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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

Intellectual Capitalism – My New Book on Economics

Intellectual Capitalism: An Objective Scientific Approach to Economics

This book is about the science of economics that occurs by asking the question:

What is the Source of Real per Capita Increases in Wealth?

and following the scientific evidence to its logical conclusion.  The book is divided into three parts.  The first part explains the economic science that results from answering the question above.  The second part is a copy of my book the Source of Economic Growth, which answers the questions of book-coverwhat causes real per capita increases in wealth and what caused the Industrial Revolution.  The third part is a series of essays on various topics in economics.

 

This book challenges many of the assumptions of free market economists that argue that economics is a social science.  It is first school of economics that is consistent with Objectivism and the founding principles of the United States of America

March 2, 2017 Posted by | News | , , , , | 2 Comments

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

What Your Position on Patents Reveals About You

It is surprising how much your position on patents reveals about your philosophical premises.  We need to first understand five fundamental facts about patents.

 

  1. The wealthiest countries in the world have the strongest patent systems.

This fact should be readily apparent to anyone who has looked into this subject.  There have been a number of studies on point and the correlation is at least as strong as the economic freedom index.

 

  1. Almost all new technologies are developed by the countries with the strongest patent systems.

This fact should be readily apparent to anyone who has looked into this subject.  This obvious fact has been verified by studies.

 

  1. The Industrial Revolution started in the countries (Great Britain and the US) that had the first functioning patent systems.[1]

Again this fact should apparent to anyone who has looked into this subject.

 

  1. Ayn Rand called patents (and copyrights) the most fundamental of all property rights.aynrandstamp

 

  1. Patents are enshrined in the US Constitution, Article 1, Section 8, Clause 8.

Patents and copyrights are the only rights mentioned in the original Constitution.  Note the Bill of Rights was not part of the original Constitution.[2]

 

Conclusions

Here are some straight forward conclusions we can draw from these facts.

 

  1. When a person is against patent rights for inventors, they are not an Objectivist, they are a poser.

 

  1. When someone argues that patents inhibit economic growth, they have an almost insurmountable burden of proof to overcome.

 

  1. When someone argues that patents retard the growth of new technologies, their position is not just wrong, it shows the person is irrational.

 

  1. When a person is against patents they are not pro-Constitution (a supporter of the Constitution), they are a poser.

Many libertarians and Austrians want to act like they support the US Constitution, but attack the property rights of inventors (patents).  You cannot have it both ways.

 

Here are some other conclusions that we can draw that are not quite as straight forward.

 

  1. People who attack patents have rejected Natural Rights.

Patents are built on Natural Rights (as is the founding of the US).  Under Natural Rights theory anyone who creates something has a property right in their creation.  Note that the libertarians and Austrians (economics) who argue against patents have all rejected Natural Rights and adopted Utilitarianism as their political ethics.  The socialists who argue against patents have adopted Altruism as their political ethics.

 

  1. People who attack patents believe reason is limited.

The Libertarians that attack patents are all enthralled with the philosophers of the Scottish Enlightenment, like Hume, Mill, Burke[3], and Hayek[4].  David Hume was an extreme skeptic that said humans could not even show we existed.  Hume argued that cause and effect did not exist.  He also argued induction and therefore science were nonsense.  He attacked Natural Rights and argued that a rational ethics was impossible.  (Hume supporters will argue he was just skeptical of these things, but the ferocity with which he attacks them shows that this was not just an interesting academic exercise on the part of Hume).  All of these philosophers undermine reason.  Many like Kant say they are for reason, but reason is limited.  That is a contradiction, but beyond this post.  Of course it is clear that the socialists also have rejected reason.

 

 

 

[1] The first patent system was Venice in the 1400s and Venice was one of the wealthiest and most technologically advanced cities in the world at the time.

[2] The Writ of Habeas Corpus is not a Right, it is a procedural guarantee.

[3] Burke is sometime considered part of the Scottish Enlightenment and sometimes not.  In this case he should be included.

[4] Intellectually Hayek fits the Scottish Enlightenment to a tee even though he is not normally included in this group.

September 16, 2016 Posted by | -Economics, News, Patents | , , , , | 3 Comments

Austrian Economics: Not Just Wrong

Numerous Objectivists and well-meaning advocates of freedom are surprised when I show them that Austrian Economics is not a pro-reason, pro-freedom, intellectual movement.  When I show them what the Austrians are saying, they make all sorts of excuses for the Austrians, including that the Austrians do not mean what they are saying, that these errors do not affect the excellent economic work the Austrians have done, and that these problems are limited to a small minority group of Austrians.  It is time that we take a good look at what Austrian Economics says and examine whether we want to lend our good name to this movement.  Below I discuss some of the common talking points.

