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 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’ 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]
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.
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.
[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
[v] Edward W. Younkins, The Road to Objective Economics: Hayek Takes a Wrong Turn, http://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
[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.
[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.
[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.
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.
Note 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.
I have been accused of taking the Austrian School of Economics out of context. Rather than range all over the topic, I will address one Austrian economist, Friedrich Hayek, primarily with respect to his epistemology. However, his sense of ethics follows directly from his epistemology so this will be discussed. As well, his metaphysics will be touched on.
My criteria of whether Hayek is a friend or foe will primarily focus on whether he is an advocate for reason (logic and evidence) as best defined by Rand and Locke. I focus primarily on Hayek’s Theory of Cultural Evolution, which lays out his ideas on epistemology. There are dozens of papers on this subject and below I will provide quotes from a number of papers that analyze Hayek’s theory.
Austrian economist, political philosopher, and winner of the 1974 Nobel memorial prize –[Hayek] spent a good part of his career developing a theory of cultural evolution. 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. In the present paper, I explore the history of this theory of cultural evolution. (Emphasis Added)
The History of Hayek’s Theory of Cultural Evolution, Erik Angner
Dept. of History and Philosophy of Science
It is clear from the quote above that ethics is a group level, not at the individual level. The ethics of a group are random and the dominate ethical rules are determined by some sort of evolutionary success. According to the paper this is not a side issue or something Hayek scribbled out that is separate from the rest of his ideas.
It is hard to believe that Rand or Locke would have been impressed with the idea that ethics are determined by the success of groups.
According to Hayek, reason was not the driving force behind cultural evolution, but rather co-evolved in the course of this process. (Emphasis Added)
Hayek’s Theory of Cultural Evolution a Critique of the Critiques, by Horst Feldmann
This paper suggests that reason is the result of cultural evolution just like ethics. It is hard to see Rand or Locke agreeing with this.
Hayek argues, however, that the demand for rational, conscious (“political”) control of the concrete particulars of social life is based upon a misunderstanding of the process of cultural evolution and on a hubristic and dangerous overestimation of the capacity of the conscious reasoning intellect. As we have seen, Hayek contends that civilization is not the creation of the reasoning mind, but the unintended outcome of the spontaneous play of innumerable minds within a matrix of nonrational values, beliefs, and traditions. The desire of modern constructivists to “make everything subject to rational control” represents for Hayek an egregious “abuse of reason” based upon a failure to recognize the limits to reason’s sphere of competence.63 Such limits, again, stem from the fact that reason is confronted by an immovable epistemological barrier: its irremediable ignorance of most of the particular, concrete facts that determine the actions of individuals within society. The constructivist’s main error is the refusal to recognize that reason is only competent in the realm of the abstract. Hayek observes that the “rationalist . . . revolt against reason is . . . usually directed against the abstractness of thought [and] against the submission to abstract rules” and is marked by a passionate embrace of the concrete. He sums up the constructivist error in this way: “constructivist rationalism rejects the demand for the discipline of reason because it deceives itself that reason can directly master all particulars; and it is thereby led to a preference for the concrete over the abstract, the particular over the general, because its adherents do not realize how much they thereby limit the span of true control by reason.”64 (Emphasis Added)
Hayek on the Role of Reason in Human Affairs, Linda C. Raeder, Palm Beach Atlantic University
“Matrix of nonrational values, beliefs, and traditions” are responsible for civilization? It is clear that Hayek does not think there is anything special about Natural Rights or the United States or any other country or their values. The best we can say is that it is the best based on its success at this time.
“Rejects the demand for the disciple of reason”? This sounds like it comes straight from an environmentalist or a modern socialist. It is clear that Hayek is not just talking about the limits of the knowledge of a central planner, he is attacking reason itself. The best possible spin is that Hayek is only attacking reason with respect to knowledge of human affairs, i.e., economics, social sciences, ethics, law, political structures, literature and the arts.
It is clear from Hayek’s rejection of reason that he does not agree with an Aristotelian or Objectivist idea of an objective reality that is knowable. At best Hayek’s metaphysics is consistent with Plato’s theory of forms, where we can only get a vague glimpse of reality.
“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.”83 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.
Hayek on the Role of Reason in Human Affairs, Linda C. Raeder, Palm Beach Atlantic University
Does the first sentence above sound like Howard Roark or Ellsworth Toohey? Hayek is pushing the worst sort of collectivism. It is a collectivist attack on the mind itself, on the independence of the mind based on reason. Hayek would have stood hand and hand with the Catholic Church in condemning Galileo to death.
