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Austrian Economics and Pedagogy

Economic theory tells us a lot about the nature of political actors along with the inadequacy of their knowledge in regulating society to bring about the common good. All rational men act purposefully to remove uneasiness from their lives. They try to maximize those things in life that give them the greatest satisfaction (e.g., money, love, power, influence, charity, altruism, holiness, etc.). However, they also act in such a way that engenders cooperation with others, facilitating and exploiting mutually beneficial gains from trade. Peaceful cooperation is the result of the operation of the market economy. People pursuing their own self-interest voluntarily cooperate to provide the needs and wants demanded in society.

We must be careful to not equate self-interested motives with selfish ones. The former describes one’s economic motivation while the latter deals with one’s character. For example, a person might have altruism or to “shepherd the flock of God” (1 Peter 5:2) as his highest goal. He would thus pursue the self-interested agenda that he believes has the highest probability of attaining that goal. He might also pursue other things along with this objective, such as owning his home debt-free, raising four children, and taking his wife on an annual skiing trip. But all these elements (and others we might think of) mix together into concerted, purposeful, self-interested action to attain the conglomerate goal.

As economist Ludwig von Mises states in the opening chapter of Human Action: A Treatise on Economics (1966), men aim purposefully at ends. “Human action is purposeful behavior…aiming at ends and goals… [and] a person’s conscious adjustment to the state of the universe that determines his life.” Sane people do not act without reason, and they do not act unless they believe that their action will remove some uneasiness. This axiom can and must be squared with the Word of God: “the righteous God tests the hearts and minds” (Psalm 7:9; cf. Proverbs 15:11; 17:3; 24:12), noting that “Every way of a man is right in his own eyes, but the Lord weighs the hearts” (Proverbs 21:2). Thus, the fact that human action is purposeful and aims at ends does not mean that such action is always righteous. Indeed, the opposite may be true. Men may think that they are doing justice and pursuing righteousness but instead actually be doing what is wrong. Indeed, while self-interest is not necessarily selfish, its objective is always tainted by sin to some extent.

The Scriptures indicate that all men are flawed in their judgments and choices. The ends that men aim at are marred by sin, just as the Bible exclaims: “All we like sheep have gone astray; we have turned, every one, to his own way” (Isaiah 53:6). While God has “put eternity in their hearts” still “the hearts of the sons of men are full of evil; madness is in their hearts while they live, and after that they go to the dead” (Ecclesiastes 3:11; 9:3). Consequently, men’s economic choices—like spiritual ones—are tainted, marred, and corrupted by sin. We are left only to marvel when we think that under God’s common grace men of such character, pursuing their own self-interests, can produce peaceful social cooperation. Capitalism and private property, especially when coupled with thrift, industry, and entrepreneurship, must be viewed as gifts from God that allow civilizations to rise and survive within a fallen world.

A selfish person is one who is absorbed in himself to the exclusion of others. He is self-interested too but his motivation is hamstrung by a character flaw. The theory of self-interest is born out in the Scriptures, often evincing the selfish foibles of human nature. We are told twice for instance that: “There is a way that seems right to a man, but its end is the way of death” (Proverbs 14:12; 16:25). Young men are admonished to not pursue their unbridled thoughts and desires: “Rejoice, O young man, in your youth, and let your heart cheer you in the days of your youth; walk in the ways of your heart, and in the sight of your eyes; but know that for all these God will bring you into judgment” (Ecclesiastes 3:11, 9:3)¹ — just as erring Lot did: “Then Lot chose for himself all the plain of Jordan, and Lot journeyed east” (Genesis 13:11)² as well as the foolish man in Christ’s parable who shortly after being satisfied with this world’s goods went to meet his frowning Maker.³

Not all of the purposes of men are bad or selfish. The Bible speaks of godly men purposing to do things too. For instance, “Paul purposed in the Spirit, when he had passed through Macedonia and Achaia, to go to Jerusalem” (Acts 19:21). The Bible also contrasts the vain purposes of “those who desire to be rich” (1 Timothy 6:9)—noting that “the schemes of the schemer are evil; he devises wicked plans to destroy the poor with lying words”—with the good purposes of “a generous man [who] devises generous things” (Isaiah 32:7-8). Furthermore, there are many biblical encouragements to pursue righteous ends: “Commit your works to the Lord, and your thoughts will be established” (Proverbs 16:33).⁴ Therefore, Christians ought to seek to align their self-interested purposes with the principles of the Word of God.

