WEBVTT NOTE The Implications of Subjectivism for Economic Policy 1 00:00:00.000 --> 00:00:06.560 It's both an honor and a pleasure to share with you the results of my research on subjectivism 2 00:00:06.560 --> 00:00:13.360 and especially to be broadcasted worldwide. I'm particularly excited about this. It's 3 00:00:13.360 --> 00:00:21.920 the time of my glory. So let me, maybe sometimes if I fail my argumentation, it will be still 4 00:00:21.920 --> 00:00:26.920 and I'm still a Hollywood producer who will find me a job, hopefully. 5 00:00:26.920 --> 00:00:32.920 Well, I will talk to you today about subjectivism implications for economic policy. 6 00:00:32.920 --> 00:00:40.920 This is a part of a larger project on subjectives that I have with different papers at different stages of publications 7 00:00:40.920 --> 00:00:44.920 and hopefully more papers to come. 8 00:00:44.920 --> 00:00:54.920 The question I will address here is why all Austrian economists are laissez-faire, in favor of free market. 9 00:00:54.920 --> 00:01:03.920 See, this would be a kind of, it would be more than a coincidence why all the Austrians are free market. 10 00:01:03.920 --> 00:01:09.920 And to be sure is not a coincidence, it's more than that. 11 00:01:09.920 --> 00:01:16.920 and I will try to explain right now what I think about that. 12 00:01:16.920 --> 00:01:24.920 There are two main justifications to answer the question why all Austrian economists are pro-free market. 13 00:01:24.920 --> 00:01:32.920 One of them is Ludwig von Mises' consequentialist and utilitarian justification. 14 00:01:32.920 --> 00:01:37.920 This is to say that the consequences of free market are more desirable, 15 00:01:37.920 --> 00:01:43.920 are more for most of the people than the consequences of interventionism. 16 00:01:43.920 --> 00:01:48.920 The other justification is provided by Murray and Rothbard among others, 17 00:01:48.920 --> 00:01:55.920 but Hans-Hermann Hoppe is working on the same path. 18 00:01:55.920 --> 00:02:03.920 So the idea would be based on the natural law and the justifications provided in the Ethics of Liberty 19 00:02:03.920 --> 00:02:10.600 liberty in favor of self-ownership, we can say that a free market is the only morally 20 00:02:10.600 --> 00:02:17.600 justifiable situation, while interventionism is basically immoral. This is the justification 21 00:02:18.940 --> 00:02:25.940 on the separate grounds than economics. Because the paradox that should be explained is how 22 00:02:25.940 --> 00:02:34.460 The paradox that should be explained is, how come a value-free economy such as subjectivist 23 00:02:34.460 --> 00:02:38.580 and the Austrian economist are at the same time also favoring free market? 24 00:02:38.580 --> 00:02:53.300 So this will be the paradox that I will try to address in this paper and in my lecture. 25 00:02:53.300 --> 00:02:59.560 The plan that I will follow will be the following, will be the subsequent one, address subjective 26 00:02:59.560 --> 00:03:05.340 value in the first place, then discuss some subjective implications for economic policy 27 00:03:05.340 --> 00:03:12.340 and assert some further developments, starting with my paper. 28 00:03:12.340 --> 00:03:17.620 Well, the subjective value, of course, most of you already know, so I will not tell you 29 00:03:17.620 --> 00:03:19.340 new things about that. 30 00:03:19.340 --> 00:03:25.140 What is important to notice is that, from my point of view, is Ludwig von Mises who 31 00:03:25.140 --> 00:03:31.220 give us the most coherent and complete definition of subjective value, especially because he 32 00:03:31.220 --> 00:03:39.740 distinguished from marginal utility, and especially because he explained us a kind of three-partite 33 00:03:39.740 --> 00:03:46.700 relationship between the adjunct, the achieved end, and the foregone end. 34 00:03:46.700 --> 00:03:53.140 will be fouling on, suppose you have five dollars, your achieved end will be a beer, 35 00:03:53.140 --> 00:04:00.940 this is from my subjective perspective, right? Then you have the same amount of money and 36 00:04:00.940 --> 00:04:05.860 you will renounce to some other ends that you could achieve with exactly the same amount 37 00:04:05.860 --> 00:04:12.940 of money that is a ticket for the cinema. Well, what Mises explains, it is very simple to 38 00:04:12.940 --> 00:04:16.820 to understand is that the achieve end is superior, 39 00:04:16.820 --> 00:04:20.980 has a superior value from the point of view of the agent 40 00:04:20.980 --> 00:04:25.860 to the means that he employed and also to the foregone end. 41 00:04:25.860 --> 00:04:29.860 This is a situation or the agent choose it freely. 