinguish it from other phenomena. Thus the label “adjective” aids the endeavour of gaining rational insight and understanding into the phenomenon of language and does not amount to the construction of anything that was not already there. If, on the other hand, linguists tried to reinvent these concepts or to attempt to apply them to other phenomena then we can see easily that we would run into all sorts of trouble. Let us imagine that a budding, pioneering linguist comes along with the aim to reinvent the rules of language, to undergo a reconstruction in order make it more coherent and, no doubt, more “rational”. After all, he is a scientist of the human race, a race that has managed to build everything from enormous craft that fly into space all the way down to tiny computers that fit into your hand. Surely he can master the design of something as simple as how we speak to one another? Let us say that he decrees that an adjective should describe not the noun in a sentence but, rather, the verb. So in the sentence “I will throw this red ball” this linguist would claim that the word “red” should actually describe the verb “throw” – so that the quality of throwing is, in some way, red. Or in the sentence “I will drink this hot coffee” the word “hot” describes the act of drinking rather than the condition of the coffee. Clearly such a reinvention would lead to utter nonsense and a complete breakdown of the purpose of language, which is the successful communication of an idea, i.e. making yourself understood by another party. The concepts that the linguist identifies, such as adjectives, are not open to his reconstruction – to him they are phenomena that already exist as a given, much like the fact that the sun rises and water flows down. The only difference is that the phenomena associated with language arose out of the interaction of many millions of human beings across centuries rather than straight out of the natural world. These concepts the linguist identifies describe a strand of reality that are already there for him to identify and to understand; any attempt by him to impose an alternative meaning or definition of these concepts results in something completely different from their original nature.

Whether or not alternative languages can, in fact, be designed, is beside the point. Languages have been designed explicitly, with Esperanto being the most notable, although any designed language has failed to gain any significant use. Our point here, however, is that existing languages are not the product of design or reinvention and that the concepts we use to identify and understand them are also not invented phenomena. Our attempt to engage in such a reinvention must necessarily result in something completely different from that which already exists.

In order to explore this further let us take another example of a social phenomenon such as prices. Indeed, prices are a classic example of a social institution that, unlike language, has been subject to a kind of constructivist reinvention. The phenomenon of prices appeared as a result of millions of private, bilateral transactions millennia before anyone actually stopped to determine what prices actually were and how individual prices are set at the levels they are. Just as the linguist used his capacity for rational analysis to determine the elements of language, so do did the economist approach the concept of prices with the desire to comprehend and gains insights into this reality, not to construct anything new (an endeavour which was only accomplished sufficiently after the realisation of the law of marginal utility). What was learnt was that a price is the exchange ratio between two goods that results from the competing valuations of those who supply a good versus those who demand it with another good (usually money). The specific price is set between the valuations of the marginal buyer and the marginal seller. The effect of a price at this level was that the willing supply and willing demand for a good were equalised.

What happens, however, when we deflect our rational thinking away from gaining comprehension of this phenomenon and embrace, instead, the desire to gain control of and “create” or (as economists usually say) “fix” prices? This false, constructivist approach looked only at surface level phenomena of prices that were manifest in the fact that the act of pricing was largely carried out by entities that were sellers of commodities and buyers of labour – in other words, businesses. This, aided by other confusions such as the paradox of value – the conundrum as to why a diamond costs more than water when the latter is infinitely more useful to mankind – led to the conclusion that prices were simply declared (as opposed to estimated) by sellers and/or were merely the arbitrary and capricious results of unrestrained greed. It would follow from these falsehoods that the price of a good could be manipulated at will or established by decree. Yet it is clear that this conception of prices has entirely different ramifications from the previous one that we outlined. With these new, constructed prices their ultimate influence is not the individual interactions of all of the millions of people attempting to fulfil their purposes but rather the preoccupations of those who decree them (i.e. the state), which are mainly political. Most of the famous cases of price fixing were designed to counteract the effects of rampant inflationism, such as the Emperor Diocletian’s fourth century Edict on Maximum Prices and President Nixon’s price and wage controls in the 1970s. The results of these prices too are markedly – even catastrophically – different. If the decreed price is too high relative to the price that would be set by supply and demand then an unsold surplus of the good would accumulate; if the price was too low then a chronic shortage would ensue. In both cases the quantity demanded and the quantity supplied are shifted out of balance, resulting in economic turmoil – as it was in the 1970s when Nixon’s price controls exacerbated the effects of the OAPEC oil embargo, leading to an acute shortage of gasoline (which, of course, promoted further government intervention in the form of selective government rationing, the 55mph speed limit and the moral degradation that occurs as a result of the destruction of the supplier/customer relationship).

Under both conceptions of prices – the un-designed and the designed – all of the surface phenomena of prices are constant. Price tags are still on the goods (if there are any goods) and money still changes hands. Yet it is clear that the difference between the two concepts is to encapsulate two entirely different strands of reality that each have vastly different origins and motivations, and vastly different consequences. In moving from the first conception to the latter, the concept of price has been changed from meaning the exchange ratio that results from the interaction of supply and demand to basically meaning the exchange ratio that is ordered by the state.

It is clear from this, therefore, that a concept, such and nouns, verbs, prices, which developed as a result of human interaction, cannot simply be changed at will or by agreement without entirely undermining its essence. Indeed with prices not even an explicit agreement amongst all of the consenting citizenry as to what a particular price should be would circumvent this fact because the resulting exchange ratio would still not accord with the reality that the concept of price tries to capture, which is the exchange ratio that results from supply and demand. What we can also begin to see is that any attempt to redesign or reconstruct these phenomena destroys their service for free, individual people and instead places them at the service of the state and is therefore antithetical to liberty. We can see this more clearly in a third example of this type of concept which is money itself. The phenomenon of money – the generally accepted medium exchange – appeared through millions of bilateral exchanges before anyone stopped to think about precisely what they were doing when they handed over, say, lumps of metal like gold or silver in exchange for stuff they could eat or use as shelter. Money was something created as a result of human interaction but nobody designed or invented money. The product of this was a medium of exchange that served reliably as a store of value, as a unit of account and as a major bulwark of sustainable economic progress. All of the monetary issues we experience today – the business cycle, inflation, and a grossly unstable financial system – stem from the attempt to recreate the concept of money as something that is created and enforced by the state, an endeavour that has not only resulted in the catastrophic effects we just outlined but also a tremendous loss of liberty as governments have been able to fund their bloated operations without resort to regular taxation.

Bearing all of this in mind, then, what is the nature of other sociological concepts which form the core of libertarian theory? These are concepts such as property, rights, obligations, laws, conflicts, and aggression. Are these phenomena which appeared gradually over many hundreds of years through social interaction? Or were they the explicitly designed product of, say, a wise and benevolent ruler who sought to create order out of chaos? We shall argue here that concepts such as rights and obligations are indeed of the same ilk as prices – they appeared over millennia as a result of millions of humans attempting to fulfil their individual purposes. The concepts were not the product of explicit, human construction; rather, they were a reality that already existed before anyone consciously thought of the matter. The purpose of our rationality is to reflect upon this reality, understand and comprehend what was occurring, and from this understanding fashion these concepts in order to explain and describe this reality. Any attempt to reconstruct them anew will, as we shall see, destroy their real value to the freely acting individual and instead place them in the service of the state.

Let us recall that the question of rights and property only arise because of conflicts that result from scarcity – the fact that two or more individuals cannot satisfy their ends owing to shortage of means. Rights and obligations over physical matter that is designated as “property” are the solution to these conflicts. In other words, rights and obligations only arose because individual, rationally acting beings, incurred a reciprocal recognition in a particular situation that physical means available were not sufficient to satisfy the ends of each, hence one had to yield and refrain from action and the other could act. The source of a conflict was the fact that one of the parties would have to suffer a loss of *value* – and end worse than the one he sought – if he had to yield to the other party, who, in turn, would have his value realised. These conflicts and their prescribed resolutions are endemic to the situation of humans as social animals. It is highly unlikely that two humans ever interacted without running into some kind of conflict over scarce means, particularly as primitive man suffered from the scarcity of the most basic of needs far more than we do today. Hence social rules are likely to be as old as humans themselves. These conflicts and their resolution through a system of rules began long before anyone actually explicitly enunciated that which was occurring. Indeed the words “rights”, “ownership” and what they were may not even have been known to anyone who sought them, in much as the same way as no one knew what a verb or a noun are until long after people actually began to communicate through language. Nobody at any point woke up one morning and said ‘Gosh, I believe it would be awfully nice if everyone had the right to private property!” as if it was an entirely new creation, nor did anyone ever explicitly “agree” the same thing. The earliest rules were probably acknowledged and understood tacitly with communication through body language. Later, as the earliest civilisations were born, customary legal systems developed through appeals by the conflicting parties for adjudication by a plurality. They made this appeal because, in the long run (and according to their own valuations), ad hoc conciliation is uncertain while resolution by violence is both uncertain and costly and dangerous. Indeed, we might say that although this process requires a degree of reflective ability of the plurality’s members, the legal rules and principles that crystallised depended upon a) their ability to address the situation that identified by the rational actors to which they need to be applied, b) the willingness of the parties to yield to them and thus avoid violence, and c) their ability to serve as a guide to behaviour in order to avoid similar incursions in the future. Crucially, there was no centralised force that had the authority to either decree or enforce the law, such authority, where it existed, resulting from usurpation. Rather, adjudicators had to earn and maintain their reputation in the knowledge that parties could seek justice elsewhere and that they – the adjudicators – might too, one day, be involved a conflict and stand to be judged. To this extent, therefore, the dispensation of impartial and principled justice resulted from self-interest. Indeed, we might say that the whole edifice of consistently and impartially applied legal rules existed solely because, in the long run, these things were the cheapest option for people to fulfil their ends. In other words, that agreeing to resolve conflicts peacefully through a system of rules was, in the long run, the best way for people to maximise their wellbeing. The result of this was, of course, the development of society – the peaceful co-operation between individuals seeking to fulfil their needs and better their lives.

Indeed, it is important to stress that a well ordered and functioning society was the product of customary social rules and was not their precursor – the peaceful resolution and avoidance of conflicts is what permits social co-operation, either primitively or under the division of labour, to flourish, and it only did so because people desired it. “Society” did not come first in order to fashion and enforce the law or to determine what conflicts were and where they existed and how everybody should behave. We are tempted to address this chicken and egg problem differently today because “society” precedes us and so we also think that it precedes our rights and obligations; we were born into an existing social order that seems to grant and impose these things on us from on high. It certainly true that latecomers to a social order, who, like us, were born in succeeding generations or were formerly outsiders, were likely to find themselves bound by previously enunciated rules. However, the origin of those rules was the perception of conflicts by individual, rationally acting people. So when, today, for example, we extrapolate from these past cases and say that a particular right applies to me and to everyone else in the world it is true that these rules and concepts predated anyone who is alive today so that it appears as though somebody else is either granting us these rights or enforcing these obligations upon us. But even today we can see that rights, obligations and conflicts must originate from the minds of the parties to the dispute that the legal rule seeks to solve. Strictly speaking when we say that “I have the right to private property” what I am really saying is that this right would be enjoyed by me in a hypothetical case where I enter a conflict over a particular good. But just as in the pre-historic cases that crystallised the concept of a right, this conflict would have to be perceived by me in order to be a breach of my rights. Someone taking my property is not theft unless I do not want them to take it; if I am perfectly fine with it then my right is not infringed (indeed, in a world where everyone helped themselves to each other’s stuff as they pleased and everyone had no problem with it no one would even know what a right to private property was). Rape is only rape because a woman (or a man, even) does not want to be penetrated; if he/she doe then it is sexual intercourse. One person injuring another is only assault because the latter does not wish the former to injure him; if the injury is the result of a consensual contact sport or an unusual sexual fetish then it isn’t. A person’s free speech is only infringed because he wants to speak. If, on the other hand, he is an uncontrollable blabbermouth who talks before he thinks then he may welcome the occasional physical restraint from speaking. In all of these cases where the physical act is consensual there is a harmony of interests – the scarce, physical matter available is directed an end that is sought by both parties and thus there is no conflict. The question of rights only arises, however, when the two parties are trying to direct physical matter towards different ends (and also, we might add, when the cost of resolving the matter in this manner is less than the cost to the plaintiff of fulfilling his ends with other means; if you steal from me a paperclip it is probably cheaper for me to buy a new one than it is to sue you for it; the history of fencing laws is illustrative of the changing economic dimension of rights and obligations). In short, because it is my right it is my choice to waive it when someone else’s goals with the same, physical matter are identical to mine.

Let us re-emphasise, therefore, that the nature of these concepts – rights, obligations, conflicts and so on – were revealed to us through rational reflection upon social interaction, and the distillation of common elements and their justification according to common principles uncovered – not created – the formulae that we libertarians cherish today, such as the individual’s right to private property.

Let us turn now to a different, constructivist conception of what rights and obligations may be – that is that these concepts were deliberately created or invoked by specific persons such as monarchs, leaders or intellectuals. It is clear that if the origin of a proposed right is not the resolution of a conflict arising from the competing valuations that exist in the minds of the parties, it must, rather, be something else. There are only two possibilities. First, a third party constructs a right according to what he hypothesises is a conflict between the parties over the property in question when there is in fact no such conflict. In other words, rather than being a party to a conflict himself, this third person looks upon the condition of other people and declares that they are in a conflict with each other that needs to be corrected with a system of rights. The second possibility, which is joined at the hip with the first, is that the conflict over property results from the valuations of a third party or of a group (such as intellectuals) who call for the construction of rights and obligations according to their own direction. In other words, these people want to distribute property rights according to what they want rather than what everybody else wants when everyone else may, in fact, be living in perfect accord with one another. In both cases the concept of a right has been changed from the resolution of a conflict over scarce, physical goods as perceived by the parties into being the resolution of a conflict over the same goods perceived by somebody else. Your rights and obligations are no longer determined by what you, as a freely acting individual want and value; rather they are defined by some other person. This is something that is markedly different, something that changes not only the definition of a right itself but also the definition of specific rights.

An exaggerated example of the first type of “right” – one that is simply imposed – is a right of each person to air. Intuitively, a right to air sounds more than plausible – after all, a person will live for barely minutes if he is not able to breathe. Surely, as some pioneering progressive might say, it is a travesty of justice that we do not all have a right to something as basic as air?! Under the state’s self-appointed mantle that it needs to ensure that we all have enough air to breathe, perhaps we can imagine exclusion zones round each other’s bodies which no one else may breach in case they breathe “your” air in the zone. Or, needless to say, we could imagine countless other ridiculous “solutions” to this non-problem. Rights to air do not exist, of course, because nobody (yet) conflicts over particles of air. The supply is more than sufficient to meet each person’s need without anyone ever coveting the air breathed by someone else. Hence rights and obligations in this scenario are superfluous and any invocation of them is an unwarranted affront to people’s perfectly peaceful behaviour. (The contrary case – that of taking away rights when they are, in fact, demanded, such as with rights to own animals that are members of an “endangered” species – is of the same ilk, but we need not deal with that here).

With the second type of constructed rights, let us take the right to private property which protects one against, say, theft. If, in order to “protect” my property, this right is no longer defined according to my valuation as to how I best want my property directed – i.e. my willingness to “exercise” my right – it must be defined by reference to something else. This can only be what the imposing party, or his intellectual advisers, regard as their valuation as to how the property is best directed. The resulting prohibited action is no way a vindication of my right to private property at all – if I am perfectly happy for my property to be taken in a particular incident and this is clearly evident then there is no discord between me and the alleged thief, nothing that the imposition of a right needs to solve. What has in fact been accomplished is the voiding of a transaction that the imposing party disapproves of according to his valuations at the expense of the valuations of me and the person who took my property. The critical element required for a generation of rights and obligations – a competing valuation over scarce, physical goods – is held by the imposing party, not by the constructed “rights” holder (i.e. me). Hence, the de facto right – i.e. the ability to have property directed to ends according to which one desires – is also held by the imposing party, not by the constructed rights holder, for it is really the imposing party’s valuation regarding this particular piece of property that is vindicated. Theft has now been constructively redefined from meaning a conflict between a property owner and a person who takes it, into a conflict between those two parties and the state. This is clearly anti-libertarian as it subsumes the desires of all of individual people and permits the imposing party to direct everyone else’s property to its desired end. The result is practically the same as the government simply outlawing certain types of voluntary trade, such as drugs or prostitution.

What we will proceed to explore in part two of this series of essays is precisely how this state of affairs – the movement from rights as a product of human interaction to being a product of explicit construction – came about and how devastating it can be to individual liberty.


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“Capitalism – A Treatise on Economics” by George Reisman – A Review

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It is not often that the present author is moved to review any particular publication by a specific author, let alone one that was published nearly twenty years ago. However, Capitalism by George Reisman, at more than one thousand pages long, is the first major treatise that is at least related to the “Austrian” tradition since the publication of Murray N Rothbard’s Man, Economy and State in 1962.

