Archives for category: Social Theory

Why is western economics based on self-interest?

. . . as answered on Quora. . . .

It isn’t.

Self-interest is a moral concept, and economists are supposed to be Wertfrei (value-free) social scientists — if on track of value.

You might say, “but economics is all about the results of people choosing according to their own values, thus all about choices dependent upon a kind of perceived or self-constructed interest.” And I reply, “well, OK, if you must — but it is just as much a science exploring other-interest, for these selves doing their choosing also value others, and their interests in others figure into their demand and supply curves just as much as does their self regard.”

The truth is this: the logic of choice at the heart of subjective value and marginal utility and marginal rates of substitution and satisficing and all that is not egoistic . . . according to economists. When they say it is — as they sometimes do, in large part because they are not always good philosophers — they err.

The brilliant Jevonsian economist P. H. Wicksteed tried to make this clear when he argued that economists are not pushing a rationale of egoism when they develop their notion of a demand schedule, nor negating altruism, either. What they apply, he argued, is a concept of non-tuism, a coinage he offered to help explain that when a person economizes in his purchases and asks for the highest prices possible in his sales, he may do so for egoistic or altruistic reasons, but still works to maximize the interest of the transaction, either egoistic or altruistic, when he makes those trades. (Or when she makes her trades, for one of Wicksteed’s better examples was of a housewife deciding the basic economy of the household under her charge.) Non-tuistic interest is a worthwhile concept to try to understand: see Israel M. Kirzner’s The Economic Point of View: An Essay in the History of Economic Thought (1960), for a good treatment.

But even Wicksteed did not get it exactly right, for nearly all our choices involve demand schedules made up of both egoistic and altruistic ends.

It helps to focus not on “interest” — which, as I assert above, has too moral a component — and not on “utility” — which is unduly abstract, and gets students confused. Concentrate, instead, on the specific uses to which a good may be put. Under the theory of Grenznutzen (border use) of the Austrian School economists (from which English-language economists got their term of art marginal utility), the various uses to which a fungible good may be put, and against which value is to be understood (as dependent upon the importance of the specific use the last unit of a good decided upon has to the economic actor), can be almost any mix of self-regarding and other-regarding purposes.

In my personal economy, my first gallon of clear water goes to drink, the second and third to food preparation, the fourth to cleaning myself, the fifth to my neighbor, the sixth to my dog, the seventh to washing the dog, the eighth to washing the house, the ninth to letting the neighbor’s cow to drink, and so forth.* All of these uses satisfy me, but several also satisfy others. Do you see how useless quibbling about whose interests are being served?

The economist does not usually inquire deeply about the egoism and altruism of the goals, or uses, that are the foci of the border use (Grenznutzen) that goes into explaining the formation of prices and the rates of exchange. Because such concerns are irrelevant to what economists are usually trying to explain.

Similarly, economists rarely fret about how a person forms the value scales which place the various uses to which goods are put into order. Not because they cannot be analyzed, but because they are mostly irrelevant to what economists do.

Who is concerned? Moralists, whose traditional and self-appointed job it is to get people to change their values.

But when moralists get worked up over whether choices on the market are “too egoistic” or “not altruistic enough,” they go too far if they also castigate all economic choice as selfish. And usually they descend into a very deep error.

The error was identified clearly by Austrian philosopher Alexius Meinong in his Ethische Bausteine (see Marie-Luise Schubert Kalsi, Alexius Meinong’s Elements of Ethics, 1996), where he explores the difference between subject and object, egoand alter. Of egoism and altruism, Meinong argued that, before any deep inquiry, one might think that “a value is egoistic if the subject is egoistic, altruistic if the alter is the subject. However, that this is not so can be seen in the fact that I myself have altruistic desires and valuations besides egoistic desires and valuations. Thus, no objection should be raised that there are altruistic and egoistic values for me. Then, the ego is subject of even altruistic values. But the altruistic nature of these values must be grounded on something other than the valu[ing] subject.”

