Economics

What Médaille Calls Capitalism

/ Aaron Richmond / Leave a comment

This post is the third in a series of posts on John Médaille’s book, Toward a Truly Free Market. To start at the very beginning–a very good place to start, mind you–find the first post here, and the second here.

Chapter two of John Médaille’s book revolves around his take on capitalism. He’s not a fan, and he doesn’t think you should be one either. He produces a chart with a hundred years worth of data on it concerning the American economy, discusses that chart for a page and a half, and is ready to call the debate for his side:

This leads us to an unavoidable conclusion: capitalism and the free market are incompatible. History shows, beyond any reasonable doubt, that the growth of capitalism and the growth of government go hand in hand. Capitalism and big government are not, as in the popular imagination and the economic treatises, things opposed; rather, the one grows on the back of the other, and the more you get of one, the more you will need of the other. (15)

Sadly, this is par for the course for this chapter, and there’s almost nothing helpful here. That is, there isn’t much helpful with respect to better understanding political economy, history, justice, or ethics. He begins with an equivocation on what capitalism is, and uses this shaky foundation to build up arguments full of insinuation and bluster. Chapter two is helpful, however, for understanding Médaille’s approach to his work. He is more salesman than economist or historian; more of a propagandist than anything else.

capitalist pig

None of this is meant to besmirch the man. Salesmen are not bad people. I aim to take up something like a defense of capitalism in this very post, after all. It would be weird to start such a thing by insulting people who sell stuff. Neither are propagandists all bad. Sometimes they make cool posters. When we like their work, we call them popularizers. The catch is, a salesman needs to have a solid product and a propagandist ought to advocate for something good, true, or beautiful. When these crucial elements are lacking, it discredits the whole project. And that’s what Médaille has done here for distributism. He’s too much in the tank to make a coherent argument that would persuade people who aren’t persuaded already. Again, I’m not saying he’s a shyster or a bad man. He could be innocently wrong here. But I am saying that this chapter is incoherent and should never have been written.

Let’s see if we can start at ground we hold in common and then get from there to why I found this chapter so unhelpful. Hopefully you’ll agree with me that ethics deals with fitting ourselves to what is real. Ethics is based on metaphysics. Médaille spent his first chapter claiming the high ground when it comes to combining economics and ethics, so we should assume that he has a good sense of how what is real relates to what he is proposing. However, in this chapter’s retelling of American economic history, Médaille somehow fails to distinguish between big government conservatism in America and Britain in the 1980s, the political economy in America in the years between 1900 and 1945, Hayekian economic theory, and pure capitalism. In his treatment of Ronald Reagan, he fails to distinguish Reagan’s rhetoric from Reagan’s policies. He jumbles all these things together under the label “capitalism,” and it’s no wonder the argument comes out as a mess. Further, it is only as a mixed-up jumble that Médaille could claim with any kind of justification that the idea of capitalism has failed “in exactly the same way in every case” of failure in the 20th century (18). The first half of that century saw the creation of the Federal Reserve, the institution of the income tax, the Great Depression and the New Deal, two hugely disruptive world wars, and a whole host of other massive government interventions into society, and Médaille is so bold to write “pure capitalism disappeared in the 1940s, caught in its own contradictions” (21).

Just as we struggle with ethics if we’re not grounded in metaphysics, it’s hard to evaluate an economic system if we don’t know what that system is. For Médaille’s assertions to make any sense, capitalism would have to be an arbitrary system that is whatever someone claims about it. But it is not that, and Médaille is not ready to critique capitalism because he does not understand what it is. Just as it makes no sense for a man to claim that his blue shirt is green, it makes no sense for a President to claim to be a capitalist and then turn around and manage the economy like Wilson, Roosevelt, Reagan, or Bush did (or Trump does, or the next guy will…). And in just this way, it makes no sense for an author to claim that an era that saw enormous government interventions into the economy leads to the “unavoidable conclusion” that “capitalism and the free market are incompatible” (15).

