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Patents and Innovation Economics

The Greatest Mistake in Economics: We Are Wealthier Because Profit Margins Are Small

Economists often argue that the West is wealthier because profit margins are driven down by competition.  For instance, here is a quote from an article in Forbes by a researcher at the Adam Smith Institute

What this means is that prices to us, the consumers, keep coming down as a result of that competition. And yes, if the prices we have to pay for things decline then we are becoming richer. Our real incomes are rising as a result.[1]

Economists have two scientific sounding theories for this idea, perfect and pure competition or the zero profit tendency.

Pure and Perfect Competition

According to Investopedia under perfect “Companies earn just enough profit to stay in business and no more, because if they were to earn excess profits, other companies would enter the market and drive profits back down to the bare minimum.”[2]  Economist hold up perfect completion up as the ideal market situation and any other situation result is “excess profits”.  In fact, perfect competition is the theoretical underpinning of anti-trust law.

There are a number of problems with this theory of perfect competition and I discuss them in depth in my book Source of Economic Growth, so this will just be a brief overview.  First of all we do not create wealth by consuming, we create wealth by producing and we can only produce more efficiently by inventing.  Our standard of living is defined by our technology.  Second the wealthiest countries are those that have producers (companies and workers) whose profit margins have not been squeezed to the bare minimum.  How wealthy are the owners of a company making the bare minimum of profits?  How much can they pay their employees, when their margins are at the bare minimum?

We get wealthier by inventing new technologies that provide large profit margins.  Railroads had (have) much larger profit margins than human mules (Sherpa’s), or canal owners, or wagon drivers.  They still deliver goods for much less cost despite their higher profit margins.  In the future railroads may be obsolete as UAVs take over the job of transporting goods as Amazon is experimenting with.

 

Zero Total Profit Tendency

                Austrian Economics supposedly rejects the perfect competition theory, however they replace it with their own version, the tendency that total profits will be zero when an economy is in equilibrium.[3]  Like perfect competition they assume that competition will drive profits down or toward zero.

 

Conclusion

Competition is not the source of wealth.  In fact in a perfect world economically, we would all produce unique items of extremely high value.  This is not to say that government inhibition of competition is good or makes us wealthier either.  However, every property right (that is enforced) results in less competition and we would not be wealthier without property rights.  Competition is a result of capitalism, it is not the definition of capitalism or what makes us wealthy.  It is this sort of confusion about cause and effect that has so-called free market economists either arguing for anti-trust laws or arguing for anarchy (the absence of property rights).

The source of all real per capita increases in wealth is due to increasing levels of technology, not competition.  The only way we increase our level of technology is by inventing.  Property rights for inventors are the most important property right economically and the fundamental basis of all property rights.

[1] Tim Worstall, Amazon Vs Walmart On Free Shipping – It’s Not Capitalism That Makes Us Rich But Market Competition, https://www.forbes.com/sites/timworstall/2017/05/09/amazon-vs-walmart-on-free-shipping-its-not-capitalism-that-makes-us-rich-but-market-competition/#6dc7b5593c8e accessed June 7, 2017.

[2] Perfect Competition http://www.investopedia.com/terms/p/perfectcompetition.asp#ixzz4jLsXzRQ accessed June 7, 2017.

 

[3]Driving the Market Process: “Alertness” Versus Innovation and “Creative Destruction” https://mises.org/library/driving-market-process-alertness-versus-innovation-and-creative-destruction accessed June 7, 2017

June 8, 2017 Posted by | -Economics, Innovation, Patents, philosophy, Regulation | , , , | 2 Comments

Is Objectivism Compatible with Austrian Economics?

There have been a number of papers comparing Objectivism to Austrian Economics.  The motivation appears to be Rand’s relationship with Ludwig Von Mises, since both are known for advocating Laissez Faire Economics.  Most of these papers have focused on ethics, particularly whether the subjective theory of value in Austrian Economics (AE) is consistent with Objectivist ethics.  The majority of these papers have argued that AE (at least the Menger-Mises side) and Rand are actually very similar and compatible, but not all including Rand herself.  In order to arrive at these conclusions, the authors have often provided nuanced explanations of what the Austrians or Rand said.  For instance, Richard Johnsson argues:

It seems to be a well-established fact that there are similarities between Rand and Menger, despite the objectivist/subjectivist issue.  Once we concede that something can be intrinsic value, in Moore’s sense, I believe the differences between Austrian subjectivism and Rand’s Objectivism vanish.[i]

Roderick Long concludes in his paper, Praxeology: Who Needs It:

I have argued that the features of Misesian praxeology that Rand found most objectionable—its aprioristic methodology, its value subjectivism, and its claims about motivational psychology—can be reinterpreted in ways that make them congenial to Rand’s philosophical principles while still preserving the essential points that Mises was seeking to make. Hence there is no reason for those of a Randian philosophical bent to deprive themselves of the powerful methodological instrument developed by Mises and his fellow Austrians: praxeology, the a priori science of human action.[ii]

And Ed Younkins argues:

Objectivism’s Aristotelian perspective on the nature of man and the world and on the need to exercise one’s virtues can be viewed as complementary with the praxeology of Austrian economics.[iii]

Objectivists are generally more critical of the Hayek branch of AE.  For instance, David Kelley writes “if a defense of freedom depends on individualism, and individualism presupposes individuals capable of genuine self-direction, Hayek cannot successfully defend freedom.”[iv]  Ed Younkins says this about Hayek, “Hayek is primarily concerned with the nature, scope, limits, use, and abuse of reason in human life. For Hayek, a man’s knowledge of the world and himself is at best limited, incomplete, and uncertain.”[v]

This paper will focus primarily on the similarities and differences of the epistemology of various Austrian Economists (Menger, Mises, Hayek) and Rand.  Rand and the economists will be taken at their word.  Unlike many previous researchers, this paper will argue that the epistemological theories of Austrian Economists are incompatible with Objectivism and inconsistent with the science project of the Enlightenment.

 

Menger

Menger lays out his epistemology in his book Investigations into the Method of Social Sciences.[vi]  Lawrence H. White in the introduction to the book, explains.

Fortunately, Menger draws and even emphasizes a suitable distinction between the “realist-empirical orientation of theoretical research” and the “exact” orientation (p. 59). The search for so-called ,”exact laws” alone is more appropriately considered the task of purely theoretical research in economics. We can make sense of “exact laws” as theoretical propositions which (necessarily) take an “if-then” form: if conditions A and B hold, then condition C must also obtain. Menger rightly insists (pp. 70, 215) that realist-empirical generalizations (e.g., A and B are usually accompanied by C) can by their nature never attain the strictness that necessarily characterizes logical implications. The two sorts of “laws” are on different epistemological planes. So without too much dissent from Menger’s thought we may divide economic theory from economic history where he divided strict theory from what he considered an empirical sort of theory. What is empirical is really historical, and this accounts for its different status from what is deductive.[vii]

Lawrence H. White goes on to explain:

But this is not because, like some economists, he (Menger) sees empiricism or positivism or falsificationism as the only proper method for both social science and natural science. Instead he argues (p. 59 n. 18) that both the search for empirical regularities and the formulation of non-empirical, non-falsifiable (“exact”) theories are methods common to both economics and such natural science fields as chemistry. In viewing theoretical research in every field as having a non-empirical proposition at its core, Menger’s position bears some resemblance to that of modern philosophers of science. [viii]

As a person who has a masters’ degree in physics and a BS in Electrical Engineering and has worked with scientists and engineers his whole life, I am unaware of any so-called theoretical side of chemistry or other natural science that is ‘non-empirical, non-falsifiable (“exact”)’ nor have I ever heard such an idea proposed by others.

Ed Younkins describes Menger’s epistemology as:

Menger distinguishes between the empirical-realistic orientation to theory and the exact orientation to theory (36–44). Whereas the empirical-realistic branch of economics studies the regularities in the succession and coexistence of real phenomena, the exact orientation studies the laws governing ideal economic phenomena. He explains that empirical-realistic theory is concerned with regularities in the coexistence and succession of phenomena discovered by observing actual types and typical relationships of phenomena. Empirical realistic theory is subject to exceptions and to change over time. Theoretical economics in its realistic orientation derives empirical laws that are valid only for the spatial and temporal relationships from which they were observed. Empirical laws can only be alleged to be true within a particular spatiotemporal domain. The realistic orientation can only lead to real types and to the particular. The study of individual or concrete phenomena in time and space is the realm of the historical sciences.[ix]

Younkins and White both seem to agree that according to Menger there is theoretical side of economics that is exact and cannot be tested empirically.  Menger argues there is also an empirical side of economics, which is not exact and subject to change over time.