The notion that economics is “based on self-interest” is actually a misguided philosophical complaint, and though I recommend Wicksteed and Kirzner and other economists to clear this up, it really is a philosophical error, and should be dealt with philosophically.


N.B. In addition to the texts explicitly cited, above, one should consult

And the reader may note that I deliberately ignored another possible meaning of “western economics” that the questioner may in fact have intended: the system of private property “capitalism.” I simply won’t get caught up in the habit of calling a practiced economic order “economics.”

The well-known George Mason University economist plies his tool to a current issue:

I’m deeply puzzled by the idea that mandatory vaccination is more morally objectionable than mask mandates. The benefits of vaccination are clearly much larger. The costs also seem much lower — 2 pinpricks versus a constant dehumanizing burden.

Bryan Caplan @bryan_caplan

I responded, helpfully:

“I’m deeply puzzled by the idea that rape is more morally objectionable than unwanted hugging and kissing. The cost of rape seems so much lower — one insertion and a few thrusts and it’s over . . . versus constant dehumanizing burden.”

Timothy Wirkman Virkkala @wirkman

Early reactions have not been uniformly positive.

twv

Nearly every reference to “conspiracy“ is stupid.

People use “conspiracy theory” and “conspiracist” often incorrectly, and with baggage from their benighted instruction in public schools and from the hectoring of major media news readers.

It is common to accuse someone of [unwarranted] belief in [non-existent] conspiracies at the first drop of the hat, upon almost zero evidence. Mere association of an idea with even the whiff of “conspiracy” taints it like the lingering body odor of Seinfeld’s toxic valet.

The funny thing is, this inculcated fear of “conspiracy theory” is very likely the result of a conspiracy. Tales of Operation Mockingbird tell how the very term ”conspiracy theory” itself was encouraged by the CIA to its cadres of news readers and reporters, to dismiss anyone who brings up critiques of the Warren Commission Report on the JFK assassination.

Are these tales true? That is, are the reports that the CIA directly told its moles within the news media to dismiss those who question the Lone Gunman Theory as “conspiracy theorists” true? We hear this a lot online, especially from . . . conspiracy theorists.

Wikipedia belittles the lore of Operation Mockingbird as “an alleged large-scale program” of the CIA, despite quite a lot of evidence for the operation’s existence (most of it not mentioned), and despite the many, many links between the legacy media’s news staff and the CIA (not to mention the dominant Ethnicity We Must Not Mention), but I have had enough run-ins with Wikipedia’s editorial staff to understand that Wikipedia was long ago taken over by the same kind of propagandists who overrun most successful start-ups of influence-peddling. The history of non-profit foundations is littered with ideological takeovers. This shouldn’t be surprising. It is more class-based than anything else, and much of what is condemned as “conspiracy theory” is actually some sort of class-based analysis.

But in American intellectual culture only leftists are allowed to engage in class analysis. All others are “conspiracy theorists” — and even the left is controlled, somewhat, by the obsessive implementation of the “conspiracy theorist” charge.

It is nevertheless the case that all conjectures about conspiracies should be judged on their factual merits, with recognition that conspiracies are evasive phenomena that do not present evidence in the innocent manner that we see the phenomena of the natural world. Clues of a conspiracy often appear first as evidence of a cover-up. Elementary praxeology should warn scientists of the danger of using the smell test in these areas, pro or con, for scientists generally do not have to fight against consciously withheld data.

”The greatest trick the devil ever pulled”: successful conspiracies would hide behind a taboo against looking into conspiracies for the same reason that true, exploitative egoists would hide behind the smoke of official altruism.

Don’t be a stooge. Reject the lore that says ”conspiracy theory” must be the province of the psychotically paranoid.

For if “they” are out to get you, it is not paranoia to notice. And there are a lot of theys out there in the business of defrauding us, stealing from us, subjugating with us.

More importantly, we must not be shamed by the shameless.

To be a conspiracy theorist should be no more controversial than an “invisible hand” theorist. A conspiracy theorist is someone who has theories about conspiracies, and considers conjectures about conspiracies as legitimate subject for inquiry and disputation. Someone who believes in a conspiracy is not necessarily a conspiracy theorist. Someone who merely suspects a conspiracy lurks behind some observed events would better be labelled a “conspiracy conjecturer”!

