State of Innovation

Patents and Innovation Economics

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

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

Dale Halling and William R Thomas – Austrian Economics and Objectivism Panel: Atlas Summit 2016

I am proud to announce that Will Thomas and I will be giving a talk on Objectivism and Austrian Economics.  This year’s Atlas Summit will be held in Las Vegas July 11-13 just proceeding FreedomFest at the same location.  Here is the description of our talk:

Prominent Objectivists have argued that Austrian Economics is compatible with Objectivism. Ludwig von Mises was Ayn Rand’s favorite economic thinker, and Objectivist economist George Reisman was trained by Mises. Despite this, Rand was very critical of a number of Austrians including F.A. Hayek and Murray Rothbard.  David Kelley has written that “Hayek seems to think that if socialist planning were possible, socialism might be the morally ideal system.” What are the philosophical foundations of Austrian Economics? Is Austrian Economics good economics? Dale Halling and William R Thomas will explore these questions in this panel session.

Presently our talk is scheduled for Wednesday, July 13 from 12:00–1:00 PM, however this is subject to change.  I have been told that I can invite anyone to my talk and they can hear my talk for free, although they will not be able to see the other fine talks at Atlas Summit.

AtlasSocietyNote that right now there is a $100 discount for early registration and this also gives you access to FreedomFest.

I hope to see many of you there.

 

 

February 8, 2016 Posted by | -Economics, philosophy | , , , , | Leave a comment

Praxeology: An Intellectual Train Wreck

One of the foremost economists in Austrian Economics is Ludwig Von Mises.  One of his major contributions was praxeology, which is  is the deductive study of human action.  I have been trying to better understand praxeology.  I have consulted numerous websites, papers, and videos on point.  Most of them either ramble on saying nothing or they spend all their time attacking logical positivists or others.  I decided to review a paper from the Mises website and a video on point.  Together I thought these were the best sources on slightly different points of praxeology.  The video was a lecture by Dr. Walter Block who is the Harold E. Wirth Eminent Scholar Chair in Economics and Professor of Economics at Loyola University New Orleans and Senior Fellow with the Ludwig von Mises Institute.  Below are statements from the paper (1-4) and the video (5-12), with  my comments below.  Note that my criticism of praxeology and Austrian Economics is not an endorsement of any other school of economics including classical, neo-classical, Keynesian, monetarists, etc.  The fact that I am critical of praxeology does not make me or mean I am a logical positivist.   Also my critique is not to suggest that there are no valid points made by Austrian Economics.

 

econgrowth.small1) “Praxeology rests on the fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.”[1]  “Let us note that praxeology does not assume that a person’s choice of values or goals is wise or proper . . . “[2]

How can you tell the difference between non-goal directed action and goal directed action, if you cannot say what goals should be pursued or will be pursued?  If the goals are random or allowed to be random, how can you be sure the actions are not random?  The answer is that there is no difference between non-goal directed action and goal directed action where the goals are random.  This is part of the value subjectivism of Austrian Economics.

What is the goal directed action of a person committing suicide?  Or a vandal?  Or a teenager on a joy ride?

The human action axiom is meaningless when it is impossible to judge the goal.

 

2) “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.”[3]

This means that praxeology is a branch of Philosophical Rationalism.  Descartes created a system of physics just by thinking about the world.  It was internally consistent.  In other words it was just like praxeology and it did not describe the world and could not be used to predict or understand how something would work.

3) “Mathematical logic is appropriate to physics.”  But not to economics.  “In physics the axioms and therefore the deductions are in themselves purely formal and only acquire meaning “operationally” insofar as they can explain and predict given facts.”[4]

There are no axioms in physics.  Physics is a science and science starts with observations, not axioms.

 

4) “That Austrian School economics rests firmly from the beginning on an analysis of the fact of individual subjective values and choices.”[5]

Note that the paper says “individual subjective choices”, which means that the word subjective here is not that each person makes their own choices.  It means that there is no rational way to evaluate people’s choices.  This subjectivism is why all major figures in Austrian Economics do not think that natural rights exist.  They do not believe that ethics can be based on reason.

 

5) Economics is pure logic – no need to verify in the real world.

That would make economics a branch of mathematics (logic), not a science.  (Also see the video https://www.youtube.com/watch?v=aTXxvWa11Lg).

 

6) While economics is based on pure logic, the lecturer argues it is science.

Dr. Block does not know what the definition of a science is.  Actually, I do not think Mises made this mistake of confusing math/logic with science.

 

7) Total profits equal zero in the economy is an axiomatic (theorem) tendency according to the professor.

If this were true we would still be living in the Malthusian Trap.  The definition of zero profit in the economy would mean that on average people are living on the edge of starvation.  Profit means that you produce enough to have a surplus.  But this does not have to bother Dr. Brock, because economics is not an empirical science, which is an oxymoron.

It appears the professor was attempting to summarize the zero profit theorem, which is based on perfect competition.  Perfect competition is a flawed concept that denies property rights, something it has in common with Austrian Economics.  I discuss the many flaws of perfect competition in my book Source of Economic Growth and also in my lecture at the Atlas Summit 2015.

If what the Austrians are trying to say is “in a technologically stagnant economy the total profits tend to zero.”  Then that is true and I discuss this in my book Source of Economic Growth.  The reason for this is the second law of thermodynamics (entropy).  It is also probably true in a technologically stagnant market, profits tend to zero for firms in the market.

 

8) The Zero Profit theorem cannot be falsified.

That is the meaning of non-empirical, but what is amazing is that he says this straight up and I showed above that in fact the theorem as he states it is in fact incorrect.

 

9) You don’t test that a triangle has 180 degrees?