Although Reisman is a contemporary of Rothbard and a fellow student of Ludwig von Mises, Reisman’s approach to economics is markedly different from either. Indeed, armed solely with knowledge of his pedigree one might be forgiven for wondering why more attention has not been directed towards to Reisman’s work from within “Austrian” circles. It is only after having read this treatise that one can see why. Although Reisman claims that Mises is his primary intellectual influence, there is very little of this treatise that could be regarded as distinctly Misesian. Rather, Reisman’s direct influences are the classical economists (especially Smith, Ricardo and J S Mill, upon whom he relies for support to an extent far beyond his reliance upon Mises) and Ayn Rand. Reisman specifically rejects the categorisation of economics as the science of human action, and prefers, instead, to regard it as “the science that studies the production of wealth under the division of labour”. He therefore willingly abandons any analysis of individual values, means, ends, and choices, and restores economic theory to the study of holistic aggregates; indeed we might say that his definition of economics, which views wealth as an entity possessing some kind of objectively determinable magnitude, demands such a restriction. Reisman positions the businessman, rather than the consumer, as the centre of the economic system, stating that consumers (as a whole) are largely dependent upon businessmen (as a whole) rather than vice versa. While, according to Reisman, consumers provide the direction of economic activity (i.e. the precise direction of resources to fulfilling specific industries), businessmen and capitalists are responsible for its extent, i.e. the limits of saving and capital investment. In other words, it is the decisions of capitalists that determine the extent of “economic progress” (a term Reisman prefers to “economic growth”) rather than those of consumers. A corollary of this is that production and producers are reinstated as the keystones of economic activity rather than consumption and consumers (there is at least an implication in parts of the treatise that production is good and proper whereas consumption is bad and wasteful, although this is much muted compared to the same in Reisman’s classical influences). Furthermore, it is clear that Reisman does not regard his approach to economics as a wertfrei science and, instead, believes his economic theory to be a rigorous promoter and defender of the capitalist system – an attitude that cannot be avoided by his definition of economics as the study of the accumulation of wealth under the division of labour, a division that he says is only possible under private ownership of the means of production. Thus, in Reisman’s world, a discussion of economics is a discussion of capitalism which, presumably, explains the book’s title.

What can we say about Reisman’s approach? Without beating about the bush we must state at the outset that Reisman, who is thoroughly acquainted with “Austrian” economics, has jettisoned a tremendous degree of sound theoretical understanding from the science. Although Reisman, who self-identifies as an “Austro-classical” economist, endeavours to restore to economics many of the (in his opinion) sound doctrines of the classical economists that were allegedly rejected following the discovery of the law of marginal utility and the backlash against Marxism, we must conclude that the result is something of a retrogression rather than a synthesis of two, hitherto quite disparate, schools of thought. In Reisman’s world, the achievement of all ends and their associated costs never advance deeper than the objective measurement of exchanges for money. He never advances any exposition of individual ends and subjective costs (indeed, he explicitly rejects the doctrine of opportunity cost). Hence the entire purpose of the economic system as serving the needs of individuals and the types of decisions that individuals must make in order to achieve these ends is missing, subsumed by the supposedly limitless need of man as a whole to accumulate “wealth” in perpetuity. In other words, Reisman’s restoration of the primacy of the production of “wealth” overlooks the fact that all production is ultimately aimed at providing for consumers and that it is the ends of consumers to which the economic system is geared. It is perfectly consistent to state, as does the wertfrei “Austrian” school, that the purpose of all economic endeavour is to provide for consumption while on the other hand remaining firm that the means of achieving this consumption can only be served by increased production. Therefore, while we can hold that the desire for consumption is the ultimate cause of economic progress, we can also state that production is the proximate cause. Thus, while Reisman’s categorisation of economic theories under the headings of either “productionism” or “consumptionism” – the former of which involves the promotion and encouragement of increased production as the means towards economic progress, the latter the promotion and encouragement of increased consumption – provides an instant and convincing cognitive aid, it obscures the clarity afforded by this insight of the “Austrian” school.

Furthermore, Reisman’s repositioning of the capitalist/businessman as the driver of economic progress relies upon capitalists providing the bulk of investment funds, i.e. that it is the consumption/saving decisions primarily of businessmen that determines the extent of economic progress. He argues that the wages of labourers do not provide a significant source of investment funds and are usually consumed either immediately or are saved in order to purchase durable consumer goods such as housing or automobiles. Any investment saving that labourers do happen to undertake is likely to be wholly disinvested at retirement, thus netting out the saving of younger generations. However, there is no reason for Reisman to think that this this must be the case. It is just as possible for investment funds to come from the savings of everyday individuals that are then lent to businessmen for them to deploy in their enterprises via a conduit such as bank savings accounts (and such a view would greatly undermine any opinion that capitalism keeps the masses in servitude as wage labour). The distinctive role of the businessman is that he provides entrepreneurial talent in order to generate economic progress by directing those saved funds to where they are most urgently desired by consumers. Yet Reisman’s treatise lacks any extensive theory of entrepreneurship and only passively recognises the need for superior decision-making in order to fulfil the ends of consumers. This lacuna in Reisman’s theory means that in order to position the businessman as the driver of economic progress he has to paint him as the primary provider of investment funds. This contrasts greatly with Reisman’s mentor, Mises, who makes entrepreneurship a hallmark of Human Action, thus giving us an insight into the economic significance of the businessman that extends far beyond the fact that he simply didn’t consume his wealth. (Some of Reisman’s views on what determines an individual’s consumption/investment preferences, which inform his theory here, are also incorrect and we will explore these below). In any case, however, Reisman seems to support his theory through a blurring of economic categories, such as labourers, consumers, capitalists, etc. (something which, irritatingly, is done all too frequently). In reality, all individual people in the economy participate in different categories at different times – a man is clearly a labourer when he goes to work, a consumer when he spends his wages in the shops, and a saver when he buys a corporate bond. However, when we are discussing, for the purposes of conceptual clarity, the roles of individuals in these economic categories, we isolate those specific roles from other categories and thus we always talk of labourers qua labourers and consumers qua consumers, etc. So even if it may happen be true that the particular people who are businessmen are responsible for the greater part of saving and investment, businessmen are consumers too and considering them as consumers qua consumers it is their decision to refuse to consume their wealth today in favour of accumulating greater wealth for consumption tomorrow that provides the source of investment funds. It is therefore true to state that it is the choices of consumers who determine both the direction and extent of economic progress. Moreover, as Mises also recognises, any consumer who is currently a wage earner can transform himself into a businessman, entrepreneur or capitalist by saving and investing his wages (while, equally and oppositely of course, any businessman who decides to consume his fortune may end up as a wage earner).

Finally, it is one thing to state that the preoccupation of the economic activity of any one (or even most) individuals may be with the accumulation and augmentation of their own wealth. But it does not follow from this that the science of economics itself concerns the accumulation of wealth. Animals preoccupy themselves with the need to attain food and shelter but this does not mean that the focus of zoology is with the achievement of these things.

Examining Reisman’s treatise on its own, non-wertfrei terms as a rigorous defence of the capitalist system, much of its earlier part is a detailed offence against the fallacies of socialism, collectivism, interventionism and environmentalism (and later, Keynesianism and inflationism). These devastating, if often heavy handed, critiques are likely to be viewed as by Austro-libertarians as Reisman’s greatest achievement in this work, even if some of it was previously published as The Government Against the Economy. A specific and lengthy chapter is possibly the most passionate assault against the ecology movement, a chapter that could easily be expanded and published as a separate treatise (Reisman’s stress of the anti-human zeal of environmentalism resonates with that of environmentalists, such as former Greenpeace Canada President Patrick Moore, who have become disillusioned with the movement). Reisman’s explanation of various forms of government intervention, such as price fixing, with reference to specific notable examples such as the oil recession of the 1970s, in which he traces out all of the effects (and effects of alternatives to) government meddling have rarely been matched. Yet much of the remainder of Reisman’s exposition does not in fact read as a promotion or a defence of the capitalist system; rather it is more akin to an aggregative, accountancy-laden explanation of what the capitalist system does, much like a description of some giant machine that swallows up inputs measured in numbers and churns out some kind of output, also measured in numbers. Reisman categorises an endeavour as productive according to its ability to earn money voluntarily through exchange. Hence all government functions, relying upon taxation, must necessarily be classified as consumption and not production. In other words, government can never produce and must always be a leech on the genuinely productive, capitalist system. Moreover, his excellent critique of socialism recognises that socialism must entail tyranny and a replacement of the ends sought by individuals with the ends sought by leaders. However, Reisman’s aggregative, accountancy approach never builds upon this insight. In the depths of the latter half of the treatise one almost forgets any connection between these accounting entries and how the capitalist economy serves the needs of individual people. One of Reisman’s stated aims in the treatise is to show how a proper understanding of the capitalist system should prevent one from feeling any kind of “alienation” from or subjugation by the capitalist system – something which Reisman comes closest to achieving through his analysis of the division of labour. Yet in the main it would appear that the Mises-Rothbard approach of detailing the economy as a network of bilateral, voluntary exchanges between individual people striving to meet their own needs through voluntary co-operation (and how these disparate and often conflicting goals and purposes nevertheless mesh into a harmonious, productive society) is much more conducive to achieving this than is Reisman’s aggregative, accountancy method. While it is true that the ability of capitalism to manifestly increase the standard of living and the degree of material wealth lends it a tremendous amount of moral weight, we can suggest here without too much elaboration that any rigorous defence of capitalism and, moreover, freedom can proceed only by focussing on the primacy of the needs of each individual person, not all of which can be measured or attained though objectively viewable exchanges for money. This omission in Reisman’s work also weakens the distinctly economic flavour of this treatise, as individual choices, desires, wants, decisions and actions do not seem to matter.

Turning now to some of Reisman’s theoretical contributions to the science of economics, there are two that stand out in particular. The first is his attempted demolition of the “conceptual framework” of the Marxist exploitation theory by asserting the primacy of profit rather than of wages. In Reisman’s view, critics of Marxism, including Böhm-Bawerk, have accepted the categorisation, originating with Adam Smith, of profits paid to capitalists as deductions from wages, and have sought explanations in order to justify this deduction. Reisman, however, asserts that wages, paid to labourers, are, in fact, a deduction from profits. If profits are calculated by subtracting business costs from business revenue, it is clear that if a person undertakes an enterprise to achieve, say, 100 units of revenue then every monetary outlay he expends in order to achieve that 100 units of revenue must count as a deduction from it. The fewer costs he has the more profit he is left with. Thus it is profits that represent the primary economic income, not wages. It is conceivable for the economic system to have profits but not wages in the event that every individual person operated as a sole trader and employed no other individuals. If, however, a businessman hires labourers to assist in his enterprise, the wages he must pay to these workers for their assistance are deducted from the ultimate sales revenues. Therefore, according to Reisman, wages only appear in the economic system on account of the help that other people provide to a businessman’s enterprise, and their help stakes a claim on his revenue. Thus it is wages that are deducted from profits, not vice-versa.

Whatever the merits of this view we must conclude that, to the dyed-in-the-wool Marxist, it is likely to be beside the point. The source of contention in the exploitation theory is that the businessman doesn’t do anything and simply leeches off the productivity of the worker; in other words by hiring labourers the businessman simply abdicates any participation in the act of production yet still gains an income. Reisman himself provides the answer to this by pointing out that labour is not the only source of productivity in a division-of-labour society and that it is, in fact, decision making, risk-taking, management and oversight that are also essential – in other words, entrepreneurship. And yet, as we noted, any extensive treatment of entrepreneurship is precisely what is missing from Reisman’s theory. Therefore, it must be submitted that an understanding of entrepreneurial profit and loss and the insulation of the labourer from business risk coupled with the time preference theory of interest provides a more effective demolition of Marxism than the primacy of profit theory which, if correct, provides only additional ammunition for it.

This brings us to Reisman’s next theoretical contribution which is his net-consumption/net-investment theory of aggregate profits, profits which he tries to explain in an environment of an unchanging supply and flow of money. The attempt to explain profit in terms of physical goods is relatively straightforward. Goods, of course, can increase or decrease and thus there can be absolutely more (profits) or fewer (losses) of them across society as a whole. We can also understand clearly, across the time structure of production, how the consumption of a smaller quantity of physical goods can be foregone today in order to produce a larger quantity of goods tomorrow. This is not so when it comes to accounting for profits and losses in terms of money which is assumed to be fixed in supply and flow. For every transfer of money that represents a credit to ones businessman’s income must show up as a corresponding debit to another businessman’s costs. Hence, while some individual businesses would earn profits and others would suffer losses, all profits and losses across the economy as a whole would net out and hence any question of aggregate profit would be impossible. The only method of solving this conundrum is to somehow, on the societal balance sheet, create a credit entry to income/equity without a corresponding debit entry to costs. It is the explanation of how this is possible that Reisman sets out to achieve.

The first element of aggregate profits – “net consumption” – derives from the fact that business revenues from consumption spending by labourers (and, as we noted, Reisman categorises all spending by labourers as consumption spending) shows up also as a business cost in the form of wage payments. Therefore, revenue and cost cancel each other out on the societal income statement. Similarly, business to business spending will be counted as both an equal and opposite revenue and cost and will net to zero. However, “the payment of dividends by corporations, the draw of funds by partners and proprietors from their firms, and the payment of interest by business firms” (which Reisman regards as “transfers”) to business owners, which provide the latter with a source of consumption spending, does not show up as a business cost yet does, once spent, show up as a business revenue. Thus the rate of profit is determined solely by the desire of the capitalists to consume. This element of profit has, Reisman claims, the ability of providing continued aggregate profits in an environment of unchanging money. For example, if the volume of spending is 1000 units of money each period, business costs could be 900 while business revenues could be 1000 and profits 100 in each and every period. (Reisman uses similar reasoning to explain how the rate of profit is increased by taxation as all taxation is consumption spending). The second element, “net investment”, derives from the fact that business spending on assets to produce business revenue are capitalised as assets and only later depreciated incrementally as a business cost. Thus, in an environment where the volume of spending is the same, business revenue exceeds business cost. For example, if 100 units of money are expended on capital assets, 800 units are spent on business costs, and there are 1000 units of business revenue, profits would be 200 as the 100 units spend on capital assets are not charged as a cost. Reisman believes that net investment provides a finite outlet for aggregate profit because, eventually, depreciation charges from assets previously capitalised will equal the value of new assets capitalised. For example, if 100 units of monetary spending on assets per year are capitalised and then depreciated at an uncompounded, annual rate of 10%, depreciation charges will be 10 units in year one, 20 units in year two, 30 units in year three, and so on until, in year 10, depreciation charges will exactly equal the 100 units of additional investment and so net-investment will provide no source of aggregate profit in that year. Thus, Reisman believes, only net consumption is capable of providing continuous, aggregate profits period after period. Net consumption and net investment are, however, joined at the hip. Reduced net consumption provides increasing funds for net investment to be capitalised on the balance sheet and charged as business costs only at increasingly remote points in the future.

What can we say about this theory? It should not be surprising to “Austrians” that Reisman’s theory is based upon net-consumption and net-investment as it those elements that are determined by the “Austrian” theory of time preference, which affects the rate of interest. (What Reisman refers to as “profit” is what most “Austrians” would refer to as “interest” – Reisman offers no explicit distinction between entrepreneurial profit and loss on the one hand and what “Austrians” would regard as interest on the other). Yet Reisman regards his theory as standing in opposition to the time preference theory and, moreover, the older productivity theory of interest. However, Reisman’s approach, characterised as simply a description of accountancy practices and the summation of money flows, does not challenge the time preference theory at all. The primary question of profit and interest that is answered by this latter theory is why do businessmen not impute the full value of the final product to the factors of production. In other words, why, even after businessmen are compensated for their managerial or oversight activities as a factor of production, is there always a further residual surplus that is not eliminated by competitive bidding amongst entrepreneurs? Why is there, to use Reisman’s terminology, a “going rate of profit” at all? The net-consumption/net-investment theory, while explaining that rises in net consumption will increase the rate of profit while reductions in them will lower it, only really explains how, from an accounting point of view, profits are possible. Reisman offers no extended treatment of the motivations of capitalists in paying (and of labourers in accepting) a sum lower than the total of business revenues and thus it is difficult to regard this as a distinctly economic theory. A more convincing explanation of his theory would detail how, with decreasing time preference, more funds are advanced to factors of production yielding revenue in the future, thus diminishing net consumption and the rate of profit, while these expenditures will be capitalised at increasingly higher amounts, depending on the time period when they come to fruition, relative to the ultimate business revenue that is earned. Thus Reisman’s accountancy-laden approach would, in this way, be fully reconciled with the “Austrian” approach to profit, or, rather, to what “Austrians” would call interest.