42 00:04:29.860 --> 00:04:32.580 I will come back in a minute. 43 00:04:32.580 --> 00:04:35.940 Well, there are many implications of that. 44 00:04:38.180 --> 00:04:41.780 That is an ordinal evaluation, it's not a cardinal one 45 00:04:41.780 --> 00:04:43.700 and many others. 46 00:04:43.700 --> 00:04:51.180 Well, an important outcome of this idea of subjective value 47 00:04:51.180 --> 00:04:54.420 is developed by Murray Rothbard. 48 00:04:54.420 --> 00:04:58.820 He discussed the concept of demonstrated preference 49 00:04:58.820 --> 00:05:04.060 in his famous article, To Art of Reconstruction of Welfare. 50 00:05:04.060 --> 00:05:07.700 What he points is that, of course, there 51 00:05:07.700 --> 00:05:10.820 must be a real action to have subjective preferences. 52 00:05:10.820 --> 00:05:20.500 You must have a real action to explain that the agent really demonstrates his preferences. 53 00:05:20.500 --> 00:05:26.160 So the question is, how do you know that the agent prefers this and not that, precisely 54 00:05:26.160 --> 00:05:28.140 because you see the real actions. 55 00:05:28.140 --> 00:05:33.540 So the important thing is that the preferences in themselves are real. 56 00:05:33.540 --> 00:05:45.000 One thing is developed by Hayek, the so-called knowledge problem, and he goes on the same 57 00:05:45.000 --> 00:05:56.000 path as Mises, but he puts the accent on the epistemological features of subjectivism by 58 00:05:56.000 --> 00:06:01.620 saying that the subjective value helps individuals to coordinate his plan. 59 00:06:01.620 --> 00:06:15.620 Well, from my point of view, demonstrated preference and known preference, two parts of the same medal is, again, the famous article of Hayek from 1935. 60 00:06:15.620 --> 00:06:26.620 The second part of my presentation will focus on subjective implications for economic policy. 61 00:06:26.620 --> 00:06:32.620 Now, I was briefly explaining things that you probably already know about what is subjectivism. 62 00:06:32.620 --> 00:06:37.620 Now, the question is, what do we do with subjectivism? What is subjectivism good for? 63 00:06:37.620 --> 00:06:41.620 What are the concrete implications of subjectivism? 64 00:06:41.620 --> 00:06:48.620 It is interesting to know, if you go through Human Action, Man Economy and State, and many other Austrian books, 65 00:06:48.620 --> 00:06:54.620 that the implications of subjectivism, besides the methodological debate, besides introductory chapters, 66 00:06:54.620 --> 00:06:59.620 are coming again when it comes to economic policy. 67 00:07:00.140 --> 00:07:05.140 So they are mainly used for tackling interventionism 68 00:07:06.540 --> 00:07:10.020 in general, and many are used especially 69 00:07:10.020 --> 00:07:15.020 for disputing price fixing regulations and other forms. 70 00:07:17.500 --> 00:07:20.260 Say I will focus as an example on price fixing 71 00:07:20.260 --> 00:07:25.260 And it is interesting to see that the objective value 72 00:07:27.180 --> 00:07:31.900 is the theoretical ground of price fixing. 73 00:07:31.900 --> 00:07:34.900 So the question one should ask is, 74 00:07:34.900 --> 00:07:39.420 can we have a price fixing with subjective values? 75 00:07:39.420 --> 00:07:41.560 The answer is obviously no, 76 00:07:41.560 --> 00:07:46.560 because if the individuals are subjectively choosing 77 00:07:46.560 --> 00:07:57.560 The ends of their actions, there is no point to fix prices, there will be a coincidence between the subjective preference and the so-called objective value. 78 00:07:57.560 --> 00:08:09.560 The difference arises when objective value is different from the demonstrated preferences of individuals. 