Menger’s epistemology should be familiar as it is a restatement of the analytic-synthetic distinction.  “Analytic propositions are true by virtue of their meaning, while synthetic propositions are true by how their meaning relates to the world.”[x]  Not surprisingly the origin of this distinction can be found in Kant and comes from his metaphysics, in which he argues there is a noumenal and phenomenal realm.[xi]  The noumenal realm is a realm of pure ideas and phenomenal world is a realm where our senses are engaged.  This logically gives rise to an epistemological analytic-synthetic distinction.

Leonard Peikoff states, “The theory of the analytic-synthetic dichotomy presents men with the following choice: If your statement is proved, it says nothing about that which exists; if it is about existents, it cannot be proved.”  Menger seems to disagree with at least the analytic (theoretical) side.  Menger seems to argue that theoretical laws of economics can be derived by just thinking about them.  Somehow these theoretical laws can tell us something empirical about economics.  Whether that is true or not, it is not consistent with Objectivist epistemology and it is not science.  The philosophy of science is a complex topic especially now days when Karl Popper is supposed to be the foremost philosopher of science and the Copenhagen Interpretation of Quantum Mechanics appears to undermine objectivity and even the law of identity.   However, even these deviations in the philosophy of science do not suggest that science can be divorced from empirical evidence.

 

Mises

Mises’ epistemology is described in his praxeology, which is supposed to be the study of human action.  The Action Axiom is the fundamental starting point of praxeology and it states “that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.”[xii]  According to Mises the principles (axioms) “are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts.”[xiii]  Mises continues, “A fashionable tendency in contemporary philosophy is to deny the existence of any a priori knowledge. All human knowledge, it is contended, is derived from experience.”[xiv]

According to Long, Rand objected to this idea of a priori knowledge in her marginalia of her copy of Human Action.  “There is no ‘a priori’ knowledge,” Rand insisted in the margins; “[t]here is no knowledge not derived from experience” (Rand 1995a, 113–14).”[xv]

Long argues that Rand’s definition of axioms is the same as Mises’ a priori.  Long admits that Rand ultimately bases her axioms on reality while Mises does not, but relies on Rand’s explanation of an axiom as “a proposition that defeats its opponents by the fact that they have to accept it and use it in the process of any attempt to deny it.”[xvi]

According to praxeology the attempt to deny the action axiom necessarily means that you are acting towards a purpose.  While it might be true that the person arguing against the action axiom is taking action toward a goal, it is not true that a person having a seizure is taking ‘conscious actions toward chosen goals’.  A person in an abusive relationship suffering from ‘battered person syndrome’ is not engage din conscious actions toward chosen goals.  Advocates of praxeology might argue that the abused person feels responsible for the abuse they are suffering and therefore they are working toward the goal of relieving their guilt.  Any impartial observer would say that the abused person’s actions are not working toward relieving their guilt or getting out the abusive relationship.  In economics it is at least an open question whether the idea of unintended consequences fits the action axiom.  In that case the result obtained was not those the person(s) was striving for.

Note, Rand says that an axiom requires a person accept it in any attempt to deny it.  Arguing that person having a seizure is not engaged in conscious actions toward chosen goals, does not mean that they have accepted the action axiom.

Another part of Mises’ action axiom is, human action is necessarily always rational.  According to Mises, “the term ‘rational action’ is therefore pleonastic and must be rejected as such.  When applied to the ultimate ends of action, the terms rational and irrational are inappropriate and meaningless.”[xvii]  Mises further states, “however one twists things, one will never succeed in formulating the notion of ‘irrational’ action whose ‘irrationality’ is not founded upon an arbitrary judgment of value.”[xviii]

This is a clear contradiction between Rand and Mises on an epistemological and ethical level.  This is not a minor disagreement, but goes to the very fundamentals of Mises’ praxeology and Objectivism.  Long however argues that this is not the case.  “Mises of course did not mean that people always pursue the most rationally defensible ends (for Mises there are no such things) or even that, given their ends, people always choose the most rationally defensible means to their ends. In part, what he meant was simply that human action is purposeful.” [xix]  According to Long, when Mises says people always act rational, he means “in a manner appropriate to their situation in the way of actually seeing it that is constitutive of their action. And this is a claim that Rand has no reason to reject”[xx]

Rand defines reason as, “reason integrates man’s perceptions by means of forming abstractions or conceptions, thus raising man’s knowledge from the perceptual level, which he shares with animals, to the conceptual level, which he alone can reach.  The method which reason employs in this process is logic—and logic is the art of non-contradictory identification.”[xxi]  Thus for Rand to act rationally is to act in accordance with reason.  This does not include all purposeful actions.  Hitler acted purposively to kill off the Jews, but this action cannot be considered rational according to Rand.

All the massaging of what Rand and Mises meant cannot reconcile these two radically different positions.  While English was Mises’ second language, his ideas about praxeology were fundamental and Mises never retracted his statements or reinterpreted them and neither did Rand.  An informal review of video lectures by Austrian Economists shows that they take Mises at his word.  It is very dangerous to reinterpret what people are saying.

Mises is clear that praxeology is a type of philosophical rationalism.

“[Praxeology’s] cognition is purely formal and general without reference to the material content and particular features of the actual case. Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori.”  Mises, Human Action, p. 32

“All theorems of economics are necessarily valid in every instance in which all the assumptions presupposed are given.” Mises, Human Action, p. 66

“Apart from the fact that these conclusions cannot be “tested” by historical or statistical means, there is no need to test them since their truth has already been established. Historical fact enters into these conclusions only by determining which branch of the theory is applicable in any particular case.”  Murray N. Rothbard https://mises.org/library/praxeology-methodology-austrian-economics.

Philosophical rationalism is defined as “the doctrine that reason alone is a source of knowledge and is independent of experience.”[xxii]  Philosophical rationalism is commonly associated with Descartes and Spinoza.  Here is what Rand said about rationalism.

[Philosophers came to be divided] into two camps: those who claimed that man obtains his knowledge of the world by deducing it exclusively from concepts, which come from inside his head and are not derived from the perception of physical facts (the Rationalists)—and those who claimed that man obtains his knowledge from experience, which was held to mean: by direct perception of immediate facts, with no recourse to concepts (the Empiricists).[xxiii]

Mises’ epistemology is not science.  At a minimum science always requires that concepts (hypothesis) are checked against reality and reality is ultimate determiner of what is true.  William Thomas, Director of Programs at The Atlas Society, argues that Mises was not a philosophical rationalist and shows that some of the concepts Mises uses, such as money, can only be derived from experience.  This is another attempt to massage the words of Mises.  What this shows is that Mises’ praxeology and his ideas about money result in a logical contradiction.  Rand’s response from Atlas Shrugged might be “contradictions do not exist. Whenever you think that you are facing a contradiction, check your premises. You will find that one of them is wrong.”

An interesting point is that Mises’ subjective theory of value is fundamental to his ideas on praxeology.  “Let us note that praxeology does not assume that a person’s choice of values or goals is wise or proper . . . “[xxiv]  “However one twists things, one will never succeed in formulating the notion of ‘irrational’ action whose ‘irrationality’ is not founded upon an arbitrary judgment of value.”[xxv]  As a result, it is impossible to separate the subjective theory of value from Mises praxeology.

George Reisman makes some important point about Mises’ contention that economics (science) should be value-free.

The notion that science and value should be divorced is utterly contradictory. It itself expresses a value judgment in its very utterance. And it is not only self-contradictory, but contradictory of the most cherished principles of science as well. Science itself is built on a foundation of values that all scientists are logically obliged to defend: values such as reason, observation, truth, honesty, integrity, and the freedom of inquiry. In the absence of such values, there could be no science. The leading historical illustration of the truth of these propositions is the case of Galileo and the moral outrage which all lovers of science and truth must feel against those who sought to silence him. [xxvi]

 

Hayek

F.A. Hayek’s epistemological ideas are contained in his ideas on “cultural evolution”.  Hayek was proud of his ideas on cultural evolution and considered them central to his ideas on economics.  “The theory (cultural evolution), of which Hayek himself was proud, is on all accounts central to his economic, social, and political project”[xxvii]

Cultural evolution is the idea that social institutions, such ethics, law, and economic systems are created by a non-rational evolutionary process.  “According to this theory, rules, norms and practices evolve in a process of natural selection operating at the level of the group. Thus, groups that happen to have more efficient rules and practices tend to grow, multiply, and ultimately displace other groups.”[xxviii]

Bruce Caldwell describes cultural evolution as:

The term “cultural evolution” refers to the evolution of a tradition of learnt rules, norms, ethical precepts, and practices, “especially those dealing with several property, honesty, contract, exchange, trade, competition, gain, and privacy” (Hayek 1988:12). This cultural heritage emerged through “a process of winnowing and sifting, directed by the differential advantages gained by groups from practices adopted for some unknown and perhaps purely accidental reasons” (Hayek 1979:155). The traditions and institutions that resulted allowed the development of a vast extended order, one capable of sustaining huge increases in population, an order that would have been considered fantastical to earlier humans existing under more primitive conditions.[xxix]

According to Hayek, no individual is capable of using reason to determine which social institution will end up with the best result beforehand or why a particular set of social norms does work well.  Linda C. Raeder in Humantis makes this point and also points out that David Hume’s ideas entered the mainstream libertarian movement through Hayek.