When Reisman does address the motivations that determine net-consumption and net-investment he does so erroneously. Reisman defines time preference as the determinant of “the proportions in which people devote their income and wealth to present consumption versus provision for the future.” It is Reisman’s link between this posited desire to provide for the future and net-investment that causes him to declare that net investment can provide only a limited contribution to net profit. To quote: “As capital and savings accumulate relative to income, the need and desire of people to increase their accumulated capital and savings still further relative to their income diminishes, while their desire to consume their income correspondingly increases”. In other words, the more saving and capital people possess the more they have provided for the future and thus productive expenditure will fall and consumption will rise, choking off net investment in the form of further additions to the asset side of the balance sheet. Thus depreciation charges begin to equalise new investments and aggregate profits from net-investment begin to fall. This view, however, is mistaken. Time preference has nothing to do with the desire of people to provide for the future. The need to provide for the future is always a present end just like any other and could be achieved by plain saving rather than investment. Time preference, rather, is the rate at which individuals prefer a larger quantity of goods available at some point in the future ahead of a smaller quantity of goods available today. It is perfectly possible for people to continue to invest sums of capital that will not produce consumer goods for well after they are deceased. Indeed, this is precisely why people have inheritances to bequeath. Many of the buildings, factories and infrastructure we have today were created not in our own lifetimes but were handed down to us from past generations. And it is further possible that capital accumulation and technological progress, which Reisman himself stresses enhances the ability to produce capital goods, will enable the production of capital goods that last further and further into the future. People would not even need to create capital goods that last so long with the purpose that they do so – in other words they could be perfectly limited in their own time horizons and yet still produce capital goods that yield a product well after the elapse of this time horizon. Let’s say, for example, that the current rate of time preference means that the produce from all assets appearing after thirty years hence is fully discounted to zero. In other words, only what the assets can produce in the next thirty years is valuable to present persons. If a capital good was created that could yield produce for sixty years, after the elapse of each year, another year’s discounted produce would be capitalised as this year is drawn into the thirty year time horizon. Therefore, such assets will provide a continued source of credits to business equity (and, thus, profits) without corresponding business costs. This is precisely the case with some of the most valuable patches of urban land which, for all intents and purposes, will go on producing well beyond the lifetimes and time horizons of any living person. Thus there is no reason for net-investment to be so limited in its contribution to aggregate profits in the environment of unchanging money. Moreover, we can see in this way how accumulating, aggregate profits that are capitalised for longer and longer periods is the hallmark of an economically progressing society – one where more and more capital is invested for longer – while the opposite, aggregate losses, represents retrogression through capital consumption.

Finally, as we noted above, there is no reason to discount saving by labourers a source of investment funds. This would divert spending from business revenue as the funds would be lent to businesses who would then spend it on “productive expenditure”. Without any corresponding business revenue the rate of profit would fall. (Thus we can see why increased funds that are made available for lending must be made at increasingly lower rates of interest).

There are one or two further disagreements we can cite here. First, “Austrian” business cycle theory, the jewel in the crown of “Austrianism”, is never explained at length and instead takes its place in a wider treatment of the effects of inflation. Second, his treatment of neoclassical price theory is too aggregative and does not explain how individual bidders and suppliers bring about a harmony between the quantity demanded and the quantity supplied. Third, as in his critique of the time preference theory of interest, Reisman often perceives differences or disagreements where there are none, such as that alleged between his productivity theory of wages and the marginal productivity theory of wages, the latter of which he describes incorrectly. And finally, in spite of having been the translator of Mises’ Epistemological Problems of Economics, Reisman has little to say concerning method – something which perhaps descends from his rejection of economics as the science of human action, which underpins Mises’ methodological dualism that divides economics from the natural sciences.

Overall, therefore, the question of whether Reisman’s approach to economics has successfully synthesised the “Austrian” and classical schools, and, moreover provided a progressive outlook for the science of economics must, regrettably, be answered in the negative. Rather, Reisman’s positive economic theory in this treatise comes across more as a restatement and re-polishing of classical economics (with some corrections to that school of thought), peppered with insights from neoclassicism and the “Austrian” school. Reisman’s rejection of the primacy of human action as the subject matter of economics has been at the expense of not only losing a great deal of theoretical understanding in the wertfrei science that this affords, but also weakening any positive promotion for capitalism and freedom.

Nevertheless, while this review has been mainly been critical of Reisman’s positive economic theory, we must end by celebrating the fact that our author has, in this treatise, many great things to say concerning socialism, environmentalism, interventionism, inflationism, Keynesianism and all other manner of false doctrines rejected by “Austrians” and libertarians alike. What Reisman has put to paper here are among the finest critical analyses of these areas ever written and, even if one cannot agree with Reisman’s specific, economic outlook, these contributions alone place Reisman in the top rank of economists whose work should be studied avidly.

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Economic Myths #15 – Unemployment

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One of the key indicators of the economic “performance” of any given country is its rate of unemployment. Low rates of unemployment are understood as a sign of prosperity while high rates are taken as a sign of recession and stagnation. Indeed, during the Great Depression, unemployment reached as high as 25% in the United States. Politicians are particularly keen to monitor the rate of unemployment as low unemployment lends credence to the economic policies of those in power while high unemployment stocks the arsenal of those in the opposition. Given also that entire economic dogmas such as the so-called trade-off between full employment and inflation, not to mention the generation-long post-war Keynesian consensus are, at least, part rooted in the concept of unemployment, one would expect unemployment to be a unique and important category in economic theory.

This short essay will not explore in detail the government induced causes or aggravations of unemployment such as the minimum wage and excessive regulations heaped upon the shoulders of employers. Such topics have been examined countless times over by many economists, “Austrian” or otherwise. Rather, what we wish to concentrate on here is the validity of the very term “unemployment” itself and to determine whether it is really a useful concept in shaping so-called “economic policy” or whether it is really redundant and meaningless.

In the first place, as “Austrians” we must be highly suspicious of any concept that is an aggregation and is not explicitly linked to any notion of individual human action. All voluntary actions are, as we know, the result of the best choice of ends available with scarce means. A man who has several million pounds stashed in his bank account may be content to spend all of his time in leisure and would be “unemployed”. Yet aside from any moral wrangling over the worth of such a lifestyle we would hardly view this as a problem. But what about those lesser privileged folk – the ones who are not working but nevertheless have the outward appearance of needing an income from some kind of employment? Shouldn’t we classify these people as “unemployed” and doesn’t this state of unemployment indicate an egregious case of market failure?

The question turns on whether employment at the terms of the available opportunities is worthwhile for the individual person. If there are jobs available yet he refuses to accept them then it indicates that he is not satisfied with the terms of those opportunities. Perhaps it is the wrong industry, it is in wrong the place, or – most likely – the wage offered isn’t high enough for him. He therefore chooses to abstain and holds out for a better opportunity to appear in the future. From the point of view of individual satisfaction with the scarce means available, the outcome of seeming “unemployment” is therefore optimal. Indeed, labour, like anything else, is a resource that is available for an individual to use. Not all resources are deployed 100% of the time as it would be wasteful to do so. Everyone, for example, owns possessions that are not being used at the current moment – food in the fridge, clothes in the wardrobe, books and DVDs on the shelf, etc. Clearly it would be wasteful – nay, ridiculous – to try and use all of these “unemployed” resources at once. They are more valuable being kept in abeyance ready for utilisation when an opportune moment appears, i.e. when the person believes that use of them would yield more benefit than leaving them idle. More widely, there are always buildings to let, oil in the ground, trees that are left standing, water in lakes and reservoirs, and so on. All of these resources remain idle because an opportunity valuable enough for deploying them has not yet arisen. Indeed, consistent requirement for all resources to be utilised would mean that shops should be empty of all goods as they have already been purchased and consumed, and ultimately everything in the world should be consumed right now. To put it at its most basic, a person actively searching for the right job is not, in his mind, unemployed in the sense of carrying out a wasteful activity.

The inability to see labour as a resource that is deployed at the choosing of the individual labourer leads to many related fallacies and reveals the dangers of looking only at surface phenomena and appearance. An individual does not view employment as an end itself – work for work’s sake. Rather, all employment is action aimed at diverting scarce means available to their most highly valued ends. Employment per se is not a goal or achievement. No one would dig a hole in the ground and fill it up again unless the act of doing so led to a valuable end. Governments and people succumb to the illusion of economic activity brought about by “employment” and the apparent lack of it by “unemployment”, with any focus on providing “full employment” never stopping to ask whether the activity in which employment will be created is worthwhile or is wasteful. The most grievous example of this this is, of course, the forced lowering of interest rates to provoke an artificial investment boom. There will be lots of employment, everyone will be engaged in lots of activity and wages will be rising rapidly. But it is clear that everyone’s endeavours are ultimately wasteful and lie on a doomed path. So-called full employment policies are therefore nothing more than a surface coating to prevent social unrest, to make people feel as though they are doing something worthwhile and to put money into their hands that they can spend. To the extent that these actions create no new wealth, however, they should properly be regarded as welfare and not as employment. The wheels may be turning but the carriage goes nowhere and it is simply expending fuel on motionless activity. Far more difficult would be for governments to concentrate on policies that promote full production instead of full employment as this would, of course, require a dramatic reduction in the size and scope of government power and interference.

We submit, therefore, that unemployment is a meaningless concept at least when applied to the unfettered free market. It may have some relevance in economies where governments impede the ability of the supply of labour to meet demand through minimum wages and the like. Apart from shutting out a good number of low-productive persons from the labour market entirely, such interferences ultimately distort people’s views as to which terms of employment are achievable – they hold out for high wages because there is the illusion that that is what their labour is worth. They do not realise, however, that supply is unwilling to meet demand at that inflated level and hence their search for employment is in vain. All of this, however, is simply a particular application of price theory. If the price of any good is fixed too high it will remain unemployed. There is, therefore, no special concept of unemployment applying only to labour that attracts a different body of theory. Furthermore, the whole question of “nominal rigidity” or so-called “sticky wages” is beside the point when it comes to economic theory. If the demand for a particular good – in this case, labour – should drop it is entirely open for the particular labourers to express incredulity at this fact and to stubbornly hold out for wages that will never meet a willing demand. This is not, however, evidence of the market’s “failure to clear”. It is simply that the supply curve remains stuck to the left. There is an misconception that the market is “efficient” because it “values” everything correctly – a doctrine that underpins so-called “efficient market hypothesis”. But the “efficiency” of the market – the  nexus of voluntary exchanges between individual people – comes from its superior ability to channel goods to where they are most highly valued; it has nothing to do with whether a good should be valued or whether any particular valuation is correct. A good could be utterly useless but if a significant enough people chase a small supply it will command a relatively high price. The market will place this ware in the hands of those who value it the most, but the source of that value is the human mind and this valuation can be and often is erroneous. If people remain unemployed, holding out for unrealistically high wages, the fault lies in their incorrect assessment of the value of their labour, not in any market’s failure. Needless to say, however, the causes of these erroneous valuations are government interferences. It is because government creates such macroeconomic calamity that price bubbles and collapses occur and so-called “sticky prices” are a phenomenon associated with post-boom deflations. Having become accustomed to high wages, it is natural for workers to become frustrated and resistant when supply for these wages suddenly dries up and they not only have to face the prospect of lower wages but also a mass shift out of the capital goods industries – where they may have developed significant, specialist skills in the meantime – to consumer goods industries. In a genuine free market it is highly unlikely that workers would be faced with these problems. However, none of this really has much to do with economic theory, the purpose of which is to expound the formal characteristics of human action rather than the substance of those actions. Rather, sticky wages is more a topic for psychology, the field of human action that studies why people make the valuations that they do.

We conclude, therefore, by emphasising that there is no special category of “unemployment” as it applies solely to labour. Any “unemployment” of labour is explained either as the willing choice of the individual worker to withhold his labour from the market (and thus, to him, the best possible outcome), or as the result of government price fixing which is merely a particular instance of the economic effects of that wider category of interference.

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Austro-Libertarianism – Three Next Steps

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Austro-libertarianism undoubtedly has a long history of scholarship of which it can proudly exemplify as not only providing a coherent body of truthful insights into the way in which the world really works, but also provides a foundation for a just and prosperous society.

However, far from resting on any laurels (and I doubt any scholar in this tradition would ever believe that we are at the stage where we can do such a thing), this essay will suggest three areas of development to which scholars in the Austro-libertarian tradition may wish to focus their research.

Pure Praxeology

The first area is to reconceive “Austrian” economics as a pure (or at least “purer” theory) of praxeology. Although “Austrian” economics is noted for deriving its laws from the theory of individual human action, economics traditionally – not least because concepts such as exchange, production, prices, money, and so on are the complex phenomena that we wish to study and understand the nature of – concentrates only on action above the level of the bilateral exchange of wares for a money income. Our economic categorisations and concepts therefore rest on that limitation. “Austrian” treatises, although they begin quite properly by explaining how economic theory is derived from the action axiom (together also with extremely useful chapters on unilateral or “Robinson Crusoe” exchange), soon begin to espouse their theories in terms of these more aggregative concepts, only occasionally returning to individual action in order to emphasise a particular point1.

A simple example to illustrate this point is the economist’s approach to the classification of goods. A “consumer good” is one that is purchased by a consumer for money without any further sale for money expected. Bread, for example, is treated as a consumer good because it generally goes through no further monetary exchange prior to being consumed. At the individual level, however, the bread may only be a capital good in making, say, a sandwich. Labour is combined with the bread and other goods – say cheese and tomatoes – in order to produce the final consumer good of a cheese and tomato sandwich. We can say the same thing about cutlery and crockery, paper and ink and so on. All of these goods are used at the level below that of exchange for money by individuals to produce further goods. “Land”, on the other hand, is treated as the natural resources which are a gift to all humans, not just an individual human being. However, a good produced by another human being may, to the individual who happens to stumble upon it, comprise “land” in the sense that it is a free gift to him and that he has not had to exert any productive effort in order to bring it into the condition in which he finds it. If, for example, I find an abandoned car in perfect working order and (assuming there are no competing ownership claims), even though the car is a produced good, as far as my action and my computation of costs and benefits towards that action goes, the car is a gift of nature and is in exactly the same condition as, say, a tree that has grown naturally.

It is easy to see why any loss of the connection to individual action can quickly lead economists in the “Austrian” tradition and their fellow travellers down wrong paths. Murray N Rothbard provides an extensive critique of W H Hutt’s aggregative concept of “consumer sovereignty” – the idea that all consumers are sovereign over producers and that the latter exist only for the benefit of the former and not for themselves2. The market place is where everybody seeks to benefit himself through voluntary exchange, and there is not, in fact, a distinct class of labourers, of producers and of consumers with one being “sovereign” over the other. Rather, everybody at differing points of the day (even from minute to minute) participates in a different economic category – a man is a labourer when he goes to work; he is a consumer when he stops by at the shop on his way home; he is a capitalist if he purchases some shares for his pension, and so on. Questions of “sovereignty” – the boundaries of rule – concern only the political arena. Concentration on the basis of economic law in individual human action would have avoided any fallacy and prevented a resort to parcel phenomena into homogenous, collective blocks. However, Rothbard hardly escapes the same danger to which Hutt succumbed, building his entire theory of production using the economic fiction of the Evenly Rotating Economy (ERE), an economy in which all economic activity is repeated and known. Thus, entrepreneurial profit and loss is eliminated. This model allows (or, perhaps, forces) Rothbard to conclude that capital goods earn no net rents and that all rents are paid back to the original factors of production – land and labour – a theme that is oft repeated throughout his entire treatise. It is submitted here, however, that regardless of how such an approach may be helpful in illustrating the complexity of the structure of production, any firm or even implied conclusions drawn from it are likely to be grossly misleading and can only lead to error. The most dangerous false step from this presentation is to assume that the ownership of land – as an original factor – provides essentially free income to those who happen to hold it. Needless to say Rothbard takes great pains to rebut this conclusion, but his attempt could be condensed, with a slight modification, to a single paragraph:

As the only income to ground land that is not profit or interest, we are left with the original gains to the first finder of land. But, here again, there is capitalization and not a pure gain. Pioneering—finding new land, i.e., new natural resources—is a business like any other. Investing in it takes capital, labor, and entrepreneurial ability. The expected rents of finding and using are taken into account when the investments and expenses of exploration and shaping into use are made. Therefore, these gains are also capitalized backward in the original investment, and the tendency will be for them too to be the usual interest return on the investment. Deviations from this return will constitute entrepreneurial profits and losses. Therefore, we conclude that there is practically nothing unique about incomes from ground land and that all net income in the productive system goes to wages, to interest, and to profit3.

The correct position, therefore, is that “things” do not “earn” anything. All actions, whether they involve the dispensation of labour, land or capital goods, require the sacrifice of one state of affairs (“costs”) in the pursuit of another state of affairs. It is hoped that the ends brought about are more valuable than the ends given up. The creation of this value if the action is successful (or its destruction if it is not) is the product of entrepreneurial judgment. All income from any action is therefore paid out to cover costs, interest or entrepreneurial profit and loss. All net rents in the economy accrue only to this latter element – successful entrepreneurial judgment with the means at one’s disposal, whether this is your labour, land that you own, or a capital good that you hold. All of these things that can be bought or sold for more or less money than is sufficient to cover their costs plus interest. It is only by remaining firmly anchored to action at the individual level that this realisation can remain in focus4.

