The Theory Of Money In The Tradition Of Carl Menger. Part I

Carl Menger, Principles of Economics (1871), Chapter VIII - The Theory of Money:

"In the early stages of trade, when economizing individuals are only slowly awakening to knowledge of the economic gains that can be derived from exploitation of existing exchange opportunities, their attention is, in keeping with the simplicity of all cultural beginnings, directed only to the most obvious of these opportunities. In considering the goods he will acquire in trade, each man takes account only of their use value to himself. Hence the exchange transactions that are actually performed are restricted naturally to situations in which economizing individuals have goods in their possession that have a smaller use value to them than goods in the possession of other economizing individuals who value the same goods in reverse fashion.

… The direct provision of their requirements is the ultimate purpose of all the economic endeavors of men. The final end of their exchange operations is therefore to exchange their commodities for such goods as have use value to them. The endeavor to attain this final end has been equally characteristic of all stages of culture and is entirely correct economically. But economizing individuals, would obviously be behaving uneconomically if, in all instances in which this final end cannot be reached immediately and directly, they were to forsake approaching it altogether.

… He would therefore make the marketing of his commodities either totally impossible, or possible only with the expenditure of a great deal of time, if he were to behave so uneconomically as to wish to take in exchange for his commodities only goods that have use value to himself and not also other goods which, although they would have commodity-character to him, nevertheless have greater marketability than his own commodity. Possession of these commodities would considerably facilitate his search for persons who have just the goods he needs.”

The most basic trade is one where two individuals prefer to have, for their personal consumption, what the other has.

Besides trading what you have for what you would rather have, you can also trade what you have for something you can more easily trade for what you would rather have. This means you trade something that you are not interested in consuming yourself for something you are also not interested in consuming yourself. In deciding what to accept in this kind of trade, you must evaluate all the elements that make it more or less difficult to sell, and at what price, and compare that to the good you are considering trading away.

These elements are:

  • Its marketability for personal consumption
  • The ease with which it can circulate between individuals who do not consume it
  • The costs that are brought about due to its physical makeup



The causal connection between goods

Carl Menger, Principles of Economics, Chapter I-2 - The Causal Connections Between Goods:

"Our well-being at any given time, to the extent that it depends upon the satisfaction of our needs, is assured if we have at our disposal the goods required for their direct satisfaction. If, for example, we have the necessary amount of bread, we are in a position to satisfy our need for food directly.

… The same applies to all other goods that may be used directly for the satisfaction of our needs, ..

But we have not yet exhausted the list of things whose goods-character we recognize. For in addition to goods that serve our needs directly (and which will, for the sake of brevity, henceforth be called “goods of first order”) we find a large number of other things in our economy that cannot be put in any direct causal connection with the satisfaction of our needs, but which possess goods-character no less certainly than goods of first order. In our markets, next to bread and other goods capable of satisfying human needs directly, we also see quantities of flour, fuel, and salt. We find that implements and tools for the production of bread, and the skilled labor services necessary for their use, are regularly traded. All these things, or at any rate by far the greater number of them, are incapable of satisfying human needs in any direct way—for what human need could be satisfied by a specific labor service of a journeyman baker, by a baking utensil, or even by a quantity of ordinary flour? That these things are nevertheless treated as goods in human economy, just like goods of first order, is due to the fact that they serve to produce bread and other goods of first order, and hence are indirectly, even if not directly, capable of satisfying human needs.”

An individual acts to improve his state of being as compared with not acting.

A good is something from the external world that improves the state of being of an individual, as perceived by the individual. A higher order good is something that helps produce the good that can be used by the individual for his perceived improvement.

First order goods are traded on the market because there are individuals who seek them. Because of the demand for first order goods, there is a demand for higher order goods, and this is why they are produced and traded on the market.



The marketability of commodities

Carl Menger, Principles of Economics, VII-2 - The Marketability of Commodities:

”..the obvious differences in the marketability of commodities is a phenomenon of such far-reaching practical importance, the success of the economic activity of producers and merchants depending to a very great extent on a correct understanding of the influences here operative, that science cannot, in the long run, avoid an exact investigation of its nature and causes. Indeed, it is also clear that a complete and satisfactory solution to the still controversial problem of the origin of money, the most liquid of all goods, can emerge only from an investigation of this topic.”