“The picture of man as a being who, thanks to his reason, can rise above the values of civilization, in order to judge it from the outside . . . is an illusion.”  For Hayek, morals, values, and reason are entirely natural phenomena, evolutionary adaptations which have enabled man to survive and flourish in his particular kind of world.

Perhaps no other area of Burke’s and Hayek’s thought is as congruent as their understanding of the role of reason in human affairs; their views are so close as to suggest that Hayek’s thought on this issue is merely an elaboration, although quite an extensive one, of Burke’s theme. Hayek developed several of Burke’s most crucial insights: 1) the priority of social experience (or “tradition”) over reason; 2) the notion that inherited social institutions embody a “superindividual wisdom”  which transcends that available to the conscious reasoning mind; and 3) the impotence of reason to ‘design’ a viable social order.[xxx]

David Kelley elaborates on this point:

Hayek, by contrast, is a critic of what he calls ―constructive rationalism. His concept of rationalism is somewhat idiosyncratic, and is not equivalent to Rand‘s conception of reason. Nevertheless, it leads him to claim that ―no universally valid system of ethics can ever be known to us, which is obviously not consistent with her view. For Hayek, moral rules have a status lying ―between instinct and reason.

Is Hayek anti-reason?  It’s hard to say, however arguing that reason is fundamentally limited (as opposed to making a mistake) in understanding reality without any real evidence is an attack on reason itself.  Like Hume, Hayek cannot say reason is completely impotent, because what would be the point of writing.  Writing presumes some ability to reason.

Hayek’s case for freedom is based on the limits of reason.  In order for Hayek’s cultural evolution to work, you cannot substitute the decisions of a single leader (or small group) for those of the masses.  To do so undermines the evolutionary process.  As David Kelley explains:

This case for market freedom is essentially negative. Hayek seems to think that if socialist planning were possible, socialism might be the morally ideal system. But the inescapable ignorance of would-be planners excludes that possibility: ―If there were omniscient men, if we could know not only all that affects the attainment of our present wishes but also our future wants and desires, there would be little case for liberty.

Hayek does not think that reason can tell you how or why social institutions, including the law and ethics work.  This is totally inconsistent Rand’s ideas and undermines the very idea of science.

Interestingly, Hayek’s position on ‘the subjective theory or value’ is a fundamental part of his epistemology, just like Mises’.  His cultural evolution requires that we cannot formulate a rational ethics because that would undermine the evolutionary process.  As a result, every ethical system is subjective and therefore so is every law.  The most we can do is put our faith in the process and blindly hope our ethical and legal systems are better than they were in the past because of the evolutionary process of cultural evolution.

 

Economics vs. Philosophy

It is clear that Austrian Economics’ epistemological positions are incompatible with Objectivism and science more generally.  However it is entirely possible that despite this, Austrian Economics has achieved great things in economics.  For instance, David Kelley has shown that John Locke made a number of epistemological errors with respect to perception, in his book The Evidence of the Senses, and yet Locke’s ideas on Natural Rights are still profound and fundamentally sound.

In this case however, when Objectivists and Austrians are talking they are not even speaking the same language.  For instance, when Rand says she is for capitalism, she means “a social system based on the recognition of individual rights, including property rights”[xxxi]  By individual rights, Rand means a moral claim based on man’s nature and discovered using reason.  Austrians do not think that a rational ethics is possible.  As a result to Austrians, capitalism is an economic system that has low levels of governmental interference, based on some utilitarian criteria.  (You cannot live without an ethical system, so most Austrians default to utilitarianism)

When Objectivists talk about property rights, they mean an ethical claim to take action with respect to something, such as land.  This ethical claim is based on a rational, natural rights system.  When Austrians talk about “property rights”, they do not really mean a “right” in any way except a purely arbitrary legal claim.  Austrians argument for “property rights” is a purely utilitarian or historical argument (Hayek) that can be fudged to meet the utilitarian goal or historical precedence.

These differences result in real differences in economic policy.  Menger, for instance, advocated 1) public works constructed by the state such as roads, railways and canals, 2) government established agricultural and vocational training institutions, 3) state intervention to stop clearing of forests on private property in the mountains of Austria when this clearing had serious and bad effects on agriculture, and 4) government intervention to stop child labour.[xxxii]           Hayek was in favor social security, some sort of government provided health care, emergency government assistance for natural disasters, and suggested that manipulating the money supply might be used to alleviate recessions/depressions.[xxxiii]

Even Ludwig Von Mises waffles on economic policies that are inconsistent with capitalism as an Objectivist would define it.

There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of a meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule.[xxxiv]

Note that Mises justification for fire regulations is based on utilitarianism, which Rand condemns as “’the greatest good for the greatest number’ is one of the most vicious slogans ever foisted on humanity.”[xxxv]

The Austrians sound a lot more like modern conservatives than capitalists.  When it is a government policy that Austrians are in favor of, they are quite happy to override peoples’ individual rights.  They just want these programs to be run more efficiently.  Austrians make a number of errors in their analysis of the economy also, however there is not time in this paper to take on these issues.

 

Conclusion

Austrians often argue that if you do not support the Austrian school of economics then which school (economists) do your support then, as if this was an election or a smorgasbord with a limited number of choice.  Science is a creative endeavor and we are not limited only the existing choices.

New Growth Economics’ central point is that wealth is created by the human mind.  This should be exciting to Objectivists, because that sounds very much like Ayn Rand.  It also points to an objective basis for economics.  Every human needs to acquire and consume a minimum number of calories or they die.[xxxvi]  This provides an objective standard that is very similar to Rand’s standard for her ethics.  It also ties economics to biology, particularly human biology, just like Rand tied her ethics to biology.

Inventions are the result of applying man’s reasoning power to the objective problems of life.  The way we become wealthier is by increasing our level of technology.  I explain this in more detail in my book, Source of Economic Growth; in my Savvy Street article, entitled ‘Inventing at the Intersection of Biology and Economics’; and in my 2015 & 2016 talks at Atlas Summit.

All species are biologically designed to spend most of their existence on the edge of starvation.  The fact that human beings, starting around 1800, were the first species to permanently escape this condition, needs a profound answer based on man’s unique nature, his ability to reason.

[i] Richard C.B. Johnsson, The Journal of Ayn Rand Studies Vol.6 no. 2 Spring 2005 pages 317-335.

Subjectivism, Intricism, and Apriorism,:Rand Among the Austrians, Penn State University Press, http://www.jstor.org/stable/pdf/41560286.pdf.

[ii] Roderick D. Long, “Praxeology: Who Needs It JARS, http://praxeology.net/praxwho-x.pdf

[iii] Edward W. Younkins, The Journal of Ayn Rand Studies Vol.6 no. 2 Spring 2005 pages 337-374, Menger, Mises, Rand, and Beyond, Centenary Symposium, Part II Ayn Rand Among the Austrians, http://quebecoislibre.org/younkins28.pdf

[iv] David Kelley, Rand versus Hayek on Abstraction,  Symposium: Rand and Hayek on Cognition and Trade, Reason Papers Vol. 33, https://reasonpapers.com/pdf/33/rp_33_1.pdf.

[v] Edward W. Younkins, The Road to Objective Economics: Hayek Takes a Wrong Turnhttp://rebirthofreason.com/Articles/Younkins/The_Road_to_Objective_Economics_Hayek_Takes_a_Wrong_Turn.shtml

[vi]https://mises.org/sites/default/files/Investigations%20into%20the%20Method%20of%20the%20Social%20Sciences_5.pdf ,  INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS

[vii]https://mises.org/sites/default/files/Investigations%20into%20the%20Method%20of%20the%20Social%20Sciences_5.pdf ,  INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS, Introduction, p. xi.