Yes you do.  Obviously Block is not familiar with the book flatland.  In fact there is an experiment in astronomy that is doing exactly this.  See http://www.mathaware.org/mam/05/shape.of.universe.html.

 

10) Block is using econometric modeling.  Econometrics assumes that economics is empirical.  Block is correct to criticize logical positivism, but logical positivism is not a correct philosophy of science.  (Also see the video https://www.youtube.com/watch?v=aTXxvWa11Lg)

 

11) Trade – both parties expect to profit by a trade is an axiom/theorem of praxeology according to Block.

While this is true, it violates the zero profit tendency.

 

12) Inputs to the economy are land, labor, capital, and entrepreneurs.

How are entrepreneurs a separate input?  Are not entrepreneurs just a combination of people and capital, at least in Austrian Economics?

The additional input and the only input of importance is human knowledge and when we are talking about economics that means inventions.

 

Conclusion

I only commented on the first 15 minutes or so of the video.  There were other errors, but explaining them would take too long.  Of course there were many valid points.

The bottom line is that praxeology is not a science and to the extent that Austrian Economics is based on praxeology it is not a science.  Block points out that there are sort of two schools of Austrian Economics and the other one is based on Hayek’s ideas.  Hayek rejected praxeology and his somewhat equivalent theory is his theory of Cultural Evolution, for more see the video Hayek: Friend or Foe of Reason, Liberty and Capitalism?  Cultural Evolution is an inherently collectivist that is based on the idea that reason is limited or totally ineffectual.  It is not a science either, since it rejects the use of reason.  No matter which branch of Austrian Economics that you investigate it is not a science.  The result is that it makes numerous errors, which I have detailed elsewhere, but include an improper definition of property rights, an improper definition of capitalism, the false model of the Austrian Business Cycle, and others.

Austrian Economics is not the only school of economics that is not a science.   However, if economics is to ever advance it has to be a science based on the nature of man and understanding that  his unique tool of survival is his ability to reason.  In my book the Source of Economic Growth I lay out the principles for a school of economics that is a science, that is consistent with Objectivism, and is consistent with Natural Rights.

 

 

 

[1] https://mises.org/library/praxeology-methodology-austrian-economics

[2] https://mises.org/library/praxeology-methodology-austrian-economics

[3] https://mises.org/library/praxeology-methodology-austrian-economics

[4] https://mises.org/library/praxeology-methodology-austrian-economics

[5] https://mises.org/library/praxeology-methodology-austrian-economics

September 8, 2015 Posted by | -Economics, philosophy | , , , | 14 Comments

The Irrational Foundations of Austrian Economics

The Austrians, such as those on the Von Mises website, like to tout that they are pro-freedom, capitalists, and arch enemies of the socialists and Keynesians.  Strangely enough this means that they have aligned themselves with socialists in opposing property rights for inventors and attacking Locke’s ideas on property.  Even more fundamentally the Austrians seem to share intellectual roots with the socialist or more broadly the post-modernist movement, which is a reactionary movement opposing the enlightenment, reason, and science.  I have written on Fredrick Hayek’s anti-reason, anti-natural rights, moral relativist positions in Hayek vs. Rand: Patents and Capitalism.

However, Hayek was not the only Austrian with post-modernists roots.  Von Mises was clear that values and prices are subjective.  By this the Austrians do not mean that they are personal or that each person puts a different value on things, they mean unconnected in anyway with reality.  Von Mises also said that economics is a value-free science.  This may sound high-minded, but science is not value free.  Science starts with an objective reality, demands logic and evidence, and morally requires that scientist report data accurately.  These positions of Von Mises place him firmly in agreement with the post-modernists (socialists, Keynesians).  Some people think I am misinterpreting the Austrian position so here is a video of a talk from the Mises University that demonstrates that the Mises people are serious about the subjective theory of value.  They are not saying it depends on your circumstances, they are saying there is no connection to reality between prices or values in economics.  The meat of the video starts at 7:35 in which the speaker states “value is just a state of mind.”  At 7:57 he is clear that value has no extensive property, which means it is not related to the real world.  8:16 the speaker states that all we have is a state of mind – that value exists only in the mind of the individual.  9:23 value is a state of mind.  9:54 there is no relation between the external world (reality) and the judgments of our minds – this is as clear as it will get that the Austrians are ignoring reality and believe economics is separate from reality.  11:14 The speaker describes profit as subjective.

Of course this position cannot logically be held to be true so you will find contradicting statements in the talk.  Just like people who deny reality, meaning they deny A is A, the position cannot be held without contradiction.  But since they deny reality matters in economics, they free themselves from the science of non-contradictory thinking – logic.  This makes the Austrians consistent with the post-modernist (socialist) movement.  I cannot say that every Austrian economist makes this mistake, but it is the accepted position of the modern Austrian school of economics and it got its start with Von Mises.

The speaker is trying to destroy the intrinsic theory of value.  Classical economists followed the labor theory of value which is an intrinsic theory of value.  According to this theory the value of an item is the sum total of the labor that went into the item.  The Austrians are correct that the classical economists’ position was incorrect, but their solution is no better.  They want to say value is determined without reference to the real world – that is it is all in the mind of the valuer, while the classical economists said value could be determined without reference to the valuer.  Both are nonsense.  Objective valuation has to take the position of the valuer and the item being valued into account.  Ayn Rand has a great explanation of this topic in Capitalism the Unknown Ideal starting on page 13 I believe.

Capitalism is based in reality, reason, and the ethics of natural rights.  Austrians are not capitalists.

February 12, 2015 Posted by | -Economics, -Philosophy, Patents | , , , | 1 Comment