“…In addition, just as in other businesses, there would be facets peculiar to this particular industry. The road entrepreneur would have to try to contain congestion, reduce traffic accidents, plan and design new facilities in coordination with already existing highways as well as with the plans of others for new expansion. He would have to set up the “rules of the road” so as best to accomplish these and other goals. The road industry would be expected to carry on each and every one of the tasks now under-taken by public roads authorities: fill potholes, install road signs, guard rails, maintain lane markings, repair traffic signals, and so on for the myriad of “road furniture” that keeps traffic moving.
Applying the concepts of profit and loss to the road industry, we can see why privatization would almost certainly mean a gain compared to the present, nationalized system of road management.
As far as safety is concerned, presently there is no road manager who loses financially if the accident rate on “his” turnpike increases, or is higher than other comparable avenues of transportation. A civil servant draws his annual salary regardless of the accident toll piled up under his domain. But if he were a private owner of the road in question, in competition with numerous other highway companies (as well as other modes of transit such as airlines, trains, boats, etc.), completely dependent for financial sustenance on the voluntary payments of satisfied customers, then he would indeed lose out if his road compiled a poor safety record (assuming that customers desire, and are willing to pay for, safety).
He would, then, have every incentive to try to reduce accidents, whether by technological innovations, better rules of the road, improved methods of selecting out drunken and other undesirable drivers, etc. If he failed, or did less well than his competition, he eventually would be removed from his position of responsibility. Just as we now expect better mouse-traps from a private enterprise system which rewards success and penalizes failure, so could we count on a private ownership setup to improve highway safety.
Thus, as a partial answer to the challenge that private ownership would mean the deaths of millions of people in traffic accidents, we reply, “There are, at present, millions of people who have been slaughtered on our nation’s highways; a changeover to the enterprise system would lead to a precipitous decline in the death and injury rate, due to the forces of competition…”
“In the Marxist tradition this stage of social development is termed “monopoly capitalism,” “finance capitalism” or “state monopoly capitalism.” The descriptive part of Marxist analyses is generally valuable. In unearthing the close personal and financial links between state and business, they usually paint a much more realistic picture of the present economic order than do the mostly starry-eyed “bourgeois” economists. Analytically, however, they get almost everything wrong and turn the truth upside down.
The traditional, correct pre-Marxist view on exploitation was that of radical laissez-faire liberalism as espoused by, for instance, Charles Comte and Charles Dunoyer. According to them, antagonistic interests do not exist between capitalists, as owners of factors of production, and laborers, but between, on the one hand, the producers in society, i.e., homesteaders, producers and contractors, including businessmen as well as workers, and on the other hand, those who acquire wealth non-productively and or non-contractually, i.e., the state and state-privileged groups, such as feudal landlords.
This distinction was first confused by Saint-Simon, who had at some time been influenced by Comte and Dunoyer, and who classified market businessmen along with feudal lords and other state-privileged groups as exploiters. Marx took up this confusion from Saint-Simon and compounded it by making only capitalists exploiters and all workers exploited, justifying this view through a Ricardian labor theory of value and his theory of surplus value.
Essentially, this view on exploitation has remained typical for Marxism to this day-despite Bohm-Bawerk’s smashing refutation of Marx’s exploitation theory and his explanation of the difference between factor prices and output prices through time preference (interest). To this day, whenever Marxist theorists talk about the exploitative character of monopoly capitalism, they see the root cause of this in the continued existence of the private ownership of the means of production. Even if they admit a certain degree of independence of the state apparatus from the class of monopoly capitalists (as in the version of “state monopoly capitalism”), for them it is not the state that makes capitalist exploitation possible; rather it is the fact that the state is an agency of capitalism, an organization that transforms the narrow-minded interests of individual capitalists into the interest of an ideal universal capitalist (the “ideelle Gesamtkapitalist”), which explains the existence of exploitation.
In fact, as explained, the truth is precisely the opposite: It is the state that by its very nature is an exploitative organization, and capitalists can engage in exploitation only insofar as they stop being capitalists and instead join forces with the state. Rather than speaking of state monopoly capitalism, then, it would be more appropriate to call the present system “state financed monopoly socialism,” or “bourgeois socialism.”
How Austrian were the French? An Austro-Australian Perspective
- Why the French Classical Liberal Tradition is Important?
- What makes the Austrian School “Austrian”?
- What makes the French CL School “Austrian”?