This is more than a quibble about definitions, with me taking a strict definition of capitalism and Médaille taking a more broad definition according to how it’s used. Recall Médaille is trying to show us why we need to listen to him when it comes to ethics and justice. He’s trying to show how we’ve got it all wrong so far. But as he’s trying to sell us his vision, he evidences no particular understanding of what pure capitalists actually claim, and no particular understanding of any of the history involved. Why would anyone think that the creation of the Federal Reserve was the necessary result of pure capitalism’s own contradictions? What do private property rights have to do with the Great Depression, or any of the other recessions on his chart? What about deregulation? He would need to address questions like these to prove his case. He would need to demonstrate why these interventions were necessary. Instead, he’s contented himself to talking about second- and third-level issues with no attempt to show us that he’s understood the first- level issues.

One of the stranger aspects of the “failure of capitalism” conversation is that the mistakes Médaille makes in this chapter have been consistently answered by capitalist theorists for decades. Consider Ludwig von Mises’s essay from 1932 called “The Myth of the Failure of Capitalism.” Médaille’s line of argument is similar to the line the Marxists took in Mises’s day:

The line of argument that leads to blaming capitalism for at least some of these things is based on the notion that entrepreneurs and capitalists are no longer liberal but interventionist and statist. The fact is correct, but the conclusions people want to draw from it are wrong-headed. These deductions stem from the entirely untenable Marxist view that entrepreneurs and capitalists protected their special class interests through liberalism during the time when capitalism flourished but now, in the late and declining period of capitalism, protect them through interventionism. This is supposed to be proof that the “hampered economy” of interventionism is the historically necessary economics of the phase of capitalism in which we find ourselves today. But the concept of classical political economy and of liberalism as the ideology (in the Marxist sense of the word) of the bourgeoisie is one of the many distorted techniques of Marxism. If entrepreneurs and capitalists were liberal thinkers around 1800 in England and interventionist, statist, and socialist thinkers around 1930 in Germany, the reason is that entrepreneurs and capitalists were also captivated by the prevailing ideas of the times. In 1800 no less than in 1930 entrepreneurs had special interests which were protected by interventionism and hurt by liberalism.

Today the great entrepreneurs are often cited as “economic leaders.” Capitalistic society knows no “economic leaders.” Therein lies the characteristic difference between socialist economies on the one hand and capitalist economies on the other hand: in the latter, the entrepreneurs and the owners of the means of production follow no leadership save that of the market.

At the beginning of the 20th Century, men like Rockefeller and Morgan had a bunch of capital, but they weren’t capitalists in the sense of believers in a capitalistic economic theory. These men were “captivated by the prevailing ideas of the times,” and the politicians of the day right along with them. In fact, as Murray Rothbard explains here, we got stuck with the Federal Reserve when these Zeitgeist-filled men all conspired together to make it be. This was not a necessary outworking of capitalistic economic theory, nor was it a needed intervention to steady out the economy. It was a power play characteristic of the Progressive Era, an era which saw technocrats and bureaucrats seizing control of various sectors with the belief that they could be managed to perfection. And so it makes no sense to say that this era proved the failure of capitalism. To argue in this way is to equivocate on what is being discussed and to bring darkness to the subject instead of light.

Imagine, if you will, what Médaille might say if someone used his style of reasoning against him. Médaille is a Catholic and much of the literature in the distributist library has been produced by Catholics. How would one expect Médaille to respond if someone brought up an example of recurring corruption among the priesthood over a period of a hundred years within the Catholic church and dismissed Catholicism because of that corruption? If that corruption had actually taken place and was provable, do you expect he would abandon Catholicism because this corrupt priesthood “grows on the back” of Catholicism, and the more you get of Catholicism, the more you need corrupt priests to make Catholicism work? Of course not. Catholicism is a thing. It is a system and a religion with definable characteristics. If Médaille decided to answer this critic at all, he would presumably set about showing how corruption isn’t essential to Catholicism. He might explain that examples of corruption within Catholicism are not due to that religion’s defects but are rather due to man’s corrupt nature, which Catholicism grants.