 

1) Patents

The Austrians have been at the center of the anti-patent movement.  They argue that patents hurt the economy and slow down technological progress.  The wealthiest countries in the world have the strongest patent systems; almost all new technologies are developed by the countries with the strongest patent systems, the Industrial Revolution started in countries with the first and strongest patent systems and those countries with the strongest patents systems correlate well with their economic freedom index.  If a socialist ignored this amount of overwhelming macroeconomic evidence, we would vilify them.

humeHowever it is worse than just ignoring the evidence  Matt Ridley, author of the Rational Optimist and darling of the Austrians, is an example of how the Austrians are willing to lie to win their points on patents.  Ridley makes the claim that technological progress does not require patents and then cites a number of technologies that were never patented.  The book (Rational Optimist) states that a number of inventions were never patented, p. 264, such as automatic transmission, Bakelite, ballpoint pens, cellophane, cyclotrons, gyrocompasses, jet engines, magnetic recording, power steering, safety razors and zippers.  Five minutes of competent research shows that all these technologies are subject to numerous patents.  The case of Bakelite shows that Ridley is not just incompetent, but a liar.  A simple internet search shows that chemist Leo Hendrik Baekeland (1863-1944) invented and first patented the synthetic resin that we know as Bakelite in 1907.[1]  I have made this point publicly and I have heard no apologies or retractions from Ridley or the Austrians.  The Austrians do not even appear bothered by this blatant lie, they continue to repeat the essence of the lie whenever they get a chance.

If Al Gore did this we would ridicule him.  But when it comes to the Austrians, we stand aside and make excuses for them.  It is worse than that, because the Austrians are part of a machine to manufacture lies about patents faster than they can be refuted.  See Adam Mossoff’s paper on point http://www.ipwatchdog.com/2015/11/19/repetition-of-make-them-true/id=63302/.  Note, that this is exactly the technique AGW environmental Nazis use.

Liars should not be trusted at all and it turns out the Matt Ridley has doubled down on his lies.  In an article in the Wall Street Journal he states:

                “Simultaneous discovery and invention mean that both patents and Nobel Prizes are fundamentally unfair things. And indeed, it is rare for a Nobel Prize not to leave in its wake a train of bitterly disappointed individuals with very good cause to be bitterly disappointed.” http://www.wsj.com/articles/the-myth-of-basic-science-1445613954

What Ridley is saying is that Nobel Prize winners and inventors are frauds.  He states that “technological evolution has a momentum of its own.”  Ridley is saying that scientists and inventors do not create anything, society does.  Ridley is not just a liar- he is EVIL.  Where did Ridley get these ideas?  They are straight from F.A. Hayek’s “Cultural Evolution.”  Ridley is not alone or anomalous among the Austrians.  Reason Magazine, the Cato Institute, Foundation fo Economic Education, and the Wall Street Journal have all joined in to propagate the Austrian lies to promote their anti-patent agenda.

Diedre McCloskey is another Austrian Economist that denigrates the work of inventors, engineers and scientists, suggesting that technological progress is on auto-pilot.  These attacks are exactly the same anti-achievement, anti-reason attacks you get from the left.  They sound like James Taggart from Atlas Shrugged:

’He didn’t invent smelting and chemistry and air compression.  He couldn’t have invented HIS metal but for thousands and thousands of other people. HIS Metal! Why does he think it’s his? Why does he think it’s his invention?  Everybody uses the work of everybody else.  Nobody ever invents anything.’ (Jim Taggart) She (Cheryl) said, puzzled, ‘But the iron ore and all those other things were there all the time.  Why didn’t anybody else make that Metal, but Mr. Rearden did?’”

This Austrian position is a repackaging of Hayek’s Cultural Evolution.  This vicious attack on human greatness is not a minor flaw or error.

 

2) The Austrians use reason and evidence to support their positions?

Mises: The Austrians are clear that praxeology and their economic theories are not based on empirical evidence.

                “[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.

You can find Austrians (Mises) saying this all over and supporting it.  If the Austrians (Mises branch) are using evidence to reach their conclusions, then they have to admit praxeology is wrong.  If praxeology is right, then you have to admit that they are not using empirical evidence.  There is no middle ground here.

