Is Christianity the Source of Western Values?

Recently on Facebook somebody linked to George Reisman’s essay Education and the Racist Road to Barbarism[1] and gave a couple of lengthy quotes:

In order to understand the implications, it is first necessary to remind oneself what Western civilization is. From a historical perspective, Western civilization embraces two main periods: the era of Greco-Roman civilization and the era of modern Western civilization, which latter encompasses the rediscovery of Greco-Roman civilization in the late Middle Ages, and the periods of the Renaissance, the Enlightenment, and the Industrial Revolution. Modern Western civilization continues down to the present moment, of course, as the dominant force in the culture of the countries of Western Europe and the United States and the other countries settled by the descendants of West Europeans. It is an increasingly powerful force in the rapidly progressing countries of the Far East, such as Japan, Taiwan, and South Korea, whose economies rest on “Western” foundations in every essential respect.

From the perspective of intellectual and cultural content, Western civilization represents an understanding and acceptance of the following: the laws of logic; the concept of causality and, consequently, of a universe ruled by natural laws intelligible to man; on these foundations, the whole known corpus of the laws of mathematics and science; the individual’s self-responsibility based on his free will to choose between good and evil; the value of man above all other species on the basis of his unique possession of the power of reason; the value and competence of the individual human being and his corollary possession of individual rights, among them the right to life, liberty, property, and the pursuit of happiness; the need for limited government and for the individual’s freedom from the state; on this entire preceding foundation, the validity of capitalism, with its unprecedented and continuing economic development in terms of division of labor, technological progress, capital accumulation, and rising living standards; in addition, the importance of visual arts and literature depicting man as capable of facing the world with confidence in his power to succeed, and music featuring harmony and melody.


For the case of a Westernized individual, I must think of myself. I am not of West European descent. All four of my grandparents came to the United States from Russia, about a century ago. Modern Western civilization did not originate in Russia and hardly touched it. The only connection my more remote ancestors had with the civilization of Greece and Rome was probably to help in looting and plundering it. Nevertheless, I am thoroughly a Westerner. I am a Westerner because of the ideas and values I hold. I have thoroughly internalized all of the leading features of Western civilization. They are now my ideas and my values. Holding these ideas and values as I do, I would be a Westerner wherever I lived and whenever I was born. I identify with Greece and Rome, and not with my ancestors of that time, because I share the ideas and values of Greece and Rome, not those of my ancestors. To put it bluntly, my ancestors were savages–certainly up to about a thousand years ago, and, for all practical purposes, probably as recently as four or five generations ago. . . .

There is no need for me to dwell any further on my own savage ancestors. The plain truth is that everyone’s ancestors were savages–indeed, at least 99.5 percent of everyone’s ancestors were savages, even in the case of descendants of the founders of the world’s oldest civilizations. For mankind has existed on earth for a million years, yet the very oldest of civilizations–as judged by the criterion of having possessed a written language–did not appear until less than 5,000 years ago. The ancestors of those who today live in Britain or France or most of Spain were savages as recently as the time of Julius Caesar, slightly more than 2,000 years ago. Thus, on the scale of mankind’s total presence on earth, today’s Englishmen, Frenchmen, and Spaniards earn an ancestral savagery rating of 99.8 percent. The ancestors of today’s Germans and Scandinavians were savages even more recently and thus today’s Germans and Scandinavians probably deserve an ancestral savagery rating of at least 99.9 percent.

It is important to stress these facts to be aware how little significance is to be attached to the members of any race or linguistic group achieving civilization sooner rather than later. Between the descendants of the world’s oldest civilizations and those who might first aspire to civilization at the present moment, there is a difference of at most one-half of one percent on the time scale of man’s existence on earth.

These observations should confirm the fact that there is no reason for believing that civilization is in any way a property of any particular race or ethnic group. It is strictly an intellectual matter–ultimately, a matter of the presence or absence of certain fundamental ideas underlying the acquisition of further knowledge.

One commenter wrote:

Reisman oddly omits the influence of biblical religion on the development of Western civilization, until recently known as Christendom, which in fact is the source of most of the values he claims to cherish.

What values?

  • Suffering and sacrifice? Jesus is supposed to have suffered and died for our sins (not his own), and Christians are admonished to emulate Jesus, as best they can.

jesus-pa-korsetAnd this is not the first instance of extolling sacrifice in the Judeo-Christian religions. Remember the story in Genesis of how God commanded Abraham to sacrifice his only son, which Abraham was quite prepared to do. God did this to test Abraham’s faith in him, and when it was tested, Isaac was replaced by a goat.[2]

Or take the Book of Job, where the Lord kills all of Job’s family in order to test Job’s faith in him. After a long and tedious discussion between the Lord and Job, Job finally concedes this act was totally just, and the Lord then gives him a brand new family. A consolation for Job, but not much of a consolation for the family killed. In this book in the Bible, God acts exactly like a mafia boss.