“Since outright grants of monopoly or quasi monopoly would usually be considered baldly injurious to the public, governments have discovered a variety of methods of granting such privileges indirectly, as well as a variety of arguments to justify these measures. But they all have the effects common to monopoly or quasi-monopoly grants and monopoly prices when these are obtained.
The important types of monopolistic grants (monopoly and quasi monopoly) are as follows:
- governmentally enforced cartels which every firm in an industry is compelled to join;
- virtual cartels imposed by the government, such as the production quotas enforced by American agricultural policy;
- licenses, which require meeting government rules before a man or a firm is permitted to enter a certain line of production, and which also require the payment of a fee—a payment that serves as a penalty tax on smaller firms with less capital, which are thereby debarred from competing with larger firms;
- “quality” standards, which prohibit competition by what the government (not the consumers) defines as “lower-quality” products;
- tariffs and other measures that levy a penalty tax on competitors outside a given geographical region;
- immigration restrictions, which prohibit the competition of laborers, as well as entrepreneurs, who would otherwise move from another geographical region of the world market;
- child labor laws, which prohibit the labor competition of workers below a certain age;
- minimum wage laws, which, by causing the unemployment of the least value-productive workers, remove their competition from the labor markets;
- maximum hour laws, which force partial unemployment on those workers who are willing to work longer hours;
- compulsory unionism, such as the Wagner-Taft-Hartley Act imposes, causing unemployment among the workers with the least seniority or the least political influence in their union;
- conscription, which forces many young men out of the labor force;
- any sort of governmental penalty on any form of industrial or market organization, such as antitrust laws, special chain store taxes, corporate income taxes, laws closing businesses at specific hours or outlawing pushcart peddlers or door-to-door salesmen;
- conservation laws, which restrict production by force;
- patents, where independent later discoverers of a process are debarred from entering a field production.”
— Murray Rothbard, Power & Market
- “Society is not merely a collection of individuals. Their interrelations in society make them quite different from what they would be in isolation. Brass is not merely copper and zinc; it is a third thing. Water is not merely hydrogen and oxygen, but something quite different from either. What an individual would be like if he had lived completely isolated from birth (assuming he could have survived at all) we can hardly even imagine…We can hope to solve many social problems not by looking at them exclusively from either an “individualist” or a “collective” aspect, but by looking at each aspect alternately.”
— Henry Hazlitt, The Foundations of Morality p.167
“Conventional thinking has greatly overemphasized and overstretched the collective perspective, whereas I think libertarianism has over-emphasized, or at the very least has a bad reputation for seeming to unrealistically over-emphasize, the individual(ist) perspective. It probably came as an understandable overreaction to the absurd overreaching of collectivism. Yet we need to be able to freely use both perspectives as tools as appropriate, as I think Hazlitt suggests here.
Here’s a different angle. Imagine a team sport match. Any sport will do. Maybe ice hockey. What is needed to watch and understand the game?
Seeing the whole field and the players, we are able to understand what is happening. Now if super video editing were used so that we could only see one of the players in the game but not any of the others, it would suddenly appear incomprehensible. What is that player doing? Why is he going this way and not that way? Why is he crashing into the wall? Just for fun? That would be an example of an extreme of missing the collective or system perspective.
Alternatively, say we were watching the game but had no idea what the rules were and what the point was. Here we are missing the individual perspective of what each player is trying to do, why, and how. Again, the whole game would be incomprehensible in that case. This is what I am trying to get at with the importance of being able to take both of these perspectives in looking at a situation or issue.”
— Konrad Graf
“The libertarian seeks property assignment rules because he values or accepts various grundnorms such as justice, peace, prosperity, cooperation, conflict-avoidance, and civilization. The libertarian view is that self-ownership is the only property assignment rule compatible with these grundorms; it is implied by them.”
-  “Grundnorm” was legal philosopher Hans Kelsen’s term for the hypothetical basic norm or rule that serves as the basis or ultimate source for the legitimacy of a legal system. See Hans Kelsen, General Theory of Law and State, trans. Anders Wedberg (Cambridge, Mass.: Harvard University Press, 1949). I employ this term to refer to the fundamental norms presupposed by civilized people, e.g., in argumentative discourse, which in turn imply libertarian norms.
That the libertarian grundnorms are, in fact, necessarily presupposed by all civilized people to the extent they are civilized — during argumentative justification, that is — is shown by Hoppe in his argumentation-ethics defense of libertarian rights.