79 00:08:09.560 --> 00:08:13.560 The third element, which is the most important, is cohesion. 80 00:08:13.560 --> 00:08:21.560 And of course, we cannot have price phasing without an enforcement of cohesion. 81 00:08:21.560 --> 00:08:25.560 Because if the price is that individual would choose freely, 82 00:08:25.560 --> 00:08:30.560 it would be the same as the so-called the just price or the objective value. 83 00:08:30.560 --> 00:08:32.560 There would be no point to introduce cohesion. 84 00:08:32.560 --> 00:08:37.560 If we introduce cohesion, it's because we think that they are somehow different. 85 00:08:37.560 --> 00:08:55.560 You see, the three main elements of interventionism are, I think this one, objective value, price fissing and coercion. 86 00:08:55.560 --> 00:09:06.560 Speaking of coercion, I will make a step further and I will try to explain that 87 00:09:06.560 --> 00:09:09.640 are two elements in coercion. 88 00:09:09.640 --> 00:09:13.880 Usually when you're discussing Austrian economics 89 00:09:13.880 --> 00:09:15.880 and we are discussing, we are using subjectivism, 90 00:09:15.880 --> 00:09:18.800 we are especially focusing on one of them. 91 00:09:18.800 --> 00:09:23.600 I will use for my argument the second part of coercion. 92 00:09:23.600 --> 00:09:27.680 So how things are going, you have an action 93 00:09:27.680 --> 00:09:31.140 someone is forcing you to do something else. 94 00:09:31.140 --> 00:09:35.600 So at that point you have demonstrated 95 00:09:35.600 --> 00:09:37.320 or known preferences, 96 00:09:37.320 --> 00:09:40.860 but you have also undemonstrated and unknown preferences. 97 00:09:40.860 --> 00:09:45.860 Precisely because coercion is a win-lose situation, right? 98 00:09:46.040 --> 00:09:50.600 You will have known preferences of the, let's say, 99 00:09:50.600 --> 00:09:52.420 the master, the one who coerces, 100 00:09:52.420 --> 00:09:56.640 and you have undemonstrated unknown preferences 101 00:09:56.640 --> 00:10:00.360 of the, let's say, the slave, the person who is coerced. 102 00:10:00.360 --> 00:10:04.120 You must see coercion as something very complex. 103 00:10:04.120 --> 00:10:06.040 You know, it's not just one thing question. 104 00:10:06.040 --> 00:10:11.040 You have, it's a compound of various situations. 105 00:10:13.680 --> 00:10:17.300 For example, one may be coerced on some segments 106 00:10:17.300 --> 00:10:20.640 of his action, may be coerced by some parts of the day, 107 00:10:20.640 --> 00:10:22.220 not necessarily the whole day. 108 00:10:23.640 --> 00:10:28.160 So, contrary to a normal action where you have, 109 00:10:28.160 --> 00:10:32.520 as I say, free choose ends, you have a win-win situation, 110 00:10:32.520 --> 00:10:35.600 Now, you can see that the no and no preferences 111 00:10:35.600 --> 00:10:36.920 are asymmetrical. 112 00:10:37.800 --> 00:10:42.640 Of course, subjective value applies also to a coercion. 113 00:10:42.640 --> 00:10:45.040 So you must say also that the slave 114 00:10:45.040 --> 00:10:47.760 actually prefers subjectively, 115 00:10:47.760 --> 00:10:50.320 objectively prefers to obey than to disobey 116 00:10:50.320 --> 00:10:55.320 because the threat must be real and must be aware of that. 117 00:10:55.320 --> 00:11:08.560 Anyway, what is probably the important thing to see here is that the question is disrupting 118 00:11:08.560 --> 00:11:14.040 this relationship between subject and preferences. 119 00:11:14.040 --> 00:11:20.260 These unknown and undemonstrated preferences will never be revealed, and it's very important 120 00:11:20.260 --> 00:11:26.260 to see that these are also genuine preferences in the sense that they would have been 121 00:11:26.260 --> 00:11:38.260 choose if the individual was free to do it. So, giving this distinction between 122 00:11:38.260 --> 00:11:48.260 demonstrated and undemonstrated preferences, we can see that is precisely because we adopt 123 00:11:48.260 --> 00:11:55.220 If we adopt a methodological perspective or a subjectivist methodological perspective, 124 00:11:55.220 --> 00:12:01.900 we obtain free market policy and vice versa. 