[viii]https://mises.org/sites/default/files/Investigations%20into%20the%20Method%20of%20the%20Social%20Sciences_5.pdf ,  INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS, Introduction, p. xiii, Lawrence H. White.

[ix] Edward W. Younkins, The Journal of Ayn Rand Studies Vol.6 no. 2 Spring 2005 pages 337-374, Menger, Mises, Rand, and Beyond, Centenary Symposium, Part II Ayn Rand Among the Austrians, http://quebecoislibre.org/younkins28.pdf

[x] Wikipedia, Analytic–Synthetic Distinction, Accessed  October 21, 2016, https://en.wikipedia.org/wiki/Analytic%E2%80%93synthetic_distinction.

[xi] Kant’s noumenal/phenomenal distinction is restatement of Plato, in which there is a realm of forms (ideas) and the imperfect world we live in.

[xii] Murray N. Rothbard, “Praxeology: The Methodology of Austrian Economics”, https://mises.org/library/praxeology-methodology-austrian-economics

[xiii] Ludwig Von Mises, Human Action, p. 32, https://mises.org/sites/default/files/Human%20Action_3.pdf

[xiv] Ludwig Von Mises, Human Action, p. 32, https://mises.org/sites/default/files/Human%20Action_3.pdf

[xv] Roderick D. Long, “Praxeology: Who Needs It JARS, p. 300, http://praxeology.net/praxwho-x.pdf

[xvi] Galt’s Speech,, For the New Intellectual, 155, http://aynrandlexicon.com/lexicon/axioms.html

[xvii] Ludwig Von Mises, Human Action, 1.I.32, http://www.econlib.org/library/Mises/HmA/msHmA1.html

[xviii] Ludwig Von Mises, Human Action, The Scholar’s Edition, p. 104.& https://mises.org/library/what-do-austrians-mean-rational ,  What Do Austrians Mean by “Rational”?, MISES DAILY ARTICLES, Accessed 6/9/16.

[xix] Roderick D. Long, “Praxeology: Who Needs It JARS, p. 309, http://praxeology.net/praxwho-x.pdf

[xx] Roderick D. Long, “Praxeology: Who Needs It JARS, p. 310, http://praxeology.net/praxwho-x.pdf

[xxi] “Faith and Force: The Destroyers of the Modern World,” Philosophy: Who Needs It, 62, http://aynrandlexicon.com/lexicon/reason.html.

[xxii] Dictionary.com, http://www.dictionary.com/browse/rationalism, accessed October 22, 2016.

[xxiii] “For the New Intellectual,” For the New Intellectual, 30, http://aynrandlexicon.com/lexicon/rationalism_vs_empiricism.html.

[xxiv] Murray N. Rothbard, “Praxeology: The Methodology of Austrian Economics”, https://mises.org/library/praxeology-methodology-austrian-economics

[xxv] Ludwig Von Mises, Human Action, The Scholar’s Edition, p. 104.& https://mises.org/library/what-do-austrians-mean-rational ,  What Do Austrians Mean by “Rational”?, MISES DAILY ARTICLES, Accessed 6/9/16.

[xxvi] George Reisman, Capitalism: A Treatise on Economics, p. 36, http://www.capitalism.net/Capitalism/CAPITALISM_Internet.pdf.

[xxvii] Erik Angner, The History of Hayek’s Theory of Cultural Evolution, p. 3, http://institutoamagi.org/download/Angner-Erik-The-history-of-Hayeks-Theory-of-cultural-Evolution.pdf.

[xxviii] Erik Angner, The History of Hayek’s Theory of Cultural Evolution, p. 3, http://institutoamagi.org/download/Angner-Erik-The-history-of-Hayeks-Theory-of-cultural-Evolution.pdf.

[xxix] Bruce Caldwell , The Emergence of Hayek’s Ideas on Cultural Evolution, p. 6, http://www.gmu.edu/depts/rae/archives/VOL13_1_2000/caldwell.pdf.

[xxx] Linda C. Raeder, The Liberalism/Conservatism Of Edmund Burke and F. A. Hayek: A Critical Comparison, HUMANITAS, Volume X, No. 1, 1997. National Humanities Institute,  http://www.nhinet.org/raeder.htm.

[xxxi] What Is Capitalism?” Capitalism: The Unknown Ideal, 19, http://aynrandlexicon.com/lexicon/capitalism.html.

[xxxii] Social Democracy For The 21st Century: A Realist Alternative To The Modern Left, http://socialdemocracy21stcentury.blogspot.mx/2012/08/rescuing-menger-from-austrians.html, accessed October 23, 2016.

[xxxiii] Nicholas  Wapshott,  Hayek on health care, social safety nets and public housing (quoting from Road to Serfdom) https://sites.google.com/site/wapshottkeyneshayek/hayek-on-health-care-social-safety-nets-and-public-housing  accessed October 23, 2016.

[xxxiv] Ludwig Von Mises, Human Action, The Scholar’s Edition, p. 741, https://mises.org/sites/default/files/Human%20Action_3.pdf.

[xxxv] Textbook of Americanism,” The Ayn Rand Column, 90, http://aynrandlexicon.com/lexicon/utilitarianism.html.

[xxxvi] Calories make a convenient catch all for all human requirements including air, water, micronutrients etc.

May 10, 2017 Posted by | -Economics, bioeconomics, philosophy | , , , , , , | Leave a comment

More Proof ENVIRONMENTALISTS are EVIL

There is a general attitude among most people that environmentalism is about making the world a better place for humans.  The reality is that environmentalists want to kill off most of the human population, which means they are advocating mass murder on a scale that makes Stalin, Mao, Hitler, and Genghis Khan look like choir boys.  In addition, they are quite happy to lie about their agenda and the supposed science they are doing.  Here are some quotes by environmentalist that show that they are EVIL.
”My three goals would be to reduce human population to about 100 million worldwide, destroy the industrial infrastructure and see wilderness, with its full complement of species, returning throughout the world.”
David Foreman,
co-founder of Earth First!environmental-nazi

”A total population of 250-300 million people, a 95% decline from present levels, would be ideal.”
Ted Turner,
Founder of CNN and major UN donor

”The prospect of cheap fusion energy is the worst thing that could happen to the planet.”
Jeremy Rifkin,
Greenhouse Crisis Foundation

”Giving society cheap, abundant energy would be the equivalent of giving an idiot child a machine gun.”
Paul Ehrlich,
Professor of Population Studies,
Author: “Population Bomb”, “Ecoscience”

”The big threat to the planet is people: there are too many, doing too well economically and burning too much oil.”
Sir James Lovelock,
BBC Interview

”We need to get some broad based support, to capture the public’s imagination… So we have to offer up scary scenarios, make simplified, dramatic statements and make little mention of any doubts… Each of us has to decide what the right balance is between being effective and being honest.”
Stephen Schneider,
Stanford Professor of Climatology,
Lead author of many IPCC reports

”Unless we announce disasters no one will listen.”
Sir John Houghton,
First chairman of the IPCC

”It doesn’t matter what is true, it only matters what people believe is true.”
Paul Watson,
Co-founder of Greenpeace

”Childbearing should be a punishable crime against society, unless the parents hold a government license. All potential parents should be required to use contraceptive chemicals, the government issuing antidotes to citizens chosen for childbearing.”
David Brower,
First Executive Director of the Sierra Club

”We’ve got to ride this global warming issue. Even if the theory of global warming is wrong, we will be doing the right thing in terms of economic and environmental policy.”
Timothy Wirth,
President of the UN Foundation

”No matter if the science of global warming is all phony… climate change provides the greatest opportunity to bring about justice and equality in the world.”
Christine Stewart,
former Canadian Minister of the Environment

”The only way to get our society to truly change is to frighten people with the possibility of a catastrophe.”
Emeritus Professor Daniel Botkin

”Isn’t the only hope for the planet that the industrialized civilizations collapse? Isn’t it our responsibility to bring that about?”
Maurice Strong,
Founder of the UN Environmental Program

”A massive campaign must be launched to de-develop the United States. De-Development means bringing our economic system into line with the realities of ecology and the world resource situation.”
Paul Ehrlich,
Professor of Population Studies,
Author: “Population Bomb”, “Ecoscience”

”If I were reincarnated I would wish to return to earth as a killer virus to lower human population levels.”
Prince Phillip, Duke of Edinburgh,
husband of Queen Elizabeth II,
Patron of the Patron of the World Wildlife Foundation

”The only hope for the world is to make sure there is not another United States. We can’t let other countries have the same number of cars, the amount of industrialization we have in the US. We have to stop these third World countries right where they are.”
Michael Oppenheimer
Environmental Defense Fund

”Global Sustainability requires the deliberate quest of poverty, reduced resource consumption and set levels of mortality control.”
Professor Maurice King

”Current lifestyles and consumption patterns of the affluent middle class – involving high meat intake, use of fossil fuels, appliances, air-conditioning, and suburban housing – are not sustainable.”
Maurice Strong,
Rio Earth Summit

”Complex technology of any sort is an assault on the human dignity. It would be little short of disastrous for us to discover a source of clean, cheap, abundant energy, because of what we might do with it.”
Amory Lovins,
Rocky Mountain Institute

”I suspect that eradicating small pox was wrong. it played an important part in balancing ecosystems.”
John Davis,
Editor of Earth First! Journal

 

January 12, 2017 Posted by | philosophy | , , , , , , , | 6 Comments

Ayn Rand’s Ethics: Natural Rights and Self-Ownership

There seems to be a lot of confusion on the issues of whether Rand’s ethics is (or is consistent with) a natural right ethics and the idea of self-ownership.  These issues seem to bring up a lot of hidden assumptions and emotions.