Capitalism is not a religion. That’s not the parallel here. But, like Catholicism, capitalism is a system with actual definable characteristics. And, just as Médaille would not call Catholicism all that the imaginary critic would call Catholicism, we ought not call capitalism all that Médaille calls capitalism unless and until he demonstrates that what he asserts is true. It is true that capitalism does not prevent men from seizing power in its name, and it does not itself expose them as hypocrites when they use “capitalism” as a cover for their interventionist policies. No economic theory will perfect mankind. If economic theory could perfect us, Jesus would have given us economic theory instead of giving us Himself. Neither can economic theory self-enforce one hundred percent consistency. But capitalism never claimed to be able to do those things. And, in the same way that corruption in the Catholic Church doesn’t disprove Catholicism, corruption in a more capitalistic country’s economy does not disprove capitalism.

Now, as a Protestant, I actually believe there is corruption baked into the essence of Catholicism. Priests should not have to take vows of celibacy because celibacy is not required by God of his ministers. So these priests wind up vowing themselves to a pattern of behavior which God never promised to empower them to maintain. And the logical result, as well as the historical result, is sexual frustration leading to sexual corruption within the ranks of the Catholic priesthood.

Of course, it is not my aim in this post to beat up on Catholics. I simply mean to show from one more angle what type of argument would have done the work Médaille wanted to get done in this chapter, and what kind of argument was conspicuously missing. “Because capitalism” is a lousy way to demonstrate causation.

So then what is real capitalism? There is no official catechism of capitalism like there is for the Catholic church. It’s true that the term ‘capitalism’ was coined by anticapitalists who wedded the ‘capitalistic mode of production’ to a specific understanding of exploitation. But that’s not what Médaille is talking about here. Throughout this chapter, Médaille is often specifically talking about capitalism as represented by Hayek and the Austrians. And because this is his frame of reference and the theory in his cross-hairs, maybe we can trust what Mises said above: a capitalist economy is one in which entrepreneurs and owners of the means of production follow the leadership of the market, and no other. Médaille has failed to show us that capitalism understood in this way is broken.

For my own part, the best explanation of capitalism I’ve heard comes from elsewhere in Mises. I linked to in my first post, but I’ll quote it here for good measure:

The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody’s actions aim at the satisfaction of other people’s needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens…

This system is steered by the market. The market directs the individual’s activities into those channels in which he best serves the wants of his fellow men. There is in the operation of the market no compulsion and coercion. The state, the social apparatus of coercion and compulsion, does not interfere with the market….It protects the individual’s life, health, and property against violent or fraudulent aggression on the part of domestic gangsters and external foes….Each man is free; nobody is subject to a despot. Of his own accord the individual integrates himself into the cooperative system. The market directs him and reveals to him in what way he can best promote his own welfare as well as that of other people…

The market is not a place, a thing, or a collective entity. The market is a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor. The forces determining the–continually changing–state of the market are the value judgments. The state of the market at any instant is the price structure, i.e., the totality of the exchange ratios as established by the interaction of those eager to buy and those eager to sell…..Every market phenomenon can be traced back to definite choices of the members of the market society.

The market process is the adjustment of the individual actions of the various members of the market society to the requirements of mutual cooperation. The market prices tell the producers what to produce, how to produce, and in what quantity. The market is the focal point to which the activities of the individuals converge. It is the center from which the activities of the individuals radiate.

Because this is what capitalism is, it is appropriate to say, as I have said, that capitalism is based on love. Two things are meant by this. First, men’s value judgments drive capitalism. They seek what is valuable and desirable to them. They seek what they love. Recall from that first post that “love” can be righteous or it can be wicked, depending on the thing loved. If men find wickedness desirable and falsely believe that evil is desirable, they will go after these ends with abandon and a purely capitalist economy will not keep them from it. However, if they value righteousness and love what is lovely, a purely capitalist economy will not keep them from pursuing praiseworthy ends either. In a capitalist economy, the market reflects the values of the society.

As a side note, this is actually the best line of critique of pure capitalism to my mind. What kind of limits ought a society to impose upon men to restrain their evil? Do men have a right to do anything they wish with their property as long as they aren’t aggressing against someone else? And if property rights ought to be limited somehow according to true religion (or some other standard), what does this mean for laissez-faire economic theory? I hope to write out my answers to these questions at some point, but because this is not the line of argument that Médaille pursues, my extended thoughts on these matters don’t belong here.

