WEBVTT NOTE 26. Utilitarian Free-Market Economics 1 00:00:00.000 --> 00:00:06.000 Part 4. Modern Alternative Theories of Liberty. 2 00:00:06.000 --> 00:00:14.000 Having presented our theory of liberty and property rights and discussed the inherent role of the state vis-a-vis liberty, 3 00:00:14.000 --> 00:00:21.000 we turn in this part of the work to a discussion and critique of several leading alternative theories of liberty 4 00:00:21.000 --> 00:00:29.000 brought forth in the modern world by those who are very roughly in the free market or classical liberal tradition. 5 00:00:29.000 --> 00:00:34.160 Whatever the other merits of these theories, they will be seen to provide a flawed and 6 00:00:34.160 --> 00:00:42.840 inadequate foundation for a systematic theory of liberty and the rights of the individual. 7 00:00:42.840 --> 00:00:46.720 CHAPTER 26 UTILITARIAN FREE MARKET ECONOMICS 8 00:00:46.720 --> 00:00:55.080 A. INTRODUCTION. UTILITARIAN SOCIAL PHILOSOPHY 9 00:00:55.080 --> 00:01:01.040 This emerged as a distinct self-conscious science or discipline in the 19th century, 10 00:01:01.040 --> 00:01:08.780 and hence this development unfortunately coincided with the dominance of utilitarianism in philosophy. 11 00:01:08.780 --> 00:01:14.320 The social philosophy of economists, therefore, whether the laissez-faire creed of the 19th 12 00:01:14.320 --> 00:01:20.720 century or the statism of the 20th, has almost invariably been grounded in utilitarian social 13 00:01:20.720 --> 00:01:22.660 philosophy. 14 00:01:22.660 --> 00:01:28.500 Even today, political economy abounds with discussion of the weighing of social costs 15 00:01:28.500 --> 00:01:33.900 and social benefits in deciding upon public policy. 16 00:01:33.900 --> 00:01:39.620 We cannot engage here in a critique of utilitarianism as an ethical theory. 17 00:01:39.620 --> 00:01:45.500 Here we are interested in analyzing certain attempts to use a utilitarian ethic to provide 18 00:01:45.500 --> 00:01:51.660 a defensible groundwork for a libertarian or laissez-faire ideology. 19 00:01:51.660 --> 00:01:58.020 Our brief criticisms will concentrate, then, on utilitarianism insofar as it has been used 20 00:01:58.020 --> 00:02:05.540 as a groundwork for a libertarian, or quasi-libertarian, political philosophy. 21 00:02:05.540 --> 00:02:11.780 In brief, utilitarian social philosophy holds the good policy to be the one that yields 22 00:02:11.780 --> 00:02:17.780 the greatest good for the greatest number, in which each person counts for one in making 23 00:02:17.780 --> 00:02:28.780 and in which the good is held to be the fullest satisfaction of the purely subjective desires of the individuals in society. 24 00:02:28.780 --> 00:02:43.780 Utilitarians, like economists, see further below, like to think of themselves as scientific and value-free and their doctrine supposedly permits them to adopt a virtually value-free stance, 25 00:02:43.780 --> 00:02:55.780 For they are presumably not imposing their own values, but simply recommending the greatest possible satisfaction of the desires and wants of the mass of the population. 26 00:02:55.780 --> 00:03:11.780 But this doctrine is hardly scientific, and by no means value free. For one thing, why the greatest number? Why is it ethically better to follow the wishes of the greater as against the lesser number? 27 00:03:11.780 --> 00:03:17.860 What's so good about the greatest number? Suppose that the vast majority of people in 28 00:03:17.860 --> 00:03:24.300 a society hate and revile redheads and greatly desire to murder them, and suppose further 29 00:03:24.300 --> 00:03:31.460 that there are only a few redheads extant at any time. Must we then say that it is good 30 00:03:31.460 --> 00:03:39.540 for the vast majority to slaughter redheads? And if not, why not? At the very least, then, 31 00:03:39.540 --> 00:03:45.260 Utilitarianism scarcely suffices to make a case for liberty and laissez-faire. 32 00:03:45.260 --> 00:03:51.340 As Felix Adler Reilly put it, utilitarians pronounce the greatest happiness of the greatest 33 00:03:51.340 --> 00:03:57.280 number to be the social end, although they fail to make it intelligible why the happiness 34 00:03:57.280 --> 00:04:02.540 of the greater number should be cogent as an end upon those who happen to belong to 35 00:04:02.540 --> 00:04:04.740 the lesser number. 36 00:04:04.740 --> 00:04:21.740 Secondly, what is the justification for each person counting for one? Why not some system of waiting? This too seems to be an unexamined and therefore unscientific article of faith in utilitarianism. 37 00:04:21.740 --> 00:04:30.700 Thirdly, why is the good only fulfilling the subjective emotional desires of each person? 38 00:04:30.700 --> 00:04:35.780 Why can there be no supra-subjective critique of these desires? 39 00:04:35.780 --> 00:04:43.260 Indeed, utilitarianism implicitly assumes these subjective desires to be absolute givens, 40 00:04:43.260 --> 00:04:48.940 which the social technician is somehow duty-bound to try to satisfy. 41 00:04:48.940 --> 00:04:55.820 But it is common human experience that individual desires are not absolute and unchanging. 42 00:04:55.820 --> 00:05:02.380 They are not hermetically sealed off from persuasion, rational or otherwise. 43 00:05:02.380 --> 00:05:08.140 Experience and other individuals can and do persuade and convince people to change their 44 00:05:08.140 --> 00:05:09.500 values. 45 00:05:09.500 --> 00:05:16.180 But how could that be so if all individual desires and values are pure givens and therefore 46 00:05:16.180 --> 00:05:22.340 are not subject to alteration by the intersubjective persuasion of others. 47 00:05:22.340 --> 00:05:27.980 But if these desires are not givens and they are changeable by the persuasion of moral 48 00:05:27.980 --> 00:05:35.620 argument, it would then appear that intersubjective moral principles do exist that can be argued 49 00:05:35.620 --> 00:05:39.580 and can have an impact on others. 