125 00:12:01.900 --> 00:12:06.820 If we want an interventionist policy, it's precisely because we must somehow believe that 126 00:12:06.820 --> 00:12:10.820 there are objective values. 127 00:12:10.820 --> 00:12:15.460 Coming concretely to the implications for economic theory, one point I would like to 128 00:12:15.460 --> 00:12:32.460 What I want to make is to show you that there are, how to put it, the subjective preference may be colors on two ways, descriptive and normative, say, value-free and value-oriented economic policy. 129 00:12:32.460 --> 00:12:45.460 So you have individual preferences. One of the main consequences that Mises himself derived from individual preferences is the fact that they cannot be evaluated from a moral point of view. 130 00:12:45.460 --> 00:12:58.460 You cannot say that one action is perverted. You cannot say that one action is immoral, precisely because you cannot judge, you should not judge what individuals are preferring. 131 00:12:58.460 --> 00:13:06.860 Deferring, and all this is in human action, value-free, based on value-free praxeology. 132 00:13:06.860 --> 00:13:12.460 Well it is interesting to see that it's practically the same consequence that a moral philosopher 133 00:13:12.460 --> 00:13:22.460 is writing in the tradition of classical liberalism are deriving, Locke and his followers and 134 00:13:22.460 --> 00:13:27.380 contemporary libertarians, Walter Block, will probably say the same point of view, there 135 00:13:27.380 --> 00:13:32.420 There is no such thing as perversion in as much as there is no coercion, as the perverted 136 00:13:32.420 --> 00:13:36.040 are not, is not coercing someone. 137 00:13:36.040 --> 00:13:40.380 The second consequence is that the values cannot be measured or compared. 138 00:13:40.380 --> 00:13:46.900 Well, the same, again, is the same, this idea can be colored from a moral point of view. 139 00:13:46.900 --> 00:13:52.180 Say, it's the same consequence that a moral philosopher writing classical liberalism 140 00:13:52.180 --> 00:13:53.180 are saying. 141 00:13:53.180 --> 00:13:59.740 For example, one of the famous writers, Isaiah Berlin, he says basically the same thing, 142 00:13:59.740 --> 00:14:06.900 that subjective preferences cannot be compared or measured. 143 00:14:06.900 --> 00:14:14.180 This is the case because subjective and objective value, that is, value is a very thick concept. 144 00:14:14.180 --> 00:14:18.180 You have altogether descriptive and normative dimension. 145 00:14:18.180 --> 00:14:24.820 So they are somehow associated together and I think from my point of view is precisely 146 00:14:24.820 --> 00:14:31.820 in this sense that this kind of intuitions that von Mises and other Austrian economists 147 00:14:31.820 --> 00:14:35.260 have are going. 148 00:14:35.260 --> 00:14:44.260 So this association between value judgments and subjective value judgments and liberalism. 149 00:14:44.260 --> 00:14:53.940 say, you can practically see a perfect opposition between subjectivist and objective value and 150 00:14:53.940 --> 00:14:59.780 you can see a perfect opposition between the economic policy that are deriving from these 151 00:14:59.780 --> 00:15:03.140 points of view. 152 00:15:03.140 --> 00:15:09.940 What I was explaining to you until now was that it's not astonishing that most Austrian 153 00:15:09.940 --> 00:15:18.140 and economics are all together value free and they are adopting a free market policy. 154 00:15:18.140 --> 00:15:28.420 This is coming from their subjective methodology precisely and there is no problem with that. 155 00:15:28.420 --> 00:15:33.500 Well, what I didn't show you until now and what I will not show you today but the next 156 00:15:33.500 --> 00:15:42.780 this year is why should one choose a subjective and therefore a free market economic policy. 157 00:15:42.780 --> 00:15:48.780 So this was an explanation of free market orientation of Austrian economics, but I didn't 158 00:15:48.780 --> 00:15:55.820 say why should this be the case, why should Austrians, why should one be Austrian, to put 159 00:15:55.820 --> 00:15:56.820 it like that. 160 00:15:56.820 --> 00:16:10.820 Of course, I didn't explain you by a psychological or a sociological inquiry why all people that are writing in this tradition are precisely writing in this tradition. 