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    Extreme Apriorism

    READINGS

    In Defense of “Extreme Apriorism”
    Murray N. Rothbard, Southern Economic Journal, 1957

    Praxeology: Reply to Mr. Schuller
    Murray N. Rothbard, American Economic Review, Dec. 1951

    VIDEO

    Praxeology: The Austrian Method
    David Gordon, Lecture at Mises University 2010

     

    STUDY QUESTIONS

    1. How would Mises define the praxeological method? Why are neither Professor Machlup nor Professor Hutchison “praxeologists”?
    2. Why does Rothbard prefer the views of Hutchison over those of Machlup?
    3. What makes social sciences fundamentally different from the physical sciences? Why does positivism work for the physical sciences? Why doesn’t it work in the social sciences?
    4. What is the Fundamental Axiom of praxeology? Why is this axiom “indisputable”?
    5. Name some of the postulates that follow from the Fundamental Axiom. Are they necessarily a priori?
    6. What is an auxiliary construct?
    7. What is the difference between an economist and a historian?
    8. How does “rationality” play into the Misesian analysis of human action? Is it important?
    9. What is the difference between Mises’s and Rothbard’s classification of the Action Axiom? What are Rothbard’s three reasons for continuing to call the action axiom a priori?
    10. What is “wertfreiheit“? Why is Mises a proponent of wertfreiheit in all sciences?
    11. How does a praxeologist use statistics and or historical accounts? Does this contradict the a priori nature of praxeology?
    12. Name some of the categories of praxeology.

     

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    The Intention of an “Evil” Rich Capitalist in a “Libertarian Utopia.”

    capitalism-is-evil

    I’m sure we have all heard such a premise in conversations with those that….well, those that don’t share our understanding for markets and libertarianism. For me, the best way to understand anything is to live it and use real world examples to develop, refine, or reject perspectives. A good one came my way this past Wednesday at work, when I was let in on some “Privileged” information and in the interest of trying to maintain some anonymity of my work and those that would rather keep this information more hush hush, I will say I deal in rental and commercial property in a wealthy and a ever growing desirable community in the Boston area. I will also say that the owners of said property started from very little and then made some great business decisions over the years and even though they don’t own mansions or drive around Rolls-Royces, they probably could and if they did I don’t think it would phase or surprise many people.

    Now I’m not sure if it is fear due to ignorance or envy, but any anti-capitalistic and/or libertarian strawmen arguments needs some addressing. One such common argument being: “In a libertarian Utopia, there would be no regulations and the rich could and probably would buy up all the land around them.” This assertion is two parts; one making the fallacious argument that libertarians believe in chaos and that libertarianism is about establishing a perfect egalitarian society without any rules, which is flat out incorrect. The other being capitalism is malevolent and a capitalist’s only goal is to own and control/restrict as much as the world as possible. This is debatable, (because people’s intentions are subjective) but I will explain here (using a real world example) how such an assertion is unlikely and that it is logical that any good capitalist would have greater success with more benevolent intentions.

    I will not explain to you what libertarianism is…..or isn’t, really. For that, Lew Rockwell does a great job here.  I will also not go into capitalism or market theory. I will just be discussing the capitalist accumulation of property with the only restriction being by those unwilling to sell to them. So let’s say a rich investor rolls into a town or community and get their hands on a bunch of unused public property and buys up some real estate that someone is looking to offload. He raises the rent on the existing real estate, but also slowly improves it. Yes the tenants will have to pay more, but they get a nicer/better place to live and they also have the option to live somewhere more suitable to their needs and costs if they can’t or don’t want to afford the new price of the apartment. So people are actually making value judgments and thus improving their living standards and happiness, regardless of if they move or stay. He also builds on all that unused land, in hopes to make more money and increase his total wealth (Profit). Now this rich investor just expelled a ton of his wealth buying up properties, land and building on it. Now because he/she (To be PC) is providing value to people, (tenants) he/she is slowly creating capital and making their money back. They realize this so he buys up more properties and creates more opportunity by building more, thus increasing their total ownership or stake in the community. One could say that no regulations on what this investor or group of investors can or cannot own, (because libertarianism has no real restrictions on property and the legitimate ownership of it) would create chaos and the capitalist would end up owning all the land/property. This is a non sequitur, but a common thought process and argument among those that border on anti-(private)property and/or those that think government actually protects and regulates property and without it, the rich would just usurp all the important land.
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    To entertain this absurdity though, let’s us say such a logical fallacy may not be untrue and suppose there is a possibility that small groups of or individual people would own huge amounts of property. I don’t think it would be similar to a private monarchy, where a whole town or community would be owned by one person or a few key people. However, for the sake of this argument, let’s say it would be that draconian. Let’s go down this road and pretend this happens.So What?! Do you think they are going to accumulate property the size of a community and burn it to the ground? Do you think they have a vested interest in spending their wealth, only to destroy their investment or any capital they would get from it or do you think they are going to improve the community and continue to ensure its future prosperity and desirability for everyone else? Is it better to acquire wealth through measures of control and coercion or by pleasing people and creating potential value for them through voluntary interaction? I think the latter is true, because such things are attractive to people who want a nice and safe community, which in turn also benefits them (The “evil rich” capitalist) in the long run. Logically there are very few sociopaths in this world that would go out of their way to acquire a “golden goose”, only to kill it. And I think most off of them exist within government. But for those few that cause chaos in society and negatively impact the lives of others, there would clearly be a demand for some type of arbitration to settle disputes. Any good capitalist would recognize and jump at the opportunity to capitalize off of bad actors in society, which unfortunately will always exist. Arbitration is a very important facet of society to settle disputes and transfer wealth from bad market actors to those effected by them, but dispute resolution is for another time and if you would like to learn more on the subject; this is a great Mises daily article.