Coupled with this endeavour of better preserving the link between the complex phenomena in the economy with individual action is a greater emphasis on “Austrian” methodology not as a separate topic but one to be espoused during the course of the treatise. The reason for this is that a “vulgar” conception of “Austrianism” would state that all economic theory and all of the laws of economics are deduced logically from the action axiom and one or two subsidiary axioms. Truths derived empirically have little or no place in “Austrian” economics. This is not, however, altogether true. Only the core theory concerning the action axiom and its immediately related categories, in addition to some of the more fundamental laws (such as the law of marginal utility) are deduced logically. However, there is a great body of “Austrian” economic law that requires the ascertainment of empirical facts. We cannot, for example, derive economic laws of bilateral exchange without ascertaining the existence of more than one human being, an endeavour which any individual cannot simply deduce. We cannot have an “Austrian” approach to the economic effects of taxation unless one group of persons had, in fact, attempted to tax another group. We cannot have an “Austrian” business cycle theory without first assuming the existence of banks, the practice of fractional reserve banking, a loan market and even money itself must be presupposed. Although the regression theorem, for instance, is a valid praxeological law5, it would only exist if we first of all knew that money existed and that people had chosen to use a good as a general medium of exchange. Now it is true, of course, that these laws would remain valid and true even if the substantive human choices upon which they rely had not been made. If we imagined a world without money, for example, and pondered its existence merely as a hypothetical we could still derive “Austrian” laws concerning it without it ever actually existing. The actual phenomena in existence simply direct our interest to them as those are the areas that matter in our lives and hence are the things we wish to study and understand. No doubt it is also quite impossible to try and “imagine” alternative institutions and choices that have never existed and to apply to them the core “Austrian” theory, especially as our own experience of real concepts such as money, exchange, prices, banking and so on often provides an illustrative tool to our theoretical insights. However, it is more accurate to speak of the entire endeavour of “Austrian” economics not solely as a body of economic law that is deduced logically, but as the application of the core theory, deduced from the action axiom, to the substantive institutional choices that humans have made, the existence of which is verified empirically6. More prominent highlighting of the “Austrian” method and the source of each parcel of knowledge during the course of a treatise would aid greatly any misunderstanding in this regard.

Ethics

The second area of fertile development in “Austro-libertarianism” is the necessity to sever or more sharply delineate the relationship, often casually assumed not only in political philosophy but also in the opinions of lay persons, between legal norms and moral norms. That is, the question of what should be legal – in other words, those norms which may be enforced by the imposition of violence – should be separated from the question of what is good, worthy or preferable. It is submitted that this is one of the greatest barriers to a proper understanding of the role of violence in interpersonal morality, and has been dealt with in detail by the present author here, here and here. Many people happily recognise the illegitimacy of the legal (violent) enforcement against themselves of norms that other people value as moral ends which, as the hapless victims of this enforcement, they themselves do not (or at the very least, they would complain about it). But, because of the prevalence of the legitimising effect of democracy and the blurring of any distinct line between the governors and the governed, most would not think twice to advocacy of the legal (violent) enforcement of ends that they deem good against other people. Indeed, the criterion for what should be legally enforced boils down to little more than what most people think should be legally enforced. Libertarians need to create an understanding that the proper role of violent enforcement is restricted to preserving the physical integrity of each individual’s person and property – and as moral agency requires such integrity in order for a person to choose and act, such an insight is crucial for any proper understanding of interpersonal morality. The examination of whether something is bad, unpleasant or a vice must be separated from the question of whether its prevention should be enforced legally; and, equally and oppositely, the examination of that which should be peacefully permitted by the law should be separated from the question of whether such acts are good and noble things. In addition to aiding moral and political philosophy, this would be of a benefit to libertarianism specifically as it would render inert the perceived support for all of those bad and unpleasant things – drugs, prostitution, gambling, blackmail, and so on – which are non-violent but are nevertheless not necessarily things that we would wish to see in our society7.

Inflation

The final area for development in Austro-libertarianism, this time in the field of economic history and anthropology, is to engage in a rigorous study of the effects of inflation and inflationism throughout history. “Austrian” scholars have certainly charted well the purely economic effects but, in the opinion of the present author, an exhaustive study of the social, cultural, political, and aesthetic effects of inflation is yet to be written, at least in the “Austrian” tradition. As Henry Hazlitt notes:

[Inflation]…discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. It often makes it more profitable to speculate than to produce. It tears apart the whole fabric of stable economic relationships. Its inexcusable injustices drive men toward desperate remedies. It plants the seeds of fascism and communism. It leads men to demand totalitarian controls. It ends invariably in bitter disillusion and collapse8.

Apart from the wide “macro” effects of inflation – not least of which include the birth of odious ideological movements and regimes and their ability to fund wars and conflict – also of interest is how inflation effects us at the individual level. For example, how many of our day-to-day products that we enjoy today are the result of genuine development by a capitalist economy and how many are simply substitutes developed in an era of inflation to enable people to attempt to salvage some of their previous standard of living? Products such as instant coffee, condensed milk; synthetic clothing; plastic bottles; and so on. How many genuine labour saving products were developed not because people genuinely wanted to save time but because inflation had either reduced their income to such a degree that time came at a premium or because inflation had induced impatience and a present-oriented fervour? Indeed the latter may have had distinct ramifications beyond the economic – the birth of adolescence as a distinct demographic; the sexualisation of society; the preference for entertainment ahead of learning; the attraction to style rather than to substance; the prominence of sound bites and “tweets” rather than in-depth analysis; the emphasis on youth and adaptability to an ever changing world rather than on age and accumulated wisdom. All of these things have significant consequences for which inflation much at least be partly responsible. Further, how much does inflation distort our views of reality and of what is possible? Inflation, as Hazlitt noted, makes speculation rather than production profitable – the image of productivity and wealth creation rather than the very thing itself. It makes big or easy wins more attractive than patient investment in a lifelong endeavour. But at the extreme we might say that we have attempted to replace reality itself with dreamed ideals. Government, has taken over and replaced real money (gold and silver) with a fake paper counterfeit. Having replaced reality with one form of fakery, we expect government to be able to legislate to replace reality with our pseudo visions, to carry out the miracle of transforming stones into bread. Thomas Nast’s cartoon, Milk Tickets for Babies in Place of Milk (below), concerning the inflation during the American Civil War, perhaps captures the foundation of this mindset in artistic form. The cartoon contains representations of reality that are passed off, for example, by Acts of Congress as reality itself. As English professor Paul A Cantor explains:

Nast’s illustration brilliantly captures [the confusion of] things with representations of things. Like Magritte [in the painting The Treachery of Images], Nast reminds us that a picture of a cow is not actually a cow, but he is not making a merely aesthetic statement. He is drawing a more serious analogy between the duplicity involved in artistic representation and the duplicity involved in the government printing money and forcibly establishing it as legal tender, an analogy embodied in the parallel “This is a Cow By Act of the Artist” and “This is Money by the Act of Congress”9.

Given that “Austrians” lead in the way in a providing a genuine understanding of the definition and effects of inflation it would be appropriate for an historian versed in “Austrian” theory to undertake a full study along the lines that we have suggested here.

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1It is also the case that most “Austrian” scholars writing today received their initial education in the mainstream economics tradition and only later “turned” to “Austrianism”. Thus one senses a tendency, if not a persistency, to lapse into the comfort of aggregative and pseudo-concepts, at best obscuring the essential connection to individual human action, and at worst completely losing it and ending up in the rhetoric of collectivist and societal-oriented action.

2Murray N Rothbard, Man, Economy and State with Power & Market, p. 631-6

3Ibid., p.530, emphasis added.

4The present author is not enthusiastic about the excessive use of equilibrium constructs and they should, at the most, be used as a tool in order to distinguish one concept from another, an endeavour that would be impossible without such a construct. Nevertheless, it is possible that a dynamic equilibrium – a fiction in which there is change and entrepreneurial profit and loss but where all forecasts of the particular entrepreneur in the model are correct – together with a focus on the costs of land acquisition and of the dispensation of labour would have created a better illustration than the ERE. But whatever model is used, it is submitted that the illustration of every stage of production, whether it is with land, labour or capital, necessitates the elements of costs, interest and entrepreneurial judgment and that, contra to Rothbard’s assertion that the mental construction of the ERE is necessary in explaining the structure of production, a much clearer grasp of reality can be and, indeed, is attained without omitting any of the crucial elements.

5Although this is disputed. See Gary North, The Regression Theorem as Conjectural History, Ch. 7 in Jörg Guido Hülsmann (ed.), The Theory of Money and Fiduciary Media – Essays in Celelbration of the Centennial.

6If anyone should doubt this and remain steadfastly wedded to the idea that “all” of “Austrian” economics is deduced logically this then he should attempt to present an “Austrian” treatise written in formal logic.

7The present author has dealt with the so-called “thick” or “thin” libertarian debate here.

8Henry Hazlitt, Economics in One Lesson, p.157.

9Paul A Cantor, Hyperinflation and Hyperreality: Thomas Mann in Light of Austrian Economics, The Review of Austrian Economics, Vol. 7, No. 1 (1994), 3-29.

Towards a Universal Human Ethic

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The effort to establish an incontestable proof for libertarianism as a universal human ethic is an immense undertaking and one that (to avoid any possible false anticipation) will not be accomplished in this short essay. We can also suggest that even if a libertarian scholar was to arrive at such a thesis it is unlikely that he would attract the attention and rejuvenation of political philosophy that, say, John Rawls did upon publication of his A Theory of Justice, an inherently statist work that found natural admirers amongst those interested in promoting the cause of the state. In this essay we will outline some important considerations that may help towards establishing libertarianism as the universal, human ethic.

The first consideration, and one that the present author is yet to see in print, is why should the burden of proof be on libertarians to establish their case? Doubtless it is the task of those who posit a particular political or ethical theory to justify their propositions, but too often in this kind of debate, democratic government is seen to be the natural, neutral or perhaps “default” position, with libertarians striving to promote something new and exciting, like a novel invention or a method that must be proven to be right before we could possibly envisage accepting it (although it seems as though we are never allowed to have it tried and tested). However, the case is, arguably, the other way round. Liberty – the freedom of each individual as an independent moral agent free from interference – is the natural, default status of human beings, as will become clear from our analysis below. It requires only negative action on the part of every individual human – the abstinence from physical invasion of the person or property of another. Anything else, however, requires a positive, conscious choice to disturb this peaceful situation and to interfere, physically, with somebody else. Those proposing such a positive course of action should surely be required to prove their case ahead of those who argue for retention of the natural state of affairs? Indeed, the difficulty of establishing a case for libertarianism does not result in the case for government being any stronger and at the very least proponents of the latter should be prepared to justify their positions as well. Often in these debates the libertarian is presented with a smorgasbord of issues and is required to explain how each and every one of them would be dealt with in a libertarian society and produce a just outcome; for some reason, the slightest weakness, the slightest inability of the libertarian to explain how a single issue, however minor, would be handled better in a libertarian society is taken as conclusive proof that libertarianism must be discarded, regardless of the finesse of the argument before that point. This is nothing but intellectual sloth, or rather a preference to bask in the comfortable status quo rather than confront formidable questions. It may be difficult to argue for the rights to self-ownership and private property, but it is much more difficult to propose that a select few should be able to override self-ownership and private property; that a select few need not earn their living by serving others through voluntary trade but can, instead, confiscate it; that the select few can enact laws and edicts with no regard to any primary rationale whatsoever; that the select few can establish massive, compulsory monopolies over whole industries such as transport and healthcare; that this little elite can accumulate debt that exceeds the productive capacity of the planet; that it can spend this borrowed money on invading and bombing civilians in foreign countries in conflicts that are not its concern. This side of the debate cannot be ignored. Now, to be sure, not all statists agree that these are legitimate things for the government to do and would wilfully deplore them in concert with libertarians (although much of this would be a criticism of that which government does, as opposed to the libertarian view that opposes government per se). But this demonstrates that the status quo is not the default option and opponents of libertarianism must be prepared to establish their own philosophies as being superior to libertarianism rather than simply dismissing one that they do not share.

The second consideration, and one that has been raised in previous essays, is the presuppositions of those who attempt to promote ethical theories of society. The characteristic of humans that distinguishes them from animals or unconscious matter is that they make voluntary choices to devote means towards ends, rather than simply relying upon instinct or the inertia of other matter. These voluntary choices are the substance of moral enquiry – because of the fact of scarcity, humans must choose between competing ends to which means could be devoted. An ethical theory informs the human of which ends he should pursue and which he should not with the means available. Without voluntary choice arising from scarcity moral theories would be redundant – total abundance would mean that every end is already fulfilled and hence moral theories would have no information to provide, and without voluntary choice moral theories would have no effect upon an action because the individual cannot change its outcome. Thus any being that makes voluntary choices is deemed to be a moral agent – the being to whom a moral theory applies. A theory of intrapersonal morality would concern only how moral agents should make choices in relation to amoral agents – those who have no voluntary choice such as dead matter, or objects. The moral question is “what is a good thing for this person to do with this object?” and not “what is a good thing for this person and for this object?” There is no such thing as moral rights arising in the form of dead matter and any moral enquiry concerns wholly the best ends for this individual human to pursue vis-à-vis that matter. With interpersonal morality, however, the question changes as now we are concerned about what is good for one actor and what is good for another in their relations between them. An interpersonal ethical theory accounts for not only the best ends of the one actor but also those of the other; thus, there arises the language of reciprocal rights and obligations that we possess and owe, respectively, to each other. As we noted, the essence of being human is that voluntary choices are completed through actions which are physical manifestations, making physical changes to the matter that is in the world and that this is the criterion of moral agency. If one person’s voluntary action, therefore, physically restrains or interferes with the person or property of another then what is the result? What happens when one person uses force against the person or property of another? Simply that this latter person is now prevented from making voluntary choices that result in actions devoted towards ends that he desires. Rather, his action is now forcibly directed, like a mere object, to the fulfilment of the ends of another individual. He therefore loses his characteristic as a moral agent and, worse still, as a human being entirely. For the very characteristic that makes him human – voluntary choice – has now been denied to him. What follows, therefore, is that any ethical theory that relies upon the force may be a perfectly applicable ethical theory to the individual actor doing the forcing – it may be perfectly acceptable if it is presented as a theory of what this one person should, treating every other human in the world as mere objects for his use. But if it is presented as an ethical theory of society then something is surely amiss – for how can such a theory apply to a society of humans, who, by virtue of that definition, each have independent moral agency making voluntary actions motivated by voluntary choices, when the substance of that theory denies them this very characteristic? It is no answer to this charge that, as humans, we have a reciprocal obligation to submit to the force of a person who may be said to have the “right to force”. Such an obligation does not make sense because an obligation presupposes the voluntary choice to carry out the substance of that obligation. If one is forced, however, there is no obligation at all – like a tree blowing in the wind it simply happens. Furthermore, the threat of force resulting in seemingly voluntary compliance is indistinguishable from force because there is no genuine choice – the same outcome will always result regardless of the victim’s choice to either carry out the forced ends voluntarily or to submit to violence. Moreover, neither does so-called “democratic oversight” of the enforcers – through, say, popular elections of the government – make any difference. In the first place, the answer of democratic oversight to seemingly despotic and autocratic propositions is reminiscent of the response of the socialists to Mises’ theory of economic calculation under socialism – in order to try and get around a very real problem faced by their theory they have to make socialism look like a market through various contrived devices such as bureaucrats “playing” entrepreneurs with money bestowed on them by the state – which raises the question of why not just adopt the market anyway instead of an inferior version of it? In just the same way here democracy lends a veneer to tyrannous and collectivist theories in order to make them look more free so that people are really “volunteering” to government edicts – which equally raises the question of why just not adopt genuine liberty? Regardless of this, however, democracy does not convey any genuine voluntary control to the individual. Rather, it conveys it to a majority of individuals. Any ethical social theory legitimated by democracy is not, therefore, a genuine human ethic but rather an ethic of the majority. Anyone in the minority is still forcibly subjected to ends that they do not want. Furthermore, this control by the majority would only be present in direct democratic systems where you get to vote on every individual issue. However, in so-called representative democracy, the political system under which most of us are languishing in the world today, the majority merely chooses the decision makers out of a carefully screened list once every four or five years – and there is no compulsion upon these leaders to carry out their manifesto commitments or electoral promises. The majority may have chosen the leaders but there is no guarantee that they would voluntarily submit to that which these leaders would decide to do once in office. Neither also does the fact that the tyranny may be partial rather than absolute save any collectivist social theory. For example, the government may forcibly confiscate 40% of your income in taxes; 60% of it is still yours to do with what you like as a free and independent human being (subject to all the myriad of government restrictions and regulations, of course). More specifically, the government does not regulate when you make a cup of coffee, or go to the toilet, or watch the television, or do your laundry. In other words there is still a very significant part of our lives in which collectivist ethical theories still allow us to be independent moral agents. However, this is only because the government has decided to leave you alone in these activities. If I had a working horse and I let it wander to any corner of the paddock that it wanted, sleep when it wanted, drink water when it wanted, none of this would change the fact that the horse is still entirely mine to dispose of as I wish. Indeed I might only allow these unilateral actions on the part of the horse because it makes it more pliable to being forced to work at a later date. In the same vein, most collectivist theories, absent some vague or waffling commitment to “fairness”, “equality” and so on, do not posit the substantive choices that should be made under their aegis – they merely advocate the procedural, political set up for making them. There is no reason why, in principle, government could not confiscate all or a larger chunk of your income, or actually regulate how often you go to the toilet or what you decide to wear. The de facto result of democracy is that it has seemingly legitimated any action of the government whatsoever, with democratic governments having made far more inroads to personal liberty of which ancient monarchs could only have dreamed. Substantive freedom under collectivism is based more upon what the populace is willing to bear rather than anything inherent in the ethical theory that informs it.