VII-2-B - The different degrees of marketability of commodities:

"The first cause of differences in the marketability of commodities we have thus seen to be the fact that the number of persons to whom they can be sold is sometimes larger and sometimes smaller, and that the points of concentration of the persons interested in their pricing are sometimes better and sometimes less well organized. …

The second cause of differences in the marketability of commodities is thus the fact that the geographical areas within which their sale is confined are sometimes wider and sometimes narrower, and that while there are many trading points within this area at which some commodities can be sold at economic prices, there are only a few such points in the case of other commodities. …

The third cause of differences in the marketability of commodities, then, is the fact that the quantitative limits of the amounts of them that can be sold are sometimes wider and sometimes narrower, and that within these limits the quantities of some commodities brought to market can easily be sold at economic prices, while this is not true of other commodities, or at least not in the same degree. …

The fourth cause of differences in the marketability of commodities is thus the fact that the time limits within which commodities can be sold are sometimes wider and sometimes narrower, and that within these limits some commodities can be sold at economic prices at any time, while others can be sold only at more or less distant points in time.”

Goods vary in difficulty in finding someone to trade them with, for use by them. A good can have a high demand or a low demand for consumption, be sold widely or sparsely, and be sold frequently or infrequently.



VII-2-C The facility with which commodities circulate:

"Some commodities have almost the same marketability in the hands of every economizing individual. … However saleable commodities of this kind may be in the hands of their producers or certain merchants, they lose their marketability altogether, or at any rate in part, if even a suspicion arises that they have already been used or only been in unclean hands. They are therefore not suited in economic exchange to circulate from hand to hand.

Other commodities require special knowledge, skills, permits, or governmental licenses, privileges, etc., for their sale, and are not at all, or only with difficulty, saleable in the hands of an individual who cannot acquire these requisites. In any case they lose value in his hands. … Hence they are as little suited as the commodities of the previous paragraph to free circulation from hand to hand.

Moreover, commodities that must be specially fitted to the needs of the consumer to be useable at all are not saleable in an equal degree in the hands of every owner. … ..especially since these businessmen generally have facilities for fitting the commodities to the special needs of their customers. In the hands of another person, these commodities can be sold only with difficulty and almost always only at a heavy loss. These commodities too are not suited to free circulation from hand to hand.

Commodities whose prices are not well known or subject to considerable fluctuations also do not pass easily from hand to hand. A purchaser of such commodities faces the danger of “overpaying” for them, or of suffering a loss before he has passed them on due to a fall in price. … ..commodities that are subject to violent price fluctuations can circulate easily only “below the market,” since all persons who are not willing to speculate will want to protect themselves against loss. Thus commodities whose prices are uncertain or fluctuate severely are also not well suited to free circulation from hand to hand.

Thus we find that for a commodity to be capable of circulating freely it must be saleable in the widest sense of the term to every economizing individual through whose hands it may pass, and to each of these persons it must be saleable, not in one respect alone, but in all four of the senses discussed above.”

Goods vary in difficulty in finding someone to trade them with, for further trade by them. A good held by different people can attain the same market price or different prices. A good may require a special skill or license to be sold. A good may be subject to considerable fluctuation in price, which makes people who are unwilling to speculate on it only willing to pay a conservative price for it. Technological evolution is one reason why many consumer goods face quickly eroding market prices.



The periodic table of the elements

A Chemist Explains Why Gold Beat Out Lithium, Osmium, Einsteinium

The different chemical elements that exist on earth have a wide range of activity at the current temperatures and pressures that we experience. They react to varying degrees to exposure to air, such as bursting into flames or corroding. Some are a solid, some are a liquid, and some are a gas. Some are dangerously radioactive.

Most chemical elements have found their way to be useful in the production of goods. Because of the different kinds of activity, they bring with them different amounts of costs to keep them useful during transportation and storage. There are differences in the costs of discovering what the element is, and of which purity it is. There are differences in the costs of dividing up or combining an amount of elements.



Speculation

Speculation | Jeffrey Herbener explains Rothbard:

”..when Rothbard theorizes about speculation, we can usefully break his treatment into these categories. He first points out how speculation works for the individual person. The individual person is speculating with respect to the future, about the outcome of his own actions. The second category is speculations that a person makes about the actions of others that he intends to interact with. So this is where we get the market. And within that category he talks about speculation that people make on their own about what others will be doing in the market; predicting what prices will be and so on. And then he talks about speculation by the specialists in the market; they’re predicting on behalf of other people the speculative outcome of even other people’s actions.