Back from pre-historic times to the present. The latest canonized saint, Mother Teresa, saw suffering as a great value – so great that she did not bother to offer dying patients any kind of palliative care, but let them suffer great pain, arguing that the pain meant that “Jesus was kissing them”[3]. To any decent person, this is an example of pure and unadulterated sadism; but by the Catholic Church – and by many others as well – Mother Teresa is hailed as a paragon of goodness.

  • Original sin? – i.e. the notion that man is depraved by nature, that he is born in sin[4], and that the only thing he can do to remove his own sinfulness is to embrace the idea that Jesus has taken all his sins on himself and suffered and died for them.

What does it mean to say that man is born in sin and cannot escape his own sinfulness? Well, to be born is a sin; one of the first things a newborn child does is learn how to crawl, and then walk, and then run and jump. This must be sinful. And then a child learns to talk – at first in single words, then in two-word sentences, and eventually he masters his first language and moves on to learn one or more foreign languages. But all of this has to be sinful. A few children very early learn to play musical instruments, and some, like Mozart, start composing symphonies at a very early age. No matter how well such a child plays, and no matter how beautiful the symphonies, this is sinful, thus evil. But this is an idea that nobody could seriously maintain. Walking, talking, composing symphonies are all good things![5]

All this changes, when you accept Jesus as your savior. But it remains unclear in what way it changes. It should be noticed, in this connection, that Jesus died for our sins some 2 000 years ago. It is hard to give an exact measurement – but has there been less sinfulness and less evil in the world since that time?

And who stands to gain and who stands to lose, if we accept original sin? The sinner – the actual evil-doer – stands to gain, for whatever sin he commits, he can always claim that he is no worse than anyone else – and also, he just couldn’t help it, since he was born in sin.

The prophet Isaiah tells us:

If your sins prove to be like crimson, they will become white as snow; if they prove to be as red as crimson dye, they shall become as wool. (Isaiah, 1:18.)

But what happens, if our actions are already white as snow?

And of course John Galt – an upholder of Western values – refused to be born with original sin.

  • The sin of pride? Or the corollary virtue of humility?

If we are born in sin and can only do sinful things, then of course it is an even greater sin to take pride in what we do, and Christianity thus teaches us to “eat humble pie”. But it may be illuminating to compare this to one of the Founding Fathers – perhaps the Founding father – of Western values: Aristotle. In The Nicomachean Ethics, he says that pride is “the crown of the virtues”. It is worth quoting him:

Now the proud man, since he deserves most, must be good in the highest degree; for the better man always deserves more, and the best man most. Therefore the truly proud man must be good. And greatness in every virtue would seem to be characteristic of a proud man. […] If we consider him point by point we shall see the utter absurdity of a proud man who is not good. Nor, again, would he be worthy of honour if he were bad; for honour is the prize of virtue, and it to the good that it is rendered. Pride, then, seems to be a sort of crown of the virtues; for it makes them greater, and it is not found without them. Therefore it is hard to be truly proud; for it is impossible without nobility and goodness of character. (The Nicomachean Ethics, book 4, chapter 3; translated by David Ross.)

And Ayn Rand, in Galt’s speech, calls pride (which she identifies as “moral ambitiousness”) “the sum of all values”.

When Christianity denigrates pride and elevates humility as a virtue, it merely tells us to blindly accept its doctrine of man’s depravity and of original sin.

  • Justice? God’s behavior toward Job is hardly just. And in the Gospels we read:

 But I tell you, love your enemies and pray for those who persecute you, that you may be children of your Father in heaven. He causes his sun to rise on the evil and the good, and sends rain on the righteous and the unrighteous. (Matthew 5:44–45.)

It is a metaphysical fact that the sun and the rain does not make a distinction between good people and evil people. But the Gospel attributes this to God and tells us to be like God and make no such distinction. And this shows that the Christian God is neither moral nor immoral: he is amoral.

  • Loving one’s family? Loving one’s life? Well, this what Jesus says:

If anyone comes to me and does not hate father and mother, wife and children, brothers and sisters—yes, even their own life—such a person cannot be my disciple. (Luke 14:26.)

  • And what about science – one of the basic Western values Reisman mentions? I just have to refer you to the fate of Galileo. Or, for that matter, to the story of the Garden of Eden: Adam and Eve were driven out, because they had the temerity to eat from the tree of knowledge. God was opposed to knowledge!
  • What about causality? What about “a universe ruled by natural laws intelligible to man”? The Bible is full of miracles, and a miracle by definition is an exception to the law of causality.
  • And what about economics? What is the relation between Christianity and capitalism?

Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. […] You cannot serve both God and money. (Matthew 6:19–20, 24.)

And what is the Christian view on time preference? Another quote from the same chapter:

Therefore I tell you, do not worry about your life, what you will eat or drink; or about your body, what you will wear. Is not life more than food, and the body more than clothes? Look at the birds of the air; they do not sow or reap or store away in barns, and yet your heavenly Father feeds them. Are you not much more valuable than they? Can any one of you by worrying add a single hour to your life?

And why do you worry about clothes? See how the flowers of the field grow. They do not labor or spin. Yet I tell you that not even Solomon in all his splendor was dressed like one of these. If that is how God clothes the grass of the field, which is here today and tomorrow is thrown into the fire, will he not much more clothe you—you of little faith? (Matthew 6:25–30.)

