Ludwig von Mises on Free Will

I am currently reading (or rather re-reading) Ludwig von Mises’ Theory and History. I may have more to say about it later; but for now I will just take up his views on determinism and free will. But first my own view:

“Free will” means the ability to choose between alternatives. Where there are no alternatives, there can be no choice; but where there are alternatives, man has to choose between them. (He may choose not to choose, but that too is a choice.) But what is free about this choice? The alternatives merely present themselves; and the consequences of the choice one makes, for good or for evil, are inescapable. What is free is merely the very act of choosing.

Take a trivial example: I wake up in the morning with a slightly sore throat. Now I have two alternatives: getting up and go to work despite the sore throat (hoping it will get better during the day) – or to report sick and stay in bed. The sore throat makes it necessary to make this choice; this necessity is determined by the circumstances. The consequences are inescapable: if I go to work, it may happen that my throat gets worse; reporting sick and staying in bed will result in the loss of one day’s pay; those possible outcomes are, at least partly, determined by my choice. The only thing that is truly free is the choice itself. And if someone were to ask me what caused the choice, the only possible answer is that I caused it; I made the choice.

It is often claimed that free will or the power of choice is in conflict with the law of causality; so that either free will is an illusion or that, if there is free will, this is an exception to the law of causality and proves that there are “uncaused” or “random” events in the universe. But it is not an exception to causality; it is a special kind of causality.[1]

Now to what Mises has to say (all quotes are from pp. 76–78, the section on “The Free-Will Controversy”):

Man chooses between modes of action incompatible with one another. Such decisions, says the free-will doctrine, are basically undetermined and uncaused; they are not the inevitable outcome of antecedent conditions. (Emphasis mine.)

This is of course precisely what I answered in presenting my own view of free will above. I cause the choice, I determine what it will be; it is caused and determined by me.

Determinists reject this doctrine as illusory. Man, they say, deceives himself in believing that he chooses. Something unknown to the individual directs his will. He thinks that he weighs in his mind the pros and cons of the alternatives left to his choice and then makes a decision. He fails to realize that the antecedent state of things enjoins upon him a definite line of conduct and that there is no means to elude this pressure. Man does not act, he is acted upon.

This is the standard determinist argument one hears all the time: you merely fool yourself if you believe in free will; in fact, you are a puppet and will always remain a puppet. (Determinists disagree over what you are a puppet of; it may be your genes, your environment, the material productive forces, your toilet training, or even God.)

Also, “determinism” is an ambiguous term. When contrasted to “indeterminism” it means simply that causality is omnipresent throughout the universe; there no such thing as a “contingent” or “random” event. But then it is also used in contrast to the idea of free will. This equivocation on the term “determinism” has played a lot of havoc. The determinist says to the free will advocate: “So you don’t believe in causality?”, and the free will advocate can only retort: “So you believe you’re a puppet of forces you cannot control?”; and the debate just stops there.

But since Mises accepts the idea that our choices are “undetermined and uncaused”, he has to give the determinists a slightly different answer:

Both doctrines neglect to pay due attention to the role of ideas. The choices a man makes are determined by the ideas he adopts.

True enough; but it is also a choice to adopt a certain idea! One hears a new idea; and then there is the alternative of accepting the idea or rejecting it. What determines which ideas one chooses, except oneself by making the choice?

One still may ask: What makes a man adopt a new idea? (It is not a matter of tossing coins or adopting it arbitrarily.) It may be that the new idea agrees with other ideas already held: it is seen as an implication of the old idea or a further development of the old idea or something that sheds new light on the old idea. But the old idea must at some time in the past have been adopted by choice. This reasoning seems to lead to an infinite regress (the choice to adopt idea A depends on earlier having adopted idea B, which in its turn depends on even earlier have adopted idea C, etc., ad infinitum).

So where does this regress stop? Probably with the first idea within a given field that a person decides to pay attention to.

But I’m digressing. Back to Mises:

The determinists are right in asserting that everything that happens is the necessary sequel of the preceding state of things. What a man does at any instant of his life is entirely dependent on his past, that is, on his physiological inheritance as well as of all he went through in his previous days.