Now the way this plays out in Man, Economy, and State is as follows. So we get this first point that all action is speculative, on page 6. Very early on, this is part of the general theory of human action; it doesn’t apply to pricing per se. But Rothbard carries this through to the section on pricings. So when we get to the section on pricings, with demand and supply, he explicitly points this out. He says: ‘Both demand and supply are speculative’. When a person has a preference rank and they say ‘I prefer an Ipad 2 to 500 dollars’, both those entries in the preference rank are speculative. The person doesn’t know before getting the Ipad 2 and using it to attain his end, what the realized value of having the Ipad 2 is. He doesn’t know until he gives up the 500 dollars, what exactly the opportunity cost is that he foregoes in the future.

So speculation is in the very formation of demand and supply. He builds this into his pedagogy when he develops his presentation of demand and supply with the total stock, total demand analysis. So here he’s not just trying to show that prices must, of necessity, be determined just by preferences, but he explicitly brings out the speculative element in that presentation.

So the conclusion from this, of course, that he arrives at, is that prices themselves, both the level of prices in markets, and changes in prices that come through shifting demands and supplies, both of these things are speculative. Prices themselves are not like facts of nature; they’re results of human action that are based upon speculation.”

Reality is incredibly complex. In order to attain our ends, we must make predictions about the future and the effects of our possible actions, and choose among them.

A price is an exchange ratio of a trade that took place between two people. A price is the result of a bidding process, which involves two or more people. A bid is based on an individual’s goals, his understanding of the world, and his predictions about the future, all of which are changing as time goes by.



Conclusion

An economy is made up of individual seeking their personal goals. For this, they require goods, most of which are produced by others. In a monetary exchange, an individual trades away something he does not intend to use for another thing he does not intend to use. This means he must consider the value of the good to other people, which relates to how the good in the future can help other people attain their goals.

Menger emphasizes this point of a money good as a consumer or producer good in the appendix.

Carl Menger, Principles of Economics, Appendix J - History of Theories of the Origin of Money:

"I refer to the observation that the character of money as an industrial metal often completely disappears from the consciousness of economizing men because of the smoothness of operation of our trading mechanism, and that men therefore only notice its character as a means of exchange. The force of custom is so strong that the ability of a metal used as money to continue in this role is assured even when men are not directly aware of its character as an industrial metal. This observation is entirely correct. But it is also quite evident that the ability of a material to serve as money, as well as the custom on which this ability is founded, would disappear immediately, if the character of money as a material applicable to industrial purposes were destroyed by some accident. I am ready to admit that, under highly developed conditions of trade, money is regarded by many economizing men only as a token. But it is quite certain that this illusion would immediately be dispelled if the character of coins as quantities of industrial raw materials were lost."



I will discuss issues such as fiat currency, legal tender laws, the regression question, and Bitcoin in Part II.

Libertarians Against Drunk Driving Laws?

Jeffrey Tucker has written an article on the laws and enforcement of driving under the influence of alcohol. He would like to see driving under the influence scrapped as a crime, and believes enforcing rules against reckless driving to be sufficient.

Tucker writes:

"With laws against DUI, what’s being criminalized? Not reckless driving as such. Not aggression against anyone. What’s being criminalized is the chemical make up of the blood in your body. That itself should be no crime. To make having a certain blood content illegal is essentially totalitarian.

But you say that drinking is associated with bad driving. Well, enforce the laws against reckless driving. Many more people drink and drive than drive recklessly. Some people drive even more safely after a few drinks, correcting for their delayed responses. We do this all the time, e.g. after a workout, when we are sleepy, when we are angry, whatever.

[..]

..the law has no business criminalizing associated peaceful behaviors rather than real crimes against person and property.”

Tucker recognizes the legal category of ‘endangerment’. He quotes another author who states that repeated swerving is an example of such. I would agree with that. What Tucker fails to mention is that being able to drive in your lane, at the appropriate speed and following the road rules, is not sufficient for being a safe road participant. Situations arise regularly that require quick, multifaceted, reactions. The danger of these type of situations can also be mitigated, to a large extent, by good observational awareness.