This proposition – that any theory that does not permit complete individual freedom can never be a genuine human ethic and therefore is, by its own standards, contradictory is not, of course, a watertight theory. It would, for example, have nothing to say to a person who did not wish to present his theory as a social theory and only cares about subjecting other people to the ends that he desires – in other words, a tyrant in the extreme. And indeed, just as a horse may need to be cajoled in working for you, so too may the tyrant pay lip service to espousing an ethical theory of society that works for everyone in order to placate the population, whereas privately he has concluded that only his ends really matter1. Nevertheless, it is certainly an important realisation whenever confronting someone who proposes such a theory. For if he is proposing a genuine theory of society then his theory is contradictory. If he is not, then his tyranny is simply revealed for what it really is and his true ends, to subject everyone else to his desires, will be laid bare for all to see. It is not likely that response to such a theory would contain an overwhelming degree of enthusiasm.

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1This is arguably the shortcoming of Hans Hermann Hoppe’s argumentation ethics, which relies upon the premise that ethical propositions must be determined by argument. Does this bind the person who doesn’t argue, or playfully argues only to cajole or placate while having already unilaterally concluded ethical propositions in his own mind?

Some Common Objections to “Austrian” Economics

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“Austrian” economics is a heterodox school of thought – its theorems and, more crucially, its methods at arriving at those theorems are not embraced as mainstream by the majority of the economics profession. Economics is, like all academia, a largely government controlled and funded science and it is probably no surprise that a school of thought that lays bare the consequences of government action is met with little enthusiasm. Nevertheless it is appropriate to examine and rebut some of the substantive objections to “Austrian” economics so that proponents of this school of thought can more sharply attune themselves when responding to them.

“Austrian” Economics is Old!

The charge that “Austrian” economics is old or outdated rests on the fallacy that progress always moves in a single direction and that everything that is known today either contains or is built upon that which is known yesterday. Hence there is no need to examine the “old” stuff. Yet the history of knowledge has seldom been one of a continued and unbroken progress. Rather, crucial insights have been lost and areas of study have been shunted on to false and wrongheaded directions, both in the natural sciences and in the social sciences, with intellectual vested interests often replacing open minded hypothesising. The history of science abounds with false paradigms of which flat earth theory and the geocentric universe are only the most patently obvious; more recently, however, it has been suggested that the conclusions reached by the theory of relativity are better explained by traditional classical physics1, and libertarians themselves have pointed out that the conventional approaches to medicine in areas such as HIV/AIDs and cancer is more concerned with propping up the profits of big pharma than in developing a genuine scientific understanding of these ailments. This is not, of course, the place to validate any of these challenges but they do serve as a warning that what we might regard as absolutely true and correct today may not be and that we have led ourselves down a blind alley. Speaking more generally, the twentieth century was possibly the most bloodthirsty and unstable in history, contrasted with the less eventful and unfairly stigmatised “dark ages” where state power was less firmly entrenched. Democracy has become the leading orthodoxy whereas faith in earlier systems of government is at an all-time low, even though democracy’s ethical superiority is far from clear. In economics itself, Rothbard has suggested that the foundation of economic thought built by Adam Smith obliterated many important insights of the earlier thinkers such as Cantillon and Turgot, even going so far as to blame Smith for the injection into economics of the labour theory of value2. The revolution in Keynesian thought and positivist methodology in the first half of the twentieth century also pushed economics from a path on which it shared much in common with the earlier “Austrian” school. Indeed the curious and scarcely challenged acceptance of Keynes’ General Theory completely blew from the water the “Austrian” explanation of business cycles as it applied to the Great Depression. As Henry Hazlitt later quipped, “what is original in the book is not true and what is true is not original” and the entire tome was never properly debated – merely accepted3. Indeed, economics today suffers from a distinct splintering into hermetically sealed units that seldom interact with each other or acknowledge a common foundation. In addition to the wedge between micro and macroeconomics, we seem to have labour economics, industrial economics, oil economics, financial economics, international economics, and so on. Most of these bubbles are little more than statistic-gathering lobbying channels to favour key industries rather than areas of study that are influential upon core economic theory. Furthermore, intellectual thought has often had a dismal record at being ahead of reality – until the 1990s Marxism was rife in academic circles and as late as 1989 Paul Samuelson, in the 13th edition of his bestselling economics textbook, stated that the Soviet economic system was “proof that…a socialist command economy can function and even thrive”. To ignore an old area of thought, or to refuse to dust the cobwebs off long-ignored treatises is not necessarily an exercise that is conducive to the preservation and growth of knowledge and, indeed, more than risks violating the first duty of the scholar – to preserve that which is already known to be true. More Menger and Mises would do far more for the economics profession than 2014 journal articles by PhDs and Nobel Prize winners.

“Austrian” Economics is too Political!

The charge that “Austrian” economics is too political may at first appear surprising given that its primary theorist, Ludwig von Mises, was extremely clear on his support for the wertfrei science and only spoke of his passion for laissez-faire in his capacity as a citizen and not as an economist, or so he claimed. Although it is true that most of those who embrace “Austrian” economists are libertarians in one form or another, this charge is more likely to originate from the fact that “Austrian” economics leads to the radical and stark conclusions that government would not benefit the average citizen, nor would it succeed in doing anything that which most people want government to do. Such results are intolerable for government advocates and hence they try to paint “Austrian” economics as having a political bias. Unfortunately, such an attitude reveals the political bias inherent in their own schools of thought. Indeed, the entirety of the mainstream, with its experimental method and drive towards socially engineered outcomes, is inherently statist, normally considering only which government action is the right one. It seldom asks itself the questions whether any government action is appropriate at all. Most macroeconomic research is funded by the US Federal Reserve and it is hardly likely that such an institution, the actions of which are so central to the “Austrian” theory of the business cycle, will be willing to engage its critics on its payroll. A little more broadly, the defects in Marx’s economic thought – his misconception of economic classes and his inability to defend his labour theory of value against the uniformity of profit levels in capital-intensive and labour-intensive industries – can be attributed not the fact that not that he was simply a bad thinker but that his thinking was subservient to his political ends4. Indeed, one of his staunchest critics, Eugen von Böhm-Bawerk, still praised Marx as “an intellectual force of the very highest order” in the book where he laid waste to Marx’s labour theory of value5. At the very least, therefore, “Austrian” economics is no more politicised than any other school of thought.

Austrian Economics is not Empirical!

The familiar charge that “Austrian” economics is deduced from the action axiom and does not make use of experimentally tested hypotheses is one of the primary dividing lines between the “Austrian” school and the mainstream. The present author has recently explained the “Austrian” method and we will not repeat here what we have examined already. Rather, we will concentrate now upon a more subtle criticism which is that, although “Austrian” economics makes the claim to be a deductive science, it must nevertheless make use of empirical facts and that both Human Action and Man, Economy and State are rife with empirical assumptions. Aren’t “Austrians”, therefore, completely misstating their own method? This criticism, however, confuses core theory on the one hand, which is formal and deductive, with the application of that theory to substantive choices that humans have made on the other. The core of “Austrian” theory – actions, ends, means, choices and the laws that are derived from them such as supply and demand, marginal utility, and so on – are deduced from the action axiom. Yet the interest in our field of study is the effects of the complex phenomena that exist in the world and the existence of certain human choices need to be taken as empirical facts in order to analyse them. If we are to have a theory of money humans must have chosen to use money; if we are to have a theory of banking, the fractional reserve system and of business cycles, humans must have chosen to use banks; if we are to have a theory of production then humans must have chosen to engage in investment and roundabout production rather than leading a hand to mouth existence. Indeed, even the existence of other humans is an empirical fact (albeit a highly certain one) that is necessary for any theory of bilateral exchange. Examination of all of these areas, which make use of the empirically validated, substantive choices that humans have made, are nothing more than application of the core, deductive economic theory to real life situations simply because these are the things that we are interested in knowing about. The conclusions reached would still be true even if those choices had never been made, but the fact that they were made is what brings them to the forefront of our attention.

A related charge from the empiricist camp is that, as a deductive science whose truths are valid a priori, “Austrian” economics can only yield analytical truths – endless tautologies that are merely elaborated definitions of the original axiom. Hence it has nothing new to say and if we wish to learn synthetic truths about reality then we must go out into the world and observe. The so-called analytic-a priori/synthetic-a postierori distinction is a convenient way for methodological objectors to the “Austrians” to attempt to dispose of valid truths that they cannot otherwise refute. If, as it is claimed, nothing about reality can be known without empirical validation, then surely that epistemological claim, which is asserted as a law of reality, applies to itself? To be consistent with what it says, this statement too would have to be tested empirically to see if it is a true law of reality. Otherwise, by its own standard, it is merely an analytical assertion which, while it may be true in and of itself, says nothing of reality at all. Regardless of this however, the wider allegation that “Austrian” economics says nothing of reality is rendered false when we consider that the action axiom itself is a law of reality. Any action demonstrates an undeniable recognition of the harmony between means and ends as they exist in the universe. A human may deny that the matrix of means and ends constitutes reality but this action of denial, which must make use of them, demonstrates that he does not hold this to be so. In denying that the action axiom is a law of reality, the person is trying to create an end in the real universe using available means that are suitable for this purpose. If the action axiom says nothing about reality then neither too do the ends that he attempts to create have anything to do with reality and so they can safely be ignored. If he was in genuine denial that the nexus of means and ends constituted reality then he would keep his mouth shut and refrain from any action whatsoever. If, therefore, the action axiom is a law of reality then so too are the laws that are deduced from them also laws of reality. Indeed it is precisely because the “Austrian” method begins with action in the world that it is firmly grounded as a school that deals with reality and with phenomena as we find them. It is patently not an epistemology that babbles on about metaphysics, imaginary constructs and ethereal musings.

Austrian Economists do not make Predictions!

The previous objection – that “Austrian” economics can say nothing about reality – is joined at the hip with this final objection that we shall consider here, that “Austrian” economists do not make predictions. One of the more sophisticated guises of this objection runs something like this: if “Austrian” economics says absolutely and necessarily true things about reality, how is it possible, when it comes to applying them to a real world situation, their validity, or emergence, becomes contingent? How is it that these can be undeniably true laws about the world yet we do not know when they are going to make their appearance and cannot be used to make predictions?

The answer to this is that “Austrian” economics can be used to make predictions – it is just that the formal laws of human action are not sufficient to make those predictions about human behaviour. Such a limitation does not invalidate the necessary truth of those laws. The fundamental categories of action are necessarily true because we cannot conceive of a mode of action in which they would be untrue. We cannot, for example, ever imagine an action that is not the result of a choice to use ends towards means. Thus, the laws that are deduced from these fundamental categories must also be absolutely true.

Looking for a moment to the natural sciences, all scientific propositions are conditional statements of the “if-then” variety, the appearance of which in the real world is contingent upon the actual conditions they require being present. A chemist may be able to tell you that, provided that two atoms of hydrogen and one atom of oxygen are present under certain conditions then they will join to form a molecule of water. Undoubtedly this law will be very useful in making predictions as we now know what will happen when certain conditions are present. But to make a prediction of future events we also need to know whether such conditions will be satisfied at X point in the future – and this is an entirely separate question. The law by itself, therefore, is not enough to make a prediction. To make predictions, we first need to study the outcome that will result when a certain configuration of variables is present; and then we need to determine whether that precise configuration will occur at some point in time. The fact that we need to carry out both tasks has no bearing on the truth or validity of the law. Carrying out the second task – attempting to determine whether certain conditions will be present – may be more straightforward for a natural scientist to do, given that unconscious matter has no will of its own. But outside of controlled laboratory conditions, even predictions of this nature have proved immensely difficult. We cannot predict the weather accurately more than about a week in advance, nor earthquakes in time to evacuate affected populations. It has previously been predicted by scientists that a rocket would never be able to leave the Earth’s atmosphere; that rail travel at high speed would not be possible because passengers would die of asphyxia; and even Einstein once predicted that Nuclear energy would be unobtainable. All of this is before we even consider the science behind the whole climate change saga and the truly abysmal scientific predictions made in fields where human action has been a variable, such as “peak oil” and other resource depletion. None of these predictions has anything to do with what happens when certain conditions are present – rather, they are predictions about whether the required conditions will be present for a particular outcome.

Natural scientists may give the appearance that both elements of prediction are a unified whole as they can predict both elements in their role as scientists by following the same method of empirical observation. When we turn to human action, however, the formal, qualitative laws of praxeology will bind human action within a certain framework. We can say that if X conditions are present then Y result will occur. These laws can be used to predict outcomes. But a whole and complete prediction of human action requires also a prediction of the substance of human choices and of the conditions in which humans will find themselves – about which, praxeology has nothing to say. Thus the praxeologist in his role as a praxeologist, does not, unlike the natural scientist, make predictions. Given the difficulty, as we just outlined, of making predictions about unconscious matter, how much more difficult must it be to make predictions of human behaviour where quantitative and substantive predictions concerning human action cannot be made with scientific certainty? The difficulty in predicting human behaviour, caused by the volition of human choice, does not, though, have any bearing upon the necessary truth of the laws of praxeology – and if anything, those laws are the mainstays in making such predictions. The fact also that the laws cannot be expressed quantitatively is also no bearing on their necessary truth – human action proceeds in whole, discrete steps and any change in conditions must be sufficient to make a change in a human’s rank of values. Whether and what point such a change will be made also cannot be reduced to scientific certainty but must, rather, be based firmly on our empathetic understanding of our fellow human beings and their response to the conditions in which they find themselves, which much also be predicted. If this was not true then profit would not exist in the world. For if every human desire and the consequent action was predictable with scientific certainty then every resource would be bid up exactly to the level of its cost. It is precisely the task of the entrepreneur to estimate future human desires and choices and to direct resources accordingly. Where he correctly estimates the conditions his application of the appropriate praxeological law will render his prediction correct.

Neither also is “Austrian” economics, however much its theorems may be necessarily true, not weaker because it lacks substantive prediction and quantitative measurement. The boundaries of science are that which can be known in the universe and “Austrian” economics restricts itself to formal, qualitative laws of action precisely because that is all that can be known with scientific certainty. To acknowledge the limits of scientific endeavour is simply intellectual honesty and not a weakness. It remains incumbent upon the mainstream to explain why they think that “science” is about making known that which is simply unknowable.

We can conclude this piece by stating that “Austrians” themselves sometimes, at the very least, give the appearance of making predictions in their capacity as “Austrian” economists. The forecasts of wild inflation and five figure gold prices that have not come to pass since the 2008 crash should remind “Austrian” economists who are desperate to display the truthfulness of their insights that these are entrepreneurial judgments and not scientific facts.

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1See, for example, Petr Beckmann, Einstein Plus Two

2Murray N Rothbard, An Austrian Perspective on the History of Economic Thought, Vol. I, Economic Thought Before Adam Smith, Ch. 16.

3Henry Hazlitt, The Failure of the New Economics – An Analysis of the Keynesian Fallacies, pp. 4-9.

4Murray N Rothbard, An Austrian Perspective on the History of Economic Thought, Vol. II, Classical Economics, p. 317.

5Eugen von Böhm-Bawerk, Karl Marx and the Close of his System, p. 77-78. In this passage, Böhm-Bawerk states that the belief of Marx, and of the classical economists, in the labour theory of value was a “cherished philosophical principle” that was not routed in strict, scientific analysis.

 

The “Austrian” Method Part Two of Two – Human Action and the Natural Sciences

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In part one of this two-part series of essays on the “Austrian” method, we explored how action forms the grounding of our epistemology. We will now, in this second and final part, determine the correct approaches for humans to go out into the world and study the complex phenomena that exist.