Saving and capital accumulation is definitely not recommended by the Gospel!

Some people will now object that the “Protestant work ethic” is the basis of capitalism.[6] But what is the reasoning here? Jean Calvin taught that every man is predestined both for success or failure in this life and for eternal salvation or condemnation. So the followers of Calvin worked hard just to show to themselves and to others that they are predestined for success and salvation rather than failure and condemnation. All I can say about this reasoning is that it is odd.

  • And what is the Christian view of free will? On the idea that we can actually choose between good and evil?

Most Christians, I believe, at least implicitly uphold free will, since it would be senseless to reward the good and punish the evil by eternal salvation and eternal condemnation, if man just can’t help what he does. But Jean Calvin could hardly have believed in free will, if he says that our eternal fate is predestined. And Martin Luther quite adamantly opposed the idea in a tract called On the Bondage of the Will.[7] He argues that free will is against what the Bible teaches, and he says that if man had free will, it could only mean the will to do evil:

In Romans 1:18, Paul teaches that all men without exception deserve to be punished by God: “The wrath of God is revealed from heaven against all ungodliness and unrighteousness of men, who hold the truth in unrighteousness.” If all men have “free will” and yet all without exception are under God’s wrath, then it follows that “free will” leads them in only one direction—“ungodliness and unrighteousness” (i.e., wickedness). So where is the power of “free will” helping them to do good? If “free will” exists, it does not seem to be able to help men to salvation because it still leaves them under the wrath of God.


This universal slavery to sin includes those who appear to be the best and most upright. No matter how much goodness men may naturally achieve, this is not the same thing as the knowledge of God. The most excellent thing about men is their reason and their will, but it has to be acknowledged that this noblest part is corrupt.


Now, “free will” certainly has no heavenly origin. It is of the earth, and there is no other possibility. This can only mean, therefore, that “free will” has nothing to do with heavenly things. It can only be concerned with earthly things.

Well, since Objectivism rejects the supernatural, free will in Objectivism “can only be concerned with earthly things”. But that was an aside.

Martin Luther claimed that we cannot reach salvation bay “doing good” but only by faith. But can we even choose to believe in God and in Jesus having absolved us from our sins? Oh, no. that, too, is determined by God:

Every time people are converted, it is because God has come to them and overcome their ignorance by showing the Gospel to them. Without this, they could never save themselves.


Grace is freely given to the undeserving and unworthy, and is not gained by any of the efforts that even the best and most upright of men try to make.

Luther claims to have Scripture on his side: He notes that when people have done bad things, it is not because they have chosen to, but because God “has hardened their hearts”. So, if we do good, it is God who has made us do good, and if we do evil, it is God who has made us do evil.

  • Faith versus reason? I will just quote Luther again:

Reason is the devil’s highest whore.[8]

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Religion has been a dominating force in man’s life since time immemorial; and the Western world has undoubtedly been dominated by Christianity. So to say that Christianity is part and parcel of our Western civilization and heritage is just a platitude. But are the things I have listed above Western values? Are they even civilized?

Ayn Rand said that the saving grace of Christianity is that it preaches the sanctity of the individual soul:

There is a great, basic contradiction in the teachings of Jesus. Jesus was one of the first great teachers to proclaim the basic principle of individualism — the inviolate sanctity of man’s soul, and the salvation of one’s soul as one’s first concern and highest goal; this means — one’s ego and the integrity of one’s ego. But when it came to the next question, a code of ethics to observe for the salvation of one’s soul — (this means: what must one do in actual practice in order to save one’s soul?) — Jesus (or perhaps His interpreters) gave men a code of altruism, that is, a code which told them that in order to save one’s soul, one must love or help or live for others. This means, the subordination of one’s soul (or ego) to the wishes, desires or needs of others, which means the subordination of one’s soul to the souls of others.

This is a contradiction that cannot be resolved. This is why men have never succeeded in applying Christianity in practice, while they have preached it in theory for two thousand years. The reason of their failure was not men’s natural depravity or hypocrisy, which is the superficial (and vicious) explanation usually given. The reason is that a contradiction cannot be made to work. That is why the history of Christianity has been a continuous civil war — both literally (between sects and nations), and spiritually (within each man’s soul). (Letters of Ayn Rand, p. 287.)

You may object that Christianity has also accomplished some great things. A couple of great philosophers – philosophers acknowledged by Objectivists to be great – were Christians (Thomas Aquinas and, to some extent, John Locke).[9] And Isaac Newton, arguably the greatest scientist of all time, was a Christian.[10]

Speaking personally, I enjoy churches and cathedrals. And certainly some Christians have composed some great music. What famous classical composer has not composed a religious oratory or a mass? And the greatest of them all, Johann Sebastian Bach, has been called “the fifth evangelist”.

But this does not really change my point. For example, are cathedrals humble? Or are they intended to make us feel humble, when we enter them? And where is the humility in Bach’s music?

It all boils down to this question: Is our Western civilization what it is because of Christianity or despite Christianity? If you answer “because of”, beware of the implications!