More to the point of this post is the second way that capitalism is based on love. It is related to the first. Not only do men’s loves/desires/needs/values make up the market, but because they do, the way to “get ahead” in a free market is to serve other men by giving them what they want and providing for their needs. Again, the free market is not a moral panacea, and men may love wrongly. Still, capitalism teaches a man to find a way to meet other men’s desires, to benefit his neighbors by serving them in some way. This is a good skill to have, and capitalism teaches it. Economist George Gilder is especially good on this point:

The unending offerings of entrepreneurs, investing capital, creating products, building businesses, inventing jobs, accumulating inventories–all long before any return is received, all without any assurance that the enterprise will not fail–constitute a pattern of giving that dwarfs in extent and essential generosity any primitive rite of exchange. Giving is the vital impulse and moral center of capitalism. (Wealth and Poverty, 35)

Hopefully we can circle back around to the morality of markets when Médaille develops his ideas of justice and property rights more fully. For it is not a subjective love based on man’s felt-needs that fulfills the law, but a love that is in accord with what God has commanded. And so, to act justly in accordance with the law is to do no wrong to a neighbor, to love your neighbor truly (Romans 13:8-10). Justice, law, and love are all tied up together, and Médaille is correct to say we shouldn’t forget about them in our economic theorizing. However, truth also ought to be part of our theorizing, and in chapter two of Toward a Truly Free Market, Médaille managed to write nearly ten pages worth of things that aren’t so.

Postscript: Oddly enough, Médaille’s approach to the economic history of America in the 20th Century in this chapter was the approach of the new economic historians, not of the political economists of old. In chapter one, Médaille spent a good chunk of his time explaining how economics does not “draw its proper methodology from physics, astronomy, chemistry, or any other physical science” (4). Now in chapter two, Médaille takes us to the laboratory of history to test out economic theories. For a good Austrian critique of this type of stuff that is more in line with what Médaille was commending to us in the first chapter, I’d recommend Joe Salerno’s essay “How to Do Economic History.”

On Scientific Pursuit

/ Aaron Richmond / 2 Comments

It is a truth universally acknowledged that one ought to query Herman Bavinck’s Reformed Dogmatics when one wishes to develop his own ideas on any subject. If Bavinck hasn’t written on a given subject directly, he’s at least put some time into developing a proper foundation from which a man can begin his own inquiry.

the-sower-van-gogh

In the last post, Médaille and Mises agreed that diminishing man as a way of practicing economics could only end in disaster. But what’s the right way to do economics? Or, broadening the question, what does it mean for a man in full to engage scientifically? How does that work? These paragraphs from Bavinck’s section on empiricism begin to answer those sorts of questions. (Note especially his reference to 2 Timothy 3:16-17 at the end of the second paragraph: “proficient and equipped for every good work.” We would be fools to put Scripture to the side in our pursuit of scientific knowledge and hope to be equipped to have success in our pursuits.)

Empiricism’s…view of science is also subject to serious question. Science, after all, is by its very nature interested in knowledge of that which is universal, necessary, eternal, and logical. Knowledge of phenomena, persons, facts, etc., though good, is still only preparatory; analysis comes first but synthesis must follow. Scientific knowledge exists only when we see the cause and essence, the purpose and destiny of things, when we know not only the that (ὅτι) but also the wherefore (διότι) and thus discern the causes of things (rerum dignoscimus causas). Empricism, however, is compelled to deny the name of “science” to all sciences except the exact sciences. But this restriction is impossible for two reasons. First, because aside from the purely formal sciences (logic, mathematics, mechanics, astronomy, chemistry), and then only in a certain sense, there can be no science without a philosophical element. In every science, inventiveness, intuition, imagination, in a word, genius (and in this connection the scientific hypothesis) play a most important role. And second, because then the name of “science” can finally be reserved only for a few subsidiary disciplines, and precisely the knowledge that is most important to human beings and that in their research is their primary interest is banished from the domain of science. Thomas’s maxim, in which he follows Aristotle, remains true: “The slenderest acquaintance we can form with heavenly things is more desirable than a thorough grasp of mundane matters.” And Schopenhauer made a similar statement: “People never stop praising the reliability and certainty of mathematics. However, what benefit is there for me in knowing with ever so much certainty and reliability something which I do not in the least care about?”