 

Hayek: These Austrians are clear that reason is impotent.

                “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. The theory, of which Hayek himself was proud, is on all accounts central to his economic, social, and political project.” (Emphasis Added) http://institutoamagi.org/download/Angner-Erik-The-history-of-Hayeks-Theory-of-cultural-Evolution.pdf

“Burke and Hayek, then, shared a common enemy as well as a common understanding: Enlightenment rationalism. Perhaps the most characteristic attribute of Enlightenment thought was its cavalier dismissal of ‘irrational’ tradition as mere superstition and prejudice.” (Emphasis added) http://www.nhinet.org/raeder.htm

According to Hayek, reason was not the driving force behind cultural evolution, but rather co-evolved in the course of this process.  (Emphasis Added)  http://www.bath.ac.uk/economics/staff/horst-feldmann/feldmann-2005-hayek-theory-of-cultural-evolution.pdf

“Hayek tells us that that rationality (he does not explicitly distinguish between either “”reason”” and “”rationality”” or “”reasonable”” and “”rational””) is “”no more than some degree of coherence and consistency in a person’s actions, some lasting influence of knowledge or insight which, once acquired, will affect his action at a later date and in different circumstances.”” Hayek also maintains that behavior guided by habit, custom, and tradition is rational in the sense that such behavior is not contrary to intelligent action.”  https://home.isi.org/hayek-role-reason-human-affairs#sthash.1zV4WFR9.dpuf

“Hayek’s argument is primarily directed against certain epistemological views that he associates with the philosophy of Rene Descartes and the Enlightenment, views he labels “”constructivist rationalism.”” For Hayek, the constructivist mentality is characterized by 1) belief in a socially autonomous human reason capable of designing civilization and culture; 2) a radical rejection of tradition and conventional behavior; 3) a tendency toward animistic or anthropomorphic thinking; and 4) the demand for rational justification of values.”  https://home.isi.org/hayek-role-reason-human-affairs#sthash.1zV4WFR9.dpuf

“This tradition is characterized, moreover, by an evolutionary perspective that conceives social institutions and practices—law, morals, money, the market mechanism, habits, language—not as products of conscious construction or enlightened invention but of a suprarational trial-and-error process of cultural evolution.”  https://home.isi.org/hayek-role-reason-human-affairs#sthash.1zV4WFR9.dpuf

“However, Hayek seemingly came to doubt there could be any such thing as properly constructed rule of law.” http://plato.stanford.edu/entries/friedrich-hayek/#LawEcoNic

“In his philosophy, Hayek relegates reason to a minor role. He argues for a modest perspective of people’s reasoning capabilities. He contends that reason is passive and that it is a social product.” http://www.rationalargumentator.com/index/blog/2015/08/rand-hayek-comparison/

Hayek’s writings on cultural evolution are long winded and therefore do not make for clear quotes.  This is not surprising when people are arguing against reason they are often long winded, such as Kant. When the Supreme Court writes a long opinion you can be sure that they are not using reason and attempting to bury the irrationalism of their argument in lots of words.

It is clear from the quotes above and related papers (most by Hayek supporters) that Hayek thinks that reason cannot be used (is impotent) to understand any social institutions.  At best Hayek is saying that reason is useful in the limited sphere of hard sciences.  If so this is just a variation on Kant.

If the Austrians (Hayek) are using reason as the Austrian apologists argue, then they have to abandon the whole idea of cultural evolution.  If CE is right, then the Austrians are rejecting reason.  Hayek was clear that Cultural Evolution (CE) underlies all his ideas in economics.  If CE is wrong then Hayek’s whole case for freedom falls as does his ideas on spontaneous order.  His ideas on spontaneous order require Natural Rights, which Hayek rejects.

We have to take people’s ideas seriously.  The Austrian fans are always making excuses for why Hayek, Mises, Menger, etc. don’t mean what they are saying.  When we are reviewing socialist ideas, such as Keynes, we hold Keynes not only responsible for what he said, but the logical conclusions of what he said.

It is a logical contradiction to use words to be against reason and therefore most people are polite or generous and assume that the Austrians do not mean what they are saying.  This is fine in casual conversation, but when people are writing about their ideas you have to take them at their word.