[1] For Scandinavian speaking readers, this essay is also available in a Swedish translation.

[2] For a discussion of this, see Søren Kierkegaard’s Fear and Trembling (or Frygt og Bæven in the Danish original).

[3] She told this to a patient, and the patient answered: “Then I want him to stop”.

[4] There is a story about Frank O’Connor (Ayn Rand’s husband) that his parents sent him to a Catholic school; but when they tried to teach him that babies are born in sin, he left and went to a common, non-religious school instead.

[5] I exclude some composers, like Henryk Gôrecki, Arvo Pärt and all the minimalists. But you may listen to them, if you want to torture your eardrums.

[6] This idea was launched by Max Weber. But I guess you already knew that.

[7] De servo arbitrio in the original Latin. It was an answer to Erasmus of Rotterdam’s De libero arbitrio or On the Freedom of the Will. My quotes are from a section that has been published separately on the web.

[8] ”Vernunft ist des Teufels höchste Hure” in German. I call this rejection of reason “the fallacy of the stolen faculty“. Everyone has to use his reason even to put a simple sentence together, and Martin Luther did much more: apart from all the tracts he wrote, he translated to whole Bible into German and is credited with being the creator of modern German. How could he do this without “whoring with the devil”?

[9] Bad philosophers, according to Objectivism, include St. Augustine, Descartes and Immanuel Kant. Augustine and Kant certainly championed (if that is the right word) original sin and man’s innate depravity.

[10] He was an anti-Trinitarian, i.e. he opposed the doctrine of the Trinity. He is also reported to have said that space and time are the thoughts of God.

Is All Action Rational?

ludwig-von-misesWell, Ludwig von Mises thought so. I quote from Human Action:

Human action is necessarily always rational. The term “rational action” is pleonastic and must be rejected as such (P. 21.).

In view of all the irrationality we observe around us, this statement sounds … well, not exactly rational. “Weird” or even “insane” would be good descriptive terms.

So what is so immensely rational about all human action that all human action is to be labeled rational? Well, all human action is about relating means to ends. Mises has some examples:

The very existence of ascetics and of men who renounce material gains for the sake of clinging to their convictions and of preserving their dignity and self-respect is evidence that the striving after more tangible amenities is not inevitable but rather the result of a choice. Of course, the immense majority prefer life to death and wealth to poverty. (P. 20.)

But nothing could be said against those who make the opposite choice and prefer death to life and poverty to wealth. They have a different end from the immense majority and choose means accordingly.

The doctors who a hundred years ago employed certain methods for the treatment of cancer whish our contemporary doctors reject were – from the point of view of present-day pathology – badly instructed and therefore inefficient. But they did not act irrationally; they did their best. (P. 20.)

In other words: people may be wrong in their choice of means; but being wrong is not the same as being irrational.

The opposite of action is not irrational behavior, but a reactive response to stimuli on the part of the bodily organs and instincts which cannot be controlled by the volition of the person concerned. (P. 20.)

So when a man acts “irrationally”, he actually does not act at all; he merely reacts, just the way animals do.

Conspicuously absent here is any attempt to analyze criminal behavior. But a criminal also relates means to ends. A bank robber has to use reason to plan and carry out his robbery – it is certainly not just a bodily reaction. Someone who wants to get rid of his rich grand-uncle in order to inherit his money has to carefully plan and perform the murder, and in a way that minimizes the risk of discovery. (He should, for example, abstain from the attempt if there is an Hercule Poirot or a Jane Marple in the vicinity.) According to Mises, he is as rational as anyone else. Only murders committed at the spur of the moment in a drunken brawl would classify as irrational, since the murderer then does not have time to consider his means or his ends.

So what makes Mises make such a statement and seriously mean it? It should come as no surprise that it is because of his idea that ultimate ends fall outside the realm of reason. Continuing the first quote above:

When applied to the ultimate ends of action, the terms rational and irrational are inappropriate and meaningless. The ultimate end of action is always the satisfaction of some desires of the acting man. Since nobody is in a position to substitute his own value judgments for those of the acting individual, it is vain to pass judgment on other people’s aims and volitions. No man is qualified to declare what would make another man happier or less discontented. (P. 20.)

So we should not pass judgment on the bank robber or grand-uncle murderer mentioned above. Who are we to substitute our own value judgments for theirs? But it is even worse::

The critic either tells us what he would aim at if he were in the place of his fellow; or, in dictatorial arrogance blithely disposing of his fellow’s will and aspirations, declares what condition of this other man would better suit himself, the critic. (P. 20; italics mine.)

Passing judgment on the bank robber or the murderer would be dictatorial arrogance!

Of course, Mises did not mean this – he forgot to think about criminal action – but this is still what he says!

What, then, is the ultimate end of the bank robber/murderer? Is it – like for any honest worker or millionaire – to make money or to earn his living? Is it just the means that are somehow inappropriate? But the bank robber did not make the money – it was made by the persons who had deposited their money in the bank. The murdered grand-uncle, not his dishonest heir, made his money (provided he earned it honestly).[1] And, as for “earning a living”, this shows some confusion about the meaning of “earn”.