50 00:05:39.580 --> 00:05:46.420 Oddly enough, while utilitarianism assumes that morality, the good, is purely subjective 51 00:05:46.420 --> 00:05:52.240 to each individual, it assumes, on the other hand, that these subjective desires can be 52 00:05:52.240 --> 00:05:58.620 added, subtracted and weighed across the various individuals in society. 53 00:05:58.620 --> 00:06:05.860 It assumes that individual subjective utilities and costs can be added, subtracted and measured 54 00:06:05.860 --> 00:06:12.960 so as to arrive at a net social utility or social cost, thus permitting the utilitarian 55 00:06:12.960 --> 00:06:17.640 to advise for or against a given social policy. 56 00:06:17.640 --> 00:06:24.520 Furthermore, some preferences, such as someone's desire to see an innocent person suffer, seem 57 00:06:24.520 --> 00:06:27.720 immoral on objective grounds. 58 00:06:27.720 --> 00:06:33.660 Yet a utilitarian must hold that they, fully as much as the most innocuous or altruistic 59 00:06:33.660 --> 00:06:38.380 Preferences must be included in the quantitative reckoning. 60 00:06:38.380 --> 00:06:43.420 I am indebted to Dr. David Gordon for this point. 61 00:06:43.420 --> 00:06:49.820 Modern welfare economics is particularly adept at arriving at estimates, even allegedly precise 62 00:06:49.820 --> 00:06:55.460 quantitative ones, of social cost and social utility. 63 00:06:55.460 --> 00:07:01.860 But economics does correctly inform us not that moral principles are subjective, but 64 00:07:01.860 --> 00:07:09.340 Note that utilities and costs are, indeed, subjective. Individual utilities are purely 65 00:07:09.340 --> 00:07:15.740 subjective and ordinal, and therefore it is totally illegitimate to add or weight them 66 00:07:15.740 --> 00:07:21.460 to arrive at any estimate for social utility or cost. 67 00:07:21.460 --> 00:07:31.500 b. The Unanimity and Compensation Principles Utilitarian economists, even more than their 68 00:07:31.500 --> 00:07:37.700 Their Philosophic Confrères are eager to make scientific and value-free pronouncements 69 00:07:37.700 --> 00:07:39.440 on public policy. 70 00:07:39.440 --> 00:07:45.820 Believing, however, that ethics are purely arbitrary and subjective, how may economists 71 00:07:45.820 --> 00:07:49.140 then take policy positions? 72 00:07:49.140 --> 00:07:55.340 This chapter will explore ways in which utilitarian free-market economists presume to favor a 73 00:07:55.340 --> 00:08:21.340 One important utilitarian variant is the unanimity principle, based on the criterion of Pareto optimality, that a political policy is good if one or more people are better off in terms of satisfying utilities from that policy, while no one is worse off. 74 00:08:21.340 --> 00:08:29.900 A strict version of Pareto optimality implies unanimity, that every person agrees to, hence 75 00:08:29.900 --> 00:08:35.720 believes that he will be better off, or at least no worse off, from a particular government 76 00:08:35.720 --> 00:08:37.660 action. 77 00:08:37.660 --> 00:08:42.600 In recent years, the unanimity principle as groundwork for a free market of voluntary 78 00:08:42.600 --> 00:08:48.600 and contractual agreements has been stressed by Professor James Buchanan. 79 00:08:48.600 --> 00:08:54.720 The unanimity principle has great attractions for value-free economists eager to make policy 80 00:08:54.720 --> 00:09:00.560 judgments for far more than in the case of mere majority rule. 81 00:09:00.560 --> 00:09:07.400 Surely the economist can safely advocate a policy if everyone in the society favors it. 82 00:09:07.400 --> 00:09:13.000 While the unanimity principle may at first appear superficially attractive to libertarians, 83 00:09:13.000 --> 00:09:18.400 however, there is at its heart a vital and irredeemable flaw. 84 00:09:18.400 --> 00:09:25.120 that the goodness of free contracts or unanimously approved changes from the existing situation 85 00:09:25.120 --> 00:09:31.840 depends completely on the goodness or justice of that existing situation itself. 86 00:09:31.840 --> 00:09:38.240 Yet neither Pareto optimality nor its unanimity principle variant can say anything about the 87 00:09:38.240 --> 00:09:45.320 goodness or justice of the existing status quo, concentrating as they do solely on changes 88 00:09:45.320 --> 00:09:52.520 is from that situation or zero point. Neither does the unanimity principle, as will be 89 00:09:52.520 --> 00:09:58.700 shown further below, keep the economist from making his own value judgments and thus breaching 90 00:09:58.700 --> 00:10:06.320 his value freedom, for even if the economist merely shares in everyone else's value judgment, 91 00:10:06.320 --> 00:10:14.200 he is making a value judgment, nevertheless. Not only that, but the requirement of unanimous 92 00:10:14.200 --> 00:10:20.560 This approval of changes necessarily freezes the existing status quo. 93 00:10:20.560 --> 00:10:26.000 If the status quo is unjust or repressive of liberty, then the unanimity principle is a 94 00:10:26.000 --> 00:10:32.400 grave barrier to justice and liberty, rather than a bulwark on its behalf. 95 00:10:32.400 --> 00:10:37.960 The economist who advocates the unanimity principle as a seemingly value-free pronouncement 96 00:10:37.960 --> 00:10:44.600 for Liberty is instead making a massive and totally unsupported value judgment on behalf 97 00:10:44.600 --> 00:10:47.880 of freezing the status quo. 98 00:10:47.880 --> 00:10:54.040 The commonly accepted compensation principle variant of Pareto optimality contains all 99 00:10:54.040 --> 00:11:00.200 the flaws of the strict unanimity principle, while adding many of its own. 100 00:11:00.200 --> 00:11:06.100 The compensation principle asserts that a public policy is good if the gainers in utility 101 00:11:06.100 --> 00:11:12.820 Utility from that policy can compensate the losers and still enjoy net gains, so that 102 00:11:12.820 --> 00:11:18.580 while there are losers in utility from this policy at the beginning, there are no such 103 00:11:18.580 --> 00:11:22.700 losers after the compensations take place. 