The first question to ask an actual conspiracy theorist is not “what conspiracies do you believe in?” but “how can we learn which proposed conspiracies might be real?”

twv

There are many documents, obtained through leaks and FOIA requests, of reports about UFOs to and from military brass and naval and air forces and nuclear installations. This particular document, offered as public evidence by Luis Elizondo, late of AATIP, to Fox’s Tucker Carlson, may be new, but there are many others, such as the Admiral Twining Memo.

Now, what we have to understand is that the military has never (to my knowledge) repudiated these documents. This means, if UFOs are hoaxes or mistakes and illusions, these many documents are fakes. Which means that the U.S. Government would rather have its citizens speculating about nonsense while thinking the Government is engaged in a huge cover-up conspiracy than disabusing the alleged sovereigns of these United States of the public fraud perpetrated at their expense.

What this says about the government is obvious: it is conspiracy and psy-op no matter what, and an unconscionable one either way.

Scoffers and “skeptics” who take comfort in the notion that UFOs amount to a scientific zero somehow also must either ignore or take comfort in the Government’s complicity in a pattern of deluding its citizens.

I find this so irresponsible and anti-republican that the confident superiority of these scoffers and “skeptics” strikes me as almost more chilling yet.

Or else they are just not very bright.

Yet these “very bright people” sure pride themselves on their savvy intelligence!

Pride goeth before a disclosure?

twv

(1790–1864)

Why are marginalist ideas and economists mainly antagonistic towards their classical predecessors?

. . . as answered on Quora. . . .

Is this true? Are they? Were they? Of the marginalists I have read, they acknowledge the great successes of their predecessors.

Indeed, after writing the Grundsätse — which provided a more coherent foundation for value and price — Carl Menger went on to tutor Crown Prince Rudolf of Austria, and spent most of his economic teaching effort emphasizing, not disputing, classical doctrines.

W.F. Lloyd, a brilliant precursor, built off of Say’s Law of Markets, sparing us the invective.

W.S. Jevons, the most anti-Ricardian of the bunch — and it was against David Ricardo whom he directed most of his ire, if memory serves — was filled with admiration for predecessors in the French Liberal School, and his never-finished Principles of Economics contains this reverential preamble:

An excellent way to begin a treatise on economics is to notice and analyse the manner in which [Nassau] Senior treats the subject in his work on Political Economy. It would be difficult, indeed, to find anything more logical and accurate than the few first pages of this excellent introduction to the science. As we shall afterwards see, Senior may not have followed his own ideas to their ultimate result; but, so far as they go, they form the best exposition of the basis of economics.

Now, I read Senior before Jevons, and I heartily concur. What a mind Senior had! He is my favorite classical-era economist. But he was also part of the Oxford catallactic trend, which was mostly uncomfortable with Ricardian economics and labor theories of value and cost. It was filled with proto-marginalists, like Lloyd. And, as H. Dunning Macleod later indicated, it might best be regarded as part of what he called “the Third School of Political Economy,” which dominated French and even American discussion. That is, it was a separate thing.

The marginalists of the last third of the 19th century were plying a new, more precise and even revolutionary theoretical toolkit. But it fit within much of classical theory, and the marginalists on the whole were not too proud. If Jevons seems cantankerous on occasion, remember, it took a long time to get the new ideas accepted, and not a few of those that did accept the ideas, like Alfred Marshall, did so by trying to incorporate the new with the old as half-measures. Austrians and Walrasians, for example, came to hone their ideas over time, making them more sui generis, inevitably finding the Marshallian/Clarkian mainstream antagonistic to them. So some of the later antagonisms to the classicals we cannot help but note — especially among some of Ludwig von Mises’ students, like Murray N. Rothbard — are no doubt the result of long-festering disputes in which the dominant school was more dismissive than anything else . . . in the manner dominant schools tend to be. And those dominant schools (which went through a Walrasian phase, to make this more complicated) tend to carry on old mistakes while scoffing at the objections of the economists they, in effect, “marginalize.”

twv

It took me long enough. A Bitcoin episode, finally!