For Hayek, the rules of morality and justice are the same as they were for David Hume: conventions that have emerged and endured because they smooth the coordination of human affairs and are indispensable, given the nature of reality and the circumstances of human existence, to the effective functioning of society.87 For Hayek as for Hume the rules of morality and justice are not the products of reason and they cannot be rationally justified in the way demanded by constructivist thinkers. And since our moral traditions cannot be rationally justified in accordance with the demands of reason or the canons of science, we must be content with the more modest effort of “rational reconstruction,” a “natural-historical” investigation of how our institutions came into being, which can enable us to understand the needs they serve.88
Hayek on the Role of Reason in Human Affairs, Linda C. Raeder, Palm Beach Atlantic University
Morality is not based on reason according to Hayek, it is based on convention. David Hume was the philosopher that came up with the ‘is-ought” problem in ethics that is the basis for moral relativism. Solving the “is-ought” problem was one of the major accomplishments Rand’s ethics.
Hume also attacked cause and effect and therefore reason, arguing that the best we can say about events is that they are closely related or probablistic. I consider Hume worse than Kant, partly because he is more understandable than Kant and because he inspired Kant. Here is what Rand had to say about Hume.
“If you observe that ever since Hume and Kant (mainly Kant, because Hume was merely the Bertrand Russell of his time) philosophy has been striving to prove that man’s mind is impotent, that there’s no such thing as reality and we wouldn’t be able to perceive it if there were—you will realize the magnitude of the treason involved.”
F.A. Hayek was the chief conduit through which Hume’s moral, political, and social theory entered the mainstream of modern libertarian thought. In his article “The Legal and Political Philosophy of David Hume” (originally presented as a lecture at the University of Freiburg on July 18, 1963), Hayek bemoaned the fact that Hume’s legal and political philosophy had been “curiously neglected.” In addition to being “one of the founders of economic theory” and the greatest British legal philosopher before Bentham, Hume “gives us probably the only comprehensive statement of the legal and political philosophy which later became known as [classical] liberalism.”
http://www.libertarianism.org/columns/self-interest-social-order-classical-liberalism-david-hume Self-Interest and Social Order in Classical Liberalism: David Hume, by George Smith, formerly Senior Research Fellow for the Institute for Humane Studies, a lecturer on American History for Cato Summer Seminars, and Executive Editor of Knowledge Products. Smith’s fourth book, The System of Liberty, was recently published by Cambridge University Press.
This clearly shows that David Hume was a big part of Hayek’s philosophical background. Bentham is Jeremy Bentham, who is considered the father of utilitarianism and is known for being an intellectual father of the utopian socialist movement in England.
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” 22 which transcends that available to the conscious reasoning mind; and 3) the impotence of reason to ‘design’ a viable social order. (Emphasis Added)
The Liberalism/Conservatism Of Edmund Burke and F. A. Hayek:A Critical Comparison, Linda C. Raeder is Associate Editor of HUMANITAS and a Research Associate at the National Humanities Institute
Here is another attack on reason, an appeal to collective reasoning and another statement that reason is impotent.
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.
The Liberalism/Conservatism Of Edmund Burke and F. A. Hayek:A Critical Comparison, Linda C. Raeder is Associate Editor of HUMANITAS and a Research Associate at the National Humanities Institute
This statement makes it clear that Hayek was anti-reason and anti-enlightenment.
Hayek, by contrast, is a critic of what he calls ―constructive rationalism.‖2 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,‖3 which is obviously not consistent with her view. For Hayek, moral rules have a status lying ―between instinct and reason.‖4 (Emphasis Added)
Symposium: Rand and Hayek on Cognition and Trade
Rand versus Hayek on Abstraction
David Kelley The Atlas Society
This is another case discussing how Hayek did not think that ethics were based on reason or that reason could ever tell us anything about ethics.
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.‖10
Symposium: Rand and Hayek on Cognition and Trade
Rand versus Hayek on Abstraction
David Kelley The Atlas Society
Hayek is not pro-liberty, at best he is pro-tradition, which is why it is not surprising to see so many religious people affiliated with the Austrian School of Economics. He is anti-reason and specifically bases his justification for ‘free markets’ on the limitations of reason generally and on the inability of reason to create or understand morals. His defense of the pricing mechanism of free markets is based not on liberty but on the idea of spontaneous order. More fundamentally, Hayek bases his justification of the pricing mechanism on tradition and utilitarian grounds.
Hayek’s metaphysics appear to be Platonic, which is incompatible with Rand and Locke. His epistemology is more consistent with Hume or Kant than Rand or Locke. You might argue that Hayek was only discussing the limits of reason with regard to social sciences, however at the least he applies it to all areas of human interaction, which includes ethics, the law, and the political realm. This means he is against Natural Rights and Locke, which means he is against capitalism. Capitalism is the economic system that arises when the law protects people’s natural rights, particularly their property rights. Hayek does not recognize property rights, at best he recognizes societies’ property conventions, which means he cannot understand capitalism. This is more than enough for me to damn Hayek as an enemy of capitalism and a foe.