In addition to this, the world of nonmaterial things, the world of values, of good and evil, law and custom, religion and morality, of all that inspires love and hatred in our hearts, lifts us up and comforts us or crushes us and grieves us, that whole magnificent invisible world is as much a reality to us as the “real world” that we perceive with our senses. Its impact on our lives and on the history of humankind is still much greater than that of the visible things about us. Human beings may be freely asked, then, to limit themselves in their research since in this domain no knowledge is possible, but this demand bounces off what Schopenhauer called the metaphysical need of the human spirit. Man is not only an intellectual but also a willing and feeling being; he is not a thinking machine but in addition to his head also has a heart, an [inner] world of feelings and passions. He brings these with him in his scientific research. In his activities in study and laboratory, he cannot lock himself out. It cannot rightly be demanded of man that in his scientific labors, that is, in one of the noblest activities of his mind, he silence the voice of his feelings, his heart, the best part of him, and thus cripple himself. Only this may always–and therefore also in the case of the practitioner of science–be demanded: that he be a good, a true man, a man of God, proficient and equipped for every good work, including this work of pursuing scientific knowledge.

If, however, the pursuit of science is both subjectively and objectively restricted, the only outcome will be that people will seek the satisfaction of their metaphysical needs in other ways. Kant took the road of practical reason; Comte introduced the cult of humanity, consecrating himself as its high priest; and Spencer humbly bowed down before “The Unknowable.” In one way or another–including even spiritism, magic, and theosophy–they all seek compensation for what science will not give them. And religion, along with all spiritual knowledge, having first been shamefully dismissed through the front door, is again admitted through the back door but now frequently in the form of superstition. “You may expel nature with might and main; it will nevertheless always come bounding back” (Horace). Only, the inevitable result is that science is then left, undefended and unarmed, to materialism. And, in fact, this is what empiricism has led to. If the content and, soon, the intellectual faculty of the soul as well proceed altogether from the external world, why then could not the soul itself be explained in terms of it as well? But over against this still always stand the “seven riddles of the world” as a source of torment and vexation to the materialistic mind. The spiritual still has not yet been explained in terms of the material, any more than rationalism has succeeded in deriving “being” from “thinking.” No passage between the two has been found. Here is a gap that neither idealism nor materialism can bridge. It is not too daring even now to say not only “we do not know” (Ignoramus) but also “we shall not know” (Ignorabimus). But when we see that, despite the great promises made and the still greater expectations entertained, empiricism and rationalism in this century ended up in mere materialism and illusionism, we wonder. Despite the opposition between materialism and illusionism, they still advanced and aided each other–in the case of Feuerbach and Strauss, Hegel’s idealism ended in materialism, and in the cases of many natural scientists, materialism is turning into full or semi-idealism. So there is good reason to ask some questions. Does not the whole of modern philosophy, in its Cartesian as well as in its Baconian expression, need revision? Are there not other and better principles of science, principles that protect us from materialism as well as idealism? (Reformed Dogmatics, Vol. I, 221-222)

homo whaticus?

/ Aaron Richmond / 3 Comments

We’re continuing our attempt to move Toward a Truly Free Market with the help of John Médaille’s book by that name. In the introductory post we began and ended with brief discussions of terms like love, hate, and free. Médaille begins his book in a similar vein, looking at the difference between the terms economics and political economy. Interestingly, he notes that the first version of the Oxford English Dictionary (completed in 1928) has no entry for ‘economics’ (2). Before that, men like Adam Smith, David Ricardo, and Karl Marx would have thought of their science as political economy. So why the change? Médaille writes:

…if they were synonyms, there would be no reason for the change. The difference between the terms is that the political economists saw their science as a humane science firmly embedded in human institutions. The new economists, on the other hand, saw their discipline not as a humane science, but as something in the order of the physical sciences, which operate independently of human intentions. (2-3)