104 00:11:22.700 --> 00:11:28.620 But the compensation principle assumes that it is conceptually possible to add and subtract 105 00:11:28.620 --> 00:11:35.260 utilities interpersonally, and thereby to measure gains and losses. 106 00:11:35.260 --> 00:11:42.540 It also assumes that each individual's gains and losses can be precisely estimated. 107 00:11:42.540 --> 00:11:49.320 But economics informs us that utility, and hence gains and losses in utility, are purely 108 00:11:49.320 --> 00:11:55.940 subjective and psychic concepts, and that they cannot possibly be measured or even estimated 109 00:11:55.940 --> 00:11:58.540 by outside observers. 110 00:11:58.540 --> 00:12:04.400 Compensations and losses in utility, therefore, cannot be added, measured or weighted against 111 00:12:04.400 --> 00:12:10.400 each other, and much less can precise compensations be discovered. 112 00:12:10.400 --> 00:12:16.500 The usual assumption by economists is to measure psychic losses in utility by the monetary 113 00:12:16.500 --> 00:12:18.540 price of an asset. 114 00:12:18.540 --> 00:12:25.820 Thus, if a railroad damages the land of a farmer by smoke, it is assumed by the compensationists 115 00:12:25.820 --> 00:12:30.740 that the farmer's loss can be measured by the market price of the land. 116 00:12:30.740 --> 00:12:35.780 But this assumption ignores the fact that the farmer may well have a psychic attachment 117 00:12:35.780 --> 00:12:41.960 to that land which is far greater than the market price, and that furthermore it is impossible 118 00:12:41.960 --> 00:12:47.580 to find out what the farmer's psychic attachment to the land may be. 119 00:12:47.580 --> 00:12:52.700 Asking the farmer is useless, since he may say, for example, that his attachment to the 120 00:12:52.700 --> 00:12:58.220 The land is much higher than the market price, but he may well be lying. 121 00:12:58.220 --> 00:13:04.860 The government, or other outside observer, has no way of finding out one way or the other. 122 00:13:04.860 --> 00:13:11.460 Furthermore, the existence in the society of just one militant anarchist, whose psychic 123 00:13:11.460 --> 00:13:17.540 grievance against government is such that he cannot be compensated for his psychic disutility 124 00:13:17.540 --> 00:13:24.340 from the Existence or Activity of Government is enough by itself to destroy the Compensation 125 00:13:24.340 --> 00:13:28.860 Principle case for any government action whatsoever. 126 00:13:28.860 --> 00:13:34.140 And surely at least one such anarchist exists. 127 00:13:34.140 --> 00:13:40.300 A stark but not atypical example of the fallacies and the unjust devotion to the status quo 128 00:13:40.300 --> 00:13:45.260 of the Compensation Principle was the debate in the British Parliament during the early 129 00:13:45.260 --> 00:13:49.700 Early 19th century on the abolition of slavery. 130 00:13:49.700 --> 00:13:54.840 Early adherents of the compensation principle were there maintaining that the masters must 131 00:13:54.840 --> 00:13:59.540 be compensated for the loss of their investment in slaves. 132 00:13:59.540 --> 00:14:05.180 At which point, Benjamin Pearson, a member of the Libertarian Manchester School, declared 133 00:14:05.180 --> 00:14:10.060 that he had thought it was the slaves who should have been compensated. 134 00:14:10.060 --> 00:14:17.340 Precisely, here is a striking example of the need in advocating public policy to have some 135 00:14:17.340 --> 00:14:21.540 ethical system, some concept of justice. 136 00:14:21.540 --> 00:14:27.460 Those of us ethicists who hold that slavery is criminal and unjust would always oppose 137 00:14:27.460 --> 00:14:33.060 the idea of compensating the masters, and would rather think in terms of requiring the 138 00:14:33.060 --> 00:14:38.100 masters to compensate the slaves for their years of oppression. 139 00:14:38.100 --> 00:14:44.340 But the value-free economist, resting on the unanimity and compensation principles, is, 140 00:14:44.340 --> 00:14:52.160 on the contrary, implicitly placing his unsupported and arbitrary value imprimatur on the unjust 141 00:14:52.160 --> 00:14:54.940 status quo. 142 00:14:54.940 --> 00:14:59.820 In a fascinating exchange with a critic of the unanimity principle, Professor Buchanan 143 00:14:59.820 --> 00:15:06.500 concedes that, I am defending the status quo not because I like it, I do not. 144 00:15:06.500 --> 00:15:12.700 But my defense of the status quo stems from my unwillingness, indeed, inability, to discuss 145 00:15:12.700 --> 00:15:17.060 changes other than those that are contractual in nature. 146 00:15:17.060 --> 00:15:23.180 I can, of course, lay down my own notions, but to me this is simply wasted effort. 147 00:15:23.180 --> 00:15:30.620 Thus, tragically, Buchanan, admitting that his idea of ethics is one of purely subjective 148 00:15:30.620 --> 00:15:43.620 is yet willing to promulgate what can only be an equally subjective and arbitrary notion on his own grounds, a defense of the status quo. 149 00:15:43.620 --> 00:15:58.620 Buchanan concedes that his procedure does allow me to take a limited step toward normative judgments or hypotheses, namely to suggest that the changes seem to be potentially agreeable to everyone. 150 00:15:58.620 --> 00:16:03.980 Pareto-efficient changes, which must, of course, include compensations. 151 00:16:03.980 --> 00:16:08.300 The criterion in my scheme is agreement. 152 00:16:08.300 --> 00:16:12.580 But what is the justification for this limited step? 153 00:16:12.580 --> 00:16:19.100 What's so great about agreement on changes from a possibly unjust status quo? 154 00:16:19.100 --> 00:16:24.780 Isn't such a limited step also an arbitrary notion for Buchanan? 