Or is it, more broadly, the pursuit of happiness? Well, most bank robbers (and murderers) get caught, and those who don’t have to live in constant fear of getting caught. It could only be called “pursuit of happiness”, if someone preferred living in jail than outside – or living in fear rather than in safety.

And what about suicide bombers? Those, too, are conspicuously absent in Mises’ reasoning – probably because he had no experience of them and could not even imagine this kind of evil. Otherwise, the existence of suicide bombers is as much proof as the existence of ascetics that some people do no not prefer life to death. And the suicide bomber can hardly be said to pursue happiness, at least not here, on earth. He would have to take the promise of paradise in the hereafter quite seriously. – But given this end – life and well-being when you are already dead – they, too, relate means to ends. But they are badly mistaken, both about the end and the means![2]

Ayn Rand made some harsh remarks in the margin of Human Action, of which I will quote just one:

Nobody can get anywhere with such a terminology! (Ayn Rand’s Merginalia, ed. by Robert Mayhew, p. 110.)

Objectivism, as you all know, holds the preservation and enhancement of life as the ultimate end and claims that this can be objectively proven. (I will not attempt to present the proof, since both “Galt’s speech” and “The Objectivist Ethics” are available for anyone to read.) This does not mean that everyone automatically agrees about this end, merely that everyone should agree. Mises claims that the majority does agree, but that is not the same thing – it leaves the possibility open that the majority is wrong.

Saying that the ultimate end is “beyond reason” and can neither be proved or disproved makes it impossible to go anywhere!

Much as I admire Ludwig von Mises, on this issue he was dead wrong.

Earlier blog posts on Mises.

[1] Off topic, but worth mentioning: If you want to equivocate, you might claim that a counterfeiter “makes money”, but that money is just that: counterfeit. The same goes for the inflation money that governments and central banks pour on us and only makes us poorer. The only ones that could be said to “make money” in this sense are those who mine and mint the precious metals.

[2] I refer you to this article in The Onion.

Ludwig von Mises on Anarchism

This is a Facebook note I published in February 2011.

Anarchists (”free market anarchists” or ”anarcho-capitalists)” are flocking in and around the Ludwig von Mises Institute, both in the US and here in Sweden. So what did Mises himself think about anarchism and anarchists? He covers the subject in a section in The Ultimate Foundation of Economic Science, p. 98f, so let me quote:

Government as such is not only not an evil, but the most necessary and beneficial institution, as without it no lasting social cooperation and no civilization would be possible.

And a bit later on:

A shallow-minded school of social philosophers, the anarchists, chose to ignore the matter by suggesting a stateless organization of mankind. They simply passed over the fact that men are not angels. They were too dull to realize that in the short run an individual or a group of individuals can certainly further their own interests at the expense of their own and all other peoples’ long-run interests. A society that is not prepared to thwart the attacks of such asocial and short-sighted aggressors is helpless and at the mercy of its least intelligent and most brutal members. While Plato founded his utopia on the hope that a small group of perfectly wise and morally impeccable philosophers will be available for the supreme conduct of affairs, anarchists implied that all men without any exception will be endowed with perfect wisdom and moral impeccability. They failed to conceive that no system of social cooperation can remove the dilemma between a man’s or a group’s interests in the short run and those in the long run.

Note the insultory language here: anarchists are “shallow-minded” and “dull”. If I said that of an anarchist, I would probably be accused of making an ad hominem argument.

But that was an aside. The substantive thing here is that we have a group of social philosophers – “free market anarchists” – who believe that a government or a state is evil by its very nature (and sometimes even the source of all evil) – and yet are willing to accept as their mentor, master and dean someone who claims the exact opposite: that government is “the most necessary and beneficial institution”.

The main flaw of “free market anarchism” is that it refuses to make a distinction between initiatory and retaliatory force. They oppose any government, even the most limited government, one that only engages in retaliatory force against initiators of force (such as criminals and foreign invaders), on the grounds that it uses force. (And they are of course blind to the fact that those “protection agencies” with which they propose to replace government, would also use force.)

Mises is aware of this distinction. When he says that “men are not angels”, he refers to the fact that some men are criminals, and that criminal acts will have to be thwarted. Thwarting criminality and foreign aggression is certainly both necessary and beneficial.

Mises had a psychological explanation for the fact that some fairly intelligent people become anarchists: it was “a reaction to the deification of the state”. (I got this from Hülsmann’s Mises: The Last Knight of Liberalism, p. 1025.) I have said virtually the same thing myself: people become anarchists because they are fed up with the way governments conduct their affairs today; and they cannot conceive of a limited government that does nothing but protect our rights against domestic and foreign aggressors. But that there is a psychological explanation for anarchism does not make anarchism right.

Also, compare my Mises quotes to what Ayn Rand writes in her essay “The Nature of Government”:

In unthinking protest against this trend [the trend toward more and more statism], some people are raising the question of whether government as such is evil and whether anarchy is the ideal social system. Anarchy, as a political concept, is a naïve floating abstraction: for all the reasons discussed above, a society without an organized government would be at the mercy of the first criminal who came along and would precipitate it into the chaos of gang warfare.