According to Médaille, the downgrade from thinking in terms of the political economy to thinking in terms of economics evidences a misunderstanding of the world and diminishes what it is to be a man:

…to make economics work as physics works, guided by physical measurement and ruled by pure mathematics, they have to reduce man to a physical object in a world of physical objects. They have to reduce man’s labor to a mere commodity, purchased at the lowest value like any commodity; they have to reduce man to an economic calculator, the mythical homo œconomicus. Mostly, they have to divorce the economic question…from any question of ethics. (3-4)

In other words, because there is simply no way to live as a man outside the realm of ethics, to pretend to do so when we practice economics is the height of folly. Building off these ideas, Médaille explains for us “the over-riding theme of this book:”

Economics, or more properly, political economy, cannot be a proper science unless it is a humane science; to be a humane science it must embody some notion of justice, and particularly of distributive justice. (5)

And so the stage is set for the rest of the work. He won’t develop his understanding of distributive justice until later in the book. We’ll pick it back up when he does.

As he closes out this chapter, Médaille faults modern economists for not foreseeing and preventing the 2008 housing bubble crash. Because “90 percent [of economists] missed the coming of the last disaster, and the one before that” (5), he asserts that economics must be “an incomplete science” and “not able to make any rational policy prescriptions” (6). The distributists, who share Médaille’s vision of the political economy, have also failed though. They haven’t been able to articulate their vision in a way that would engage with people on an economic level in the same way that they’ve succeeded so well in engaging on an ethical level. Addressing this issue is one of Médaille’s goals for Toward a Truly Free Market. He aims to give distributists reasons for the hope that is in them and to arm them with economic arguments so that they have “the intellectual arms and armor necessary to enter the debate on more equal terms” (9).

In this first chapter, Médaille also mentions the Austrian school of economics, dubbing it one of the branches of economics which is “nearly the opposite of distributism” (8). If the opposition between distributism and “Austrianism” is true in general, it’s certainly not true with regard to the specific points Médaille makes in this chapter. To a man, Austrians object to the idea of homo œconomicus, for example. Over at Mises.org, Ryan McMaken has suggested instead that the concept is a tool for central planners because it allows them to flatten man’s desires down to economic utility. Were man to behave mechanistically with only economic motivations, he would be much easier to predict and control. To refer back to Médaille’s language above, if it were legitimate to reduce men down to physical objects, it would be more plausible for outside authorities to plan their lives. Austrians agree with Médaille, however, that man is motivated by far more than monetary considerations in his actions. In the article just mentioned, McMaken quotes Mises on the subject:

It was a fundamental mistake…to interpret economics as the characterization of the behavior of an ideal type, the homo œconomicus. According to this doctrine traditional or orthodox economics does not deal with the behavior of man as he really is and acts, but with a fictitious or hypothetical image. It pictures a being driven exclusively by “economic” motives, i.e., solely by the intention of making the greatest possible material or monetary profit. Such a being does not have and never did a counterpart in reality; it is a phantom of a spurious armchair philosophy. No man is exclusively motivated by the desire to become as rich as possible; many are not at all influenced by this mean craving. It is vain to refer to such an illusory homunculus in dealing with life and history.

Mises and Médaille agree that man is more than a merely physical, material, or monetary being.

csm_Lempertz-1104-155-Paintings-15th-19th-C-Hans-Herrmann-Dutch-Flower-Market_4bd1400d00

Dutch Flower Market by Hans Herrmann…homo œconomicus at a loss amidst the beauty

So too, Austrians have always rejected the mathematical approach to economics. Consider this from elsewhere in Mises:

The mathematical method must be rejected not only on account of its barrenness. It is an entirely vicious method, starting from false assumptions and leading to fallacious inferences. Its syllogisms are not only sterile; they divert the mind from the study of the real problems and distort the relations between the various phenomena.

If the mathematical method is no good, what method ought to be used instead? Mises terms his own approach “logical economics,” which he says is “a theory of processes and changes,” namely the “analysis of the market process.” The market process is, at its core, simply “purposive human action.” This is why Mises called the book from which I’ve pulled these quotes Human Action. Note that this is a far cry from Médaille’s charge above that the “new economists” understand their discipline to “operate independently of human intentions.” So innocent are the Austrians of this charge that their whole system is based on the axiom that humans act. Men intend things. They are purposive beings. This is right where economics starts for the Austrians, and because this axiom is true, we’re able to logically deduce from said axiom a system of laws which have both meaning and sound predictive capabilities.