 

Natural Rights:  Any logical analysis of whether Objectivist ethics can be classified as a natural rights ethical system has to start with some definitions.  The word “rights” here means that this term is only concerned with the ethical interaction between people.  Usually, this is even further limited to the ethical basis of governments or political systems.  Objectivist ethics covers more than just natural rights.

Natural means that the ethical system is based on nature or reality.  Logically, a “rights” system is either natural or unnatural there are no other choices.  That is basic logic and is called the law of the excluded middle.  (If you comment that there is some third choice, expect a harsh reply explaining that you do not understand basic logic.  If you double down on this irrationality, expect an even harsher reply).

The question then boils down to whether Objectivist ethics is based in nature (reality) or whether it has a non-natural basis and the only non-natural basis would have to be a supra-natural or completely arbitrary basis.

It is clear to anyone who has studied Rand’s ethics that it is based in nature, specifically the nature of man.  I have written on this extensively, see here.  It is clear that Rand’s ethics is in the broad category of Natural Rights.

If you want to argue that Rand’s formulation of rights is different than the Founding Fathers or Locke’s or other natural rights philosophies, that is fine, but that is not the question.  Do not comment that Harry Binswanger or Leonard Peikoff or someone else disagrees.  Objectivism is about reason, not about ordained leaders.  Arguing from authority, without providing a rational argument, is dishonorable to Objectism, Rand, and turns aynrandstampObjectivism into a religion.

 

Self-Ownership:  Once again we start with a definition.  Self-ownership is defined as having ethical and legal control over one’s body and mind.  If you disagree with this definition then you need to provide you own and you need to explain why you are not using the standard definition, which has been around for hundreds of years.

Based on the definition above it is clear that Rand’s ethical system is consistent with self-ownership.  If you argue it is not, then you do know what a definition is or alternatively what Rand said on the subject (expect harsh replies if you argue this irrational position).

Now you might argue that “self-ownership” is not axiomatic (or a fundamental observation) of Rand’s ethics and you would be correct.  Technically, it is not an axiom in Locke’s formulation of natural rights either.

January 6, 2017 Posted by | philosophy | , , , | 4 Comments

FEE: Ayn Rand Predicts Its Intellectual Bankruptcy

FEE or the Foundation for Economic Education has proven to be intellectually bankrupt.  For instance, their position against patents and Intellectual property shows that they do not understand property rights or rights generally.  They also revere the work of the philosopher David Hume, who argued “cause and effect” does not exist, induction is just correlation, and that a rational ethics is not possible (the so-called is-ought problem).  This means that Hume undermined reason, science and ethics.  Despite this FEE thinks Hume is a great guy.  FEE also promotes Matt Ridley who denigrates human achievement in science and engineering, calling Nobel Laurites in science and inventors frauds, for more click here.

Interestingly Ayn Rand predicted this.  The founder of FEE, Leonard Read, sent Rand a prospectus for his plan to create FEE.  Rand told Read that his premises were flawed.

The mistake is in the very name of the organization. You call it “The Foundation for Economic Education.” You state that economic education is to be your sole purpose. You imply that the cause of the world’s troubles lies solely in people’s ignorance of economics and that the way to cure the world is to teach it the proper economic knowledge. This is not true–therefore your program will not work. You cannot hope to effect a cure by starting with a wrong diagnosis. (The whole letter is reproduced below)

 

According to FEE reason and capitalism are incompatible, which is why they promote the works of Mises, Hayek, Menger, and Rothbard.  You cannot defend capitalism successfully while attacking reason and a rational ethics.  These ideas are incompatible with Natural Rights, which is what created econgrowth.smallthe United States and capitalism.  FEE is worse than the socialists, because they undermine the very basis of freedom.

Hat tip to Christopher Budden for finding this letter.

To Leonard Read

February 28, 1946

 

Dear Leonard,

 

I have read the prospectus of your proposed organization very carefully. No, you have not given our case away. But you have not presented it completely. You have covered only one minor, secondary aspect of it. The partial presentation of a great issue, featuring a secondary aspect, will amount in practice to giving the issue away. Therefore I don’t think that your organization will serve your purpose—if this prospectus represents its program.

 

The mistake is in the very name of the organization. You call it “The Foundation for Economic Education.” You state that economic education is to be your sole purpose. You imply that the cause of the world’s troubles lies solely in people’s ignorance of economics and that the way to cure the world is to teach it the proper economic knowledge. This is not true–therefore your program will not work. You cannot hope to effect a cure by starting with a wrong diagnosis.

 

The root of the whole modern disaster is philosophical and moral. People are not embracing collectivism because they have accepted bad economics. They are accepting bad economics because they have embraced collectivism. You cannot reverse cause and effect. And you cannot destroy the cause by lighting the effect. That is as futile as trying to eliminate the symptoms of a disease without attacking its germs.

 

Marxist (collectivist) economics have been blasted, refuted and discredited quite thoroughly. Capitalist (or individualist) economics have never been refuted. Yet people go right on accepting Marxism. If you look into the matter closely, you will see that most people know in a vague, uneasy way, that Marxist economics are screwy. Yet this does not stop them from advocating the same Marxist economics. Why?

 

The reason is that economics have the same place in relation to the whole of a society’s life as economic problems have in the life of a single individual. A man does not exist merely in order to earn a living; he earns a living in order to exist. His economic activities are the means to an end; the kind of life he wants to lead, the kind of purpose he wants to achieve with the money he earns determines what work he chooses to do and whether he chooses to work at all. A man completely devoid of purpose (whether it be ambition, career, family or anything) stops functioning in the economic sense. That is when he turns into a bum in the gutter. Economic activity per se has never been anybody’s end or motive power. And don’t think that any kind of law of self-preservation would work here—that a man would want to produce merely in order to eat. He won’t. For self-preservation to assert itself, there must be some reason for the self to wish to be preserved. Whatever a man has accepted, consciously or unconsciously, through routine or through choice as the purpose of his life—that will determine his economic activity.

 

And the same holds true of society and of men’s convictions about the proper economics of society. That which society accepts as its purpose and ideal (or to be exact, that which men think society should accept as its purpose and ideal) determines the kind of economics men will advocate and attempt to practice; since economics are only the means to an end.

 

When the social goal chosen is by its very nature impossible and unworkable (such as collectivism), it is useless to point out to people that the means they’ve chosen to achieve it are unworkable. Such means go with such a goal; there are no others. You cannot make men abandon the means until you have persuaded them to abandon the goal.

 

Now the choice of a personal purpose or of a social ideal is a matter of philosophy and moral theory. That is why, if one wishes to cure a dying world, one has to start with moral and philosophical principles. Nothing less will do.

 

The moral and social ideal preached by everybody today (and by the conservatives louder than all) is the ideal of collectivism. Men are told that man exists only in order to serve others; that the “common good” is man’s only proper aim in life and his sole justification for existence; that man is his brother’s keeper; that everybody owes everybody a living; that everybody is responsible for everybody’s welfare; and that the poor are the primary concern of society, its holy shrine, the god whom all must serve.

 

This is the moral premise accepted by most people today, of all classes, all stages of education and all political parties.

 

How are you going to sell capitalist economics to go with that? How are you going to get them to accept as moral, proper and desirable such conceptions as personal ambition, economic competition, the profit motive and private property?

 

It can`t be done. Their moral ideal has defined these conceptions as evil and immoral. So modern men are consistent about it. Our “common-gooder conservatives” are not. It’s one or the other.

 

Here is the dilemma in which the public finds itself when listening to our conservatives: the public is told, in net effect, that collectivism is a noble, desirable ideal, but collectivist economics are impractical.

