Saturday, September 22, 2012

An Argument that Statism is an Amoral Philosophy

Let us start from a rather uncontroversial assumption that there exist so-called thick moral terms, i.e., terms whose very use implies a definitionally necessary moral evaluation of their content. Think of terms such as generosity and charity. It is logically impossible for there to be evil generosity or wicked charity. Or think of terms such as theft, counterfeiting, and Ponzi scheming. It is logically impossible for there to be benevolent theft, praiseworthy counterfeiting, or laudable Ponzi scheming.

In other words, there exist certain terms whose descriptive content implies a logically necessary moral assessment. Of course, this by itself does not constitute an argument for moral objectivity, since we differ in our application of these terms to various instances of human action. This, however, is not relevant to my argument here.

Now, let us ask a statist - that is, a believer in the desirability of the state and its institutions, including the ones mentioned in the latter part of this sentence - what conditions would need to hold for him to be able to justifiably accuse the IRS of stealing the money of private individuals, the Fed of counterfeiting money, or the Social Security Administration of engaging in a Ponzi scheme.

It seems to me that the statist can offer two relevant answers to this question, both of which leave him in a very uncomfortable position. First, given that the descriptive content of the above morally negative terms appears to match quite well the nature of the activities performed by the above state institutions, and assuming that the statist wishes to avoid the conclusion that the institutions whose existence he finds morally desirable engage in inherently immoral activities, he might suggest that it is definitionally and logically impossible for the IRS to steal, for the Fed to counterfeit, and for the SSA to engage in Ponzi schemes. In other words, he might suggest that the very nature of these institutions logically precludes describing their activities in these thick moral terms.

However, since redefining the terms in question so as to make them morally positive or morally thin whenever they are applied to the institutions of the state and their activities would be a semantically arbitrary move, it logically follows that the statist believes that moral categories do not apply to our judgments regarding at least some of the fundamental institutions of the state and their activities. In other words, the statist is logically compelled to conclude that he finds their existence desirable for reasons that are amoral, that is, immune to considerations of morality.

Alternatively, he might suggest that the thick moral terms mentioned above - theft, counterfeiting, and Ponzi scheming - apply only to illegal activities, while the activities performed by the IRS, the Fed, and the SSA are legal. This, however, implies that the only relevant moral difference here is that the state issued a certain declaration (the declaration of legality) with respect to its institutions and their activities, while it did not issue the same declaration with respect to the selfsame activities of private individuals and private organizations. This, in turn, implies that declaring something as legal (by the state, since, presumably, it is a matter of definition that only the state can issue such declarations) means removing the object of declaration from the realm of moral judgment and thus immunizing it to considerations of morality. In sum, the logical conclusion of this train of thought is that legality is an amoral, or, worse still, an amoralizing concept.

Hence, regardless of which of the abovementioned two answers the statist decides to choose, it turns out that the justification of his choice has to be ultimately grounded in amoral reasons. In other words, it turns out that, contrary to some prominent anti-statist arguments, the philosophy of statism in its cognitively faultless form seems to be based not so much (or not exclusively) on hypocrisy or general immorality, but on amorality.

Wednesday, September 19, 2012

The Problem of Involuntary Human Authority

I have no problem with voluntary authority, such as that wielded by politically unconnected company bosses, presidents of free clubs and associations, heads of non-coercive religions, etc.

Likewise, I have no problem with involuntary divine authority - I find it perfectly reasonable to believe that rebelling against the authority of an all-powerful being on whom the existence of the Universe depends is, like rebelling against the "authority" of fundamental physical constants, logically futile.

What I do find very problematic is involuntary human authority, which, as far as I can tell, is the perfect vehicle for the most immoral, unscrupulous and grasping human instincts, and the source of the majority of our most serious social problems. Following de Molinari and his successors, I believe that a thorough rejection of the principle of involuntary human authority is a necessary condition, perhaps the necessary condition, for the advancement from barbarism to civilization.

Monday, September 17, 2012

A Short Logico-Conceptual Derivation of the Austrian Prescription Against Recession

Value destruction is the depletion of the sources of value. Value conservation is the replenishment of the sources of value. Value creation is value conservation plus the addition of new sources of value.

Income can be allocated along the following three margins: consumption expenditures, savings, and hoardings. These three margins correspond, respectively, to the following three uses: consumption, investment, and hedging against uncertainty.

Consumption is utility-increasing value depletion, as opposed to waste, which is utility-decreasing value depletion. Investment is value conservation (capital reaccumulation) or value creation (capital accumulation).

In the world of imperfect information, investment requires entrepreneurship (successful uncertainty bearing), which, in turn, requires the existence of generally reliable price signals (the preconditions of sound economic calculation) and capitalist regime certainty (reliable institutional protection of property rights and contracts).

An economic recession is a period marked by systemic, large-scale waste (capital consumption and malinvestments) caused by the preceding distortion of price signals, especially interest rates (signals that coordinate production over time, i.e., coordinate savings with investment).

To get out of a recession, malinvested and overconsumed capital has to be, respectively, reinvested and reaccumulated, which requires entrepreneurship and its preconditions, listed two paragraphs above.

Uneven inflation of the money supply in the world of imperfect information falsifies economic calculation, discourages saving (and thus investment), and distorts the intertemporal structure of production. Deficit spending weakens the system of reliable institutional protection of property rights and contracts and diminishes the value of hoardings, thus creating regime uncertainty.