Methodological Dualism

The “Austrian” approach to the explanation of phenomena is that science must apply a definitive and rigorous methodological dualism – taking one approach towards the study of human action on the hand and a different approach towards the study of the actions of unconscious matter on the other. The study of humans – that is, of their conscious actions as opposed to the actions motivated by the chemical and biological physiology of their bodies, such a heartbeat – must be validated by deduction from the action axiom. Within this category of study falls praxeology and the parts of it that branch into economics and ethics. The study of unconscious matter, on the other hand, must be validated empirically, encompassing all of the areas of study to which we typically apply the epithet “science” – physics, chemistry, biology and so on. This position of the “Austrians” is contrary to that of the mainstream economics profession which takes a methodological monistic approach, with the study of human action being categorised in exactly the same way as dead, unconscious matter and subjected to validation by evidential testing. Indeed science these days is almost synonymous with “evidence” and any conclusions that are not validated through evidence are seen to be worthless. The huge myriad of facts and statistics that are gathered about society are all used as “evidence” to indicate a particular problem or that a government intervention is or is not working. Indeed the entire approach gives credence to those who seek to bring about social engineering – if humans are merely mechanical objects that always behave in manner X when action Y is imposed then society can be manipulated like a puppet on a string in accordance with the will of the political leaders. If the product of this engineering is a failure then the hypothesis is merely viewed as being incorrect and – regardless of the lives ruined or lost in the first round – perhaps we should try seeing if humans behave not in manner X but in manner Z when action Y is imposed. By failing (or refusing to acknowledge) that it is the method itself and not the specific conclusions under it that are at fault, endless rounds of programmes and interferences are justified in order to try and get government to shape society according to whatever preoccupations – justice, equality, fairness etc. – happen to rule the roost. It is not too outlandish to suggest that the biggest social experiment of this kind – the Soviet Union – took seventy gut-wrenching years and countless millions of lives before it was abandoned as a failure. The settlement of this question, therefore, and proof of the necessity of methodological dualism is one of the most important bulwarks against tyranny that liberty-minded individuals should be prepared to understand.

Deduction

Our first task is not to establish whether this dualism is justified, but, rather, whether it is possible to learn anything of substance at all through reasoning and deduction. A positivist objection to validating knowledge through reasoning is that it must necessarily be analytical and tautological rather than synthetic and progressive of knowledge. In other words, everything we need to know is contained in the original proposition and deducing further knowledge from it amounts merely to an engagement in endless definitions that teach us nothing new about the world whatsoever. But just because something is deduced from a given proposition does not mean that it is simply an elaborated definition of that original fact; rather, we very much learn something new about the world that affects how we interact with it. Even a very simple proposition – such as two parallel lines will never meet – will have impacts on geometry, design, endeavours in construction and even our spatial awareness. Try building an object where your design relies on the false proposition that two parallel lines will, at some point, meet and you will probably find that it will collapse. Similarly, the fact that we derive the whole corpus of economic theory from the simple proposition that “humans act” does not mean that we are expressing redundant and pointless definitions through economic theorising. All of the subsidiary axioms – that humans choose means, towards ends, at a cost, resulting in profit or loss – as well as concepts we derive from them – supply and demand, marginal utility, prices, exchange, interest, capital goods – and not to mention all of the further complex laws that we deduce from them all collapse into the basic axiom that humans act. Yet to understand these concepts and laws is not to engage in endless tautology. Do we not learn anything new about the world by deducing from the fact that humans act that price controls will cause either a shortage or surplus of the controlled goods? Do we not gain something from realising that increased taxation will raise the cost of production and hence retard its extent? All of these concepts and laws tell us something we did not know before about how we interact with the world and we would be very much at a loss without their realisation.

Unconscious and Conscious Beings

Having established this, therefore, let us proceed to justify the methodological division between the validation of knowledge of the actions of unconscious matter on the one hand and the actions of humans on the other. As we mentioned in part one, the seeking of knowledge in inherently bound with our role as actors and how we can enhance our use of means towards ends motivated by choices. The study of all complex phenomena in the universe is fundamentally an endeavour to enhance our understanding of another fundamental category of action, that of causality and the operation of causes – how one event causes another. It is through our role as actors where we must display and utilise an inherent understanding of the causal link between events that we come to realise the necessity for methodological dualism.

The physical objects around us in the world are all capable of being categorised as means through which we may meet our ends. A particular action utilising an object as a means will give a certain result – the end may be fulfilled, unfulfilled or fulfilled to a degree short of that desired; “over-fulfilment” – that is that the means through action produce more of an end that that which was sought may also be considered but it overlaps with un-fulfilment if the result is to create a net loss by impacting on other ends. This success or non-success of actions – that is, the suitability of means for ends – determines our knowledge of causes between these two categories of action. With unconscious objects humans tend to find that the same outcomes occur from repetition of a certain action under like conditions – if I let go of a ball it drops to the ground; if I do it a second time it drops to the ground again. In other words I find that on each occasion repeated actions to attain an end display a universal causal link between means and ends. However, if I shout at the ball to wash my laundry for me, I will learn that there is no causal link between shouting at a ball and my laundry being cleaned, however much I may repeat the action. This forms the basis of all approaches to the gaining of knowledge of unconscious matter – by holding all other variables constant and altering only the variable under examination we derive the laws of physics and chemistry from our observation, through action, of this matter. Importantly, these laws are invariably true and operate whenever the conditions are fulfilled. A further aspect that we know innately from our actions is that these truths tend to be quantitative as well as qualitative – that a given quantity of means is necessary to produce the end and variations of that quantity may either enhance or spoil attainment of the end. If I wish to sweeten my hot beverage I may add a spoonful of sugar; half a spoonful giving half the sweetness would be too little and two spoonfuls giving twice the sweetness would be too much. In the laboratory this translates into quantitative or proportionate laws; when we examine the boiling and freezing points of water, for example, we do not simply form a broad, qualitative law that increasing temperature will increase the energy of water molecules and lowering it will decrease the energy; rather, we know that a temperature of 100 degrees Celsius will boil water and a temperature of 0 degrees will freeze it, with each degree towards those points approaching it incrementally. As we know from observing our kettle or a pot on the stove, water doesn’t sit their tepidly until the boiling point is reached then vaporise suddenly; rather it starts to bubble and steam at much lower temperatures. Similarly, water approaching freezing will not suddenly ice over all at once but begins to turn to frost and slush at 2-3 degrees. Quantitative laws whose effects occur in infinitely small steps are precisely those truths of unconscious matter that are determined by the natural sciences, validated fundamentally through our inherent understanding of our use of them as means in actions towards ends. As we stated in part one, the fact that we continue to act to utilise means towards ends indicates that these causal links are not random or spontaneous but are, rather, objective laws of reality.

From our actions towards humans, however, we learn something markedly different. The realm of the physiological and chemical properties of their bodies is, of course, the same as that of unconscious matter – prick a man and he will bleed; hold a flame to him and his skin will burn. The domain of his consciously chosen actions, however, is where we find two important differences. First, the same human will not necessarily behave in the same way when the same situation is repeated, even if all other variables are held constant. Second, two humans will not necessarily behave in the same way in the same situation at the same time, even though they may each be acting under the same conditions. If I walk into a busy shop and shoot a gun in the air, some of the people will dash for cover, some will stand petrified, others will scream, others still may rush to tackle me to the ground and so on. Different people respond to the event in different ways. If I then leave and, a few minutes later, walk in and do the same thing again what will I find? Will the same people who dashed for cover last time do the same thing this time? Will the exact same people who screamed last time do so a second time? The answer is likely to be no – some of those who dashed for cover or stood petrified last time may now be buoyed up by their prior experience and join the ranks of those who rush to tackle me; those who tried to stop me last time, however, may not wish to risk their lives a second time and will run for shelter. Of course it is equally possible that they will all behave in exactly the same way – what is important is the fact that this aspect cannot be determined. The conscious choice of human actions serves to break those actions free of reliance upon the laws of physics. I don’t have to wait for the wind to push me two metres to the left; I can just decide to move my legs and walk that distance in that direction. Actions must, of course, always be in congruence with natural laws; I can’t for instance, jump and expect to be propelled into space. I can, however, make the conscious decision to build a rocket that will take me into orbit if the means are available and I don’t need to sit around and wait for the inertia of physical matter to do it for me. Human choice and volition, therefore, replaces the laws of physics as the cause of human action. Importantly, the place of human choice must be regarded as not just a cause but the ultimate cause of such action. The very existence of free will precludes the possibility of universal laws regarding the substance of a given action that is motivated by that will. Either an individual is free to do what he wants or he is not and his actions are reliant upon some other inertia. Psychology – the study of why humans make the choices that they do – may one day determine whether given physical or chemical impetuses in the brain always result in a given action; but until that stage is reached we must regard human choice as a distinctly teleological phenomenon. Economic science therefore proceeds in a markedly different direction from that of the natural sciences. Economists begin from the general, ultimate cause of human action and deduce from it the specific laws of phenomena; natural scientists, on the other hand, begin with the specific phenomena and work “backwards” to determine their more general causes.

Should the teleological nature of human action be doubted then consider the case of the individual who seeks to derive knowledge of other humans. Knowledge, as we have said, is the perquisite of actors – its purpose is to determine more accurately the technical requirements for future action, enhancing the understanding of the suitability of means directed towards ends. Let’s say that a man wants to hold a dinner party and wishes to serve either steak or salmon – whichever is less expensive (or more expensive, if he was trying to impress his guests). If the steak is cheaper he will serve steak and if salmon is cheaper he will serve salmon. Before this knowledge is gained his future action – whether he will serve steak or salmon – is uncertain and conditional upon the content of the knowledge. When he receives that knowledge – let’s say that steak is cheaper – he makes a choice to serve steak at his party. But he could easily have chosen salmon if salmon had been the less expensive of the two. In other words the very seeking of knowledge itself proves the uncertainty of future action and any attempt to seek knowledge of other, equally acting human beings, and derive concrete laws concerning the substance of their action would be contradictory.

Our knowledge of humans, as opposed to that of unconscious matter, therefore appears to be curtailed by a very wide margin. For we cannot, in our actions, approach other humans in the same way as we approach other matter – we cannot mould and shape humans in the way that we can other means to which we devote our ends. Does this mean, then, that we can know nothing at all about human action? Does our attempt at any study at all necessarily lead us into a dead end and should we give up? Not at all; we learnt in part one how our actions form the bedrock of our epistemology and how it necessarily constrains and conditions our search for knowledge. In exactly the same way, while we cannot form strictly substantive laws of human action, we can discover laws regarding their formal requirements – laws that exist by virtue of action itself regardless of the content of the individual action. In short, if we cannot examine the impetus towards the substance of actions and derive no laws at all from their observation we need to return to the root of the formal constraints of action by examining action itself.

The Characteristics of Laws of Human Action

There are three important qualities regarding the truths that we derive from the fact of action – first, they are deduced logically from the action axiom; second, they are formal and not substantive laws; and third, they are qualitative and not quantitative. They are deduced because only an actor has the innate ability to understand the meaning of action. In our own role as actors, we have an introspective understanding of the meaning of action and what it is to be an actor and we rely upon this understanding to draw conclusions about other actors. When a person picks up a cup in order to drink for instance, we know that this is not a random movement instigated by the laws of physics; rather, we know, from the knowledge we have validated from our own action, that this person is using means towards ends as the result of a choice. Simply observing and cataloguing the physical movements would tell us nothing at all – we might know that his arms move 46.3 centimetres to the left and his fingers clasp the cup and raise it 31.7 centimetres from the height of the table; but only reflection upon these movements, derived from our own role as actors, will tell us anything about these movements as freely chosen actions using means towards ends. Any kind of empirical validation of this knowledge is therefore impossible. Second, the laws are formal in that they specify the qualities of actions as a general category but have nothing to say about their substance. We may deduce, for example, the law that, all else being equal, an increase in the demand for a good will raise its price. But we have nothing to say on precisely what this good will be and when it will be demanded. Indeed, nothing about the physical quality of objects tells us whether they will be economic goods at all – such a categorisation being dependent upon the volition of the human mind. What is desired today may be discarded as useless tomorrow and vice versa. And finally, these truths are qualitative and not quantitative because actions occur in whole, discrete and concrete steps that take place in one go and do not proceed in infinitely small increments or decrements. If the temperature of a room is raised by one degree per minute water in the room may gain energy gradually by a measurable step per degree. Yet a human in the same room will not start shedding small parts of his jersey gradually at each degree; rather, there will come a point later where he perceives himself to be too hot and will take off the entire jersey in one go. Further, the impetuses that result in a change of choice resulting in an action are not uniform between human beings – others might find that they get too hot at a lower or higher temperature. And on a different day they may all make a different decision. Similarly, two objects that contain minute, physical differences may be regarded as the same good by the acting human. One bottle of water might contain exactly one litre of water; another might contain 1.0001 litres. Yet to the acting human this difference may be negligible and he will happily regard each bottle as interchangeable. It is partly for this basic reason that the application of mathematical formulae to explain (or rather, to predict) human action is invalid – mathematical sequences proceed in infinitely small gradations, the result of which would lead one to expect that human action also proceeds in such tiny, measurable steps.

It is these aspects that cause much ire and infuriation in the mainstream economics profession. Under the mantle “science is measurement” any method that rejects the formation of quantitative and substantive laws is seen as inherently unscientific. Science, however, is the seeking of knowledge as it exists in the universe; it is therefore perfectly scientific to state that laws must be qualitative if that is all they ever can be; grossly unscientific behaviour – indeed, an aberration on the part of anyone who proclaims to respect discovery of the truth – is to attempt to make known that which never can be. If quantitative laws cannot be determined then that is the boundary of scientific discovery.

The attempt to ascertain laws of human action through empirical validation produces only statistics and historical truths about the choices that were made at that particular time and place by those particular humans. Simply because the price of meat doubled during a shortage of cattle in Ruritania in 1952 does not mean that such a shortage in 2014 will also cause a doubling in price – or any change in price at all. Empirical validation fails to work in the realm of human action because none of the variables are ever held constant in two situations. The laws must instead be validated by holding the variables constant in one’s mind and deducing what must be the necessary result by virtue of the formal qualities of action. It follows from this also that the laws cannot be used to predict, with any scientific accuracy, future action – something that “Austrians” sometimes unwittingly overlook in their zeal to promote their otherwise correct understanding of economic theory. “Austrians” who have predicted a heavy increase in price inflation following the Federal Reserve’s money printing have had to cope with the smug retorts of the mainstream as this inflation has not emerged, largely because the demand to hold cash, particularly by the banks, has also increased. We cannot ever say that, for example, if the quantity of money is increased that there will be price inflation of any measurable quantity or even if price inflation will appear at all. All we can say is that, if all else remains equal, one is betting very heavily on the result of price inflation by carrying out the action of printing money. The focus of “Austrian” economists is to explain phenomena and not to engage in the Friedmann-ite obsession with the prediction of future events. Ironically, however, given their superior explanatory power, “Austrian” predictions tend to be more accurate than those of the mainstream – “Austrians”, for example, were among the few to recognise the instability of the housing bubble prior to the 2008 crash. Furthermore, being derived from absolutely true, self-evident premises the laws themselves – should our logic be correct – must also be absolutely true for the entirety of time, regardless of whether the particular phenomenon with which the law is concerned ever appears in society. A Robinson Crusoe island, for example, would be devoid of interpersonal exchange; and yet the laws of interpersonal exchange would still be true and valid. Phenomena which appear in society may determine the scope and direction of that which we wish to study, but they do not preclude the truthfulness of phenomena that have not made an appearance or do so to a lesser extent. Even if empirical validation in this field was possible, therefore, its limitation to present and visible phenomena would result in knowledge of a markedly poorer tapestry. It is unlikely that the Robinson Crusoe situation of unilateral exchange has ever existed to be observed and yet so informative is this situation of our basic economic understanding that we would be worse off without it.

Does this mean that we can never say anything at all about the content of actions? We can, but only on the basis of empathetic understanding of our fellow human beings and not upon any strictly defined laws. The realms of entrepreneurship and historical analysis use this method to determine and explain the actions and choices of humans in the future and the past respectively. Profit opportunities exist precisely because future actions cannot be embedded in concrete law; if they were everyone would know what they would be and every good and service would consequently be bidded up or down to precisely its cost. Rather, entrepreneurs must take their empathetic understanding of human desires in the future and combine it with superior logistical and technical knowledge of his goods or services and methods of production in order to make a profit. The historian, in forming explanation of past choices, must do this retrospectively. Use of the natural sciences and the sciences of human action will provide a circumscribed explanation for the most part – an historian who attempted to explain the effects of the Irish potato famine as the result of witchcraft would clearly be a charlatan, for example. Yet the key question of why historical figures acted as they did, their thoughts and feelings that motivated them towards action – a branch of historical investigation that Mises labelled thymology – can only ever be based on the historian’s empathetic view of the factual conditions under which the historical character was acting. The result is historical explanations that are based not upon concrete and certain knowledge but are simply more or less persuasive than others.