155 00:16:24.780 --> 00:16:30.820 And if willing to proceed to such an unsatisfactory limit, why not go still further to question 156 00:16:30.820 --> 00:16:33.500 the status quo? 157 00:16:33.500 --> 00:16:39.860 Buchanan proceeds to assert that our task is really that of trying to find, locate, 158 00:16:39.860 --> 00:16:48.060 invent schemes that can command unanimous or quasi-unanimous consent and propose them. 159 00:16:48.060 --> 00:16:52.060 What in the world is quasi-unanimity? 160 00:16:52.060 --> 00:16:58.580 Since persons disagree on so much, these schemes may be a very limited set, and this may suggest 161 00:16:58.580 --> 00:17:05.180 to you that few changes are possible, hence the status quo defended indirectly. 162 00:17:05.180 --> 00:17:12.100 The status quo has no propriety at all save for its existence, and it is all that exists. 163 00:17:12.100 --> 00:17:19.180 The point I always emphasize is that we start from here, not from somewhere else. 164 00:17:19.180 --> 00:17:26.780 Here one longs for Lord Acton's noble dictum, liberalism wishes for what ought to be, irrespective 165 00:17:26.780 --> 00:17:29.780 of what is. 166 00:17:29.780 --> 00:17:35.120 Buchanan's critic, though far from a libertarian or a free-market liberal, here properly has 167 00:17:35.120 --> 00:17:41.980 the last word, I certainly do not totally object to seeking contractual solutions, but 168 00:17:41.980 --> 00:17:47.740 I do think that they can't be projected in a vacuum which allows the status quo power 169 00:17:47.740 --> 00:18:07.300 Let us now turn to the position of Ludwig von Mises on the entire matter of praxeology, 170 00:18:07.300 --> 00:18:11.580 value judgments and the advocacy of public policy. 171 00:18:11.580 --> 00:18:17.460 The case of Mises is particularly interesting, for he was, of all the economists in the 20th 172 00:18:17.460 --> 00:18:23.180 century, at one and the same time the most uncompromising and passionate adherent of 173 00:18:23.180 --> 00:18:30.740 laissez-faire, and the most rigorous and uncompromising advocate of value-free economics and opponent 174 00:18:30.740 --> 00:18:33.940 of any sort of objective ethics. 175 00:18:33.940 --> 00:18:39.180 How then did he attempt to reconcile these two positions? 176 00:18:39.180 --> 00:18:43.820 Mises offered two separate and very different solutions to this problem. 177 00:18:43.820 --> 00:18:47.060 The first is a variant of the unanimity principle. 178 00:18:47.060 --> 00:18:53.500 Essentially, this variant affirms that an economist per se cannot say that a given governmental 179 00:18:53.500 --> 00:18:56.380 policy is good or bad. 180 00:18:56.380 --> 00:19:03.940 However, if a given policy will lead to consequences, as explained by praxeology, which every one 181 00:19:03.940 --> 00:19:11.100 of the supporters of the policy will agree is bad, then the value-free economist is justified 182 00:19:11.100 --> 00:19:18.140 in Calling the Policy a Bad One. Thus, Mises writes, an economist investigates whether 183 00:19:18.140 --> 00:19:24.780 a measure A can bring about the result P for the attainment of which it is recommended, 184 00:19:24.780 --> 00:19:30.980 and finds that A does not result in P, but in G, an effect which even the supporters 185 00:19:30.980 --> 00:19:38.020 of the measure A consider undesirable. If the economist states the outcome of his investigation 186 00:19:38.020 --> 00:19:59.920 And again, economics does not say that government interference with the prices of only one commodity 187 00:19:59.920 --> 00:20:03.500 is unfair, bad, or unfeasible. 188 00:20:03.500 --> 00:20:09.540 It says that it makes conditions worse, not better, from the point of view of the government 189 00:20:09.540 --> 00:20:13.480 and those backing its interference. 190 00:20:13.480 --> 00:20:19.220 Now this is surely an ingenious attempt to allow pronouncements of good or bad by the 191 00:20:19.220 --> 00:20:23.240 economist without making a value judgment. 192 00:20:23.240 --> 00:20:28.840 For the economist is supposed to be only a praxeologist, a technician, pointing out 193 00:20:28.840 --> 00:20:35.320 to his readers or listeners that they will all consider a policy bad once he reveals its 194 00:20:35.320 --> 00:20:37.960 full consequences. 195 00:20:37.960 --> 00:20:42.280 But ingenious as it is, the attempt completely fails. 196 00:20:42.280 --> 00:20:48.720 For how does Mises know what the advocates of the particular policy consider desirable? 197 00:20:48.720 --> 00:20:54.300 How does he know what their value scales are now or what they will be when the consequences 198 00:20:54.300 --> 00:20:56.860 of the measure appear? 199 00:20:56.860 --> 00:21:02.780 One of the great contributions of praxeologic economics is that the economist realizes that 200 00:21:02.780 --> 00:21:09.580 he doesn't know what anyone's value scales are except as those value preferences are 201 00:21:09.580 --> 00:21:14.380 demonstrated by a person's concrete action. 202 00:21:14.380 --> 00:21:21.060 Mises himself emphasized that one must not forget that the scale of values or wants manifests 203 00:21:21.060 --> 00:21:25.220 itself only in the reality of action. 204 00:21:25.220 --> 00:21:31.960 These scales have no independent existence apart from the actual behavior of individuals. 205 00:21:31.960 --> 00:21:37.740 The only source from which our knowledge concerning these scales is derived is the observation 206 00:21:37.740 --> 00:21:40.180 of a man's actions. 207 00:21:40.180 --> 00:21:45.700 Every action is always in perfect agreement with the scale of values or wants because 208 00:21:45.700 --> 00:21:53.060 these scales are nothing but an instrument for the interpretation of a man's acting. 209 00:21:53.060 --> 00:21:58.720 In Mises' own analysis, then, how can the economist know what the motives for advocating 210 00:21:58.720 --> 00:22:05.640 various policies really are, or how people will regard the consequences of these policies? 