Mises and Hayek are both rejecting reason from different points of view.  This is not surprising because the intellectual tradition of Austrians is David Hume.  Hume is perhaps the worst anti-reason philosopher in the last 300 years.  Hume and Adam Smith were great friends.  Hayek is a straightforward extension of the Hume- Smith line of irrationalism.  Menger and Mises follow a slightly different path of Hume to Franz Brentano, who elevates emotions to the level of epistemological absolutes.  Hume and Smith did the same thing.

Apologists for the Austrians always suggest that I am making huge leaps without evidence.  If I said that Keynes is the product of the Kant-Marx line no one would suggest that I am making outrageous leaps.  Intellectuals are responsible for not only exactly what they say, but also the logical conclusions of what they say.  Just because Austrians spout that they were for free markets does not mean that we can hold them to a different standard than the socialists.

 

3) Are the Austrians Really for Free Markets?

Menger pushed the following ideas: (1) public works constructed by the state such as roads, railways and canals. (2) government established agricultural and vocational training institutions (Menger 1994: 123). (3) government subsidies to certain sectors. (4) 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. (5) government intervention to stop child labour (Menger 1994: 129), according to this article http://socialdemocracy21stcentury.blogspot.mx/2012/08/rescuing-menger-from-austrians.html.

Hayek was willing to make all sorts of compromises with the idea of free markets, because he was committed to Cultural Evolution, not reason and not Natural Rights.  For instance, he was for the government providing everyone with a “Basic Income” according to this article http://www.libertarianism.org/columns/why-did-hayek-support-basic-income.

In this quote Hayek argues for mandatory insurance.  “Once it becomes the recognized duty of the public to provide for the extreme needs of old age, unemployment, sickness, etc., irrespective of whether the individuals could and ought to have made provision themselves, and particularly once health is assured to such an extent that it is apt to reduce individuals efforts, it seems an obvious corollary to compel them to ensure or otherwise provide against those common hazards of life.”  The Constitution of Liberty (1960)

Mises supports fire regulations according to this article http://socialdemocracy21stcentury.blogspot.mx/2010/10/was-mises-socialist-why-mises-refutes.html.

The claim of Austrians that their founders are for a pure free market is absolute nonsense.

 

4) What Are the Supposed Great Achievements of the Austrians?

I am constantly told that the Austrian Economists made great contributions to economics, whatever their other faults.  Other than Menger’s Marginal Utility, Hayek’s flawed ideas on Spontaneous Order, and perhaps Mises’ insight that War does not create prosperity, I am unaware of any other great economic contributions by the Austrians to economics.  I have asked numerous Austrians to name the great economic contributions of the Austrians and they are never able to actually name any.

What the Austrians were good at was criticizing socialism and Marxism.  The ability to criticize is not the same thing as the ability to put forward good economic theories.

Here are a number of errors that Austrians make in economics.  They claim that fractional reserve banking creates money out of thin air.  This position is absurd and makes Austrians look like flat Earthers.  Here is an article on point https://hallingblog.com/2012/11/13/understanding-the-coming-financial-collapse-central-banking-fraction-reserve-banking-and-legal-tender-laws/.  The Austrian Business Cycle Theory does not fit the empirical facts and even some Austrians have admitted so in academic papers.  Of course this does not matter because empirical evidence is irrelevant (Mises) or we cannot use reason to analyze our own world (Hayek).  The Austrians obsession with the Fed (Central Banks) as the cause of all recessions results in them ignoring other important facts in the economy and creates a mystical obsession with Central Banks.  The Austrians position on Property Rights is not only wrong, it undermines capitalism and the law.

 

5) Ayn Rand on the Austrians.

Rothbard: Rothbard is the father of the anarcho-capitalism movement.  Rand described it as “a naive floating abstraction”.

Hayek: Ayn Rand in her marginalia launched a nasty attack on Friedrich von Hayek calling him, among other things, a “God damn fool” and a “vicious bastard.” (Mayhew, ed., Ayn Rand’s Marginalia, pp. 149 and 151.)

 Mises:  Rand called him the greatest living economist.  However, Branden appeared to speak for himself and Ayn Rand says:

“We must take the gravest exception, for example, to the general doctrine of praxeology; to the assertion that all value-judgments are outside the province of reason, that a scientific ethics is impossible; to the disavowal of the concept of inalienable rights; and to many of the psychological view expressed.”  (Branden 1963b, 34) The Journal of Ayn Rand Sutidies Vol. 6 No. 2.

According to Branden, Rand’s comments in the margin of Human Action were highly critical of Mises works.  Branden, The Passion of Ayn Rand.

What Rand admired about Mises were his criticisms of socialism and Marxism.