I see no difference between Rand and Mises on this issue. And I’m neither shallow-minded nor dull.

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The response to this note was largely positive, although (of course) a couple of anarchists admonished me to wade through all the anarchocapitalist literature before I open my mouth. There was also some lively and friendly discussion. I will quote one of my own comments, because I think I am on to something important here:

There is one thing I think needs to be emphasized:

We have plenty of historical experience with various forms of government, or various forms of organizing society. We have primitive tribes, Greek city states, the Roman empire, feudalism, absolute monarchy. representative government, modern dictatorships (to name those that readily come to mind). We can study the historical evidence and draw conclusions from it, e.g. that representative government is a great step forward, or that there is a strong correlation between the degree of freedom in a society and the degree of wealth.

But we have absolutely no experience with a situation where a proper limited government (or “night watchman state” as I usually call it) is vying with anarchocapitalist protection agencies. So there is no historical evidence to point to and draw conclusions from. All we can do is imagine scenarios.

I think this is one reason it is so difficult to get the point across to the anarchocapitalists. They paint a rosy scenario of protection agencies peacefully competing with one another; and we paint a bleak scenario of protection agencies fighting it out in the streets. When we are fighting the anarchocapitalists, we are fighting against floating abstractions and fantasies.

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Addendum 2016: An objection one commonly hears from anarcho-capitalists is that Mises is merely referring to left-wing anarchism and that his view does not apply to right-wing capitalism or anarcho-capitalism. This was a development he simply did not know about and thus could not criticize.

But this objection does not hold water. Murray Rothbard, the father of modern anarcho-capitalism, first developed this idea as early as the late 40’s. Mises certainly was aware of this. (See on this Jörg Guido Hülsmann’s Mises: The Last Knight of Liberalism, the section “Last Skirmishes with the Anarchists”, p. 1023–1030.)

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PS. On Facebook I was asked this question:

Why is it so important that Rand and Mises were in agreement?

Yes, why on earth? Obviously, this whole blog post is a gross ad verecundiam or “argument from authority”. I just feel so much better having two great authorities behind me than just one.

However, it so happens that they are both right.

Is ”Austrian” Economics ”Rampant Rationalism”?

Facebook note from July 2011 (slightly edited).

A while ago, in a Facebook note (later reproduced on my web site[1]), I quoted someone who said that the “Austrian” objections to fractional reserve banking is an example of “the rampant rationalism of the Austrian school” – to which I answered that this is an example of the rampant empiricism of some Objectivists.

I won’t address fractional reserve banking here[2] but focus on this accusation against the “Austrians”.

What is rationalism? Originally, it is the name of a school of philosophy (the big names being Descartes, Spinoza and Leibniz) that held that true knowledge is arrived at by reason alone, as apart from experience. – The opposite school, of course, is empiricism (exemplified by John Locke, George Berkeley and David Hume), that held that true knowledge comes from experience, as apart from reason. (There are many differences between those thinkers, but as a rough approximation those definitions hold true.) Those two schools represent two sides of a false dichotomy, but I hardly have to explain this to students/supporters of Objectivism.

But the word is also used by Objectivists in a slightly different sense (the difference being that it is not used about a philosophical school, but about a kind of psycho-epistemological malady): the habit of using abstractions not thoroughly grounded in experience (“floating abstractions”), of making deductions in a cognitive vacuum. – “Empiricism” is also used in a transferred sense: if someone merely gathers disconnected facts and fails to integrate and to abstract from them – if someone is “concrete-bound” – he is said to be an empiricist.

OK, this is a bad habit.

But what makes “Austrian” economics rationalistic in this sense? It is the insistence of Mises and many of his followers that economics is an “aprioristic” science, that its theorems are not derived from experience (they certainly apply to experience, but are not derived from it) The whole of economics, on this view, is derived from the “category of action”, sometimes also called the “axiom of action”. [3] This reflects a heavy Kantian influence on Mises and his followers, and, of course, a Kantian influence is always bad, isn’t it? A theory such as Kant’s can only lead to disasters, when put to practice.

But wait a minute now. Of all the schools of economics, “Austrianism” is the one closest to the truth. It is the only economic school that champions full, laissez-faire capitalism. (There are some “Austrians”, e.g. Hayek, who are not fully consistent on this point, but it is true as a general rule – “for the most part”, as Aristotle would say.) But how could this be, if rationalism and “apriorism” can only have disastrous consequences? Wouldn’t one instead expect the “Austrians” to be Marxists or Keynesians or environmentalists or even theocratic thugs?

Or take the connection to real-life events in today’s world. Who best predicted the current financial crisis? The bursting of such bubbles as the IT bubble and the real-estate bubble? Well, most of them are economists of the “Austrian” school.[4]

Other schools of economics may be accused of “rampant empiricism”. A case in point is the German Historical School. Members of this school merely gathered historical and statistical data, and even rejected the very idea that there can be such things as “economic law” (such as the law of supply and demand). They ended up as socialists (“Kathedersozialisten” or “socialists of the chair”).[5]

There is also a British (or English) Historical School, but it does not seem to be much better. For example, according to Wikipedia:

They rejected the hypothesis of “the profit maximizing individual” or the “calculus of pleasure and pain” as the only basis for economic analysis and policy. They believed that it was more reasonable to base analysis on the collective whole of altruistic individuals. (Italics mine.)