211 00:22:05.640 --> 00:22:13.040 Thus, Mises, qua economist, may show that price control, to use his example, will lead 212 00:22:13.040 --> 00:22:17.320 to unforeseen shortages of a good to the consumers. 213 00:22:17.320 --> 00:22:23.360 But how does Mises know that some advocates of price control do not want shortages? 214 00:22:23.360 --> 00:22:29.080 They may, for example, be socialists, anxious to use the controls as a step toward full 215 00:22:29.080 --> 00:22:30.920 collectivism. 216 00:22:30.920 --> 00:22:36.760 Some may be egalitarians who prefer shortages because the rich will not be able to use their 217 00:22:36.760 --> 00:22:41.360 money to buy more of the product than poorer people. 218 00:22:41.360 --> 00:22:46.280 Some may be nihilists, eager to see shortages of goods. 219 00:22:46.280 --> 00:22:51.040 Others may be one of the numerous legion of contemporary intellectuals who are eternally 220 00:22:51.040 --> 00:22:56.840 complaining about the excessive affluence of our society or about the great waste of 221 00:22:56.840 --> 00:22:58.400 energy. 222 00:22:58.400 --> 00:23:02.040 They may all delight in the shortages of goods. 223 00:23:02.040 --> 00:23:07.280 Still others may favor price control even after learning of the shortages because they 224 00:23:07.280 --> 00:23:15.400 or their political allies will enjoy well-paying jobs or power in the price control bureaucracy. 225 00:23:15.400 --> 00:23:21.800 All sorts of such possibilities exist, and none of them is compatible with Mises' asserting 226 00:23:21.800 --> 00:23:29.160 as a value-free economist that all the supporters of the price control or of any other government 227 00:23:29.160 --> 00:23:35.520 intervention must concede after learning economics that the measure is bad. 228 00:23:35.520 --> 00:23:42.480 In fact, once Mises concedes that even a single advocate of price control or any other interventionist 229 00:23:42.480 --> 00:23:50.200 measure may acknowledge the economic consequences and still favor it for whatever reason, then 230 00:23:50.200 --> 00:23:56.820 Mises as a praxeologist and economist can no longer call any of these measures bad or 231 00:23:56.820 --> 00:24:03.080 good or even appropriate or inappropriate without inserting into his economic policy 232 00:24:03.080 --> 00:24:09.280 pronouncements the very value judgments that Mises himself holds to be inadmissible in 233 00:24:09.280 --> 00:24:12.260 a scientist of human action. 234 00:24:12.260 --> 00:24:18.780 For then, he is no longer being a technical reporter to all advocates of a certain policy, 235 00:24:18.780 --> 00:24:24.820 but himself an advocate, participating on one side of a value conflict. 236 00:24:24.820 --> 00:24:31.000 Moreover, there is another fundamental reason for advocates of inappropriate policies to 237 00:24:31.000 --> 00:24:36.980 refuse to change their minds even after hearing and acknowledging the praxeological chain 238 00:24:36.980 --> 00:24:39.120 of consequences. 239 00:24:39.120 --> 00:24:45.480 Our praxeology may indeed show that all types of government policies will have consequences 240 00:24:45.480 --> 00:24:49.600 that most people, at least, will tend to abhor. 241 00:24:49.600 --> 00:24:56.800 However, and this is a vital qualification, most of these consequences take time, some 242 00:24:56.800 --> 00:24:59.200 a great deal of time. 243 00:24:59.200 --> 00:25:05.120 No economist has done more than Ludwig von Mises to elucidate the universality of time 244 00:25:05.120 --> 00:25:08.000 preference in human affairs. 245 00:25:08.000 --> 00:25:16.200 The praxeologic law that everyone prefers to attain a given satisfaction sooner than later. 246 00:25:16.200 --> 00:25:22.080 And certainly Mises, as a value-free scientist, could never presume to criticize anyone's 247 00:25:22.080 --> 00:25:28.720 rate of time preference, to say that A's was too high or B's too low. 248 00:25:28.720 --> 00:25:33.920 But in that case, what about the high time preference people in society who may retort 249 00:25:33.920 --> 00:25:36.320 to the praxeologist? 250 00:25:36.320 --> 00:25:41.660 Perhaps this high tax and subsidy policy will lead to a decline of capital. 251 00:25:41.660 --> 00:25:46.200 Perhaps even the price control will lead to shortages, but I don't care. 252 00:25:46.200 --> 00:25:52.260 Having a high time preference, I value more highly the short-run subsidies or the short-run 253 00:25:52.260 --> 00:25:57.680 enjoyment of buying the current good at cheaper prices than the prospect of suffering the 254 00:25:57.680 --> 00:26:00.360 future consequences. 255 00:26:00.360 --> 00:26:07.400 And Mises, as a value-free scientist and opponent of any concept of objective ethics, cannot 256 00:26:07.400 --> 00:26:09.480 call them wrong. 257 00:26:09.480 --> 00:26:15.640 There is no way that he can assert the superiority of the long run over the short run without 258 00:26:15.640 --> 00:26:22.960 overriding the values of the high time preference people, and this cannot be cogently done without 259 00:26:22.960 --> 00:26:27.480 abandoning his own subjectivist ethics. 260 00:26:27.480 --> 00:26:33.160 In this connection, one of Mises' basic arguments for the free market is that on the market 261 00:26:33.160 --> 00:26:40.120 there is a harmony of the rightly understood interests of all members of the market society. 262 00:26:40.120 --> 00:26:46.600 It is clear from his discussion that he doesn't merely mean interests after learning the praxeological 263 00:26:46.600 --> 00:26:51.700 consequences of market activity or of government intervention. 264 00:26:51.700 --> 00:27:00.060 He also and in particular means people's long run interests, for as Mises states, for rightly 265 00:27:00.060 --> 00:27:05.720 understood interests we may as well say interests in the long run. 266 00:27:05.720 --> 00:27:12.080 But what about the high time preference folk who prefer to consult their short run interests? 