Conclusion

What we have outlined in these two parts is only the briefest possible sketch of the “Austrian” method as it applies both to economics specifically and to wider epistemology. It is therefore appropriate to end with a core bibliography of works that explore the “Austrian” method in more detail than we have been able to here:

 

Introductory Works:

Gordon, David                    An Introduction to Economic Reasoning

White, Lawrence                The Methodology of the Austrian Economists

 

Texts:

Menger, Carl                          Investigations into the Method of the Social Sciences

Mises, Ludwig von               Epistemological Problems of Economics

Human Action, Part One, “Human Action”

Theory and History

The Ultimate Foundation of Economic Science

Robbins, Lionel                    Essay on the Nature and Significance of Economic Science

Rothbard, Murray N            The Logic of Action, Section One, “Method”

Hoppe, Hans Hermann      Economic Science and the Austrian Method

                                                   The Economics and Ethics of Private Property, Part Two , Chs. 9, 10, 14

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The “Austrian” Method Part One of Two – Foundations of “Austrian” Epistemology

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One of the primary dividing lines between practitioners of the “Austrian” School of economics and those of the mainstream is the appropriate method of economic reasoning – how are economic theorems validated and thus known to be true? “Austrians”, of course, are famous for their assertion that all of economic theory is deduced from a handful of axioms concerning human action, plus one or two empirical truths, such as the desire for leisure time. The mainstream, on the other hand, treats economics as being more akin to the natural sciences, where propositions are first formulated as hypotheses that must then be tested and validated empirically by sensory observation.

In commenting on this disagreement we shall, in this first part of our examination, go to the very heart of the matter and first of all define what we mean by epistemology and secondly to examine how it is that we know absolutely anything whatsoever. This is necessary before we look more closely at the “Austrian” method as it applies specifically to economics in part two.

Once more we must say that we are tackling here a very deep and extensive area of philosophy and much of that which we present will necessarily be brief, undeveloped and possibly incomplete. Nevertheless we hope here to outline the foundations of this important and much derided area of “Austrian” theory and its implications not only for economics but also for the social sciences and philosophy more widely.

The Purpose of “Austrian” Epistemology

One of the most frequent objections to the “Austrian” method is the misunderstanding that its chief concern is with how knowledge is acquired. Surely, these critics contend, we must have experience of, for example, what is supply and what is demand, or how to use money before we can formulate any theorems that concern them? We cannot just sit back and muse in our mind over these concepts divorced from any real, sensory interaction with what these things mean. However, the a priori nature of “Austrian” economic reasoning has less to do with how knowledge is attained and more to do with the cardinal question of how knowledge is validated – in other words, how do we know a given proposition to be true? Take, for example, the assertion that two parallel lines will never meet. We are not interested in the particular origins of my experience of parallel lines; rather, the question we want to answer is given that I have an experience of parallel lines what validates my conclusion that they will never meet? Do I need to construct the proposition “two parallel lines will never meet” as a hypothesis and then validate that hypothesis by empirical testing? Or will critical reflection upon the problem resolve the matter? In other words, do I need to go out and test a large sample of parallel lines in the real world in order to determine whether they will never meet; or can I reason in my mind that this must be absolutely and undeniably true?

The two titans of the twentieth century “Austrian” School, Ludwig von Mises and Murray N Rothbard, disagreed on the epistemological status of the fundamental categories of human action. Mises, who was influenced by Kantian epistemology, regarded them as “categories of the mind” and that they therefore existed prior to any experience. On the other hand Rothbard, an Aristoletian, denied this and regarded them as “broadly empirical”, something that could only be realised through experience. In other words they did not share the same theory concerning how we come to know the fundamental categories of human action. This divergence of opinion, however, did not prevent them both from recognising the essential self-evident truth of these fundamental categories and from recognising that such categories, regardless of how they come to be known, will always be a priori to the complex phenomena for which economics seeks an explanation. In spite of their differences in some of the more esoteric questions of epistemology, therefore, both could agree that all of the laws of economics are validated by reasoning and deduction from these self-evident categories and not from empirical testing. It is, therefore, the requirements for the validity of economic theory that separates practitioners of the Austrian School from their mainstream colleagues. This will be the focus of our attention in these essays.

Epistemology and Human Action

Let us therefore turn to the foundations of the “Austrian” method in wider epistemology. Contrary to what empiricists and relativists may claim, what is true and valid is heavily constrained by certain conditions of the universe in which humans find themselves. Truth and knowledge are not a tabula rasa upon which we can scribe whatever interesting pieces of information happen to come along. Even if they were we would first have to presuppose the existence and understanding of certain concepts simply to make such a record and communication – concepts such as identity, non-contradiction, alternatives, possibilities, causality, language, quantities, and of course, at the base of it all,  truth itself. You cannot record or communicate unless you have a common understanding of the concepts that you are recording or communicating. It is such presupposed concepts that heavily anchor the ambit of that which constitutes objective knowledge. Where does our knowledge of all of these aspects come from and how does it constrain or condition our search for further veracity?

It is submitted that at the very basis of all knowledge are a limited number of self-evident truths – truths that are proven simply by the endeavour of attempting to validate them. Furthermore, these self-evident truths are revealed to us through our action and the action axiom – the fact that we act in the universe and interact with reality – as all human endeavours in acquiring knowledge are actions and it is the formal conditions of actions that constrain the boundaries of knowledge.

The unique quality of self-evident truths is that they do not need further validation – to validate a proposition is to make it evident; yet if either stating or enquiring into the proposition is to validate it then one does not need to waste time and effort seeking further validation through observation, evidence or whatever; it is absurd to endeavour to make evident that which already is.

The first self-evident truths that we can derive from the action axiom are the individual actor’s identity, his consciousness and his existence. For any enquiry into the question of whether he exists and whether he is conscious answers that very question itself; for he cannot make such an enquiry without demonstrating to himself his existence and his consciousness. Furthermore, he presupposes his identity and his separation from other beings and objects – his enquiry being “do I exist?” and not whether a tree or China exists. He would settle the former question by introspection but not the latter questions, indicating his realisation of his identical separation from those other concepts, objects or beings. Any attempt by the individual to deny his existence, consciousness and identity would be to prove them – one cannot deny that one exists or is conscious; nor can one construct such an argument without recognising that he and he alone is the subject separate and distinct from other beings and objects.

Second, we have the constraints imposed by the formal categories of action itself – ends, means, choices and so on. All action must make a choice to direct means to an end at the exclusion of other ends with the outcome of either a psychic profit or a psychic loss. All enquiries are themselves actions that make use of these categories and so any attempt to disprove them would be futile. But what other self-evident truths are revealed by these categories of action? All actions must combine two or more means to produce an end at the cost of another end; what this reveals is our knowledge of conjunctions – “and” and “or” – for we must combine one means and another in order to produce either end A or end B. We also reveal our knowledge of quantities – for every end requires a specific quantity of a combination of means. A single cup and half a pint of water may be enough to satisfy the end of quenching my thirst; fewer cups or less water would fail to quench it; more cups would be superfluous and more water would cause a flood. Our actions always aim at combining means in the correct proportions. Quantities, incidentally, are a praxeological concept and are not reliant upon whatever we choose to represent them in notation or communication. We know that 2 plus 2 will always equal 4 whenever we act in relation to goods in the real world. The numbers themselves – 1, 2 3, 4 etc. – are simply symbols that we apply to the praxeological concept of each given quantity, routed in our understanding of action – 1 to a single unit of a good, 2 to double that quantity of units, 3 to triple the quantity, and so on. On paper 2 plus 2 could equal 5 but this only serves to change the symbols that we apply to these concepts and all that we have done is renamed that which we once called “4” as “5”. The concepts of 2, 4 and 5 always remain constant and routed in our action and regardless of what we call these quantities a fixed quantity of a good plus another fixed quantity will always arrive at the same quantity in sum however much the operation is repeated. Moreover, regardless of the symbols we choose our expression of quantities is always in a form or magnitude that best serves to meet our ends – both the diameter of a screw and the distance between London and New York City are lengths in space, yet it is praxeologically convenient for us to express the former in millimetres and the latter in either kilometres or miles.

As well as further embedding the law of identity in our recognition of these categories of action, we also reveal an understanding of the law of non-contradiction (A or not-A). For an action is motivated by the condition of scarcity thus revealing that we know that we cannot have our cake and eat it; nor can we swim and remain dry; nor can we be in two places at once. To believe the contrary would mean that a human would never act as he would expect all of his ends to arrive at his doorstep immediately. Action pursues either one end or another and is routed in the realisation that to achieve both or all of them would be a contradiction.

Third, actions all have to take place in space and we interact with this space in order to fulfil our ends. Hence we know automatically that our world is constructed in three dimensions and that certain interactions with space will fulfil our ends whereas others will not. If an apple is to my right then I reach out to my right and I am able to take possession of the apple; if it is on my left then I reach out to the left. More importantly, from this knowledge we derive all of the laws of Euclidean geometry that we use in order to interact with space.

Fourth, we have an understanding of the nature of causality as all actions are designed to produce a causal interference in the world that alters the assumed chain of events. If I wish to eat an apple and proceed to pick an apple from a tree I demonstrate that I know that my action will cause me to take possession of the apple and will cease its hanging from the branch. If I kick a ball my action causes it to fly through the air to another location. If humans did not have an innate understanding of causality then they would never act as they would not know that their movements would bring about the end desired. Action therefore demonstrates an understanding of the phenomenon of causality.

Fifth, we must know through our actions that we live in an aura of uncertainty – uncertainty in the sense that the actor does not know whether a given event is certain to materialise – not whether it is actually certain to do so in practice. If the actor knows that it is certain that event A will happen at point T then there would be no purpose in acting in order to bring about event B. An action to bring about event B at point T indicates that the actor knows that the materialisation of event A at point T is not certain and is subject to change. In any case, regardless of the knowledge of the certainty of events, action itself – the individual motivation towards ends by desires and choices – demonstrates that the world is not ruled by determinism. If it was the materialisation of all future actions of any individual would be motivated not by the individual desires of the human but by a pre-ordained plan that is written into the fabric of the universe. The fact that an actor expresses desires and choices that result in actions that change the course of events demonstrates that there is no fixed course to occurrences in the universe and that they can be altered by an expression of free will, if the means are sufficient. Furthermore, the act of making an enquiry also demonstrates the universal fact of uncertainty – the nature of an enquiry is that the answer is uncertain and could be one way or another. If the answer was certain then we would never bother to make an enquiry as we would already know the correct answer.

Finally, we have an understanding of the nature of time. All actions must take place through time and thus we know that we exist in a linear continuity. If actions did not have to take place through time then the ends would be achieved instantly and thus there would be no action – nor would there be any need to sequence the attainment of ends in order of preference. Indeed time, like quantities, is an inherently praxeological phenomenon. If humans were not subject to the condition of scarcity that motivated them to act and all of their ends were attained to their fullest instantly then the universe might physically exist in what we know as the “passage of time” but humans would have no awareness of this concept. All events would be contemporaneous and all enjoyments received instantly – there would be no comprehension of historical sequence and temporal distance would be non-existent. Any measurement of this non-existent distance in hours, minutes and seconds – let alone centuries, decades and years – would clearly be impossible.

By virtue of the inescapable fact that humans act we lay the groundwork for epistemology through our revelation of these self-evident truths – self-evident because any attempt to deny them must reveal their truth. We therefore realise that there is a body of truths that we know to be absolutely and apodictically true. The fundamental importance of this realisation cannot be denied – these categories of action that we have elaborated constrain and condition our search for knowledge and we cannot imagine knowledge that is incompatible with them. They are not mere conventions or choices of enquiry but are, rather, incontestably and undeniably true presuppositions of all arguments and theorems that may be posited. They are not the results of such arguments but are, rather, the starting blocks – that with which we must work in order to deduce further truth. More importantly, however, it anchors our search for objective truth of reality without having to investigate metaphysical and supernatural problems. In the deepest and murkiest waters of epistemology “truth” could mean pretty much anything we want it to mean. We could hold that simply because something is perceptible and realisable to us does not mean that it is “truthful” according to some as yet unknown, higher plain of understanding. Take, for example, the sensory perceptions. The fact that I can see an object, can touch it, can smell it taste it and if I drop it I can hear it break does not necessarily mean that the proposition “this object exists” is necessarily true – I am just perceiving it to be true. The world is not really full of colour nor do noises actually exist – these are simply interpretations by the brain of particular frequencies of light wave and sound wave respectively. Indeed there may be other senses that I do not possess that may depict hidden reality that I cannot perceive. Taken to an extreme, for all I know nobody else may exist and nothing of what I can perceive around me may be real – it might be some giant hallucination or a video game concocted by some other being who inhabits the genuinely real universe. Is it not possible that reality could just be a product of my consciousness and could I not be deluding myself when I try to concoct objective truths to comprehend that reality? These questions, however, do not concern us when we ground our epistemology upon action. If I act so as to use a cup as means from which to drink a beverage in order to satisfy the end of quenching my thirst I demonstrates my knowledge of the cup’s existence and its possession of certain qualities that affect its suitability as means in action and its direction towards the end of quenching thirst. I can try and deny this and reason that, upon some “higher” plain of understanding, this cup does not exist or that it possesses qualities which it does not. Yet my actions towards this object will always prove the opposite, from actions that both succeed in attaining their ends and those that fail. I might claim that the law that the angles of all triangles sum to 180 degrees is not really true according to some mystical level of knowledge. And yet when I act so as to construct one, or if I try to build a structure that relies on triangles, I will always have to use triangles with angles that sum to 180 degrees; if I did not the outcome would be a failure to attain my end. There is therefore a distinct epistemological harmony and coherence that is revealed to us through the categories of actions – choices, means, ends, results – that ground our knowledge in objective reality and rescue it from ethereal musings. If there was no such coherence between these categories then a person would simply never act at all as there would be no objective laws that link these categories. The characteristic of genuine hallucinations is that they display discordance between the categories of action. In a real case, an individual experienced a hallucination induced by LSD in which he believed his partner had turned into a vicious snake; terrified, he grabbed a knife and proceeded to stab the snake. His end was to kill the snake – a being that looked like a snake, behaved like a snake, hissed like snake and to all intents and purposes was, to him, a snake. And yet the result was that he killed not a snake but his partner. It is clear that where the identities and qualities of means and ends change randomly at will it would be impossible to ground our epistemology on any plain of reality at all. The fact that we are able to continue to act, to meet ends through means motivated by choices indicates that this is not so. Even the failure to meet ours ends indicates not a lack of objective law but the fact that the means were not appropriate for the ends sought – and will be inappropriate once again if the action is repeated under the same conditions. Unless interactive flaws, such as the appearance of the snake, begin to emerge in our current reality then we can be content that we are not all undergoing a mass hallucination, that this is the reality in which we live and this is what we are interested in as the object of our study. More powerfully, however, any action whatsoever demonstrates an individual’s belief in an objective knowledge of this reality that he is powerless to deny – for to do so would itself be an action that displays knowledge of the harmony between choices, means and ends.

We are with confidence, therefore, able to take a position contrary to those of positivism, relativism, skepticism, nihilism and the like and hold that there is a body of truths that are absolutely and undeniably true, undeniable because their self-evidence is revealed to us through the fact their denial would simply end up proving them. It is this springboard – epistemology grounded upon an action – that leads directly to the “Austrian” understanding of how to derive knowledge of other humans and of inanimate, unconscious objects.

Finally, we must also state the fact that the endeavour to attain knowledge and truth is itself bound inherently with our role as actors. Our goal in explaining complex phenomena and gaining an understanding of the world around us is to enhance the effectiveness of our actions – even if the end is merely to attain knowledge for some aesthetic purpose such as the exercising of the mind and the enjoyment of an inherent sense of beauty and order that one may perceive in truth. Non-actors, those creatures whose movements are motivated simply by instinct, never seek the attainment of knowledge for they do not possess the rational mind through which to process it; and if we were humans living in a world of total abundance the seeking of knowledge would be superfluous. Not only would a lack of knowledge itself indicate scarcity but when all enjoyments and satisfactions are achieved instantaneously the attainment of knowledge would have no purpose. Al things would be known and enjoyed immediately and there would be no enquiry into anything whatsoever. At its most basic level, therefore, knowledge itself is a category of action and is intimately bound with our role has human actors.

Conclusion

Having sketched the foundations of our epistemology, therefore, we can go on in the next part to the “Austrian” understanding of human action and the actions of non-humans and the implications of this understanding for economics.

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Climate Change and Social Rules

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Human-induced climate change (formerly known as “global warming”) is, currently, a mainstream political topic that free market advocates frequently wade into, and rightfully so. When government threatens to use this excuse to expand its level of control both nationally and internationally, lovers of liberty cannot help but be drawn into defending their cause against this onslaught.

Nevertheless it is submitted that too much effort is directed at tackling the issue of whether human-induced climate change (through carbon dioxide emissions or whatever) is happening, and that there are insufficient attempts at clarifying precisely what, if anything, should be done under the assumption that it is happening. While it is interesting to debate the truth of the science and the motivation of the parties involved (especially the Intergovernmental Panel on Climate Change (IPCC)), we must submit that it is not within our capacity as political philosophers to tackle the conclusions of the natural scientists (although when it comes to the climate there is an arguable epistemological case against drawing too many incisive conclusions from such research, plus against the assumption that, if climate change is happening, it would necessarily lead to “catastrophic” or even unfavourable results, or that such results could not be adapted to). Rather, the more interesting question for libertarians is the extent to which (if any) social rules and political philosophy apply to a phenomenon such as climate change.