Or catch it via podcast, using your podcatcher or SoundCloud:

LocoFoco Netcast, Season 2, Episode 8: Bitcoin Background (Late April, 2021).

Professor James R. Otteson, the author of the terrific book Actual Ethics (2006), has a new book coming out at the end of the month, The Seven Deadly Economic Sins:

So he joined Lee Waaks and me for an interesting conversation on the topic of his book:

Frédéric Basiat (1801-1850)

What is the third school of political economy, and how is it distinct from the French liberal school?

…as answered on Quora. . . .

The term “Third School of Political Economy” was coined by Scottish economist H. Dunning Macleod (1821–1902). Whereas the designation “French Liberal School” focuses on the nationality of its members and on their general laissez faire policy positions, Macleod focused on the catallactic point of view of Condillac’s Le Commerce et le gouvernement, considérés relativement l’un a l’autre (1776) as it spread among dissident economists all over Britain, Europe and America. While most historians refer to J.-B. Say as the fountainhead of French Liberal Political Economy, Macleod placed Say squarely in the “Second School of Political Economy,” which Adam Smith famously launched and most of us know as Classical Political Economy.

The train of thought Macleod identified as “Third” is indeed distinct from Smith, Say, Ricardo and the Mills, as well as from the Physiocrats (the “First School”) before them. In Elements of Economics, and other works, Macleod discussed a handful of economists as the school’s exemplars: Étienne Bonnot de Condillac (French); Archbishop Whately (British, first in a long line of heretical Oxford economists); and Arthur Latham Perry (American). He made much of the science as all about exchange, though he came to prefer the name “economics” for the science over Whately “catallactics.” But Macleod was a quirky fellow, and used the Physiocrats’ term, “Economical Philosophy,” in the title of one of his better treatises.

Macleod is generally considered an “also-ran” in the history of economics. His own contributions never really gained much ground, though he had a rather surprising influence on American institutionalism. But one thing you glean from reading his work, as well as that of Perry: Frédéric Bastiat was the most-admired (or at least most inspiring) of the writers in this school. And since Bastiat was French, and a radically individualistic laissez faire proponent, “French Liberal” is hard to argue with.

Other “members” of this school include Destutt de Tracy (French, but translated into English by Thomas Jefferson), Henry Charles Carey (American), Amasa Walker (but not his eclectic son, Gen. Francis Amasa Walker, both Americans), Gustave de Molinari (Belgian), Jean Gustave Courcelle-Seneuil and Yves Guyot (both French). But taking a hint from W.S. Jevons, I include not only Leon Walras’ father, but Leon himself, and especially Jevons, Menger, and their followers. Vilfredo Pareto, an admirer of Molinari, probably also qualifies.

But that is argumentation, a thesis to be established. Or maybe a mere waste of time.

That being said, the distinguishing feature of the school is the idea that in trade both parties [expect to] gain. This is a bedrock notion of today’s neoclassical economists, who sometimes sniff and snort that this idea is “obvious.” Or “just an assumption.” A presupposition. But what the Third School did with it does differ from modern economics in important ways. But that, I think, is another story.

twv

Yves Guyot (1843-1928)

Why is capitalism not liberalism?

…as answered on Quora….

Which capitalism? Which liberalism?

What came to be known as “capitalism” grew out of mercantilism and the freeing up of such systems in part by liberals — “classical liberals” — who sought to limit government interference in the workings of markets. Arguing for a generally ‘laissez faire’ approach, and persuaded by economic reasoning that most of the goals and methods of mercantilists achieved socially negative results — often the opposite of the promised results of the traditional advocates of private-public partnerships — these liberals helped spur the astounding economic advances of the agricultural and industrial revolutions.