Tucker calls for the enforcement against reckless driving, which is something the state does a very bad job at, and is something they don’t appear to really care much about, or more specifically, is something that is completely impossible for them to accomplish. Public roads are a gargantuan central planning disaster. The roads are not in the right places, they are not evolving as they could be as far as rules and technology, nobody pays for how much they use it, swaths of people are driving who shouldn’t be, and no matter what your professional reputation is you are free to roam any public road in any neighborhood you wish.

Whether driving under the influence causes danger or not is a biological, empirical, and most of all entrepreneurial matter. To argue that the state should manage the roads in one way or the other is a pretense of knowledge, and is not a good position to take for libertarians. The problem of transportation can only be properly approached decentrally, through property rights.



Update:

Jeffrey has written to me:

"Thanks!

Good piece. Like a part two of mine.”

Intellectual Property For Medicinal Drugs?





Medicinal drugs are often named as an example of where intellectual property protection has an advantage for consumers. For example, in a recent video titled ‘End Software Patents’, Alex Tabarrok says:

"In an industry like pharmaceuticals, patents make sense. It costs about a billion dollars to develop the average new drug. But a generic imitation might cost just 50 cents a pill. If innovators are not able to recoup their cost of development, there will be no-one left to innovate. But does every innovative idea need a 20 year monopoly?"

He then goes on to give reasons why patents may not be a good idea in other fields. I’d like to analyze the given reason in support for patents for medicinal drugs.

A billion dollars sounds like a high number, but the reason a firm is now willing to spend that is because they expect to have concentrated benefits. If there is no expectation of such concentrated benefits, actors in society may still be willing to spend lower amounts of money and time individually for less concentrated benefits, but attain far-reaching results collectively.

Furthermore, a high stated cost in current-day development of knowledge about medicine (production and its effects), can also lead us to question if there are ways that costs can be lowered, through changing the rules of the health-care game. Health-care is a highly publicly regulated industry and enjoys rent-seeking on all levels.

Instead of favoring levels upon levels of centrally planned and controlled production of health-care (which patents are part of), why not consider allowing individuals to compete and contract freely, and build their institutions from the bottom-up. Competing drug testers, competing associations of doctors, competing hospitals and best practices, and competing real insurance (not the quasi-welfare ‘insurance’ that exists today). And all would have the freedom to change, set their own standards, and learn from each other. What would that do to the cost of developing new knowledge about drugs, and how it is dispersed?

The health-care industry is in competition with all other industries. If the health-care industry didn’t have much to offer to customers, then people would spend their money elsewhere. One clear shift away from health-care would be prevention. People would spend more resources preventing getting injured and diseases if doctors and hospitals weren’t able to provide what they can today. My point here is that there is such a thing as ‘creating (and maintaining) an industry’.

There are individuals who are directly interested in the continued development of drug (and other medical) research. They are the doctors and the people who want to sell drugs (factories and pharmacies), and also patients. Apart from the creation of the drugs themselves, what is just as important is knowledge about them and how they interact with human biologies. This means in a world without intellectual property, we can expect doctors to form close ties with and fund medical research; most likely through doctor’s associations, which will be required by customers for predictability and accountability.

As we see today, many individuals and institutions are also willing to donate to such causes.



Update:

Alex has written to me:

"Thanks. You may be interested to know that I have written a lot on cutting back FDA regulations to lower the costs of new drugs.

http://fdareview.org/

Cheers

Alex Tabarrok”

Santa Claus: A Tale Of Socialism

My wife was recently told that raising children without the tale of Santa Claus is heartless. The tale is usually presented as reality to trusting young children. What is the tale about?

Santa runs a factory on the North Pole with many ‘happy workers’. He does not partake in the international division of labor. He does not buy from any producers, he does not ship resources from overseas, he does not use any pricing, he doesn’t need producer goods from others, and no electricity or gas.. He is simply able to create everything from scratch in his one factory. Pencils? No problem. Computer tablets with nanometer-scale microchips? No problem either. Santa has an uncanny ability to stay out of trouble for trademark, patent and copyright infringement. In the tradition of Karl Marx, he has a giant beard.

Who are the recipients of all this material wealth? The children who have been ‘good’, as judged by the almighty central planner himself, who knows everything that the children have been up to.

Santa also knows and keeps track of the precise desires of the children. You only have to ask him what you want, and he’ll effortlessly adjust his production schedule, and deliver the goods for millions right on time all on the same day.