In my opinion, Hayek’s esteem of Hume, Bentham, and Burke point to a much deeper antipathy to reason. His ethics is essentially majority rules with the modifier of natural selection. He specifically thinks it is the most absurd folly to think any one person can use reason to judge a society. This is consistent with his intellectual compatriots Hume and Burke. Hayek’s ethics is perfectly consistent with the moral relativists that say we cannot judge and an ISIS or a USSR or christianity. His ethics are antithetical to Rand’s and Locke’s. Hayek is clear that he does not think Natural Rights can be justified by reason and that Natural Rights cannot claim any special place in the world. Hayek is not a friend of reason, liberty, or capitalism. Rand’s estimation of Hayek is similar to mine, although I think I have spent much more time analyzing the issue.
I am willing to entertain any serious evidence that I have mischaracterized Rand or how the sources I am citing mischaracterized his arguments. I am not interested in unsubstantiated claims that I have misunderstood or mischaracterized Hayek. Do not complain that my standard is Rand and Locke, I told you that upfront. I am not interested in arguments that talk about other leading figures in the Austrian School of economics. Stick to the subject and provide actual evidence.
I often have people say Natural Rights do not exist. Then they point to something like the Earth and state the Earth is a sphere – that is real, the mass of the Earth is real and can be measured, but the Right to Property or the Right of self ownership are not real, they don’t exist in nature and there is nothing natural about them. A similar complaint is that Natural Rights are subjective, while the mass of the Earth is objective.
Objective: (of a person or their judgment) not influenced by personal feelings or opinions in considering and representing facts.
Subjective: based on or influenced by personal feelings, tastes, or opinions.
Volition: 1) the act of willing, choosing, or resolving; exercise of willing: She left of her own volition. 2. a choice or decision made by the will.
Note that a choice can be objective or subjective but both are exercising one’s will. One can choose to not believe the world is a sphere (technically a spheroid and not a perfect spheroid). One can choose to ignore the objective facts and contend the Earth is flat. This does not make the decision to understand the Earth is a spheroid subjective. Note the Catholic Church choose to believe the Sun rotated around the Earth, despite the objective facts. Global warming (AGW) prophets ignore the facts every day. It is clear that just because something is volitional does not make it subjective.
But what about Natural Rights or ethics, there are no objective facts involved according to these people. As we established above, just because something is volitional (i.e., a choice) does not make it subjective. Euclidean Geometry (EG) is not based on any objective facts. It is a purely logical system and devoid of any empirical facts, does that mean it is subjective? There have never been any two perfectly parallel lines that go on forever and finding or not finding such lines is irrelevant to EG. Does this mean that Euclidean Geometry is subjective? Does it mean it is not real? Well the answer to any problem in EG is not based on personal feelings or opinions, it is based on facts, but not empirical facts. But is EG real? Well certainly the mathematical system of Euclidean geometry exists. You might object that EG is not based on empirical facts, but it is influenced by them. Two perfectly straight parallel lines might not exist in nature, but close representations of them do exist and are used in construction and numerous other area’s every day.
The extreme empiricist wants to deny any higher order concepts exist. So to the extreme empiricist the number four does not exist. Four oranges exist and four nails exist, but four does not exist. This sort of thinking, would deny the existence of gravity. Things fall to the Earth and the Earth rotates around the Sun, but gravity is not an empirical fact; it is a scientific theory. A scientific theory is a model of nature that explains and predicts many different empirical facts.
Locke explained Natural Rights in terms of a “state of nature.” He stated that when man lived by himself, he necessarily owned himself and the products of his labor. Locke’s theory of Natural Rights explains why slavery is illegal, where property rights come from, why theft, murder, and assault, are illegal. Almost all of our common law is based on Natural Rights. It is an extremely powerful theory, much like Newtonian gravity and motion, or evolution. The Marxists attacked Locke based on the idea that people lived in groups. This is an intellectually dishonest sleight of hand. Locke was not making an empirical argument, he was making a logical argument. It is the same as Euclidean Geometry starting with the idea that two parallel lines never intersect. The power of Locke’s ideas is undeniable. The results were the creation of the industrial revolution, unparallel reduction in human suffering, the elimination of slavery and the elimination of force as an accepted method of settling disagreements.
Ayn Rand explained that values are only possible to living things, because life faces the metaphysical choice of life or death. Ethics is the selection of those rules consistent with life. The ethics of a human being are different than the ethics of a tree. Man is the only species that does not have a built in ethical system or instinct. Man is volitional, so he can choose an ethics of death. However, such an ethical system is a contradiction in terms, since only something that is alive can have values. Ethics is based on the fact of life and the only logically consistent ethical system is one that chooses life. Humans are rational animals and therefore must have an ethical system consistent with their nature. Since reason is a personal attribute (not collectivist), ethics is about a set of rules that allow individuals to exercise their attribute that is necessary for survival. Thus any ethical system that limits or undermines man’s reason is inherently an ethics of death, which is a contradiction in terms. This means that man must own himself, because the ability to think without the ability to act is meaningless. Now we are back to Locke.
Natural Rights and ethics are based on objective reality. You can choose to ignore these facts, just as you can choose to ignore gravity, but you cannot escape the reality that to do so is to choose death in both cases.
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