 

In order to have a practical economy, that of capitalism, we must resign ourselves to an immoral society, that of individualism. This amounts to saying: you have a choice, you can be moral or you can be practical, but you can`t be both. Given such a choice, men will always choose the moral, because it is preposterous to expect them to choose that which, by the speaker`s own assertion, is evil. Men may be mistaken about what they think is good (and how mistaken they’ve been! And what lying they indulge in to deceive themselves about it!), but they will not accept evil with full, conscious intent and by definition.

 

Nor will men accept the idea that a moral ideal is impossible, that it cannot be achieved in practice. (And they are right about that, too—it’s a thoroughly *unnatural* proposition.) Therefore it is absolutely useless to tell them that Marxist economics are impractical, so long as you`re also telling them in the same breath that Marxism is noble. They will merely say: “Well, if that’s the ideal, and it cannot be achieved through the economics of capitalism, to hell with the economics of capitalism! If Marxist economics do not work, we’ll find something that works. We must find it. So we’ll go on experimenting. At least Marxism tries in the right direction, while capitalism doesn’t even try to achieve the collectivist ideal. Capitalist economics do not even try to offer us a solution.” How often have you heard this last one?

 

Now the most futile and ludicrous of all stands to take on this question is the one attempted at present by most of our conservatives. It may be called the “mixed philosophy.” It’s a parallel to the theory of a “mixed economy,” just as untenable, silly and disastrous. It’s the idea that capitalism can be morally justified on a collectivist premise and defended on the grounds of the “common good.” It goes like this: “Dear pinks, our objective, like yours, is the welfare of the poor, more general wealth, and a higher standard of living for everybody—so please let us capitalists function, because the capitalist system will achieve all these objectives for you. It is in fact the only system that can achieve them.”

 

This last statement is true and has been proved and demonstrated in history, and yet it has not and will not win converts to the capitalist system. Because the above argument is self-contradictory. It is not the purpose of the capitalist system to cater to the welfare of the poor; it is not the purpose of a capitalist enterpriser to spread social benefits; an industrialist does not operate a factory for the purpose of providing jobs for his workers. *A capitalist system could not function on such a premise.*

 

The economic benefits which the whole society, including the poor, does receive from capitalism come about strictly as secondary consequences, (which is the only way any social result can come about), not as primary goals. The primary goal which makes the system work is the personal, private, individual profit motive. When that motive is declared to be immoral, the whole system becomes immoral, and the motor of the system stops dead.

 

It’s useless to lie about the capitalist`s real and proper motive. The awful smell of hypocrisy that accompanies such a “mixed philosophy” is so obvious and so strong that it has done more to destroy capitalism than any Marxist theory ever could. It has killed all respect for capitalism. It has, without any further analysis, simply at first glance and first whiff, made capitalism appear thoroughly and totally phony.

 

The effect is precisely the same as that produced by Willkie, Dewey and all the rest of the “me-too,” “I’ll-get-it-for-you-wholesale” Republicans. Do not underestimate the common sense of the “common man” and do not blame him for ignorance. He could not, perhaps, analyze what was wrong with Willkie or Dewey—but he knew they were phonies. He cannot untangle the philosophical contradiction of defending capitalism through the “common good” —but he knows it’s a phony.

 

Is there anything more offensive and preposterous than to tell an unemployed worker that the millionaire who is throwing a champagne party on his yacht is doing so only for his, the worker’s benefit, and for the common good of society? Can you really blame the worker if he then goes out and demands that the yacht be confiscated? Is it economic ignorance that makes him do so?

 

The more propaganda our conservatives spread for capitalist economics while at the same time preaching collectivism morally and philosophically, the more nails they’ll drive into capitalism’s coffin. That is why I do not believe that an economic education alone is of any value. That is also why you will find it difficult to arouse people`s interest in the subject. I believe you are conscious of this difficulty; your prospectus shows anxiety on the scope of “creating a greater desire for economic understanding.” You will not be able to create it.

 

The great mistake here is in assuming that economics is a science which can be isolated from moral, philosophical and political principles and considered as a subject in itself, without relation to them. *It can’t be done.*

 

The best example of that is Von Mises’ “Omnipotent Government.” That is precisely what he attempted to do, in a very objective, conscientious, scholarly way. And he failed dismally, even though his economic facts and conclusions were for the most part unimpeachable. He failed to present a convincing case because at the crucial points, where his economics came to touch upon moral issues (as all economics must), he went into thin air, into contradictions, into nonsense. He did prove, all right, collectivist economics don’t work. And he failed to convert a single collectivist.

 

The organization desperately needed at present is one for EDUCATION IN INDIVIDUALISM, in every aspect of it: philosophical, moral, political, economic—in that order. (That is the actual order in which men’s thinking proceeds on these subjects.) As part of such a program, an education in sound economics would be essential and valuable. Without it, it is a wasted effort.

 

I suspect that you might have been misled by the fact that you have heard businessmen accept the most preposterous economic fallacies; and you concluded that once the fallacies are exposed, the trouble is cured. Do not be deceived by superficial symptoms; the trouble goes much deeper than that; the trouble is not in the nonsense they accept, *but in what makes them accept it*.

 

I have written all this at such great length because I consider an organization created by you as potentially of tremendous importance. I consider you the only man in my acquaintance who has the capacity to translate abstract ideas into practical action and to become a great executor of great principles. Therefore I would hate to see you fail in what could be a great undertaking, by attempting it on the wrong premise and in the wrong direction.

 

I am particularly worried by the fact that you intend to start on such a grand scale (a $3,000,000 budget). If you do not lay the proper foundation first, a three-million-dollar skyscraper will collapse on you more surely and more disastrously than a little bungalow. You will find yourself widely, publicly known and tagged as another ineffectual outfit like the N.A.M. or the Industrial Conference board; your name will become that of “another one of those conservatives,” instead of a new, powerful figure that would attract national attention by representing a real cause, and gain a following through courage, integrity and an unanswerable case, which is what I want you to become. You will find yourself caught in the ruins and forced to go on by the responsibility of so expensive an organization. The end of such a process is—Virgil Jordan.

 

It would be so much better and so much more practical to start in a smaller way and grow by a natural process rather than a forced one. You do not have at present the men and the educational material to use on a $3,000,000 scale. It would be better to gather your specialists and train them first, rather than release on the nation a flood of unprepared, “mixed philosophy” propagandists.

 

This letter is my contribution to your cause. If it helps you to analyze the situation, that is the best help I can offer you. If you agree with my analysis, I can continue to help you in this way, in the matter of philosophical direction. I know you have plenty of economists to call on for your work, but no people capable of undertaking the philosophical-moral part of it. Your main problem is to find them. And I will help you long-distance, to the extent that I can.

 

I shall be most interested in your answer to this.

 

As to your proposed radio program, I don’t think it’s a good plan. Personally, in spite of my interest in the subject, I’m afraid I would not listen to such a program. I think it would bore me. Five men talking on the same subject from the same general viewpoint would be more monotonous than just one man making a connected speech. The fact that the five men disagree on details would only add confusion, dilute and diffuse the subject and make the whole of the broadcast inconclusive and probably pointless.

 

If you decide to use Anthem in The Freeman, let me know. I’d like to have you do it, only I’d want to edit the story a little first; it’s old and there are some passages which I think are bad writing and which I’d like to straighten out.

 

Ayn Rand

January 1, 2017 Posted by | -Economics, -Philosophy, Intellectual Capitalism, Patents, philosophy | , , , , , | Leave a comment

Philosophical Foundations of Carl Menger

There has been a lot of interest in the philosophical foundations of Carl Menger.  Many Objectivist writers have emphasized Menger’s Aristotelian training, while other have suggested that Menger’s ideas align with Kant and Popper.  Most scholars agree that Franz Brentano, who was an Austrian Philosopher, had a big influence on Menger.

Carl Menger was an Aristotelian although not a pure one. He read Aristotle and studied the works of Franz Brentano (1838-1917), a contemporary of Menger at the University of Vienna, who taught Aristotelian philosophy there. Brentano has been considered to be the leading Austrian philosopher of the late nineteenth century.

In order to obtain a better understanding of Menger’s philosophy, it is important to understand Franz Brentano’s philosophical ideas.  Brentano’s work focused mainly on the philosophy of psychology.  Sigmund Freud was his student and highly influenced by Brentano.[1]

Brentano argued that philosophy should be scientifically rigorous, as rigorous as the natural sciences.[2]  However, Marx and many others Mengerhave said they were doing science.