But the paradox remains: If rationalism is such a bad thing, and if Immanuel Kant is the worst of all philosophers (and even “the most evil man in mankind’s history”), then why do we get the best economic theories from someone who was a rampant rationalist, even a Kantian?

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Addendum: A particularly obnoxious example of calling “Austrian” economics rationalist I found in a blog post from 2006 by Diana Hsieh, Fractional Reserve Banking: Fraud or Not?. After quoting the relevant part from Reisman’s Capitalism on why a 100% gold standard is morally superior to any “fractional” system (p. 957f), she dismisses it without giving any real counter-argument, and then writes:

Over the past few years, I’ve heard various Objectivist scholars complain of the heavy rationalism of George Reisman’s work.

Although Diana Hsieh has a PhD in philosophy, she obviously has not learned what is wrong with giving an ad verecundiam argument. But then, “various Objectivist scholars” have good reason to find rationalizations for how they have treated George Reisman. Accusing him of having this psycho-epistemological malady is as good a rationalization as any (or as bad, rather).

[1] It is also included in my essay Is Fractional Reserve Compatible with Objectivism?.

[2] If you are interested, you may read my collected blog posts on the subject.

[3] See on this my blog post Is Action an A Priory Category?.

[4] A case in point is George Reisman’s article When Will the Bubble Burst?. But there are other examples.

[5] If you want to know more about this, read Carl Menger’s Investigations into the Method of the Social Sciences.

Fictional taxes

I have written about this in Swedish before, but I think it may be of interest to non-Swedes as well. – For the sake of simplicity (or out of laziness), I keep the examples in Swedish currency. The exchange rate between Swedish kronor (SEK) and US dollars is currently 8.5 SEK per dollar.

Suppose you are a young child and your parents give you pocket money in the form of a weekly allowance of 200 kronor. However, every week your father hands you 300 kronor and immediately takes 100 kronor back. When you ask: “Dad, why on earth do you do this?”, he answers: “Those 100 kronor will go to paying your next weekly allowance”.

This could be described as you, the child, getting an allowance of 300 kronor, of which you pay a third back in “income tax”. But of course, no child would be fooled by this reasoning. Only adults can be that foolish.

Now, back to real life:

For the last 25 years I have worked for the Swedish government, as a librarian (“second assistant”) in the Swedish Royal Library.[1] (Before that, I worked for some years as a school teacher, which is also a job in the public sector.) For this work I receive a monthly salary, on which I allegedly pay approximately a third in income tax. So, every month, I get a slip of paper in my mail, saying that I have received (approximately) 21 000 kronor, from which 7 000 kronor are deducted as tax, so that I actually get 14 000 kronor into my bank account.

But where are those 7 000 kronor? They exist only in the form of a figure on a slip of paper!

By contrast, if I earned the same amount of money from a job in the private sector, then a third of my income would actually go to the government in the form of income tax. In terms of time, it would mean that I work a third of the year for the government and two thirds for myself and/or my family.

This income tax money goes to defraying government expenses, part of which is of course paying the salaries of government servants (such as second assistant librarians at the Royal Library). But when I, a government servant, pay a third of my income as income tax, this money also goes to paying the salaries of government servants – which means, in effect, that I supposedly pay the government 7 000 kronor a month, which then goes to paying my salary for the next month! Exactly as in the fictional example I started out with.

Obviously, this “income tax” I am paying is entirely fictional. The government could just as well pay me 14 000 kronor and take no tax at all; it would make no difference.

But suppose the income tax is raised to, say, 50%. (The public sector is expanding; the government needs more servants and more money to pay their salaries.) For those of you who work in the private sector, this would mean you now work half of your time for the government instead of just one third; but I am a government servant and already work 100% of my time for the government. The change for me would be that I now only receive 10 500 kronor in take-home pay. If the fiction of me paying an income tax is removed, it would simply mean that I now have a lower monthly salary, which is of course exactly what I have. And the situation would be the same, if the tax were raised to, say, 90%. The actual outcome is that I will now receive 2 100 kronor in take-home pay, which, of course, I could not live on.

But the government certainly does not want to treat its servants that unkindly. So in order to compensate me (us) they have to raise our pay. In the 50% case above, this would mean that my “before tax” income would have to be raised to 28 000 kronor. In the 90% case, it would have to be raised to 140 000. But this tax is as fictional as before. I won’t suffer from the raised tax, but everyone who works in the private sector will.

But say there is a genuine tax reform and income tax is lowered to 10%. Now, my take home pay will be almost 19 000! But who is paying for my raised income? Not me: the 2 100 I allegedly pay is still only a figure on a slip of paper. No, the pay raise is paid by the taxpayers in the private sector. But wait a moment – their taxes have just been lowered to 10%! The government after this tax reform will not have enough money to pay its servants’ salaries! Government servants (including second assistant librarians) will have to be fired! Or else, my “before tax” pay will have to be lowered so my take-home pay still stays at 14 000. But even so, the government now has much less money to pay in salaries. It won’t be able to pay me my 14 000 either.