Rand’s overall evaluation of the Austrians is damning.  Rand was initially attracted to some of the Austrians.  This only proves she was human.  Thus, it is not surprising that many Objectivists are initially attracted to the Austrians, as was I.   .

What is interesting is that most Austrians understand that Objectivism is incompatible with Austrian Economics, but many Objectivists have not figured this out.

 

 

6) Conclusion

 

Austrian Economics is not just wrong, it is actively working against Freedom, Capitalism, Science, and Reason.  The case against Austrian Economics is overwhelming.

  • -Austrian Economics rejects and denigrates the intellectual achievements of inventors, engineers, and scientist.
  • -Austrian Economics rejects and actively undermines reason and science.  (The modern Austrians are happy to lie to promote their positions.)
  • -Austrians are not defenders of the United States Constitution.
  • -Austrians undermine property rights, the law, and Natural Rights.
  • -Austrian Economics actively undermines the idea of a rational Ethics.
  • -The great Austrian Economists were not defenders of free markets and capitalism.  They were quite willing to allow government interference in the market, if it fit their goals.
  • -Austrian Economics pushes a number of economics theories that are laughably wrong.

 

If we hold the Austrians to the same standards we do for the socialists, we see that they are essentially the same.

[1] http://bakelitecollector.com/bakelite-history

September 12, 2016 Posted by | -Economics, Patents | , , | 1 Comment

Milton Friedman: Advocate for Freedom?

I have been criticized for pointing out that Austrian Economics, particularly Menger, Mises, and Hayek, is not consistent with reason, science, or Natural Rights and therefore not consistent with Capitalism.  In this article I am going to apply the same standards to Milton Friedman, who is also often cited as a great advocate of freedom and capitalism.

Milton Friedman won the Nobel Prize in economics and is not part of the Austrian School of Economics.  He is often classified as a monetarist or part of the Chicago School of Economics, I think the latter is more accurate.  Ayn Rand was no fan of Friedman.  She criticized his belief that economics must be morally neutral.   In this video, Rand states that Friedman is not an advocate for Capitalism and an enemy of Objectivism.Friedman

 

Epistemology

Milton Friedman laid out his ideas on epistemology in the essay “The Methodology of Positive Economics” (1953).  Some experts claim that the essay was a big influence on the Chicago School of Economics.  In this article he essentially argues for a pragmatic approach to epistemology, which boils down to if a model (theory) is predictive it is correct.

Friedman’s methodology, which appears to justify the eclectic and pragmatic view that economists should use any model that appears to “work” regardless of how absurd or unreasonable its assumptions might appear, has been deployed in service of a rigid theoretical orthodoxy.

Philosophy of Economics

Friedman argues that economic models are generally judged by the reasonableness of the underlying assumptions/propositions, however he thinks this is incorrect.

In so far as a theory can be said to have “assumptions” at all, and in so far as their “realism” can be judged independently of the validity of predictions, the relation between the significance of a theory and the “realism” of its “assumptions” is almost the opposite of that suggested by the view under criticism. Truly important and significant hypotheses will be found to have “assumptions” that are wildly inaccurate descriptive representations of reality, and, in general, the more significant the theory, the more unrealistic the assumptions (in this sense).

The Methodology of Positive Economics (1953)

It is easy to show Friedman’s pragmatism is mistaken.  Copernican Heliocentrism with its epicycles of the planets was highly predictive, but it was not science.  In science/engineering this is known as a heuristic model.  Heuristic models are often created by curve fitting the observed data.  They predict how a system will work within very narrow circumstance, but do not explain the underlying physics (causes).  As a result, heuristic models cannot be extended or built upon, when people attempt to do so they lead to false conclusions.

Friedman’s epistemology boils down to pragmatic “pure empiricism”, which means he accepts the evidence of his senses, but denies logic and concepts.  Friedman disconnects assumptions/propositions from the results of the model, which is an attack on logic.  An analogy would be that it might make no sense that doing a rain dance causes it to rain, but our empirical evidence says that it is predictive of whether it rains in the next couple of days so it is a good theory.  As a result, we are supposed to ignore that there is no causal relationship between the rain and the rain dance.

Friedman’s epistemology is anti-reason.  In one case Friedman argued that we need freedom because of this epistemological uncertainty.  “I have no right to coerce someone else, because I cannot be sure that I am right and he is wrong.”[1]  This is common position of libertarians and Austrians – lack of knowledge requires freedom.  This position not only undercuts all of science, it removes reason as the foundation of ethics, political philosophy, and law.  It is also unadulterated nonsense.