I could add to this that it is also dependent on all the choices he has made in his previous days. A man’s character is shaped by the choices (big or small) that he has made. A man becomes brave by making many brave choices; and he becomes a coward by making many cowardly choices (just to take one example).

Yet the significance of this thesis is considerably weakened by the fact that nothing is known about the way in which ideas arise.

Very little is known. I said something earlier about how ideas arise, but it is just a preliminary sketch. (And what Mises has in mind is the fact that we know very little about the relation between what goes on in our mind and the neurology of our brain.)

The free-will doctrine is correct in pointing out the fundamental difference between human action and animal behavior. While the animal cannot help yielding to the physiological impulse that prevails at the moment, man chooses between alternative modes of conduct.

This, of course, is true. Animals are goal-directed in the sense that they act (or react) to preserve their lives and the life of the species (by procreating); but it is only man who can consciously set goals and purposes and who has to do this consciously in order to survive and prosper.

There is another quote later in the book about this crucial difference between man and the other animals:

Free will means that man can aim at definite ends because he is familiar with some of the laws determining the flux of world affairs. There is a sphere within which man can choose between alternatives. He is not, like other animals, inevitably and irremediably subject to the operation of blind fate. He can, within definite narrow limits, divert events from the course they would take if left alone. He is an acting being. (P. 179.)

Agreed. Mises continues:

The will is unbendable and must not yield to any violence and oppression, because man is capable of choosing between life and death …

“Life and death” is the fundamental alternative for all living organisms, including man, but man is the only organism that needs to be aware of this alternative. – I’d like to add that most choices we make are not literal “life-or-death” choices: when we make our choices and weigh pro and con, we simply take it for granted that the choice we make should be the most life-promoting choice; if we have a choice between an edible mushroom and a poisonous one, we do not even bother to consider picking the poisonous one. There is one exception:

…and of preferring death if life can be preserved only at the price of submitting to unbearable conditions.

It is very rarely that death is actually preferable to life. One instance is if one is suffering from a painful and incurable illness. But I don’t think this is what Mises has in mind here; it is more likely that he thinks of risking one’s life fighting against tyranny. It reminds me of that famous Patrick Henry quote: “Give me liberty or give me death!”

This blog post is beginning to meander, so I stop here. For the time being. And this choice was mine to make.

(Scandinavian readers may also read Mises och determinismen and Spridda tankar om den fria viljan.)

[1]) Leonard Peikoff discusses this at some length in Objectivism: The Philosophy of Ayn Rand, pp. 62–69.

Review of Georges Reisman’s “The Government Against the Economy”

This review was published in Taurus (European Quarterly issued by European Democratic Students) no 1/1981, and is based on a Swedish version published in Svensk Linje2–3/1981.  I re-publish it now, because the book has recently been made available in a Kindle version.

In all probability, the least intelligent and most destructive method of fighting inflation is price and wage controls.

And at the same time it is the incomparably most popular method.

It is unintelligent because it represents an attempt to lower the temperature of the economy by manipulating the thermometer. It is destructive because it destroys the price mechanism, the only reliable source of information about the relation of supply and demand on a free market.

And it is popular because neither the politicians nor the public at large understand what inflation is and what causes it, what a free market is and how it functions, what the actual results are of price and wage controls. If there is any general opinion at all, it seems to be that the money supply in the economy increases because prices and wages rise (the “spiral” theory). This of course is the exact opposite of the truth, a total reversal of cause and effect.

Fortunately, there is now a book available which explains these matters in a manner clear and intelligible even to the layman, and which also makes good and interesting reading: The Government Against the Economy by George Reisman. (Reisman is an American economist who has studied under the late Ludwig von Mises and who, philosophically, is a disciple of Ayn Rand.)

The most striking feature of Reisman’s book is its rare combination of being an excellent introductory textbook on the market economy and at the same time an impassioned pamphlet in defense of that economy, without ever losing neither its intellectual nor its polemical stringency. Reisman accomplishes this feat through the pedagogical structure of his book: he starts out by describing how the free pricing process on a free, unhampered market creates harmony and progress, and how it acts to close the gaps in income and wealth between different people and groups of people rather than widen them. (This of course is quite contrary to the claims of capitalism’s backbiters.) The free market makes possible a constant progress in which everyone, not only a select few, can have a share.