Remember that this is exactly what Médaille was after: an understanding of the political economy that did not reduce man down to a physical object, and which would at the same time have the ability to suggest policies which would be able to prevent (or at least anticipate) economic disasters. On this point, it’s worth marking that there was no mention of distributists that predicted the crisis of 2008 in Médaille’s book. Maybe some distributists saw it coming, but Médaille doesn’t provide any examples. Austrians, on the other hand, were describing the housing bubble and predicting a coming crash as early as 2001 and 2002. And not just a few of them. Over at the Mises wiki you can find documentation of two dozen or more Austrians sounding the alarm about the impending crisis throughout the early 2000s.

But, overall, we’re off to a good start as we move toward a truly free market. We must recognize what man is if we’re to analyze his behavior in social cooperation and exchange. He is not simply a physical object, but also an ethical being, motivated by desires toward certain ends. There will be plenty of time for disagreements later on. Médaille maintains that his system recognizes the ethical element of economics and embodies distributive justice particularly. Mises defines his system as an analysis of human action in the market process. These different starting points will come to a head especially in chapters three, four, and five. But if the core contention of chapter one is that economics as a science must deal with man holistically, then I am happy to affirm it. And, as far as I can tell, so are the Austrians.

Love & Economics

/ Aaron Richmond / 3 Comments

Love always gets good press. Everyone loves love. Some say it’s all you need. In fact, love is so great that it’s self-defining. ‘Love is love’ according to the ad campaign that our elites are currently waging upon us. Incidentally, this is a brilliant way to maintain two blasphemies at once: first, that love is a magical label which a man can apply to any and every desire in his heart he wishes to justify; and second, that our loves are on par with (or can even usurp) the place of the one true God in our lives. The biblical construction, of course, is that God is love.

How should we feel about this sort of move in our culture? How should we feel about ad campaigns teaching blasphemies? How should we feel about corporations providing cover for perversity? We should hate it. We should even pray to hate it more than we currently do. Indeed, hating well is part of what it means to fear God: “The fear of the Lord is to hate evil: pride, and arrogancy, and the evil way, and the froward mouth, do I hate” (Prov. 8:13). Doug Wilson meditated on this verse a few years ago at the beginning of the year and resolved to become a better hater:

The fear of the Lord is to hate what is evil. We should be able to immediately see that there is no virtue or vice to be found in a transitive verb. By themselves as verbs, love is not good and hatred is not bad. Everything rides on the direct object. If you love your mom, that is great, but if you love child porn — same verb and everything — you are being wicked. In order to honor God, the right verb has to be lined up with the right direct object. Genuine love lines up with certain things, and so does true-hearted hate.

In the passage quoted, the direct object for hate must be evil, pride, arrogance, an evil way, and perverted speech. If you look around at the landscape that lies before us in this freshly minted 2014, there are many objects that rightly qualify as direct objects of our hatred — if we are to be disciples of Jesus in 2014. We live in what military men call a target-rich environment.

His post continues with seven ways we can better follow Jesus by hating as he hates. Go read it and come back.

This idea of nurturing the right hates is grounded in the Bible, so it would be wrong to credit the idea to a man. But I suppose I first started thinking in these grooves when I read Orthodoxy by G.K. Chesterton in high school. In a section explaining his “position about all that was called optimism, pessimism, and improvement,” he outlined a paradoxical approach to life:

It will be said that a rational person accepts the world as mixed of good and evil with a decent satisfaction and a decent endurance. But this is exactly the attitude which I maintain to be defective…. I know this feeling fills our epoch, and I think it freezes our epoch. For our Titanic purposes of faith and revolution, what we need is not the cold acceptance of the world as a compromise, but some way in which we can heartily hate and heartily love it. We do not want joy and anger to neutralize each other and produce a surly contentment; we want a fiercer delight and a fiercer discontent. We have to feel the universe at once as an ogre’s castle, to be stormed, and yet as our own cottage, to which we can return at evening.