The goods are actually provided by the parents, who have to generate excess capital themselves for this kind of spending. The goods they purchase are produced all around the world, through economic cooperation among masses of people. It took the whole of humanity to get where we are now; with continual difficulty for the accumulation of capital goods because of wars and predatory governments.

The reality of production contains many great lessons about peace and cooperation among cultures and peoples. The family unit is also based on economic cooperation, compassion, and mutual benefit. All of this is glossed over and substituted in the Santa Claus myth. People who don’t tell the Santa story to their children may not be heartless and may have better stories to tell to their children.

For Tom Woods: are rights a human construction or do they exist?

In a recent video, Tom Woods brings up secession. He says:

"The question of secession is basically raising this issue: is it possible that the political unit could become so large as to be, even by government standards, dysfunctional?"

[..]

"Why would it be that the number of square feet in the United States is like a heaven-sent number? Like ‘it’s this many square feet; and if you want it to be slightly fewer square feet then there’s something wrong with you..’

The union is supposed to be a practical thing. It’s supposed to be a means to an end; not an end in itself. The union is not something we’re supposed to get down and worship, or wave incense before.. It’s a practical thing and yet the hysterics about secession.. the hysterics who have been criticizing people who consider this idea, are treating the union as if it were an object of religious veneration. This is bizarre and creepy.”

If the union is to be evaluated according to means and ends, then what about the states themselves, and then what about (libertarian) property rights? Mises and Hazlitt understood property rights as (the culmination of) chosen means by specific individuals for the achievement of their personally desired ends.

In an earlier video, ‘Where Do Rights Come From?’, Tom said:

"The fact that we can make this argument from numerous angles, and yet it leads us to the same basic conclusion of the existence of natural rights.. I don’t think that’s a weakness, I think that’s a strength. I think that shows that it’s a truth that, that albeit perhaps from somewhat different angles, we are all approaching.. from different ways."

It seems like Tom is trying to have it both ways: have rights be something that exists, and (at least at the level of larger political organization) have it be a constructed human means for a human end.

In his video, Tom speaks highly of Rothbard and Hoppe. Both of them have, however, written negatively on Mises’ view of subjective means and ends regarding the rules of society (link 1, link 2).

Tom speaks of ‘treating the union as an object of religious veneration’, but I believe that is the way many libertarians treat rights as.

Jeffrey Herbener and Ralph Raico on Darwinism

In a recent speech titled ‘Legacies of the Great War’, Jeffrey Herbener quoted part of a book review by Ralph Raico:

"Tooley deals deftly with the intellectual and cultural currents of pre-war Europe. Contributing to the proneness to violence were a bastardized Nietzschianism and the anarchosyndicalism of Georges Sorel, but most of all Social Darwinism — really, just Darwinism — which taught the eternal conflict among the races and tribes of the human as of other species."

On Wikipedia we find:

In Darwin’s day there was no rigid definition of the term “Darwinism,” and it was used by opponents and proponents of Darwin’s biological theory alike to mean whatever they wanted it to in a larger context.

And:

Social Darwinism is an ideology of society that seeks to apply biological concepts of Darwinism or of evolutionary theory to sociology and politics, ..

If Raico was meaning to say that Darwin advocated Social Darwinism, then I offer the reader a written reply by Darwin to eugenicist Francis Galton:

"Though I see so much difficulty, the object seems a grand one; and you have pointed out the sole feasible, yet I fear utopian, plan of procedure in improving the human race. I should be inclined to trust more (and this is part of your plan) to disseminating and insisting on the importance of the all-important principle of inheritance."

If Raico was meaning to say that the theory of evolution teaches “the eternal conflict among the races and tribes of the human as of other species”, then I’d like to offer the following explanation:

The passing on of genetic information through variation and selection implies the spreading and non-spreading of certain genetic information. It does not however describe a necessary conflict between the people who carry that information. If one sibling has three offspring and another sibling has one offspring, all of them can still cooperate peacefully under the division of labor. Only if one includes the aim that certain information must proliferate at the expense of other information, does one arrive at Social Darwinism.

And as Youtuber Qualiasoup says in his friendly video on evolution:

"Some people feel that an acceptance of evolution implies, or leads inevitably towards, the desire for supremacist control over the breeding of human beings. But recognizing facts about nature doesn’t mean you have any wish to apply them to social policy.. Evolution isn’t an endorsement of eugenics any more than accepting the fact that the females of numerous species kill and eat the males after mating is an endorsement of cannibalism; it’s simply a recognition of reality."