He emphasized that all our knowledge should be based on direct experience. He did not hold, however, that this experience needs to be made from a third-person point of view, and thus opposes what has become a standard of empirical science nowadays. Brentano rather argued a form of introspectionism: doing psychology from an empirical standpoint means for him to describe what one directly experiences in inner perception, from a first-person point of view.[3]

This passage starts strong with knowledge based on direct experience, but then shifts making the observer part of the experiment and then it redefines empirical to mean “inner perception”.  This inner perception is the means to absolute truths according to Brentano.

Brentano argues, “that they (mental phenomena) are only perceived in inner consciousness, while in the case of physical phenomena only external perception is possible” (Psychology, 91).  According to Brentano, the former of these two forms of perception provides an unmistakable evidence for what is true.

Brentano says that it (inner perception) is the only kind of perception in a strict sense.[4]

According to Webster’s Dictionary, science is “knowledge about or study of the natural world based on facts learned through experiments and observation.”  By observation, Webster’s does not mean inner perception.  While Einstein was famous for his “thought experiments”, they were a way of conceptualizing a problem in physics.  They were not actual experiments nor did they substitute for actual experiments.  Brentano is not doing or proposing to do science, despite his statement.

Brentano is widely regarded as Aristotelian and studied Aristotle extensively.  He also was fascinated with the Scholastics and Descartes, but disliked Kant and the German idealists.[5]  Brentano and Aristotle appear to agree on Universals, which Peikoff explained as:

Universals, he (Aristotle) holds, are merely aspects of existing entities, isolated in thought by a process of selective attention; they have no existence apart from particulars. Reality is comprised, not of Platonic abstractions, but of concrete, individual entities, each with a definite nature, each obeying the laws inherent in its nature. Aristotle’s universe is the universe of science. The physical world, in his view, is not a shadowy projection controlled by a divine dimension, but an autonomous, self-sufficient realm. It is an orderly, intelligible, natural realm, open to the mind of man.[6]

Brentano’s rejection of Platonic abstractions may have accounted for his distaste for Kant.

Despite the appearance of agreement with Aristotle on metaphysics, Brentano’s position in epistemology significantly differs from Aristotle.  Brentano rejects that our senses are how we initially obtain knowledge about the world.

In fact he maintained that external, sensory perception could not tell us anything about the de facto existence of the perceived world, which could simply be illusion. However, we can be absolutely sure of our internal perception. When I hear a tone, I cannot be completely sure that there is a tone in the real world, but I am absolutely certain that I do hear. This awareness, of the fact that I hear, is called internal perception.

External perception, sensory perception, can only yield hypotheses about the perceived world, but not truth. Hence he and many of his pupils (in particular Carl Stumpf and Edmund Husserl) thought that the natural sciences could only yield hypotheses and never universal, absolute truths as in pure logic or mathematics.

Franz Brentano maintained that our senses were invalid and could not tell us anything about the world. [7]

This is the exact opposite of Aristotle.

[H]e (Aristotle) thinks that we can and do have knowledge, so that somehow we begin in sense perception and build up to an understanding of the necessary and invariant features of the world. This is the knowledge featured in genuine science (epistêmê).

Brentano and Aristotle are completely opposite on one of the most fundamental points of epistemology.  Because this issue is foundational, it will affect everything else the two men have to say on science and philosophy.  I think it is a mistake to argue that Brentano was Aristotelian.

With this background this paper will examine Menger’s epistemological positions.  Menger lays out his epistemology in a book entitled Investigations into the Method of Social Sciences.[8]  Lawrence H. White in the introduction to the book, explains.

Fortunately, Menger draws and even emphasizes a suitable distinction between the “realist-empirical orientation of theoretical research” and the “exact” orientation (p. 59). The search for so-called, ”exact laws” alone is more appropriately considered the task of purely theoretical research in economics. We can make sense of “exact laws” as theoretical propositions which (necessarily) take an “if-then” form: if conditions A and B hold, then condition C must also obtain. Menger rightly insists (pp. 70, 215) that realist-empirical generalizations (e.g., A and B are usually accompanied by C) can by their nature never attain the strictness that necessarily characterizes logical implications. The two sorts of “laws” are on different epistemological planes. So without too much dissent from Menger’s thought we may divide economic theory from economic history where he divided strict theory from what he considered an empirical sort of theory. What is empirical is really historical, and this accounts for its different status from what is deductive.[9]

Lawrence H. White goes on to explain:

But this is not because, like some economists, he (Menger) sees empiricism or positivism or falsificationism as the only proper method for both social science and natural science. Instead he argues (p. 59 n. 18) that both the search for empirical regularities and the formulation of non-empirical, non-falsifiable (“exact”) theories are methods common to both economics and such natural science fields as chemistry. In viewing theoretical research in every field as having a non-empirical proposition at its core, Menger’s position bears some resemblance to that of modern philosophers of science. [10]

Menger is arguing that science involves a theoretical side that is impervious to empirical data.  This sounds a lot like Brentano’s idea of “inner perception”, which “provides an unmistakable evidence for what is true.”  Menger says there is a second side of economics (science) which is empirical and never provides “exact” true theories in economics or science generally.  This is very similar to the explanation of Brentano’s ideas on empirical evidence: “External perception, sensory perception, can only yield hypotheses about the perceived world, but not truth.”[11]

Brentano’s and Menger’s ideas match up fairly well.  Neither of their positions fit Aristotle’s epistemological ideas.  Both of them have misappropriated the word science.  In science reality is always the final judge.  There is nothing that man knows that did not start with our perceptions and nothing in science that is “exactly true”, i.e., independent of empirical observation.

While Bentano and Menger appear to be opposed to Kant, their epistemological positions are a lot closer to Kant than Aristotle.  Menger’s theoretical-empirical split fits Kant’s noumenal and phenomenal realm when translated to epistemology, which results in the analytic-synthetic distinction.  “Analytic propositions are true by virtue of their meaning, while synthetic propositions are true by how their meaning relates to the world.”[12]

Menger and Brentano’s empirical side is a precursor to Karl Popper’s mistaken ideas on science.  Popper appeared to accept David Hume’s skepticism of induction and his response is the same as Menger’s and Brentano’s, which is that empirical evidence never gives us the truth, just closer approximations.  This is not the philosophy of science and is based in-part on an incorrect understanding of what knowledge is.  Knowledge does not mean being omniscient or having “perfect knowledge”.  It is impossible to gain knowledge by just thinking about things (Without reference to the reality).

Menger’s ideas are inconsistent with Objectivism.  They undermine science and economics.

 

 

[1] http://plato.stanford.edu/entries/brentano/#method,  Stanford Encyclopedia of Philosophy, Franz Brentano (First published Wed Dec 4, 2002; substantive revision Tue Aug 26, 2014)

[2] http://plato.stanford.edu/entries/brentano/#method,  Stanford Encyclopedia of Philosophy, Franz Brentano (First published Wed Dec 4, 2002; substantive revision Tue Aug 26, 2014)

[3] http://plato.stanford.edu/entries/brentano/#method,  Stanford Encyclopedia of Philosophy, Franz Brentano (First published Wed Dec 4, 2002; substantive revision Tue Aug 26, 2014)

[4] http://plato.stanford.edu/entries/brentano/#method,  Stanford Encyclopedia of Philosophy Franz Brentano (First published Wed Dec 4, 2002; substantive revision Tue Aug 26, 2014)

[5] http://plato.stanford.edu/entries/brentano/#method,  Stanford Encyclopedia of Philosophy, Franz Brentano (First published Wed Dec 4, 2002; substantive revision Tue Aug 26, 2014)

[6] Leonard Peikoff, The Ominous Parallels, 29, http://aynrandlexicon.com/lexicon/aristotle.html.

[7] https://en.wikipedia.org/wiki/Franz_Brentano, accessed November 11, 2015, Wikipedia, Franz Brentano

[8]https://mises.org/sites/default/files/Investigations%20into%20the%20Method%20of%20the%20Social%20Sciences_5.pdf ,  INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS

[9]https://mises.org/sites/default/files/Investigations%20into%20the%20Method%20of%20the%20Social%20Sciences_5.pdf ,  INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS, Introduction, p. xi.

[10]https://mises.org/sites/default/files/Investigations%20into%20the%20Method%20of%20the%20Social%20Sciences_5.pdf ,  INVESTIGATIONS INTO THE METHOD OF THE SOCIAL SCIENCES WITH SPECIAL REFERENCE TO ECONOMICS, Introduction, p. xiii, Lawrence H. White.

[11] https://en.wikipedia.org/wiki/Franz_Brentano, accessed November 11, 2015, Wikipedia, Franz Brentano

[12] Wikipedia, Analytic–Synthetic Distinction, Accessed  October 21, 2016, https://en.wikipedia.org/wiki/Analytic%E2%80%93synthetic_distinction.