Only after having laid this foundation does Reisman proceed to show the destructive effects of price controls. The primary, fundamental effect (the one that explains all the others) is that controls create shortages: goods which are not allowed to rise in price as the market demands simply disappear from the market. (And non-existent goods evidently are of no use to anyone, no matter how cheap they are!)

The odds, however, are that the politicians won’t solve the problem thus created by abolishing the harmful controls, but by expanding them and eventually make them all-embracing. But an economy where all prices are controlled is a socialist economy. And consequently the last few chapters of the book deal with socialism, with the chaos and tyranny prevailing in socialist societies.

One might say (to make a literary association) that Reisman leads us from the Paradiso of capitalism, through the Purgatorio of a mixed economy, down to the Inferno of socialism (hopefully with the result that we, in real life, will make the opposite journey).

All this may sound theoretical, and I have of course just presented the bare skeleton of Reisman’s reasoning. But his book does not lack “flesh” in the form of practical examples and applications. Most of this are taken from the oil crisis. Reisman shows that it is not the American oil companies or even the Arab sheikhs who are ultimately responsible for the US oil crisis, but the US government, which, by its controls and “guidelines”, has prevented the market (i.e. the citizens) from responding rationally to the Arab oil embargo. Without price controls, Reisman contends, the oil embargo would have made a dent in the US economy. With controls, the embargo has all but destroyed the economy.

Controlling prices is tantamount to making it illegal for people to act rationally – and the results cannot be other than disastrous. This, in a nutshell, is the message.

But if inflation is the result of an uncontrolled expansion of the money supply, wouldn’t the solution be to control it according to Milton Friedman’s monetarist prescriptions? Reisman takes this up in a short epilogue, where he rejects monetarism and advocates a 100% gold standard. The subject deserves a more extensive discussion (maybe a volume of its own?[1]) – but Reisman’s arguments are clear and, as far as I can see, quite sound. (The big problem is not that the money supply is uncontrolled, but that it is controlled by the government.)

The book has a foreword by former US Treasury Secretary William Simon, and is warmly recommended by F.A. Hayek and Henry Hazlitt, a recommendation with which I most heartily agree.

$ $ $

The Government Against the Economy was also favorably reviewed in two Objectivist publications, and I take the liberty of giving a couple of short quotes from them:

The Government against the Economy’ offers the rare sight of a powerful and original mind in full control of his subject. It establishes George Reisman as an economic thinker of the first rank. – Harry Binswanger (The Objectivist Forum, vol. 1, nr 2, April 1980.)

This book is […] totally untainted by the twentieth century ‘economics’ that has produced our current state of affairs. It is a book written by the type of person that, in my judgment, Ayn Rand has referred to as a ‘new intellectual’, which is why the book can offer us the kind of fundamental guidance we need if we are to avoid the chaos and tyranny of a socialist future. – John Ridpath (The Intellectual Activist, vol. 1 nr 7, January 1980.)

Update September 9: This review is now also on Amazon.

[1]) More extensive discussions can be found in Reisman’ magnum opus, Capitalism: A Treatise on Economics.

Self-Lovers and Self-Loathers

About a year ago I wrote a blog post, Aristotle on Egoism, with extensive quotes from The Nicomachean Ethics. In a nutshell: the egoism or self-love of a good man is good; the egoism of a bad man is bad – and he cannot even experience self-love, since there is nothing to love in him. A bad man has to experience self-loathing.

I came to think of this again yesterday, when I saw the following comment in a discussion thread on Facebook:

All Ayn Rand did was to give the OK for pricks all over the world to tell selfish assholes that it’s OK to be selfish.

You must have heard this kind of “objection” to Objectivism many times before; but perhaps not in this colorful language. 😉

Only in a world populated exclusively by “pricks” and “assholes” would this statement make sense. But OK: there are some “assholes” in the world; and only a “prick” would advise them to also be selfish “assholes”; for the rest of us it would better to advise them to be totally selfless; then they would go sacrifice themselves, and we would get rid of them.

Good men and women, on the other hand, should certainly tell other good men and women that it is OK to be selfish. We are neither “pricks”, nor “assholes”.

I won’t delve further into this issue; it is a case of “examining a folly”, and it is enough to realize it is a folly.