¹ As a result, “There is none righteous, no, not one; There is none who understands; There is none who seeks after God. They have all turned aside; They have together become unprofitable; There is none who does good, no, not one… Destruction and misery are in their ways; and the way of peace they have not known” (Romans 3:10-12, 16-17). The natural man in his sin “devises wickedness on his bed; he sets himself in a way that is not good; he does not abhor evil” (Psalm 36:4). “Perversity is in his heart, He devises evil continually, He sows discord… A heart that devises wicked plans… For their heart devises violence” (Proverbs 6:14, 18; 24:2). Even sinful rulers “devise evil by law” (Psalm 94:20).

² God can and does turn the bad actions of men into blessing at times. For instance, Joseph told his brothers “you meant evil against me; but God meant it for good” (Genesis 50:20). Paul “was consenting” to the death of Stephen (Acts 8:1) but God likewise turned his foul play into great benefit for His people.

³ So he purposed: “‘I will do this: I will pull down my barns and build greater, and there I will store all my crops and my goods.’ And I will say to my soul, ‘Soul, you have many goods laid up for many years; take your ease; eat, drink, and be merry’” (Luke 12:18-19; cf. 1 Corinthians 15:32; Ecclesiastes 8:15).

⁴ Two other related passages include: “The steps of a good man are ordered by the Lord, and He delights in his way” (Psalm 37:23), and “Trust in the Lord with all your heart, and lean not on your own understanding; in all your ways acknowledge Him, And He shall direct your paths” (Proverb 3:5-6).

Originally published in The Times Examiner on November 23, 2005.

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Economic Theory, Self-Interest, and the Bible

At its core, Jacob’s book addresses in brief the history of classical liberalism and the libertarian movement, explains the basics of the philosophy of liberty, and tells the stories of a number of modern libertarian organizations at work right now. It’s wonderfully entertaining, easy to read, and splendidly pithy.

Among Huebert’s most salient points is his excoriation of “conservatism” and its relationship to libertarianism. He completely demolishes the myth that Ronald Reagan was even close to a libertarian, and hopefully such words will shock conservatives into realizing that most, if not all, of “traditional conservatism” as enshrined in Reagan is nothing short of a lie.

I’m a particular fan of the chapter on war (read an excerpt here); it’s so great that I have to quote the first paragraph in full:

Libertarianism and war are not compatible. One reason why should be obvious: In war, governments commit legalized mass-murder. In modern warfare especially, war is not just waged among voluntary combatants, but kills, maims, and otherwise harms innocent people. Then, of course, wars must be funded through taxes, which are extracted from U.S. citizens by force — a form of legalized theft, as far as libertarians are concerned. And, historically, the U.S. has used conscription — legalized slavery — to force people to fight and die. In addition, an interventionist foreign policy makes civilians targets for retaliation, so governments indirectly cause more violence against their own people when they become involved in other countries’ affairs. Plus, war is always accompanied by many other new restrictions on liberty, many of which are sold as supposedly temporary wartime measures but then never go away.

And now I… have nothing else to say. This is it. This is what we need to communicate to everybody. War kills. War is immoral. To the Christian, aggressive war is among the greatest of all evils humans can commit. Peace is our code. Period.

Another great part of Jacob’s book is his chapter on education. Public, compulsory schooling is not libertarian. And guess what, vouchers are not a viable alternative. This principle is somewhat difficult to explain to many people, but I have contended for years that vouchers are just another back door for government control of education. Huebert does a much better job of explaining it than I ever have.

I could go on and on just describing the chapters themselves, but I want to give you a concise flavor for the book so I will stop with the praise here. However, there are a few weaknesses to the book that I would be remiss not to point out. First, I think that Jacob was a bit too critical of the Libertarian Party, and a bit too kind to the Campaign for Liberty. It’s true that the LP has not lived up to the radical vision of its founders at times, and there are questions that I still have about its future. Nevertheless, it continues to be the home of a huge number of amazing activists and thinkers, and we dismiss the effect that it can have. The LP will only fail to live up to its original purpose if we let it – Murray Rothbard said as much many years ago and prominent LP members such as Mary Ruwart and Lee Wrights say the same today.