Let us start by outlining a few key assumptions:

  • Climate change is happening;
  • It is induced by purposeful human activity and, specifically, by net carbon dioxide emissions;
  • The phenomenon cannot be attributed to any identifiable individual or group of individuals; rather it is only the action of all humans in concert, although specific areas of the Earth and particular industries may exhibit greater contributions owing to the level of their industrialisation;
  • The phenomenon neither perceptibly nor directly harms any individual or property at any particular moment in time. The effects are gradual and cumulative, causing changes that might only be measurable (let alone noticeable) after a long period of time.

It is these last two facts that are often cited as the necessity for government intervention – that as no one individual suffers any sudden, appreciable cost from climate change that can be traced back to the action of another identifiable human being, it is alleged that neither the free market pricing, profit and loss system, nor traditional tort law, can control the phenomenon. Rather, climate change is one vast negative externality of human behaviour, in which we are slowly but surely sowing the seeds of our own doom with each step of economic and industrial progress. This allegation we will come to later. First of all it is important for us to understand precisely in whom the “right” to prevent climate change from happening is vested.

Rights and Obligations

The Earth and the matter it contains – the trees, the sky, the land, the oceans, the birds, the bees and so on – are all unconscious entities that have no desires, no feelings, no choices and no rational actions to bring about preferred ends. “Mother Nature” and the providence she brings may be an apt and vivid representation of the world and of all of its natural gifts, but it must be realised that she is only a metaphor. There is no conscious entity that can possess any “right” to be preserved, nor owed the obligation to be preserved. Any talk, therefore, of climate change being a “betrayal” of the planet and continued acts of industrialisation and pollution as somehow being “treasonous” are complete nonsense. Ascribing rights to the Earth is as ridiculous as ascribing it obligations – a pool of water, for instance, is not regarded as a murderer when someone drowns in it. Rather, these elements – rights and obligations – only arise between morally responsible beings, i.e. those beings that are endowed with moral choice. Any rights and obligations that arise as a result of climate change are, therefore, strictly between humans and not between humans and the planet. Even if the Earth did have “rights” in any meaningful sense, they would still have to be executed and enforced by human beings against other human beings.

For the same reason neither do “future generations” possess any right to enforce climate stability. Just as much as unconscious and lifeless matter, unborn or hypothetical persons cannot possess rights and responsibilities. One may judge it a very good thing to bequeath to our descendants a legacy of the world in a particular state but, again, this would be a judgment of existing humans and not of their unborn children and grandchildren. The right claimed is, once more, of those currently living people who wish to see the world continue in a certain state for their heirs.

Related to this aspect is the view that the Earth has some kind of inherent beauty or a universal and almost omnipotent splendour that transcends the existence of human beings. Far from co-existing with the Earth in a symbiotic relationship, humans are seen as a cancerous scourge that is destroying the planet’s innate and immovable qualities, a scourge that may (in some more extreme versions of this view) permissibly be killed in order to protect and defend the intrinsic magnificence of nature. All of this is nonsense. The Earth has been through many different modes of being throughout its approximately six billion years of existence. Whether it is better existing as a green and lush land of forestry, as a dead and lifeless cinder orbiting the sun, or covered in sea, ice, volcanoes, or whatever else, is a judgment that is made by humans. Absent any human there is no state in which the Earth can be that could be said to better or worse, beautiful or ugly, harsh or gentle, and so on. Even relatively more objective criteria such as whether it is “warm” or “cold” are judged against the temperature that is most comfortable for human existence. Climate change is not “harming” or “destroying” the planet. It is only changing it from one form into another. It requires a thinking, desiring and choosing human being to determine whether the form the Earth is in (or that to which it is being changed) is preferable. If this particular epoch of the Earth’s existence is especially and inherently satisfying, appealing, and worthy of preservation then this is a human judgment that is not measurable by any universal criteria. If humans are inducing climate change the effect of this is solely upon the preferences of other humans – and not upon the non-existent soul of the Earth. The question of climate change is therefore an interpersonal human matter, and not one that is between humans and the planet.

There is, therefore, no special body of rights and obligations that emerges solely because of climate change, and all discussion of the morally permissible means to deal with climate change must engage with the question of the rights and obligations of existing humans to prevent it. If, then, we take this approach, it appears at first blush that the problem of climate change may reduce to being simply one of the aggression of one person (or set of persons) against another. If the actions of person A on his property A1 causes damage on property B1 that is owned by person B then person A is liable. Can our discussion of how this harm can be prevented simply be the stock one of whether government should wade in and do so or whether the free market should? Unfortunately this approach is not likely to be adequate for the very reason we mentioned earlier. There is no one identifiable victim of aggression and there is no one identifiable perpetrator. It is the action of all humans in concert that is causing these changes to the climate that have allegedly deleterious consequences upon all human beings. Surely only the strong hand of the government is sufficient to prevent its disastrous results? A response to this, however, requires not capitulation and surrender, but rather, a deeper investigation by political philosophers (and libertarians in particular) into the nature of the problem of climate change in order to see whether the circumstances justify any interpersonal regulation at all. To this we shall now turn.

Humans and Nature

A human, in all of his endeavours, faces two sources of difficulty in the world – the state of nature on the one hand and the actions of his fellow humans on the other. Nature, that is, the world in which a human finds the environment around him, can be a harsh benefactor. When humans first trod on the virgin soil of the Earth, the availability of materials, water, and foodstuffs may have been plentiful and abundant in a raw and unbridled state. However, harnessing those resources and transforming them into arrays that would allow them to meet a wide range of ends would take centuries of toil and capital accumulation, something that did not significantly get off the ground until the beginning of the latest two centuries’ of human existence. Furthermore, natural phenomena such as the variability of the weather and the cycle of the seasons serve only to make this task more difficult. Nevertheless, whatever nature throws at man is something that, in the first instance, has to be taken as a given. Whatever configuration of elements nature provides to humans, whether it is good or bad, gentle or harsh, safe or dangerous, plentiful or mean, has to be dealt with as it is found. Only subsequent human action, in relation to what nature has provided, can bring about a change in the situation. Nature does not possess any choice in how it presents itself; it is simply under the orders of the laws of physics to do that which results. One could not, for example, “reason” with the ground to start growing crops, or shout at the clouds to provoke a rainfall. All of the problems that nature throws at humans, therefore, can only be overcome by taking nature as a given, by understanding its reality and by then learning to act with it symbiotically. We manufacture a hammer head out of metal and not out of sponge because metal is hard and will force a nail into a wall. We make a bucket without holes because otherwise water would leak out to the ground. We make knives sharp because a blunt object would not exert enough pressure to slice through meat or bread. We fertilise the soil in the winter, sow the seeds in the spring, tend to the ripening of the crops in the summer, and finally harvest in the autumn. In all of these cases we are acting in accordance with what nature has given us in order to meet our ends. It is true, of course, that as we progress we can overcome some of these problems with greater ability. Artificial heating and sunlight can, to a degree, overcome the problem of restricting crop production to the seasonal cycle. But still, this is only possible because we have learnt about the nature of energy and electricity, and we have still had to harness these in a way that is compatible with their nature. We do not click our fingers to make electricity appear; rather we have to generate it, lay cables to transport it to a heating or lighting outlet, and back again to complete the circuit. So even when we get to very advanced stages of production, capital accumulation and technological insight, we are always acting in accordance with what nature gives us. We cannot change this fact of existence. Our only option is to understand more incisively how we can use whatever nature provides.

Humans, on the other hand, are very different. Humans do not merely exist in the universe as dead, unconscious matter whose actions are only the result of physical laws or chemical reactions. Rather they possess choice, choice that is, in turn, motivated by desire and leads to concrete actions. As a result these choices can be debated, challenged, reasoned with, and altered at will. The substance of a human’s action, therefore, in contrast with the substance of the actions of unconscious matter, do not have to be taken as a given. Indeed they cannot be taken as a given because there simply is nothing to be taken as it is – every action is the result of a new choice and a new decision, not merely a repetition of what has happened before. Even the decision to repeat a previous action – like driving down the same road to work every morning – is a new decision to carry on doing something that was done before. Although it may be estimated with a varying degrees of probability, there is nothing that is ultimately and categorically predictable about the substance of a human’s action to the total exclusion of an alternative, and any hypothesis concerning what a particular human will do at a particular time and place is a personal judgment based on empathetic understanding.

Both of these factors – nature on the one hand, and fellow humans on the other – are sources of the overriding and predominant concern of human existence – scarcity and the conflicts that arise from scarcity. Nature does not produce enough resources for a human to meet all of his needs without the intervention of labour – choices must be made to resolve conflicts between ends that are held dear. Other humans compound this by desiring the use of resources that could meet your ends. The resolution of conflicts from each source of scarcity requires a bifurcated approach. Conflicts arising from nature can be resolved only by gaining a greater understanding of that nature in order to use what is has given to the furthest possible extent. Conflicts arising between humans, however, are resolved by social rules that derive from morality and how these rules deem it appropriate for a human to act in order to avoid conflict with another. The strongest of these rules are laws, those which may be enforced violently, as opposed to mere custom, manners, traditions and so on. It is with these strong rules to which the standard libertarian approach is non-aggression, self-ownership and private property. It is individual humans who have values, choices and desires; it is individuals who conflict over the ends to which the scarce means available must be devoted. It is therefore individuals who determine when there is a clash of values that needs to be resolved. It is the clash of individual wills that marks the realm of political philosophy separate from the realm of nature.

How, therefore, does human-induced climate change fit into this framework? Is it a conflict that arises out of inter-personal human interaction, in which case it is subject to social rules? Or is it more akin to an act of nature that must be dealt with as and when it arises? It is almost universally assumed that because humans are responsible for climate change in a strict, causative sense, that this automatically brings it within the purview of interpersonal human conduct and should be regulated by social rules. However, what we shall argue here is that simply because human purposeful activity causes an effect does not mean that social rules arise to control that effect. A person, X, makes an external piece of matter, some part of the Earth – whether it be land, wood, water, or whatever – the object of his action because he has recognised it as being scarce and therefore valuable. The result of his action is to transform – i.e. produce – the object (or “good”) from servicing one end to serving another. No other human expressed such a preference as if they had they would have already “homesteaded” the matter, or good, by making it their object of their action first. A human turns this piece of material into servicing a particular need because he prefers that need and the state of being of the good that will meet that need. If another person, Y, comes along and attempts to make the same good the object of his (Y’s) action then the result of this is to divert it away from X’s ends towards Y’s ends. Y’s conduct is, here, subject to the regulation of social rules because X identifies a violent intervention to his property that is attributable to the chosen and purposeful action of Y. There are three key elements in this situation:

  • Goods;
  • An identifiable human (X) who has diverted the goods to a certain end;
  • An identifiable human (Y) who has chosen, deliberately, to divert the goods to another end.

Take away any one of these elements and any talk of social rules becomes meaningless. First, it should be obvious that if there were no goods then there would be nothing to conflict over and social rules would serve no purpose. Secondly, if X did not exist or was not identifiable then there would be no conflict as the good would be ownerless upon Y’s arrived. And finally, if did not exist, or if the intervention of Y was not carried out by a human but, say, by an act of nature then social rules would serve no purpose as they cannot regulate unthinking and unconscious objects.

With climate change, we do not have just one of these elements missing – rather, all three are marked by their absence. First, it is not clear that there are any identifiable goods that are violently interfered with. In other words, is the climate that surrounds a property considered a part of that property (or something that, if changed, can make a violent, physical intervention to that property) or is it something that simply provides varying external benefits and burdens to property which will affect their relative values, in the same way that a conveniently located school might enhance the desirability of nearby houses? Whereas a hurricane would clearly cause untold physical damage and havoc to a property, changes in rainfall, sunshine and temperature may make no appreciable physical intervention at all while, at the same time, enhancing or reducing its desirability. If so, then good weather is tantamount to being something that provides an external benefit to property without intervening, physically, with the property itself. If this is true then other people cannot be forced to continue providing external benefits to your property, nor can they be prevented from carrying out actions that will stop them. If the school decides to close, its owners and managers choosing to devote their efforts elsewhere, and this affects the desirability of your property, few would suggest that you should have a violently enforceable right to enslave them and keep the school open. Or, if my pretty garden enhances the value of your property, should you have the right to force me get out my wheelbarrow and spade? Secondly, there are not necessarily any identifiable individuals that own property that has suffered physical intervention by climate change. Thus far most of the alarmism is only based on hypotheses of future effects and, furthermore, has come not from individual property owners but from governments, their sponsored scientists, activists, environmentalists and political groups. Indeed, given the abysmal record of governments in protecting property from all other kinds of manmade threat we must be extremely suspicious as to why they so enthusiastically champion their own resolution of this one. Finally, and, perhaps, most importantly, climate change is caused not by any one individual but by the action of all humans together. The effect is not caused by the action of any identifiable individual human or identifiable set of humans but is the consequence of the purposeful activity of multiple humans acting independently. A requirement of moral responsibility, and thus, the regulation of an action according to social rules is the individual consciousness that chooses that action. One, single human possesses this consciousness, and this enables him to become morally responsible for actions that are taken even when he chooses to act as part of a group of individuals. All humans together, however, do not possess any individual consciousness that can be held morally responsible for its actions. Humans as a whole, as opposed to individually, are not an individual, sentient, or conscious being. In their collective they are not, therefore, divisible from nature but must, very much, be taken to be a part of it. This is not intended to make the genealogical point that, along with the vegetation and animals, we are all part of the same rock orbiting the sun. Rather, as any one human approaches and considers phenomena arising from humans acting altogether, he must treat and deal with them as phenomena of nature and not as those of an individual being. This still applies even where the groups can be localised – for example, heavily industrialised countries such as the United States will churn out more net carbon dioxide emissions than third world countries (which are often alleged to bear much of the burden of climate change). Simply because people are forcibly “united” by their government or state identity does not mean that their individually chosen action, or action chosen in concert with other individuals, can be held morally responsible for the harm alleged. But even if it did there would still be an enormous problem with causation and proportionality. It is just that an individual should be held responsible only for the harm that he causes and only to the extent that he caused it. How do we know whether a person’s or company’s carbon dioxide emissions caused a change in climate that affected another person’s property and if we do know, then how much? We can, of course, measure net contribution to carbon dioxide emissions. But what if the harm would have happened anyway from everyone else’s contributions and neither the addition nor subtraction of this one person’s emissions would have made any difference?

Indeed, it is not at all surprising that humans would exert some kind of collective side effect upon the Earth that is not reducible to the purposeful behaviour of any single one of them. Larger quantities of anything generally have effects that are either unperceivable or negligible when smaller quantities are considered. Groups of humans have been known to create seismic activity when they jump up and down at the same time1. Millions, if not, several billion people are always walking upon the Earth at the same time. Thus far this has not created any noticeable problem. However, if we suddenly started to see minor tremors causing cracks to appear in buildings from all of those “selfish, profit-seeking” humans walking everywhere, would the most sensible response be to call upon government to regulate how many paces everyone can take in a day, and when? Or should we just to accept the phenomena like an effect of nature and ensure it is accounted for in building design?

Conclusion

Summing up the above argument, therefore, we may conclude that where the purposeful activity of all human beings but of no individual human being, or identifiable group of the same who are purposefully acting in concert, creates certain effects then these effects must be regarded as akin to effects of nature and not of an individually, morally responsible being. The collective “humans” possesses no individual moral responsibility that can be held to account by social rules. Simply because something is induced by the actions of all humans does not mean that any one of the humans is responsible and can be penalised by another human.

The appropriate response to human induced climate change, therefore, is the same response to all of the other problems that nature throws at us – by taking it as a given, understanding its reality as deeply as we can and then learning to act with it symbiotically. This may allow us not only to avoid it but to also, perhaps, use it as an opportunity, as a resource, in ways that, at present, we are not able to consider. Even at the moment it appears far from certain that the effects of climate change will be universally bad and will not have mitigating or even beneficial results. Indeed, those who are so concerned about how we leave the world for our descendants might want to consider whether it is just for us to deny them these possibilities. Nevertheless we should end by saying that none of this means that people should not, individually, act to preserve the climate as it is by restricting net carbon dioxide emissions if that is how they wish to proceed. They are quite welcome to restrict their own emissions and to persuade others to do so. But, as in the pursuit of all other values, they should do so peacefully and voluntarily and not muster the violent hand of the government to enforce it for them at the expense of those who do not share that view.

View the video version of this post.

1One recent example is when Seattle Seahawks fans jumped up and down in celebration during a game on December 2nd 2013: http://www.bbc.co.uk/news/world-us-canada-25205548.

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