Update:

Jeffrey has written to me:

"Dear Niels,

Of course, Darwinism doesn’t imply as a logical necessity conflict among the different species of the human race. What Raico and Tooley are pointing out is that influential intellectuals in the 19th century took it to mean just that and the results of their interpretation were harmful to the cause of liberty. Raico and Tooley are recounting what happened in history, not critiquing Darwinism as a system.

Best regards,

Jeff”

I am happy to hear Jeffrey’s clarification on this issue, but I remain unhappy with the way Raico has phrased this.

Rothbard Misunderstood And Misrepresented Mises’s Morality

Murray Rothbard in Praxeology, Value Judgments, and Public Policy (1976):

The case of Mises is particularly interesting, not only because he was a leader in the modern Austrian school and in praxeology, but also because he was, of all the economists in the twentieth century, the most uncompromising and passionate adherent of laissez-faire and at the same time the most rigorous and uncompromising advocate of value-free economics and opponent of any sort of objective ethics. How then did he attempt to reconcile these two positions?

Rothbard quotes Ludwig von Mises, from Human Action (1949):

"An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If the economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate."

Rothbard continues:

Now this is surely an ingenious attempt to allow pronouncements of “good” or “bad” by the economist without making a value judgment; for the economist is supposed to be only a praxeologist, a technician, pointing out to his readers or listeners that they will all consider a policy “bad” once he reveals its full consequences. But ingenious as it is, the attempt completely fails. For how could Mises know what the advocates of the particular policy consider desirable? How could he know what their value scales are now or what they will be when the consequences of the measure appear?

Mises says ‘if you want result p and not result g, then measure a is bad for you’. This doesn’t require Mises to know who supports p or g to make such a pronouncement.



Rothbard:

[..]

All sorts of such possibilities exist, and none of them is compatible with the assertion of Mises, as a value-free economist, that all supporters of price controls—or of any other government intervention—must concede, after learning economics, that the measure is “bad.” In fact, once Mises conceded that even a single advocate of price controls or any other interventionist measure may acknowledge the economic consequences and still favor it, he could no longer call any of these measures “bad” or “good” or even “appropriate” or “inappropriate” without inserting into his economic policy pronouncements the very value judgments that he himself held to be inadmissible as a scientist of human action.

If a person is aiming at shortages, and favors price controls because of it, then Mises would not call it bad for that person. Rothbard seems stuck in the idea that a measure either is or is not bad. Mises’ point is that the words good and bad are only meaningful in the context of subjective value. And because of subjective value, this leaves a large common ground for advocacy of laissez-faire, when an individual is aiming at the same things we are but misunderstands the consequences of certain policies or societal rules.



Mises:

"Liberalism, in its 19th century sense, is a political doctrine … As a political doctrine liberalism (in contrast to economic science) is not neutral with regard to values and ultimate ends sought by action. It assumes that all men or at least the majority of people are intent upon attaining certain goals. It gives them information about the means suitable to the realization of their plans. The champions of liberal doctrines are fully aware of the fact that their teachings are valid only for people who are committed to their valuational principles. While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness … abundance to poverty. It teaches men how to act in accordance with these valuations."

Rothbard:

In this second variant, Mises successfully escaped the self-contradiction of being a value-free praxeologist advocating laissez-faire. Granting in this variant that the economist may not make such advocacy, he took his stand as a citizen willing to make value judgments. 

[..]

..for Mises the utilitarian .. he was only willing to make the one value judgment that he joined the majority of the people in favoring their common peace, prosperity, and abundance. In this way, as an opponent of objective ethics .. he made the minimal possible degree of such judgments; true to his utilitarian position his value judgment is the desirability of fulfilling the subjectively desired goals of the bulk of the populace.

[..]

They may well decide that it is worth sacrificing a modicum of wealth and efficient production because of the high opportunity costs of not being able to enjoy an alleviation of envy, or a lust for power, or a submission to power, or, for example, the thrill of “national unity, ” which they might enjoy from a (short-lived) economic crisis. 

What could Mises reply to a majority of the public who have indeed considered all the praxeological consequences and still prefer a modicum—or, for that matter, even a drastic amount—of statism in order to achieve some of their competing goals? As a utilitarian, he could not quarrel with the ethical nature of their chosen goals: for he had to confine himself to the one value judgment that he favored the majority achieving their chosen goals.