But almost no country has ever sported pure laissez faire — such a policy seems austere to folks in government, whose power is limited under such a policy — and Actually Existing Capitalism has always been to some degree mercantilist, filled with goofy and exploitative favoritism, transfer payments, deceptive and slippery regulations, tragedies of the commons, vast public work projects, and persistent rent-seeking manias. Self-proclaimed liberals fought this for many decades of the 19th century, but the popularity of socialist ideas infected the class of people who called themselves liberals, and this class of people reverted to a kind of neo-mercantilism, dubbed ‘progressivism’ in America and ‘social democracy’ in Europe, often pushing to dirigisme — sometimes called fascism and other times called national socialism and often pitched with eulogistic, sloganeering brand names, like The New Freedom and The New Deal.

It is time to take back the term ‘liberalism’ from the advocates of some jury-rigged ‘third way’ between laissez faire and state socialism. But we may have to stick with alternatives, like ‘libertarianism’ or Benedetto Croce’s ‘liberism.’

It would be easy to argue that ‘capitalism’ has almost always been used as a pejorative, and should be dropped like a scorched spud. Worse yet, naming a system of private property, free production, free trade, free labor, and free banking by only one of the three traditional factors of production — ‘capital’ (instead of by land and labor as well) — makes capitalism unsuitable for those who wish for any sort of precision. But we are probably stuck with it, too. In my nitpickier moments I sometimes talk up The Catallaxy — the emergent order of all voluntary exchanges (Richard Whately defined economics as ‘catallactics,’ or the Science of Exchanges, nearly two centuries ago, and F.A. Hayek coined the above term for the liberal system sometime in the 1960s or 70s) — but that isn’t going to fly.

When someone says they are for or against ‘capitalism,’ we must ask for clarification. When folks call themselves a ‘liberal’ but are only liberal in spending other people’s money, laugh in their faces.

Today’s critics of capitalism must not be allowed to get away with their most characteristic legerdemain, pretending that every problem in our mixed economy is caused only by the ‘free market’ aspect of the system, and not the government part. And conservative defenders of capitalism have got to stop calling the current system ‘free enterprise.’ Wake up and throw out the coffee grounds.

In my opinion, liberals are those who advocate laissez faire capitalism. They oppose the neo-mercantilists of all varieties, and socialists even stronger.

So, back to the question. Why is capitalism not liberalism? Capitalism is an economic order; liberalism is an ideology.

Alas, we are almost always stuck with the tedious job of disambiguating both terms.

twv, October 24, 2019

Increasing numbers of people look upon our world as dominated by “curated reality” — not reality itself. So much of what we think of as true is determined not by our stable appraisals, but by our acceptance of frameworks established by others, by factoids paraded as facts, fantasies doing all the heavy lifting, and narratives told by the gifted storytellers, and perhaps also by conspiracies among some or all of these players.

There is something to this perspective, and the big questions regarding it would seem to be

  1. how much of reality curation is individuals “competing in the marketplace for memes”;
  2. how much is orchestrated meme production and distribution out in the open and
  3. in secret; and
  4. how much is “rational” or “irrational”?

The scare quotes because rationality is a contested concept.

Ray Scott Percival’s essay in Scott Adams and Philosophy: A Hole in the Fabric of Reality (Open Court, 2018), along with several essays by David Ramsay Steele, addresses some of these issues. Scott Adams is one of the most important current advocates of the curated-reality concept, promoting the notion that hypnotism defines much of our human experience, where “the facts don’t matter” (just like on Whose Line Is It, Anyway?). Though I have only just begun reading it, Percival’s essay “Biases Are Rational!” provokes thought — and reminds me of notions I mulled over years ago. A trouble with the Daniel Kahneman/Amos Tversky approach to biases is that by focusing on neoclassical economics’ rather narrow definition of rationality, it suggests that people are error-prone at a very fundamental level, and thus scuttles a more “invisible hand” (emergentist) understanding of human action. Percival takes this on directly:

“Biases,” Percival writes, “can be adaptive to our circumstances.” This view of the cognitive biases Gerd Gigerenzer calls “ecological rationality.” It strikes me as familiar. Did not Armen Alchian advance similar ideas? In any case, Percival argues that we are rational in how we manage our biases — adapt them in light of experience. Here I am reminded of Herbert Spencer’s version of praxeology, human choice and action being defined as “actions adjusted to ends.” But we have to extend the adjustment process to “ends adjusted to means” by trial and error, and standards and routines adjusted in due course.