    Realistically though, I don’t think a small few would end up owning all the important land absent the restrictions on the ownership of property. Remember, all legitimate transactions need to have a willing buyer and seller. (Unless you’re the first owner, but homesteading is for another time though) Some would be unwilling to sell. Others may be willing to sell, but they also have the right to discriminate. Other buyers may place greater values on the same properties and thus competition would breed ownership diversity. Also, one would reach a point where it would be impossible to properly allocate resources in their massive ownership stake and selling would eventually HAVE to be an option because of it. So there are plenty of reasons why it would be very unlikely for there to be a huge ratio to the amount of property or land owned, to those (few) that own it.  Not to say that the capitalist pursuit of property is anything like the game of Monopoly, but similar to the game, you win by everyone else making poor decisions and going bankrupt and not by who first controls the entire board.
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    Now, to use my real life example to make my insignificant and drawn-out point. My work has been putting a bunch of money into their properties; upgrades, improvements, new equipment, infrastructure….Even diversifying where they invest. This “privileged” information that I received the other day, was that they bought a small automotive repair shop, very near to a ton of other properties that they already own. At the time this didn’t make any sense to me, being they have more money than they need (I hate to use that phrase, but given their wealth and how they don’t really spoil themselves, they really don’t “need” any more capital) I now understand why someone would do something like this and shame on me for thinking only in terms of monetary value. The capitalist wants to improve and ensure the quality of his community, just the same as those who live and are a part of it! I mean if you made all the right decisions and had money burning a whole in your pocket because of it, wouldn’t you buy up assets to keep out any riff raff and to ensure the cronies don’t bring down the morale and quality of the community? Talk about literally “investing in your community” Real capitalists are conservationists. They take care of and preserve their resources and wherever possible, improve upon them.

    It turns out that is exactly what these people I work for are doing! They see value in at the very least making sure this community isn’t overran with any…..undesirables. Doing this, they are improving things for their own selfish benefit and thus creating demand for others to live there and prosper. The kicker; their investment is exponentially returned to them for the value they create for others. We don’t know what will come about with this repair shop deal, but if the last 45 years of community improvement and town desirability says anything…..this will only make it better. For a libertarian, the best part is that property and the pursuit of it did this. Not government or the guns they point at peaceful people as they voluntary interact with each other to create value for society. The simple concept of property and people being allowed to own however much of it someone else is voluntarily willing to exchange, is not a bad thing and actually makes for a better society and creates value for people. I know it did for me when I moved here.

    So the next time someone tells you that we need government to manage and control the exchange and accumulation of property, because capitalists will just buy up all the property and control and oppress people. Tell them government already does that and they don’t even legitimately own any land! The failures with this terrible idea of government are not synonymous with the unrestricted concept of ones pursuit of property and should not be compared to each other. Rules created through property rights and the respect for them, are far superior to the coercive authoritarianism of the State to dictate the free association of people and their pursuit  of and with the fruits of their labor. So whether libertarian chaos rules the day and “Evil” rich people use voluntary exchange to acquire vasts amounts of property or the more reality based scenario where they pursue just enough of it to keep out cronyism, really doesn’t matter. Both would be far better than the system we have now where government gets to decided the legitimacy of the ownership of property and then uses coercion to dictate how it’s used, while also demanding rent for said legitimate ownership of property. Not to mention the irony of then claiming it exists to protect such things.  Remember to pay your property tax so you don’t get evicted from what you thought was your property and/or thrown in a cage for failure to pay…..What seems like rent to government and how does such a perversion of property rights benefit anyone or at all legitimate?35

  • welding

    Resurrecting Lachmann

    The Boston Austrian Economics Group and the Manchester Austrian Economics Group joined forces to host the event “Who is Ludwig Lachmann?” on Wednesday, May 7, 2014. We were joined by leading Lachmann scholar Michael Valčićfor an evening of lively discussion and debate. So, who is Ludwig Lachmann, and why would anyone spend dinner discussing him?