267 00:27:12.080 --> 00:27:16.100 How can the long run be called better than the short run? 268 00:27:16.100 --> 00:27:21.060 Why must right understanding necessarily be the long run? 269 00:27:21.060 --> 00:27:27.380 We see, therefore, that Mises' attempt to advocate laissez-faire while remaining value-free, 270 00:27:27.380 --> 00:27:32.740 by assuming that all of the advocates of government intervention will abandon their position once 271 00:27:32.740 --> 00:27:38.980 they learn of its consequences, falls completely to the ground. 272 00:27:38.980 --> 00:27:44.640 There is another and very different way, however, that Mises attempts to reconcile his passionate 273 00:27:44.640 --> 00:27:51.100 Advocacy of Laissez-Faire with the Absolute Value Freedom of the Scientist. 274 00:27:51.100 --> 00:27:57.920 This is to take a position much more compatible with praxeology, by recognizing that the economist 275 00:27:57.920 --> 00:28:05.620 qua-economist can only trace chains of cause and effect and may not engage in value judgments 276 00:28:05.620 --> 00:28:09.140 or advocate public policy. 277 00:28:09.140 --> 00:28:15.460 This route of Mises concedes that the economic scientist cannot advocate laissez-faire, but 278 00:28:15.460 --> 00:28:23.940 then adds that he as a citizen can do so. Mises as a citizen then proposes a value system, 279 00:28:23.940 --> 00:28:30.780 but it is a curiously scanty one, for he is here caught in a dilemma. As a praxeologist, 280 00:28:30.780 --> 00:28:38.500 he knows that he cannot, as an economic scientist, pronounce value judgments or advocate policy. 281 00:28:38.500 --> 00:28:45.200 But he cannot bring himself simply to assert and inject arbitrary value judgments. 282 00:28:45.200 --> 00:28:51.820 And so, as a utilitarian, for Mises, along with most economists, is indeed a utilitarian 283 00:28:51.820 --> 00:28:59.780 in ethics, although a Kantian in epistemology, what he does is to make only one narrow value 284 00:28:59.780 --> 00:29:05.460 judgment, that he desires to fulfill the goals of the majority of the public. 285 00:29:05.460 --> 00:29:12.700 Happily, in this formulation, Mises does not presume to know the goals of everyone. 286 00:29:12.700 --> 00:29:20.100 As Mises explains in his second variant, liberalism, that is laissez-faire liberalism, is a political 287 00:29:20.100 --> 00:29:21.900 doctrine. 288 00:29:21.900 --> 00:29:28.580 As a political doctrine, liberalism, in contrast to economic science, is not neutral with regard 289 00:29:28.580 --> 00:29:32.420 to values and ultimate ends sought by action. 290 00:29:32.420 --> 00:29:38.420 It assumes that all men, or at least the majority of people, are intent upon attaining certain 291 00:29:38.420 --> 00:29:39.820 goals. 292 00:29:39.820 --> 00:29:45.680 It gives them information about the means suitable to the realization of their plans. 293 00:29:45.680 --> 00:29:50.120 The champions of liberal doctrines are fully aware of the fact that their teachings are 294 00:29:50.120 --> 00:29:57.060 valid only for people who are committed to their valuational principles, while praxeology 295 00:29:57.060 --> 00:30:03.860 and therefore economics, too, uses the terms happiness and removal of uneasiness in a purely 296 00:30:03.860 --> 00:30:06.340 formal sense. 297 00:30:06.340 --> 00:30:09.720 Liberalism attaches to them a concrete meaning. 298 00:30:09.720 --> 00:30:17.580 It presupposes that people prefer life to death, health to sickness, abundance to poverty. 299 00:30:17.580 --> 00:30:23.360 It teaches men how to act in accordance with these valuations. 300 00:30:23.360 --> 00:30:28.800 In this second variant, Mises has successfully escaped the self-contradiction of being a 301 00:30:28.800 --> 00:30:34.200 value-free praxeologist advocating laissez-faire. 302 00:30:34.200 --> 00:30:40.000 Granting in this variant that the economist may not make such advocacy, he takes his stand 303 00:30:40.000 --> 00:30:43.540 as a citizen willing to make value judgments. 304 00:30:43.540 --> 00:30:48.440 But he is not willing to simply assert an ad hoc value judgment. 305 00:30:48.440 --> 00:30:54.960 Presumably, he feels that a valuing intellectual must present some sort of ethical system to 306 00:30:54.960 --> 00:30:57.960 justify such value judgments. 307 00:30:57.960 --> 00:31:03.540 But as a utilitarian, Mises' system is a curiously bloodless one. 308 00:31:03.540 --> 00:31:09.520 Even as a valuing laissez-faire liberal, he is only willing to make the one value judgment 309 00:31:09.520 --> 00:31:15.400 that he joins the majority of the people in favoring their common peace, prosperity and 310 00:31:15.400 --> 00:31:17.180 abundance. 311 00:31:17.180 --> 00:31:23.140 In this way, as an opponent of objective ethics, and uncomfortable as he must be with making 312 00:31:23.140 --> 00:31:29.180 any value judgments even as a citizen, he makes the minimal possible degree of such 313 00:31:29.180 --> 00:31:35.660 judgments. True to his utilitarian position, his value judgment is the desirability of 314 00:31:35.660 --> 00:31:42.100 fulfilling the subjectively desired goals of the bulk of the populace. 315 00:31:42.100 --> 00:31:46.700 A few points in critique of this position may here be made. 316 00:31:46.700 --> 00:31:52.740 In the first place, while praxeology can indeed demonstrate that laissez-faire will lead to 317 00:31:52.740 --> 00:31:58.660 harmony, prosperity and abundance, whereas government intervention leads to conflict and 318 00:31:58.660 --> 00:32:05.440 impoverishment, and while it is probably true that most people value the former highly, 319 00:32:05.440 --> 00:32:10.740 it is not true that these are their only goals or values. 320 00:32:10.740 --> 00:32:16.500 The great analyst of ranked value scales and diminishing marginal utility should have been 321 00:32:16.500 --> 00:32:28.740 Many people, whether through envy or a misplaced theory of justice, may prefer far more equality 322 00:32:28.740 --> 00:32:32.820 of income than will be attained on the free market. 