Hearty hate and hearty love. Over a decade after first reading that book, I think those words are still true and I’m grateful to Chesterton for writing them. But I bring up these concepts and my appreciation for Chesterton for another reason. Having not read much from Chesterton other than this book and The Everlasting Man, I wasn’t aware until a couple years ago that he was a major proponent of an economic system called distributism. Some Christian writers I respect have recently mentioned the system positively and a friend from facebook praised a book on the subject to the skies: “hands-down the best book on political economy for a general readership that I’ve read…more social than socialism and more liberty-minded than libertarianism.”

Based on the testimony of Chesterton and these other friends, I bought and read John C. Médaille’s book, Toward a Truly Free Market. Over the weeks to come, I intend to publish a blog series reviewing this book to explain why I found the book’s arguments so unconvincing. As I’m not an economist, I’m hardly qualified to comment on the book as an authority in myself. However, I believe I can explain why Médaille’s book failed in my eyes in comparison to typical explanations of the relevant economic history and theory one would find from an economist of the Austrian School.

Despite my assessment of the book, I’m happy to confess from the outset that I realize Médaille is a true ally on many of the most important contested fronts of our social life today. Not only do I enjoy Chesterton’s work and respect my friends who think about political economy as Médaille does, but I also regularly read nearly all of the publications represented in the blurbs of Toward a Truly Free Market. So this is not a take-down series against an enemy. In fact, I believe many of the things Médaille proposes would be improvements upon the current system.

1672_Gérard_de_Lairesse_-_Allegory_of_the_Freedom_of_Trade

The Dutch Maiden, liberty pole in hand, in Gérard de Lairesse’s Allegory of the Freedom of Trade, 1672

With these caveats out of the way, I will start looking at Médaille’s first chapter in the next post. For now, I’ll end with a note on his title. Just as love and hate must be understood and evaluated based on their direct objects, I take Médaille to be reminding us with his title that freedom—specifically the free market—must be understood and evaluated based on its context. Everything that gets labelled a ‘free market’ in our day is not in accord with true freedom. On this, we agree. But we’ll soon separate when Médaille begins to explain what his vision of a truly free market entails. For my own part, I believe with Mises that a truly free market is based on service and meeting one another’s needs. To bring it back to where we started, it’s based on love. And, after all, love is all you need.

‘Everybody in acting serves his fellow citizens…’

/ Aaron Richmond / 2 Comments

In a helpful summary of some of the economic thought of Ludwig von Mises, Robert P. Murphy quotes “Mises’s definition of the market and his understanding of its most important features” as follows:

The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody’s actions aim at the satisfaction of other people’s needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens…

This system is steered by the market. The market directs the individual’s activities into those channels in which he best serves the wants of his fellow men. There is in the operation of the market no compulsion and coercion. The state, the social apparatus of coercion and compulsion, does not interfere with the market….It protects the individual’s life, health, and property against violent or fraudulent aggression on the part of domestic gangsters and external foes….Each man is free; nobody is subject to a despot. Of his own accord the individual integrates himself into the cooperative system. The market directs him and reveals to him in what way he can best promote his own welfare as well as that of other people…

The market is not a place, a thing, or a collective entity. The market is a process, actuated by the interplay of the actions of the various individuals cooperating under the division of labor. The forces determining the–continually changing–state of the market are the value judgments. The state of the market at any instant is the price structure, i.e., the totality of the exchange ratios as established by the interaction of those eager to buy and those eager to sell…..Every market phenomenon can be traced back to definite choices of the members of the market society.

The market process is the adjustment of the individual actions of the various members of the market society to the requirements of mutual cooperation. The market prices tell the producers what to produce, how to produce, and in what quantity. The market is the focal point to which the activities of the individuals converge. It is the center from which the activities of the individuals radiate. (Choice, 116-117)

I figured an economics post was way overdue, as ‘Bastiat’ is there at the top of the page on every post. I think this quote will come in handy for reference in the future, too.

Bob Murphy’s got a couple podcasts, by the way, that are usually a lot of fun.