 

Science

Friedman is not proposing to do science, he is proposing to collect data that never leads to knowledge.  Science is based both on reality and reason/logic.  Friedman wants to ignore the reason/logic side of science.  While Friedman has different reasons for not proposing to do science, he is otherwise consistent with the Menger, Mises, and Hayek in rejecting science in economics.  Ultimately, Friedman’s ideas on science are just a rehash of Karl Popper’s misguided concept of science.

 

Ethics

Friedman is consistent with the Austrians in suggesting that economics must be value free – that is devoid of ethics.  Friedman argues in his paper The Methodology of Positive Economics, that for a discipline to be a science it must be free of moral judgments.  However, Friedman appears to making a finer distinction of where ethics fits in science and particularly in economics.

Positive economics is in principle independent of any particular ethical position or normative judgments. As Keynes says, it deals with “what is,” not with “what ought to be.”

The Methodology of Positive Economics

First, science requires a profound set of ethics that are unique in history.  This ethics requires reporting the data accurately,[2] follow the data to its logical conclusion, and never ascribing non-natural causes to the observations.

Second, imagine taking Friedman’s point of view in the science of medicine.  Medical doctors are not there to deal with ought to be, just to observe what is.  Are doctors biased in their observations, because they bring ethics into their science?

The question of ethics in economics disappears if the correct fundamental questions of economics iare defined and therefore the definition of economics is properly defined.  The most fundamental question of economics is: What is the source of real per capita increase in wealth?  This leads to the correct definition of economics which is the study of how man obtains the things he needs to live.  This puts the focus on human well-being, just like medicine.

Economists who pretend that they are not injecting ethics into economics are really pushing utilitarianism, often summed up as ‘the greatest good for the greatest number’.  This always leads to disaster.  In the short term the greatest good for the greatest number always weighs in favor of taking the property of those who create and giving it to those who do not, for instance.  In fact, many philosophers who push utilitarianism also push socialism.  The counter is usually that stealing people’s property is not good in the long run, but this argument rarely wins over most people.

I searched if Friedman ever mentions Natural Rights or Locke and never found anything.  This is not surprising as he explicitly rejects ethics, at least in economics, and implicitly accepts utilitarianism.

Friedman is inconsistent with the founding principles of the United States, inconsistent with Objectivism, and not an advocate of Capitalism, which is the economic system that occurs when a country protects people’s Natural Rights.

Friedman, in my opinion, is highly influence by the philosophers of the Scottish Enlightenment, which would not be surprising as Adam Smith is in this group and also Jeremy Bentham, one of the big proponents of utilitarianism. [3] The Scottish Enlightenment philosophers were also highly skeptical of the efficacy of reason.

 

Source of Economic Growth

Friedman did not write much about what causes real per capita increases in wealth.  I assume he accepted the standard neo-classical idea that increases in capital were the cause of economic growth.  This does not fit the empirical evidence.  Friedman’s lack of interest in the question is damning.  Although, he did focus his attention on what inhibits economic growth.

Friedman spends almost no time discussing inventions or inventors.  Inventions are the only way to increase real per capita incomes and define the upper bound on the standard of living in any given period of time.  The fact that Friedman ignores them shows incredibly poor judgment.

 

Industrial Revolution

The Industrial Revolution was the first time in history that real per capita incomes started to grow consistently.  Friedman’s only comments about the most important event in the history of economics was that the idea of robber barons was a myth.  This is not what I would expect of a scientist, however Friedman was clear that he was not doing science.

 

Conclusion

Milton Friedman hardly fares any better than the Austrian Economists.  Personally, I think his writing is much better than the Austrians and he is more likeable, which seemed to be part of his success in spreading his ideas.

Friedman’s ideas are inconsistent with reason, science, or Natural Rights and therefore not consistent with Capitalism.  He is not proposing to do science and undermines reason with his pragmatism.  However, unlike the Austrians, Milton Friedman’s supporters are not actively undermining property rights in his name.

 

 

 

[1] https://mises.org/library/friedman-intolerance-critique

[2] Something the so-called scientists studying Anthropomorphic Global Warming ignore.

[3] http://www.forbes.com/sites/realspin/2014/07/31/milton-friedmans-property-rights-legacy/#264b72e06663

August 27, 2016 Posted by | -Economics, Innovation | , , , | 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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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end

 

 

 

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