Is the Wealth of the Rich Merely Trickling Down to Us?

The “trickle-down” theory is a ludicrous attempt to justify economic inequality on the grounds that the poor can live of the crumbs that are falling from the rich man’s table – and the richer the man, the more crumbs will fall to the poor. It is also known as the “horse and sparrows” theory: if a horse is fed oat, some oat will fall by the wayside to be eaten by sparrows, and the more oat you feed the horse, the more oat also to the poor sparrows. Of course, this theory is an easy target for ridicule from advocates of economic equality – an easy straw man to attack. The poor would gain much more if the rich were heavily taxed or if their wealth were outright confiscated and distributed equally among us poor. That is their reasoning, anyway. “Trickle-down” should be replaced by “loot-and-plunder”.

I found this cartoon on Facebook to illustrate the theory:

Is the Wealth of the Rich Merely Trickling Down to Us?

There is, however, not a shred of truth in this theory. Consider what the productive rich are actually doing with their money. They save it, invest it, make profits that they then re-invest, make more profits, re-invest them, and this just goes on and on. (I wrote “the productive rich”; there are also worthless heirs that squander their money, but then they will lose their wealth.[1] The guy in the picture above will certainly soon become poor, if he does nothing but wining and dining. And then there are the politicians, who take our money and squander it on their own pet projects; and they, too, are wining and dining a lot.)

Of course, taxing the poor makes the poor poorer; but, paradoxical as it may sound, taxing the rich also makes the poor poorer, although in a more indirect way.

As is so often the case, George Reisman explains it best, so let me quote him:

The progressive personal income tax, the corporate income tax, and the capital gains tax all operate in essentially the same way as the inheritance tax. They are all paid with funds that otherwise would have been saved and invested. All of them reduce the demand for labor by business firms in comparison with what it would otherwise have been, and thus either the wage rates or the volume of employment that business firms can offer. For they deprive business firms of the funds with which to pay wages.

By the same token, they deprive business firms of the funds with which to buy capital goods. This, together with the greater spending for consumers’ goods emanating from the government, as it spends the tax proceeds, causes the production of capital goods to drop relative to the production of consumers’ goods. In addition, of course, they all operate to reduce the degree of capital intensiveness in the economic system and thus its ability to implement technological advances. […] [T]hese taxes, along with the inheritance tax, undermine capital accumulation and the rise in the productivity of labor and real wages, and thus the standard of living for everyone, not just of those on whom the taxes are levied. (Capitalism: A Treatise on Economics, p. 308.)

In my own words: taxing the rich will lead to fewer jobs, lower real wages, less labor saving machinery; in short, a lower standard of living for us who are poor (or relatively poor).

Some taxes hurt the poor directly, for example taxes on tobacco, or alcoholic liquors, or petrol. It stands to reason that a poor person may have to give up smoking or drinking simply because the alternative would be to give up eating or moving out of his apartment and become homeless; while a rich person may continue his consumption of Habana cigars and vintage wine without even noticing the extra expense. And a poor person may not be able to afford driving his car to work, while Al Gore and his ilk will continue to ride in limousines or tour the world in air planes to teach the rest of us to take the bicycle instead of the car to avoid carbon emissions and “save the climate”. This is, to put it diplomatically, a vile injustice.

That the common income tax and VAT hurt us economically goes without saying: and this any educated laymen can understand. But taxes on the rich are especially insidious, because they do not at a cursory glance seem to harm the poor. But, as explained above, they do.

But back to the idea that this is “trickle-down”. George Reisman again:

Of course, many people will characterize the line of argument I have just given as the “trickle-down” theory. There is nothing trickle-down about it. There is only the fact that capital accumulation and economic progress depend on saving and innovation and that these in turn depend on the freedom to make high profits and accumulate great wealth. The only alternative to improvement for all, through economic progress, achieved in this way, is the futile attempt of some men to gain at the expense of others by means of looting and plundering. This, the loot-and-plunder theory, is the alternative advocated by the critics of the misnamed trickle-down theory. (Ibid., p. 310.)