323 00:32:32.820 --> 00:32:39.060 Many people, pache the aforementioned intellectuals, may want less abundance in order to whittle 324 00:32:39.060 --> 00:32:42.660 down our allegedly excessive affluence. 325 00:32:42.660 --> 00:32:56.660 Others, as we have mentioned above, may prefer to loot the capital of the rich or the businessman in the short run, while acknowledging but dismissing the long-run ill effects because they have a high time preference. 326 00:32:56.660 --> 00:33:07.660 Probably very few of these people will want to push statist measures to the point of total impoverishment and destruction, although this may well happen. 327 00:33:07.660 --> 00:33:17.660 But a majority coalition of the above might well opt for some reduction in wealth and prosperity on behalf of these other values. 328 00:33:17.660 --> 00:33:29.660 They may well decide that it is worth sacrificing a modicum of wealth and efficient production because of the high opportunity cost of not being able to enjoy an alleviation of envy, 329 00:33:29.660 --> 00:33:40.660 or a lust for power, or submission to power, or, for example, the thrill of national unity, which they might enjoy from a short-lived economic crisis. 330 00:33:41.660 --> 00:33:56.660 What can Mises reply to a majority of the public who have indeed considered all the praxeological consequences, and still prefer a modicum, or, for that matter, even a drastic amount of statism, 331 00:33:56.660 --> 00:33:59.620 in order to achieve some of their competing goals. 332 00:34:00.820 --> 00:34:06.420 As a utilitarian, he cannot quarrel with the ethical nature of their chosen goals. 333 00:34:06.980 --> 00:34:13.300 For, as a utilitarian, he must confine himself to the one value judgment that he favors the 334 00:34:13.300 --> 00:34:21.860 majority achieving their chosen goals. The only reply that Mises can make within his own framework 335 00:34:21.860 --> 00:34:28.260 is to point out that government intervention has a cumulative effect, that eventually the economy 336 00:34:28.260 --> 00:34:35.460 must move either toward the free market or toward full socialism, which praxeology shows will bring 337 00:34:35.460 --> 00:34:43.460 chaos and drastic impoverishment, at least to an industrial society. But this too is not a fully 338 00:34:43.460 --> 00:34:51.060 satisfactory answer. While many or most programs of statist intervention, especially price controls, 339 00:34:51.060 --> 00:34:59.020 are indeed cumulative. Others are not. Furthermore, the cumulative impact takes such a long time 340 00:34:59.020 --> 00:35:04.120 that the time preferences of the majority might well lead them, in full acknowledgment 341 00:35:04.120 --> 00:35:11.700 of the consequences, to ignore the effect. And then what? Mises attempted to use the 342 00:35:11.700 --> 00:35:17.700 cumulative argument to answer the contention that the majority of the public prefer egalitarian 343 00:35:17.700 --> 00:35:23.980 and Measures, even knowingly at the expense of a portion of their own wealth. 344 00:35:23.980 --> 00:35:30.260 Mises' comment was that the reserve fund was on the point of being exhausted in Europe, 345 00:35:30.260 --> 00:35:35.060 and therefore that any further egalitarian measures would have to come directly out of 346 00:35:35.060 --> 00:35:39.940 the pockets of the masses through increased taxation. 347 00:35:39.940 --> 00:35:45.580 Mises assumed that once this became clear, the masses would no longer support interventionist 348 00:35:45.580 --> 00:35:51.140 Measures. But in the first place, this is not a strong argument against the previous 349 00:35:51.140 --> 00:35:57.980 egalitarian measures, nor in favor of their repeal. But secondly, while the masses might 350 00:35:57.980 --> 00:36:05.220 well be convinced, there is certainly no apodictic certainty involved. And the masses have certainly 351 00:36:05.220 --> 00:36:11.340 in the past, and presumably will in the future, continue knowingly to support egalitarian 352 00:36:11.340 --> 00:36:16.980 and other statist measures on behalf of others of their goals, despite the knowledge that 353 00:36:16.980 --> 00:36:21.220 their income and wealth would be reduced. 354 00:36:21.220 --> 00:36:27.480 Thus Dean Rappard pointed out in his thoughtful critique of Mises' position, does the British 355 00:36:27.480 --> 00:36:33.760 voter for instance favor confiscatory taxation of large incomes primarily in the hope that 356 00:36:33.760 --> 00:36:37.260 it will redound to his material advantage? 357 00:36:37.260 --> 00:36:43.940 or in the certainty that it tends to reduce unwelcome and irritating social inequalities? 358 00:36:43.940 --> 00:36:49.780 In general, is the urge towards equality in our modern democracies not often stronger 359 00:36:49.780 --> 00:36:54.940 than the desire to improve one's material lot? 360 00:36:54.940 --> 00:37:00.460 And on his own country, Switzerland, Dean Rappard pointed out that the urban, industrial 361 00:37:00.460 --> 00:37:06.420 and commercial majority of the country have repeatedly and often at popular referenda 362 00:37:06.420 --> 00:37:12.540 endorsed measures to subsidize the minority of farmers in a deliberate effort to retard 363 00:37:12.540 --> 00:37:18.060 industrialization and the growth of their own incomes. 364 00:37:18.060 --> 00:37:23.460 Rappard noted that the urban majority did not do so in the absurd belief that they were 365 00:37:23.460 --> 00:37:26.900 thereby increasing their real income. 366 00:37:26.900 --> 00:37:33.220 Instead, quite deliberately and expressly, political parties have sacrificed the immediate 367 00:37:33.220 --> 00:37:39.940 material welfare of their members in order to prevent, or at least somewhat to retard, 368 00:37:39.940 --> 00:37:43.260 the complete industrialization of the country. 