In contrast, despite the influence of Ron Paul and the large amount of money initially invested, I am a bit underwhelmed by what the Campaign for Liberty has been able to do at the national level. In truth, the awareness that America now has of the Federal Reserve and its criminal nature is incredible, but is this the result of C4L or is it just the momentum from 2008? I personally wish C4L would be more a hub of local activism rather than another organization trying to take on the House of Representatives. Don’t get me wrong, I want to see C4L succeed, but I also want to make sure that local efforts are well-funded and well-staffed.

This leads me to another minor oversight in the book: the lack of discussion of local activism. Don’t get me wrong, I despise politics and the electoral process is completely inane. Moreover, I readily admit national politics stinks and is frequently a waste of money except in very specific situations (the Ron Paul Presidential Campaign being the most spectacular example). But on a local level (i.e. states, counties, cities) individuals can have very real impacts that truly promote liberty and help people live more freely. I wish Jacob had explored this more thoroughly, because I imagine that concrete examples of success would inspire people to get out there and make a difference.

Finally, the price tag is a bit stiff, but I still contend that you need this book on your bookshelf to have, read, and lend out. While Amazon.com generally sells the book for $35, you can get a paperback copy for $25 at the Mises Institute Store. No matter what you choose, the knowledge you will gain from reading this is totally worth it.

Please consider buying Libertarianism Today at Amazon.com and LCC will then get a small kick-back from the sale. Remember, LCC receives a small percentage of any shopping you do at Amazon when you go through an LCC link. Help keep LCC growing and growing; your support is much appreciated!

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What is the best book on the essentials of libertarianism?

Our group from the Libertarian Longhorns (and Robert Butler, executive director of LP-Texas) left Austin around 6am on Saturday, January 23, to make sure we arrived in time to get a decent seat. Robert volunteered his vehicle, and so I didn’t have to drive. We talked up the LP’s plans and upcoming events on the drive to Houston and back.

Upon arrival, we had the privilege to meet some really neat  people. I happened to run across a few LCC readers as well, like Yvonne Kelly (on the far left of the group picture). Tom Woods said hello as he walked in, and I briefly spoke with Lew Rockwell as well while drinking some coffee.

The theme of the day was "the failure of Keynesianism" — appropriate considering our current political situation, wouldn’t you say? Doug French was the first speaker. For some reason I have lost my notes, but his topic was "Bank Failures in a Keynesian World." What was most interesting to me about his talk was the striking parallels of the circumstances preceding "the lost decade" and the circumstances we are now experiencing in the United States. One can only hope that failed policies would be remembered, but alas and alack it’s politics not wisdom that we deal with.

Tom Woods spoke about "Keynesian Predictions vs. American History." Did you know that as World War 2 was coming to a close, policy makers were concerned that the soldiers coming home would overwhelm the economy and that a new depression would ensue. How wrong they were: 1946 was the single greatest year for the American economy ever. I also enjoyed his ransacking of Paul Samuelson and Paul Krugman.

Before lunch we enjoyed hearing the beloved Congressman Ron Paul. His principal point was simply that a true revolution is philosophic in nature. This is most certainly true, and the Austrian School of Economics is at the forefront of this change. Dr. Paul touched on many topics, but as he likes to do he focused on monetary policy and foreign policy. He made specific mention of the importance of auditing the Federal Reserve. He said that once audited, two well-kept secrets will be brought into the open once again: (1) that the Fed frequently bails out friends via the discount window (Fed short term loans), and (2) that the Fed has many international activities unaccounted for. Thus, we find monetary policy is also connected to foreign policy as well. Call me conspiratorial if you must, but the CIA’s funding goes beyond Congress – it’s tied to the Fed as well. Best quote from Ron: "Quite frankly, in a Constitutional Republic, you would not have a CIA."

Lew Rockwell was our final speaker for the day on "Economics and Moral Courage." He noted that although in many ways we are quite free (such as the freedom of the internet), we are also having much freedom taken away from us little by little. Moreover, as more freedom is stolen from us, people are more frequently not able to envision how freedom actually works. They simply do not have experience in understanding cause and effect. In truth, this is due to the "banality of evil," something small that ekes its way into public life. For example, the acceptance of a wrong premise about the role of government in life can be a first step toward more and more government control, leading finally to totalitarianism. What begins with banality, ends in bloodshed.

Overall, I’d say it was a great day…

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Mises Circle Houston Recap