The productive rich (think Rockefeller, Carnegie, Ford, Bill Gates, Steve Jobs, etcetera, etcetera) actually flood the rest of us with wealth (and themselves become wealthy in the process). Taxing or expropriating them simply means to dam this flood. And this may make it appear “trickle-down” – because governments and politicians will only allow a small portion of this wealth to trickle down to us; the rest of it lands in their own pockets.

[1]) It has actually been argued that such squanderers are a boon to the economy: there is a famous book called The Fable of the Bees by Bernard de Mandeville, published 1714 that argues this. The argument is that the worthless heir who splashes his money around makes the restaurants (or brothels) he frequents richer; while his frugal brother, who spends and invests his fortunes, has no such visible effects. As one can expect, Mandeville’s book has been praised by John Maynard Keynes. In fact, this is of course a variant of the “broken windows” fallacy; if one does not focus on the immediate effects but also on the long range effects, one will see that the frugal brother is of benefit to the economy, not the worthless heir.

The art of quoting Ayn Rand out of context

The fact that vice-president candidate Paul Ryan has cited Ayn Rand as a major influence on him has engendered a flurry of comments on the net. The positive thing about this is that Ayn Rand will come to the forefront in the coming election; the negative thing is that we will see even more of the smears of her that we are already too familiar with, and even more of the complete misinterpretations of her views that we are also too familiar with.

Here is a typical quote:

Rand has […] been elevated to a central figure in conservatism. Business moguls have embraced her because of her frank worship of wealth. “Money is the barometer of a society’s virtue,” she said. And her contempt for government, with its regulations and taxation, was just what America’s reckless and self-centered class of business executives wanted to hear.

What does it mean to say that “money is the barometer of a society’s virtue”? To Ayn Rand’s detractors it obviously means that a man’s wealth is a measure of his virtue, regardless of whether he has earned it by productive work or by loot-and-plunder. They see no difference between honest work and robbery: both are just ways of grabbing money.

The quote is from Francisco d’Anconia’s “money speech” in Atlas Shrugged. So let me quote the full paragraph:

Money is the barometer of a society’s virtue. When you see that trading is done, not by consent, but by compulsion – when you see that in order to produce, you need to obtain permission from men who produce nothing – when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you – when you see corruption being rewarded and honesty becoming a self-sacrifice – you may know that your society is doomed. Money is so noble a medium that it does not compete with guns and it does not make terms with brutality. It will not permit your country to survive as half-property, half-loot.

And another quote:

Money will always remain an effect and refuse to replace you as the cause. Money is the product of virtue, but it will not give you virtue and it will not redeem your vices. Money will not give you the unearned, neither in matter nor in spirit. Is this the root of your hatred of money?

It is statements like this that the detractors of Ayn Rand simply have to ignore or evade and not let come to public knowledge in order to smear her.

(More from Francisco’s “money speech” and other Rand quotes on money in The Ayn Rand Lexicon.)

Learning from History

There is an old adage that those who do not learn from history are doomed to repeat it. And recently several people (including myself) have posted this picture on Facebook:Image

It has been suggested that those who do study history should make an effort to educate the rest of us. But this presupposes that the rest of us are willing to listen and be educated, which I think is rather doubtful.

But I see a wider and deeper problem here. It is not enough to know what has happened in the past; one must also have some understanding of the underlying causes; otherwise one would just know what happened, not why it happened. Understanding those causes and then explaining them to others is the big challenge. And, as Ludwig von Mises once wrote, “Facts don’t speak; they have to be spoken about by a theory.”[1]

One small example of this from economic history: America had a depression in 1920–21, but it was over in about a year’s time. The depression that began in 1929, on the other hand, went on for a decade or more. Why? In 1921 there was no or little government meddling with the economy; by 1929 president Hoover had introduced a lot of interventionist measures, which were then continued and expanded by FDR. Will today’s politicians and economists learn from this experience? No. They cannot learn from it, because they either don’t know or reject the Austrian Business Cycle Theory.[2]

There are many theories of history, but most of them are simply false (and even bizarre). There is the theory that all of history is a manifestation of God’s will; and there is Hegel’s variation on this theme, that interprets history as a series of steps whereby the World Spirit seeks its own self-realization. And there is of course dialectic materialism. The first two theories do not explain anything (unless one is able to read the mind of God or the World Spirit); and the last one leads to severe misinterpretations of history. (And people who are steeped in this theory will stick to it, no matter what the facts are.)