December 6, 2016 Posted by | -Economics, -History, philosophy | , , , , , , | 1 Comment

Austrian Economics and Aristotle

Austrian Economics is always claiming a strong connection to the Philosophy of Aristotle.  The Austrians main connection to Aristotle is the idea of apriorism.  In philosophy apriorism is defined as the philosophical doctrine that there may be genuine knowledge independent of experience.  This apriorism shows up particularly in Menger and Mises.  In Mises case it is clearly related to his ideas on praxeology.  In Menger’s case this comes from his epistemology in which he states there is an exact theoretical side of science and an inexact empirical side of science.  The question is whether the Austrians’ claim to following Aristotle’s ideas or being neo-Aristotelian has any validity.

One of the most defining points of Aristotle’s philosophy was his disagreement with Plato’s “Theory of Forms.”  Plato argued that we cannot trust our senses and the world they perceive is at best a vague, shadowy version of the real world.  For more see Plato’s Allegory of the Cave.  According to Plato if you see a red ball there is a perfect version of red and a perfect version of a ball in the “real world” and we are seeing some sort of distorted versions of these.  Plato’s real world is often represented as being up in the sky, sort of a heaven.  Since we cannot trust our senses, Plato’s answer is that we must just think about what has to be true and that will lead us to the truth.  This is known as rationalism.

Aristotle rejected Plato’s ideas and said we could trust our senses.  In order to verify (and integrate) that our conclusions from our senses are valid Aristotle created rules of thought or logic.  It is important to remember that to Aristotle these conclusions were always based on (tested against) the real world evidence.  In other words, logic was useful in reasoning about the world, but the ultimate proof was reality.  This makes him diametrically opposed to Plato’s rationalism.

There is a famous painting entitled The School of Athens by Raphael in which Plato is pointing to the sky and Aristotle has his hand out pointing to the world before us that illustrates the differences between Aristotle and Plato.  Aristotle’s epistemology is based in this world, where Plato thinks that the real world is somewhere else.

How did Austrians ever get the idea that apriorism is consistent with Aristotle?  A search of Aristotle on the Internet Encyclopedia of Philosophy of Philosophy and the Stanford Encyclopedia of Philosophy does not show any mentions of apriorism or apriori.  An informal search of academic papers and books finds only a couple of mentions of Aristotle and apriorism, except by Austrians (Austrian/Objectivists).  Both argue that apriorism is inconsistent with Aristotle’s philosophy.  One book says that Aristotle the empiricist exposes the vanity of armchair natural scientists and it is clear that Aristotle lies on the side of empiricism not apriorism.[1]

This idea that apriorism is consistent with Aristotle appears to come from Aristotle’s concept of axioms.  Aristotle had one axiom, the principle of non-contradiction according the Stanford Encyclopedia of Philosophy.  The explanation (justification) of this axiom sounds similar to the Austrians apriorism.

“Before embarking on this study of substance, however, Aristotle goes on in Book Γ to argue that first philosophy, the most general of the sciences, must also address the most fundamental principles—the common axioms—that are used in all reasoning. Thus, first philosophy must also concern itself with the principle of non-contradiction (PNC): the principle that “the same attribute cannot at the same time belong and not belong to the same subject and in the same respect” (1005b19). This, Aristotle says, is the most certain of all principles, and it is not just a hypothesis. It cannot, however, be proved, since it is employed, implicitly, in all proofs, no matter what the subject matter. It is a first principle, and hence is not derived from anything more basic.

What, then, can the science of first philosophy say about the PNC? It cannot offer a proof of the PNC, since the PNC is presupposed by any proof one might offer—any purported proof of the PNC would therefore be circular.”[2]

 

This axiom was expanded to three axioms, the law of identity, the law of the non-contradiction, and the law of the excluded middle.  It seems to me that the other two laws follow from the law of identity.

This sounds similar to how Austrians justify their apriorism, however the Austrians extend the idea to state:

(a) that the fundamental axioms and premises of economics are absolutely true;

(b) that the theorems and conclusions deduced by the laws of logic from these postulates are therefore absolutely true;

(c) that there is consequently no need for empirical “testing,” either of the premises or the conclusions; and

(d) that the deduced theorems could not be tested even if it were desirable.[3]

While this was written by Murray Rothbard it is the logical conclusion of Menger’s “theoretical science.”  These ideas are diametrically opposed to those of Aristotle.  Austrian Economics is not Aristotelian, not science and not consistent with Objectivism.

econgrowth.smallI have pointed to an economic theory that is consistent with Aristotle, science, and Objectivism.  Part of my insight came from  “New Growth Economics”, whose  central point is that wealth is created by the human mind.  This should be exciting to Objectivists, because that sounds very much like Ayn Rand.  It also points to an objective basis for economics.  Every human needs to acquire and consume a minimum number of calories or they die.  This provides an objective standard that is very similar to Rand’s standard for her ethics.  It also ties economics to biology, particularly human biology, just like Rand tied her ethics to biology.

Inventions are the result of applying man’s reasoning power to the objective problems of life.  The way we become wealthier is by increasing our level of technology.  I explain this in more detail in my book, Source of Economic Growth; in my Savvy Street article, entitled ‘Inventing at the Intersection of Biology and Economics’; and in my 2015 & 2016 talks at Atlas Summit.

All species are biologically designed to spend most of their existence on the edge of starvation.  The fact that human beings, starting around 1800, were the first species to permanently escape this condition, needs a profound answer based on man’s unique nature, his ability to reason.

 

[1] Walter E. Wehrle, The Myth of Aristotle’s Development and the Betrayal of Metaphysics

[2] Aristotle’s Metaphysics http://plato.stanford.edu/entries/aristotle-metaphysics/#FundPrinAxio

[3] Murray N. Rothbard,” In Defense of “Extreme Apriorism”, https://bastiat.mises.org/sites/default/files/Defense%20of%20Extreme%20Apriorism,%20In_6.pdf, accessed November 25, 2016.

November 26, 2016 Posted by | -Economics, bioeconomics, Blog, philosophy | , , , , , | 1 Comment

Austrian Economics and Objectivism Panel Session

Will Thomas and I gave a talk at Atlas Summit 2016 on Austrian Economics.  The talk focused on epistemological and ethical positions of Carl Menger, Ludwig Von Mises, and F.A. Hayek.  A number of people asked for the slides and related materials.  Below I provide links to nine posts on blog that investigate some of the issues discussed in the talk in more detail.  Below that are the slides from the talk.

 

Articles

Is Carl Menger a Socialist?  https://hallingblog.com/2016/06/25/is-carl-menger-a-socialist/

 

Why Austrian Economics Subjectivity is Wrong and Condemns Economics to Being a Pseudo-Science   https://hallingblog.com/2016/06/13/why-austrian-economics-subjectivity-is-wrong-and-condemns-economics-to-being-a-pseudo-science/

 

Can “Dignity” Explain the Industrial Revolution: A Review of Deirdre McCloskey’s Economic Ideas  https://hallingblog.com/2016/05/22/can-dignity-explain-the-industrial-revolution-a-review-of-deirdre-mccloskeys-economic-ideas/

 

Carl Menger: Austrian Economics vs. Objectivism  https://hallingblog.com/2016/03/21/carl-menger-austrian-economics-vs-objectivism/

 

Carl Menger: Principles of Economics  https://hallingblog.com/2015/11/16/carl-menger-principles-of-economics/

 

Capital in Disequilibrium: The Austrians’ Answer to New Growth Theory  https://hallingblog.com/2015/09/09/capital-in-disequilibrium-the-austrians-answer-to-new-growth-theory/

 

Praxeology: An Intellectual Train Wreck  https://hallingblog.com/2015/09/08/praxeology-an-intellectual-train-wreck/

 

Hayek: Friend or Foe of Reason, Liberty and Capitalism?  https://hallingblog.com/2015/03/04/hayek-friend-or-foe-of-reason-liberty-and-capitalism/

 

The Austrian Business Cycle Debunked  https://hallingblog.com/2015/02/15/the-austrian-business-cycle-debunked/

 

The Irrational Foundations of Austrian Economics  https://hallingblog.com/2015/02/12/the-irrational-foundations-of-austrian-economics/

 

 

Slides

Slide1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide11

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide15

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide17

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide21

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide26

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide27

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide28

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Slide32

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide33

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide34

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slide36

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

end

 

 

 

July 21, 2016 Posted by | -Economics, philosophy, Uncategorized | , , , , , | Leave a comment