369 00:37:43.260 --> 00:37:49.580 A more agricultural Switzerland, though poorer, such is the dominant wish of the Swiss people 370 00:37:49.580 --> 00:37:52.420 today. 371 00:37:52.420 --> 00:37:58.700 The point here is that Mises, not only as a praxeologist but even as a utilitarian liberal, 372 00:37:58.700 --> 00:38:04.300 can have no word of criticism against these statist measures once the majority of the 373 00:38:04.300 --> 00:38:11.260 public have taken their praxeological consequences into account and chosen them anyway on behalf 374 00:38:11.260 --> 00:38:15.180 of goals other than wealth and prosperity. 375 00:38:15.180 --> 00:38:20.700 Furthermore, there are other types of statist intervention which clearly have little or 376 00:38:20.700 --> 00:38:26.420 no cumulative effect, and which may even have very little effect in diminishing production 377 00:38:26.420 --> 00:38:28.600 or prosperity. 378 00:38:28.600 --> 00:38:33.560 Let us for example assume again, and this assumption is not very far-fetched in view 379 00:38:33.560 --> 00:38:41.200 of the record of human history, that the great majority of a society hate and revile redheads. 380 00:38:41.200 --> 00:38:46.280 Let us further assume that there are very few redheads in the society. 381 00:38:46.280 --> 00:38:52.300 This large majority then decides that it would like very much to murder all redheads. 382 00:38:52.300 --> 00:38:53.520 Here they are. 383 00:38:53.520 --> 00:38:59.040 The murder of redheads is high on the value scales of the great majority of the public. 384 00:38:59.040 --> 00:39:04.200 There are few redheads, so that there will be little loss in production on the market. 385 00:39:04.200 --> 00:39:10.040 How can Mises rebut this proposed policy, either as a praxeologist or as a utilitarian 386 00:39:10.040 --> 00:39:11.040 liberal? 387 00:39:11.040 --> 00:39:15.080 I submit that he cannot do so. 388 00:39:15.080 --> 00:39:21.760 Mises makes one further attempt to establish his position, but it is even less successful. 389 00:39:21.760 --> 00:39:27.640 Criticizing the arguments for state intervention on behalf of equality or other moral concerns, 390 00:39:27.640 --> 00:39:31.580 he dismisses them as emotional talk. 391 00:39:31.580 --> 00:39:38.380 After reaffirming that praxeology and economics are neutral with regard to any moral precepts, 392 00:39:38.380 --> 00:39:43.640 and asserting that the fact that the immense majority of men prefer a richer supply of 393 00:39:43.640 --> 00:39:50.040 material goods to a less ample supply is a datum of history, it does not have any place 394 00:39:50.040 --> 00:39:52.200 in Economic Theory. 395 00:39:52.200 --> 00:39:57.980 He concludes by insisting that he who disagrees with the teachings of economics ought to refute 396 00:39:57.980 --> 00:40:05.440 them by discursive reasoning, not by the appeal to arbitrary, allegedly ethical standards. 397 00:40:05.440 --> 00:40:12.960 But I submit that this will not do, for Mises must concede that no one can decide upon any 398 00:40:12.960 --> 00:40:19.400 policy whatever, unless he makes an ultimate ethical or value judgment. 399 00:40:19.400 --> 00:40:25.560 But since this is so, and since according to Mises all ultimate value judgments or ethical 400 00:40:25.560 --> 00:40:33.560 standards are arbitrary, how then can he denounce these particular ethical judgments as arbitrary? 401 00:40:33.560 --> 00:40:40.040 Furthermore, it is hardly correct for Mises to dismiss these judgments as emotional, since 402 00:40:40.040 --> 00:40:47.000 for him as a utilitarian reason cannot establish ultimate ethical principles, which can therefore 403 00:40:47.000 --> 00:40:51.240 only be established by subjective emotions. 404 00:40:51.240 --> 00:40:56.680 It is pointless for Mises to call for his critics to use discursive reasoning, since 405 00:40:56.680 --> 00:41:02.960 he himself denies that discursive reasoning can ever be used to establish ultimate ethical 406 00:41:02.960 --> 00:41:03.960 values. 407 00:41:03.960 --> 00:41:09.280 Furthermore, the man whose ultimate ethical principles would lead him to support the free 408 00:41:09.280 --> 00:41:16.200 market should also be dismissed by Mises as equally arbitrary and emotional, even if 409 00:41:16.200 --> 00:41:21.920 If he has taken the laws of praxeology into account before making his ultimately ethical 410 00:41:21.920 --> 00:41:23.680 decision. 411 00:41:23.680 --> 00:41:28.840 And we have seen above that the majority of the public very often has other goals which 412 00:41:28.840 --> 00:41:34.360 they hold, at least to a certain extent, higher than their own material well-being. 413 00:41:34.360 --> 00:41:41.600 Thus, while praxeological economic theory is extremely useful for providing data and 414 00:41:41.600 --> 00:41:47.840 knowledge for framing economic policy, it cannot be sufficient by itself to enable the 415 00:41:47.840 --> 00:41:55.920 economist to make any value pronouncements or to advocate any public policy whatsoever. 416 00:41:55.920 --> 00:42:01.860 More specifically, Ludwig von Mises to the contrary notwithstanding, neither praxeological 417 00:42:01.860 --> 00:42:08.420 economics nor Mises' utilitarian liberalism is sufficient to make the case for laissez-faire 418 00:42:08.420 --> 00:42:11.080 and the free market economy. 419 00:42:11.080 --> 00:42:18.000 To make such a case, one must go beyond economics and utilitarianism to establish an objective 420 00:42:18.000 --> 00:42:24.680 ethics which affirms the overriding value of liberty, and morally condemns all forms 421 00:42:24.680 --> 00:42:30.960 of statism, from egalitarianism to the murder of redheads, as well as such goals as the 422 00:42:30.960 --> 00:42:35.140 lust for power and the satisfaction of envy. 423 00:42:35.140 --> 00:42:41.860 To make the full case for liberty, one cannot be a methodological slave to every goal that 424 00:42:41.860 --> 00:42:45.340 the majority of the public might happen to cherish.