161 00:16:10.820 --> 00:16:16.820 So this will be a further development that I will try to write down. 162 00:16:16.820 --> 00:16:27.260 So, my guess is that subjectivism can be mobilized to justify a free market policy, not only 163 00:16:27.260 --> 00:16:32.180 to explain that, precisely for the reason that I just indicated, because value is a 164 00:16:32.180 --> 00:16:39.940 thick concept. And even rhetorically speaking, I think it's much more convincing an argument 165 00:16:39.940 --> 00:16:45.380 based on subjectivism, then on argument based on a moral principle. 166 00:16:45.380 --> 00:16:56.380 Second, a development that I foresee is because in the light of this subjectivist interpretation, 167 00:16:56.380 --> 00:17:02.260 one can better explain, in my sense, the distinction between various intellectual tradition on 168 00:17:02.260 --> 00:17:03.260 the free market. 169 00:17:03.260 --> 00:17:07.540 Of course, you are aware of the fact that you have a long range going from classical 170 00:17:07.540 --> 00:17:12.540 for liberals, mean-archists and anarcho-capitalist libertarians. 171 00:17:13.700 --> 00:17:18.000 Well, there are disagreements between these traditions 172 00:17:18.000 --> 00:17:22.360 and I think that is precisely the systematic application 173 00:17:22.360 --> 00:17:25.500 of subjectivism that gives this difference. 174 00:17:25.500 --> 00:17:29.400 For example, some people think that some scholars, 175 00:17:29.400 --> 00:17:33.440 say classical liberals, think that national defense 176 00:17:33.440 --> 00:17:37.060 or individual security is objective, 177 00:17:37.060 --> 00:17:38.900 is based somehow on an objective value. 178 00:17:38.900 --> 00:17:43.620 That's why this should be enforced. 179 00:17:44.700 --> 00:17:46.140 And the consequence, of course, 180 00:17:46.140 --> 00:17:49.220 would be a price fixing on a security issue. 181 00:17:49.220 --> 00:17:52.500 So, to put it differently, I think that 182 00:17:53.500 --> 00:17:55.860 different types of subjectivism 183 00:17:55.860 --> 00:18:00.860 that are not based on extensions to knowledge 184 00:18:01.060 --> 00:18:06.060 or other ultra-subjectivist 185 00:18:07.060 --> 00:18:15.060 points of view, but it's between the segments of reality to which subjectivism is applied. 186 00:18:15.060 --> 00:18:23.060 It's the same thing I was explaining to you previously with coercion. So you don't have only one concept of coercion. 187 00:18:23.060 --> 00:18:29.060 You have segments of reality that may be under coercion or not. 188 00:18:29.060 --> 00:18:33.380 or not, as a parallel, take the example of water. 189 00:18:33.380 --> 00:18:38.380 This was the main invention of marginal revolution, 190 00:18:38.700 --> 00:18:41.740 that you don't have water, you have glasses of water. 191 00:18:41.740 --> 00:18:44.120 I think the question is the same. 192 00:18:45.700 --> 00:18:47.700 And third, the calculation debate. 193 00:18:47.700 --> 00:18:51.460 This is an age-old story, I will not go through, 194 00:18:51.460 --> 00:18:53.940 especially because I'm out of time, 195 00:18:53.940 --> 00:18:58.940 but age-old, that is, age of Austrian economics, right? 196 00:18:58.940 --> 00:19:23.940 Well, based on what I've said on subjectivists, until now, I believe that Rothbardians' demonstrated preferences are not incompatible, but precisely they are one side of the known preferences of Hayek and vice versa. 197 00:19:23.940 --> 00:19:33.180 There is no opposition on why a socialist society wouldn't work, but is kind of complementarity. 198 00:19:33.180 --> 00:19:38.780 And you can see that because you make one step back and you see that both of them are 199 00:19:38.780 --> 00:19:41.600 defending a subjective value. 200 00:19:41.600 --> 00:19:45.100 Of course there may be disagreements then about the application of subjective value at the 201 00:19:45.100 --> 00:19:50.260 different, as I said, segments of reality. 202 00:19:50.260 --> 00:19:56.260 So, I thank you very much for your attention, looking forward to answer the questions.