Hence, inflation and deficit spending discourage investment and prevent entrepreneurship, consequently prolonging recessions, as well as encourage capital consumption and malinvestment, consequently deepening recessions.

Qua policy advisors, Austrian economists suggest that the things to do in a recession is to avoid inflation and eliminate deficit spending. Qua policy advisors, (New) Keynesian economists suggest that the things to do in a recession is to generate inflation and engage in deficit spending.

Thus, qua policy advisors, Austrian economists suggest getting out of recessions via value conservation (and eventual value creation), while (New) Keynesian economists suggest prolonging and deepening recessions via continued value depletion. QED.

Friday, September 14, 2012

The Late Roman Stage of Modern Western Civilization, Or the Tytler Cycle Revisited

You want economic growth? Print a lot of colored paper tickets or create a lot of virtual bookkeeping entries. You are in debt? Inflate it away (see above) or go into more debt. You lived beyond your means? Live even more beyond your means. You want to save for the bad days in the face of impending crisis? Spend everything on luxuries instead. You did a good job of serving the needs of others? Expect confiscation. You did a bad job of serving the needs of others? Expect bailout. You live by your own means? Expect calls for confiscation. You live at the expense of others? Expect calls for empowerment. You want peace and stability? Try to police the whole world. The world erupts in war and chaos because it doesn't want to be policed? Police it even more methodically. Your political meddlings distorted the world economy? Meddle in it even more fervently. And so it goes.

Yes, this is the common wisdom of modern Western civilization. And yes, it indicates as clearly as possible that the modern Western civilization is in its late Roman stage once again. And while it is not yet certain that it will share the fate of Rome, this scenario is now more probable than not.

Thursday, September 13, 2012

On Methodological Absolutism in Economics

What I have always regarded as the most arrogantly absurd (and absurdly arrogant) element of the usual positivist critique of Austrian methodology is calling the latter "dogmatic" and "absolutist" in its choice of research methods.

Just think of it - even the most intransigent Austrian apriorists do not claim that pure logic holds all the answers regarding the nature of the economic universe - what they say is that with respect to certain disciplines (e.g., economic theory) it is logic, while with respect to other disciplines (e.g., economic history) it is empirics, which, as far as I'm concerned, is a pretty humble and moderate view.

Positivists, on the other hand, are precisely the ones who claim that there is a single source of answers (empirics) to all meaningful economic questions, and that no "armchair theorizing" can effectively challenge this view. It does not seem hard to tell who is the dogmatic and the absolutist here.

Wednesday, September 12, 2012

The Tangled Issue of Praxeology and Thymology

Steven Horwitz wrote an essay in which he claims that ASE is not only empirical, but perhaps even more empirical than the neoclassical mainstream. I disagree with this assessment and in this post I would like to briefly explain why.

For me, the core paragraph of Horwitz's text is this: "When the economist goes to analyze the world, the core toolkit that comes only from reflection on action is a rather small set of basic propositions. Most of the interesting work in economics is institutionally contingent. For example, even if we recognize the importance of being able to engage in economic calculation, our ability to do so effectively depends upon the set of institutions in the economy under analysis."

Did Mises and the contemporary Misesians claim that "when the economist goes to analyze the world, the core toolkit that comes only from reflection on action is a rather small set of basic propositions"? No. For instance, the theorem of the impossibility of calculation under socialism and the Austrian Business Cycle Theory consist of very complex sets of propositions - and yet they are purely deductive and a priori. Whether these complex sets of propositions are applicable to any given present or historical set of instances of human action is an entirely different matter - a thymological, not a praxeological matter. But Horwitz suggests that one can advance beyond "a rather small set of basic (praxeological) propositions" only by studying the institutional contingencies of contemporary or historical economic systems. In other words, he implies that praxeology advances by means of thymological analysis, not that in order to conduct sound thymological analyses one needs to have a complete, complex praxeological structure worked out in advance. And it is the latter that is the Misesian position, while the former is, terminological differences aside, hardly distinguishable from the position of a standard neoclassical Popperian.

Yes, Horwitz is right in saying that "our ability to (engage in economic calculation) depends upon the set of institutions in the economy under analysis". But that is precisely what the purely aprioristic, praxeological theorem of the impossibility of economic calculation under socialism says! It says: only given the existence of certain institutions (money, private property in the means of production, and free exchange of property titles) can there be rational economic calculation. This is a purely aprioristic conditional statement, and it is hardly "basic" or "economically uninteresting". In fact, the astonishing predictive power of this theorem comes precisely from the fact that Mises formulated it before any serious thymological work on the Soviet economy could have been done. To sum up, praxeology depends on thymology (i.e., on the existence of the so-called "auxiliary assumptions", which are not institutionally contingent - e.g., it is not institutionally contingent that there exist as-of-yet unsatisfied wants, that goods are scarce, or that people differ from one another) but its level of complexity and completeness (not applicability or relevance) in no way depends on the amount of thymological data at our disposal, and it is the belief in such a dependence that Horwitz (mis)attributes to Mises in his text.

To clarify matters further, I created the following diagram, which depicts the relationship between praxeology and thymology in what I hope is a transparent and unambiguous manner:

Hopefully it will be of some use to scholars of Austrian Economics.