For discussion of why people (to one extent or the other) do value these underlying norms, see Stephan Kinsella, “The Division of Labor as the Source of Grundnorms and Rights,” Mises Economics Blog (April 24, 2009), and idem, “Empathy and the Source of Rights,” Mises Economics Blog (Sept. 6, 2006). See also idem, “Punishment and Proportionality,” pp. 51 and 70:
- People who are civilized are … concerned about justifying punishment. They want to punish, but they also want to know that such punishment is justified — they want to legitimately be able to punish … Theories of punishment are concerned with justifying punishment, with offering decent men who are reluctant to act immorally a reason why they may punish others. This is useful, of course, for offering moral men guidance and assurance that they may properly deal with those who seek to harm them.
— Stephan Kinsella
“What if praxeology (deductive action theory in the tradition of Ludwig von Mises) is conceived as something much larger than merely the backstop for Austrian economics or a sort of pre-Austrian-economics warm-up act? In that case, economics ought to be better defined as one branch of praxeology among others. Since Mises kept mentioning economics as the “thus-far best-elaborated part” of praxeology, shouldn’t more thinkers be taking this up and working on advancing other such parts?
This is one of the questions addressed in my 2011 paper Action-Based Jurisprudence, which, among other things, sought to more explicitly define another branch that I am now calling the theory of legal concepts. I am now working on taking this approach further and in new directions, but meanwhile here is an update on the question of defining economic theory and other fields, as parts of praxeology. One element in what originally helped me get moving further in this direction of an enlarged vision for praxeology a couple years ago was Stephan Kinsella’s compilation of references, “Mises: Keep it interesting,” (Mises Economics Blog [RIP], October 16, 2010).
Since writing the original paper two years ago, I have taken note of the discussion in Guido Hülsmann’s 2003 introduction to the third edition of Epistemological Problems of Economics, entitled, “From Value Theory to Praxeology.” This describes Mises’s process of working backward from subjective value theory to arriving at his formal concept of action. It contains a descriptor at one point of economics as that part of praxeology that deals with action that uses economic calculation. On this basis, I might suggest for economics: the study of aspects of action as they arise uniquely only within the context of an exchange economy in that the latter enables economic calculation.
We can briefly test out this “exchange economy” proposal (or some other proposal) for the case of defining economics by playing a game of takeaway: “No exchange economy? No prices.” Check. “No exchange economy? No interest rates.” Check. And then on down the list of what we think ought to be considered part of “economics” proper. “No exchange economy? No time preference.” Well, no. Not so fast. There is time preference regardless of the presence/absence of an exchange economy, so this one doesn’t pass. It looks like it must belong more to a “core” area of praxeology rather than to any particular specialized branch of praxeological investigation.
We might also then see Mises’s classic statement on the impossibility of economic calculation under socialism, “Economic calculation in the socialist commonwealth,” (original German 1920) in a new light. It becomes a particular instance of playing the takeaway game: “No private factor-of-production ownership? No (real) factor prices and thus no profit/loss calculation.” Check.
My most recent thinking on the general issue is that praxeology is a tool that we can use as one element in the study of just about anything involving human action. The parts or branches should then simply be defined by the sets of subject matter that we are using praxeology to investigate. I was pleased to see some work in this direction in criminology as presented in Renaud Fillieule’s 2012 Mises Memorial Lecture, “Misesian praxeology: An illustration from the field of sociology of delinquency,” delivered at the Austrian Scholar’s Conference in Auburn, 10 March 2012, which I also recently mentioned here.
So we’re out here investigating what praxeology/thymology can show us if we apply it to issues x, y, and z, extending to all the things in the social sciences that we are interested in understanding better. This could become useful in the entirety of the social sciences—as opposed to the natural sciences—which I think is more what Mises had in mind with praxeology/thymology vis-à-vis natural science methods.
In other words, there ought to be plenty of work to do to carry forward the actual “program” that Mises launched, which was much larger than economics. It was a call for a revolution out of historicism (see especially Theory and History) and positivism (see especially The Ultimate Foundation of Economic Science) in the social sciences as such and was by no means limited to economics. Economics was Mises’s own primary specialization within praxeology; it doesn’t have to be everybody else’s.”