Objectivism does have a theory of history, but unfortunately it is not developed in any detail (the exception to this is Leonard Peikoff’s The Ominous Parallels). The theory is that history is ultimately determined by philosophical ideas, and history is, in Leonard Peikoff’s words in OPAR, a “duel between Plato and Aristotle”. And one has to stress that it is the ultimate cause, because there are so many other factors that have an influence on history.

One may also object to this theory that history did not start with Plato and Aristotle, so what determined history before their time? Well, there have always been philosophical ideas; most often they have been religious ideas, but religion is the precursor to philosophy. And if one takes Plato and Aristotle as symbols for an other-worldly orientation versus a this-worldly orientation, it does make sense.

One last remark: theories themselves ultimately have to be derived from facts. But I believe they have to be derived from facts that are very simple and basic, even self-evident. A case in point is what “Austrians” call the “axiom of action”, the fact that man is a being who acts purposefully and does merely react the way animals do. This, I think, we learn directly from introspection and from observing other human beings. Much can be deduced from this simple axiom, but the axiom itself is not deduced; it is a matter of direct observation. (As to the idea that this is “a priory” knowledge, not derived from experience but preceding experience, I refer to my earlier blog post Is action an a priori category?)

PS. Objectivism is not the only philosophy that sees history as a struggle between Platonism and Aristotelianism; Lyndon LaRouche (and his followers) hold the same idea. The big difference is that they take the side of Platonism and regard Aristotle much the way Objectivists view Immanuel Kant, as the arch-villain of philosophy.

[1]) I’m quoting this from memory; I have forgotten where in Mises’ writings I read it. Maybe some Mises expert can remind me.

[2]) You can read about this in Robert P. Murphy’s The Depression You’ve Never Heard of: 1920–1921 in The Freeman, and in Thomas E. Woods’ The Forgotten Depression of 1920 on The Ludwig von Mises Institute’s web site.

Kindle Book by George Reisman

George Reisman has just published a Kindle book called Warren Buffett, Class Warfare and the Exploitation Theory. It is only 59 pages long and consists of two parts: first, his Open Letter to Warren Buffett, and second, an excerpt from Capitalism: A Treatise on Economics, dealing with the same subject. Especially for those unfamiliar with George Reisman’s theories, this is an excellent introduction. (Those familiar with his theories may enjoy it, too.)

Reisman’s identification of the “primacy of profits” principle is certainly one of the most important discoveries in the history of economic thought. At least since the days of Adam Smith it has been taken for granted that the original income was wages and that profits are a deduction from wages. Reisman shows that the exact opposite is true. In the “early and rude state”, as Adam Smith calls it, no wages were paid at all, and all income was profits; the rate of profit was 100%. It was only with the advent of the first capitalists – people who hired workers to help them and invested in buying tools from others rather than making their own tools – that wages (and other money outlays) came into existence. Since that time the rate of profit has steadily been lowered and is today, in our fairly advanced capitalist society, only a few percent. And this is what, over the centuries, has improved our standard of living to unprecedented heights.

Also, this is a truly original discovery – at least, I have not seen it anywhere in the writings of other economists (and I only read good economists). It is a pity that too few, so far, have paid attention to this principle.

Much of what Reisman writes can be found, explicitly or implicitly, in Mises and his other predecessors. But this principle, along with his “net consumption/net investment theory”, is a new insight.

(For Scandinavian speaking readers, I have tried to present the “primacy of profits” principle in an essay called George Reisman: Why Do We Need Him? – George Reisman, of course, has not read this essay, so any mistakes are my own responsibility. But I don’t think I have made any mistakes.)

Update August 10: Now also on Amazon. (Also read Wladimir Kraus’ Amazon review.)

George Reisman himself mails me:

I was especially gratified that you stressed the primacy-of-profits doctrine. I consider it extremely important and also relatively simple, but almost everyone seems to ignore it or just not get it. So I’m extra glad that you both get it and stress it.

Yes, I think this principle is simple, once one has grasped it. But someone has to be the first to grasp it, and this someone was George Reisman. I would not have been able to arrive at it on my own.