Mises did not favor the majority achieving their goals in all possible situations. Mises subjectively favored peace and prosperity. He was under the impression that the majority also favored peace and prosperity, and this provided a common ground for advocacy of laissez-faire, the unknown ideal for the achievement of peace and prosperity.

Learning How To Think | by AJ

This is a repost of the answer given by AJ to the question: ‘What lessons would you create to teach kids how to think?’.



Learning to thinking clearly is “simply” a matter of unfailingly diligent mental hygiene.

  • Don’t mix strong emotions with intellectual thinking (this is basic)
  • Keep your identity small
  • Identify all the unseen premises
  • Don’t assume (especially, never assume you can’t understand something)
  • Hard but indispensible: Avoid the myriad traps that words create through their vagueness - especially equivocation-based errors. This means always relentlessly seek out clearer and clearer definitions for all strategic terms upon which an argument rests.

The master key that unlocks all of the above is to divorce your intellectual thinking from your social signaling and the authority structure of society. This means way more than just demanding sources. Here’s a quote I liked regarding authority:

Authority is so deeply ingrained in our psyches that its effects are extremely subtle. People think they are not submitting to authority if they question what the teacher tells them, but the real trick is much more insidious: there’s an intellectual attitude the teacher has that the students fails to question, or even notice.

It’s not so much only that you believe in black holes, but that you view them as something to believe or disbelieve in the first place. Not so much that you believe a line is made of points, but that you let the constant equivocation among different definitions of “point” slide. It’s not so much that you accept E=mc^2, but that you go along with the reification of the word “energy” without batting an eye.

Even the rebel cannot escape. They rebel against the church, but they never lose the religious thinking habits.

To escape is like peeling away the layers of an onion. First you stop believing in the facts the authority figure is claiming, and you fancy yourself a rebel. Next you reject their theories or school of thought, believing yourself now truly independent. Then you reject their entire endeavor as fundamentally broken and set out on your own, thinking yourself fully free from authority. 

Eventually, if you’re lucky, you shake that lingering habit that you learned from the top intellectual charlatans, that of being loose with definitions. Finally you see the authority bound up in how society treats words themselves, realize not to ask what a word means but how it could be usefully defined, stop trying to prove definitions, and even embrace visual explanations when possible.

Though most will find the anti-mainstream physics examples bizarre, similar examples could be made regarding the errors of the statist attitudes of political scientists or mainstream economists. The key is that it is not merely wrong facts you have to watch out for, but the positive social association with careless thinking and language-usage habits that comes from listening to a revered authority figure make a bad argument that sounds very good.

For the child, then, the best way not to get them mired in the bad thinking habits of authorities is probably to not present anyone to the child as an authority; each person must rise or fall on his or her own coherence and clarity of explanation. No teacher or famous dead dude is any better than a random forum poster or a friend on the playground unless they can make a case clearly and have good mental hygiene habits.

Beyond that, all there is to do is let their natural curiosity bloom.

Ludwig von Mises on Science and Morality





Ludwig von Mises was a supporter of the (classical) liberal order of society, but he did not try to use science to prove that it was objectively just or good.

Science has to do with existential propositions: with the “is” and the “is not.” It is only with regard to existential propositions that there can be any question of truth versus falsity.

Value judgments, on the other hand, are not existential propositions and are not subject to proof or disproof.

Value is based on individual human perception. Some like chocolate ice cream, some like vanilla ice cream. Some like to see others suffer and some like to see others thrive.

Society is the pattern that comes about from individuals choosing cooperative means to attain their personally valued ends. If some individuals choose uncooperative means to attain their personally valued ends, they are not acting objectively ‘bad’ or ‘evil’. They are only acting at odds with the subjective ends of other individuals.

In the religious age, the wishes of The Invisible Man were taken as determining right and wrong. In modern day, without such a notion, we can observe the wishes of individuals and see if they are compatible with ours, and attempt to persuade them to act otherwise if they aren’t. The claim that they are acting ‘objectively evil’ is however invariably at odds with the notion of subjective value.