One of the things I encountered years ago reading F.A. Hayek is the notion that rationality in the French sense, constructivist and very clean and sterile — “Spockian,” you might say, referencing Mr. Green-blooded Pointy Ears — is not a very useful guide to actual human acts and interactions. One of Hayek’s distinctions in this regard was to distinguish teleocratic from nomocratic behavior — that is, purposive from rule-following. While to many theorists teleocratic explanations tend to boil down to a simple ends-means matrix, capable of simple mathematical formulation and calculable in Thorstein Veblen’s parody as “lightning-swift,” actual human action has competing goals as well as scarce means, often radically insufficient information to make any sure calculation, and an almost kaleidic shifting of all these elements (divergent ends, competing scarce means, uncertain knowledge and even a vast scope of nescience); pretending otherwise is foolish. Hayek believed that people use rules of thumb to make manageable the complexity of our actions. No matter how goal-oriented we are, we use rule-following habits to navigate the sheer booming, buzzing confusion of life.

My rap, back then, was that every purposive being did not just ration scarce means towards his ends, but also had to ration rationality itself. That is, the technical proficiency of ends-means calculations is always circumscribed by habits of thought and action that are learned behavior, and pertain to a tacit dimension of our reality. (I confess, I got this view from Julian Jaynes, whom I read long before Herbert Spencer, whose view of the human mind was also a matter of modularity and learning over vast spans of time, by natural selection, or “survival of the fittest”; you may note a tip of the hat to Michael Polanyi as well.)

What does all this have to do with a possibly curated reality? Well, we cannot conceive of reality without curation, or at least mediation by more than just pristine symbols. We are not robotic inquirers proceeding to adjust our mental maps of the world in a one-to-one, crisp-and-nifty rationalism. We human beings use a number of tools that are not just thinking with a limited set of concepts and fact/non-fact propositions, tested and perfected. Among those tools include myth and metaphor. These are crucial to our ecological rationality.

And because our complex of routines is so complex, it is quite possible to manipulate ourselves and others to scuttle the best use of those routines. Indeed, one way to curate another person’s sense of reality is to use rhetoric and mythic thinking but not acknowledge it, keeping the methods sub rosa. Thus we witness, in our time, people who pretend that they are Just The Facts, Ma’am thinkers, while they are almost wholly controlled by ideologies that gain their power from fantasy and myth more than from any careful calculation.

The notion of curated reality undermines simple appeals to “the facts.” Nietzsche’s challenge is pertinent here: There are no facts, only interpretations. But even more basic than that is the idea that we act and judge actions by conjectures often so outlandish that they might as well be called fantasy, and that our understanding of choice depends upon hypothesized counter-factuals, the “roads not taken” with every choice we make. Those are the costs of our actions. And they are necessarily “metaphysical” and not simply factual.

The complexity of the phenomenology of human choice lands us in a realm that simple accounts of rationality — especially low-brow materialist accounts, the kind you tend to encounter among engineers and science-fiction readers and stand-up comedians — simply cannot comprehend. Because of this, the very model of rationality as a Spock-like discipline leaves its proponents open to manipulation by people who understand that this model is necessarily insufficient. As James Randi was fond of saying, the easiest people to fool by stage magic are scientists. There is a reason for that.

Thus the curated reality of our time finds its biggest marks amongst those I call “the moderate brights,” who — unknowingly committed to grave error — repeat stock memes and thereby reinforce our present irreality.

twv

N.B. I hope to report back on these issues after I finish Ray Scott Percival’s contribution to Scott Adams and Philosophy, and perhaps the great David Ramsay Steele’s several essays as well. This post is merely my rehearsal of old ideas dimly recalled from back when I read economics and choice theory in a near-scholarly manner. Oh, and also: facts do matter. They just do not amount to “all that is the case.”