    Murray Rothbard noted in a 1993 preface to Man, Economy, and State that: “It has indeed become evident in recent years that there are three very different and clashing paradigms within Austrian economics: the original Misesian or praxeological paradigm, to which the present author adheres; the Hayekian paradigm, stressing ‘knowledge’ and ‘discovery’ rather than the praxeological ‘action’ and ‘choice,’ and whose leading exponent now is Professor Israel Kirzner; and the nihilistic view of the late Ludwig Lachmann, an institutionalist anti-theory approach taken from the English ‘subjectivist’-Keynesian G.L.S. Shackle.”

    Rothbard counted Lachmann not only as an Austrian economist, but an Austrian economist of high contemporary importance. Is Rothbard’s description of Lachmann in the above passage accurate? To prepare for the May 7 event, the Boston and Manchester groups got a dose of Lachmann with a few suggested readings: “The Role of Expectations in Economics as a Social Science,” “Complementarity and Substitution in the Theory of Capital,” and “From Mises to Shackle.”

    LachmannRothbard attributes nihilism to Lachmann. Rothbard is charging Lachmann with epistemological nihilism, not moral nihilism, since as a wertfrei (“value free”) endeavor, Austrian economics is not concerned with morality, just means and ends. Epistemological nihilism holds that no theory, law, or other form of knowledge can accurately describe reality.

    According to Rothbard, Lachmann has this “institutionalist anti-theory approach.” In another passage, Rothbard opines: “It must be noted that nihilism had seeped into current Austrian thought…It began when Ludwig M. Lachmann, who had been a disciple of Hayek in England in the 1930s and who had written a competent Austrian work entitled Capital and Its Structure in the 1950s, was suddenly converted by the methodology of the English economist George Shackle during the 1960s. Since the mid-1970s, Lachmann, teaching part of every year at New York University, has engaged in a crusade to bring the blessings of randomness and abandonment of theory to Austrian economics.” Is this charge of epistemological nihilism true?

    Lachmann writes: “As regards universal laws, nobody doubts that human beings are subject to them. The question we face is not whether such laws exist, but whether those which do are of much help in enabling us to understand how social situations change.” He is not an epistemological nihilist, it is clear. And his hesitance at applying economic theory to history and its data in order to verify laws is quintessentially Austrian. Correlation does not imply causation, and economics is essentially about causation, about what humans cause to happen through their actions. Only experimentation can prove causation. And on experimentation, Rothbard himself wrote: “In the sciences of human action…it is impossible to test conclusions. There is no laboratory where facts can be isolated and controlled; the ‘facts’ of human history are complex ones, resultants of many causes.”

    That is not to say there is no disagreement between Lachmann’s economics and Rothbard’s economics. Rothbard is comfortable with statements such as: “Any increase in capital goods can serve only to lengthen the structure, i.e., to enable the adoption of longer and longer productive processes.” (MES 8.4).

    Capital and its StructureLachmann, on the other hand, decries any quantitative reference to capital as a whole, such as “increase in capital goods.” He says in Capital and Its Structure (the book Rothbard claimed to approve of): “…we cannot add beer barrels to blast furnaces nor trucks to yards of telephone wire…Where [the economist] has to deal with quantitative change he needs a common denominator. Almost inevitably he follows the business man in adopting money value as his standard measurement of capital change. This means that whenever relative money values change, we lose our common denominator…In equilibrium, where, by definition, all values are consistent with each other, the use of money value as a unit of measurement is not necessarily an illegitimate procedure. But in disequilibrium where no such consistency exist, it cannot be applied.” And to Lachmann, we live in perpetual disequilibrium: “We are living in a world of unexpected change; hence capital combinations, and with them the capital structure, will be dissolved and re-formed.”

    Both the Boston and Manchester groups were receptive to Lachmann’s ideas on the inherent problem with quantifying capital. After all, do breweries represent capital goods to the temperance promoter? Does a brewery constitute more capital than, say, a tow truck? Breweries are not even goods to the promoters of temperance: Breweries are bads and detract from total capital goods. Because valuations differ and there is no homogenous/equilibrium valuation in terms of money, the very concept of an objective “increase in capital goods” seems faulty.

    So where is Lachmann’s paradigm today in Austrian thought? Other than Jaime’s restaurant in North Andover, Massachusetts, it is conspicuously absent. Most of Lachmann’s works are out of print, cost a small fortune to purchase, and are not viewable anywhere online. To compare with the other paradigmatic leaders in Austrian thought that Rothbard named: Hayek is commonly taught in economics classrooms around the world, even at the undergraduate level. Rothbard is dear to hundreds of thousands of anarcho-capitalists, constitutionalists, and even the Communist Party secretary of Shanghai is getting into him. Lachmann has inspired no such mass adoration, but perhaps he should. Is it time to resurrect Lachmann? Whether the answer is yes or no, it can’t hurt to learn about him.