Based partially on: Why Liberalism? | by Daniel James Sanchez (also in video)

David Gordon and the Cash Register Thought Experiment

In ‘What Is Morality? The Ethics of Hazlitt' (1 June 2012), David Gordon says:

"Suppose, you see an opportunity to steal. Let’s say, you’re in a store and you see the cash register is open and the store owner has just gone to the back, and you can just take the money out.. You have good reasons to think he won’t be able to catch you. So you might say: ‘Well, isn’t this in your immediate interest that you’d be able to get all this money? ..and nobody’s going to catch you.’

But for Hazlitt, it isn’t into your long run interest, because in order for the market.. social cooperation to function, people really have to follow these rules on a fixed basis. They have to have these rules internalized, taught to us, so that we don’t violate them, whenever we think we could get away with it. If we did that then social cooperation would break down.

So it’s in everybody’s interest that we always follow these fixed rules, even though you might think that maybe there are some cases we can get away with it. It isn’t in our interest to just calculate in each case whether you can get away with breaking the rules. What’s in our long-run interest is that we always follow the rules.

Now you might say: ‘Well, aren’t there occasions.. exceptions like famous cases that Kant discusses?’ There’s a murderer knocking on the door and he asks if a certain person he’s trying to murder is in the house, so do you have to answer yes if the person is there; do you have to tell the truth to a murderer? Most people say ‘No, you don’t’. It is an exception to the rule that you’re not supposed to lie. … So you might say: ‘Well, aren’t there some kind of exceptions to these rules?’ But Hazlitt says: maybe there are, but these too can be specified as rules.”  [34m15s to 37m15s]

I understand Gordon’s take to mean the following:

Overall, the existence of social cooperation serves our individual interests; it is a means to our ends. However, if analyzed in individual scenarios, we would (with regularity) come up with a different answer, as to whether we anticipate social cooperation to serve our ends. And so, the rational anticipation of means versus ends at the individual level leads to (some or total) disintegration of society, even if these individuals are convinced of Austrian economics. To resolve this, we must act to raise the valuation of social cooperation from a means to an end in itself, in ourselves and in others.

Hans Hoppe and Stefan Molyneux have argued the same point (see here and here): that Austrian egoism leads away from social cooperation.

I’d like to offer a more precise analysis:

If one is convinced of Austrian economics (and prefers health to sickness, abundance to poverty, etc, over the medium to long run), then it is always perceived to be preferential that other people interact through the division of labor and private property. One exception could be for a partner in crime. It is this question of crime for oneself that I now first wish to discuss.

In a market society, where most people are in favor of social cooperation for others, this culminates in an environment where each individual is highly incentivized to act peacefully.

a.             b. 

Not only are individuals incentivized to refrain from crime, but they stand to gain from acting in those ways (and give off signals) that show social behavior.

Returning to the cash register hypothetical, we are looking at a person with a reputation, that was built up through many years. This person most likely also has a career and prospects for the future. If he does not have an income through production and trade, then he may be relying on friends and family or other institutions who are investing in him. And after this event he has many thousands of purchases (trades) he wishes to make in the future. If he were to take an amount of money, all of this would be put in jeopardy. How much money gained now, that one may or may not get away with stealing, is it worth risking ruining one’s entire future?

Another element in this scenario is that the more money is taken, the higher the risk of being found out. This is because a big amount missing may be spot upon the owner returning, and he can run outside to ask other people about who was in his store. This further lowers the potential gain by stealing.

Gordon stated in his hypothetical that the person knew he wouldn’t be found out, but is that how reality works? How do you know there is no hidden camera? How do you know when the owner returns? How do you know nobody else will walk in? How do you know nobody will recognize you as you walk out? We do not know the future, and have to constantly speculate on it.

People in society are also aware of the possibility of being harmed, and they take action on it if they perceive it’s a real risk. This is one of the functions of the immediate social group of friends and family, which are held intact if those relationships are perceived to be beneficial. People don’t just lend money to strangers, and they don’t tend to leave cash registers open and unmonitored for long amounts of time.

Another aspect is psychic loss and gain: if I am able to thrive peacefully in society, do I really want to gain at the expense of another? And if I get away with it initially, I will have to worry about being found out for a long time. Instead, if I inform the store owner that his cash register was mistakenly left open, I may make a friend.

To conclude: I don’t think that society will break down from economically enlightened individuals thinking through the situations they are in, and how it affects their ends (in either a small society or a complex one). In fact, I think quite the opposite.

In regards to partners in crime: the previous analysis applies to an individual considering crime as well as a group considering crime.