“A most important truth about money now emerges from our discussion: money is a commodity. Learning this simple lesson is one of the world’s most important tasks. So often have people talked about money as something much more or less than this. Money is not an abstract unit of account, divorceable from a concrete good; it is not a useless token only good for exchanging; it is not a “claim on society”; it is not a guarantee of a fixed price level. It is simply a commodity [emphasis added]. It differs from other commodities in being demanded mainly as a medium of exchange. But aside from this, it is a commodity—and, like all commodities, it has an existing stock, it faces demands by people to buy and hold it, etc. Like all commodities, its “price”—in terms of other goods—is determined by the interaction of its total supply, or stock, and the total demand by people to buy and hold it.”
We have seen that Crusoe, as in the case of any man, has freedom of will, freedom to choose the course of his life and his actions. Some critics have charged that this freedom is illusory because man is bound by natural laws. This, however, is a misrepresentation—one of the many examples of the persistent modern confusion between freedom and power. Man is free to adopt values and to choose his actions; but this does not at all mean that he may violate natural laws with impunity—that he may, for example, leap oceans at a single bound. In short, when we say that “man is not ‘free’ to leap the ocean,” we are really discussing not his lack of freedom but his lack of power to cross the ocean, given the laws of his nature and of the nature of the world.
Crusoe’s freedom to adopt ideas, to choose his ends, is inviolable and inalienable; on the other hand, man, not being omnipotent as well as not being omniscient, always finds his power limited for doing all the things that he would like to do. In short, his power is necessarily limited by natural laws, but not his freedom of will. To put the case another way it is patently absurd to define the “freedom” of an entity as its power to perform an act impossible for its nature!
If a man’s free will to adopt ideas and values is inalienable, his freedom of action—his freedom to put these ideas into effect in the world, is not in such a fortunate condition. Again, we are not talking about the limitations on man’s power inherent in the laws of his own nature and of the natures of other entities. What we are talking about now is interference with his sphere of action by other people—but here we are getting a bit ahead of Robinson Crusoe and our discussion. Suffice it to say now that, in the sense of social freedom—of freedom as absence of molestation by other persons—Crusoe is absolutely free, but that a world of more than one person requires our further investigation.
The Economization of Time
“Man is subject to the passing of time. He comes into existence, grows, becomes old, and passes away. His time is scarce. He must economize it as he economizes other scarce factors.
The economization of time has a peculiar character because of the uniqueness and irreversibility of the temporal order. The importance of these facts manifests itself in every part of the theory of action.
Only one fact must be stressed at this point. The economization of time is independent of the economization of economic goods and services. Even in the land of Cockaigne man would be forced to economize time, provided he were not immortal and not endowed with eternal youth and indestructible health and vigor. Although all his appetites could be satisfied immediately without any expenditure of labor, he would have to arrange his time schedule, as there are states of satisfaction which are incompatible and cannot be consummated at the same time. For this man, too, time would be scarce and subject to the aspect of sooner and later.”
“Inflation’s standard definition is too narrow to provide an appreciation of the extent of its harm; it is far more than a deterioration of the currency’s purchasing power. It’s also much more than a “hidden tax.” Government’s perennial fiat inflation is a subtle WMD. Consider the following:
In funding wars, it allows government to ignore the fiscal resistance of its citizens.
It benefits the central government at the expense of secondary and tertiary governments.
It turns moral hazard and irresponsibility into an institution, and guarantees recurring economic crises.
By making credit cheap, it encourages businesses to finance their ventures through borrowing rather than equity. Because of market competition, few firms can resist the offer of low credit, making them more dependent on banks. As Pius XI noted in 1931, it puts a dictatorship in the hands of lenders who regulate the lifeblood of the entire economic system.
Fiat inflation drives people to invest in capital markets where few will have the expertise, time, and inclination to monitor their investments properly. In former times people could save simply by holding gold and silver coins.
Under a perennially increasing price level, the average citizen finds his best strategy is personal debt, which weakens self-reliance and independence.
Under chronic fiat inflation, people will tend to choose their employment based on monetary returns. Money then becomes the prime or only consideration for personal happiness.
Perennial inflation deteriorates product quality. Industries that cannot compensate for inflation with technological innovation turn to other means, such as producing an inferior product under the same name. Lying, which is bound up with fractional-reserve banking, tends to spread like a cancer over the rest of society.
By fueling the exponential growth of the welfare state, fiat inflation fosters the decline of the family. Families become degraded into “small production units that share utility bills, cars, refrigerators, and especially the tax bill.” The welfare state drives the family and private charities out of the “welfare market.”
As Hülsmann concludes, “fiat inflation is a juggernaut of social, economic, cultural, and spiritual destruction.”
— George F. Smith, The Case For Natural Money