This is of course the reason why such drastic tax cuts are never made. They are simply not affordable, from the government’s point of view. (Such tax cuts of course would have to be made in conjunction with a radical slimming of the public sector – libraries and schools, along with many other things, would have to be privatized.)

Why, then, is this fiction being maintained? Well, I think it is sheer hypocrisy. People with statist inclinations simply want us to believe that we are all taxpayers, although some of us clearly aren’t.

To illustrate the hypocrisy: one Swedish politician (Mona Sahlin, who was from 2007 to 2011 the leader of our Social Democratic party) a few years ago made a statement to the effect that she, personally, loved to pay taxes! Paying taxes was the best thing in life! And so, everybody else should love it, too.

But there is no slightest difference between me and Mona Sahlin, except this one: her income is exorbitant, compared to mine. Her “taxes” are as fictional as mine. She loves paying taxes that in actual, sober fact don’t exist.

But what would happen if this plain fact were simply acknowledged and we public servants actually did not have to pay those taxes we do not really pay anyway? Well, there might be a public outrage, as people now would see clearly what the fiction is intended to hide: that some of us don’t pay taxes. The whole public sector would be seen as parasitical (which, to a great extent, it certainly is). The result might be a tax revolt.

Now, I certainly don’t regard myself as a parasite because of my work. Libraries are an important part of civilization, and so are schools (although I say the last with some hesitation, considering the sorry state of our educational system). In an ideal laissez-faire society, such institutions would be privately owned and maintained. But unfortunately, I live in this century, not in some future utopia – so this is not something I should accept unearned guilt for.

In feudal times members of the nobility were tax exempt. But they were so, because they performed another service to the country (or “society at large”, to use the common collectivist catch-phrase) – they were supposed to take part in warfare, whenever there was a war.

Today, many public servants (librarians and school-teachers are examples) do perform a valuable service and of course should be paid for it. It would be unfair to call them “parasitical”, just because they work in the public sector and are paid with tax money. Teachers can of course try to find work in private schools. But I don’t think this is a possibility for librarians – at least not here in Sweden.

So there is no reason for feeling bad about working in the public sector – at least not for us who are also fighting for a future of limited government. But we should not pretend that we are taxpayers – neither me nor Mona Sahlin.

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There is another, “macro-economic” point: although this tax money is entirely fictional, I believe it is still counted when national income or GDP is calculated. Obviously, the figures have to be overstated if fictional money is included.

[1] This was originally written shortly after I retired in 2009 (Swedish law does not allow me to work past the age of 67). My reasoning also applies to the alms I receive as a pensioner, although the amount is smaller.

Time Preference and Net Consumption

Adapted from a Swedish blog post.

In case you are unfamiliar with these terms: “Time preference” refers to the fact that people (everything else equal) prefer a need satisfaction now or in the near future before the same need satisfaction in the more remote future. – “Net consumption” means the consumption of the capitalists, and the “net consumption theory” is the theory that the general level of profit in the economy is equal (or nearly equal) to the consumption of the capitalists. The theory is presented at length in George Reisman’s Capitalism: A Treatise on Economics, chapter 16.

Everything else equal, poor people have a higher time preference and – which is to say the same thing – a lower degree of future orientation than rich people. Take a homeless person, for example: he has to try to survive the day or the week; he is not in a position to set money aside for long-range projects or for his retirement. Another example would be a drug addict, whose time horizon is limited to his next “fix” – or an alcoholic who can only think of his next drink. – A less extreme example would be a poor farmer, who can only plan ahead for one year at a time; he needs this year’s harvest for him and his family to survive, and cannot put away more seed corn than is necessary for the next year’s harvest. (All farmers in Adam Smith’s “rude and early state” would be in this situation.)

At the other end of the spectrum, take a multi-billionaire such as Bill Gates or George Soros: he does not have to worry about surviving the next day, week, month, year or even decade; he can plan ahead for the future without having to concern himself too much with the present. He can even plan ahead for the time after his death and for securing the future of his children and grandchildren.

In between there are the rest of us: people with a moderate or fairly high income. We are in a position to set some of our money aside for the future: for buying a new house or a new car, providing for our children’s education, planning vacations, providing for our retirement.

But everything else is not always equal, so there are exceptions. A poor person may be struggling hard to get out of his poverty; and a very rich person may be squandering his wealth and end up poor.

If you are familiar with The Fountainhead, you may remember that Gail Wynand was sleeping on a couch in his office while building up The Banner and only later used his money to buy a yacht, create an art gallery, and commission a house from Howard Roark. – And for an example of rich people squandering their wealth, read Bernard de Mandeville’s The Fable of the Bees[1].

A change in the time preference of very poor people does little for the economy as a whole. Neither does such a change in the time preference of the few “squandering rich”. It is the time preference of the well-to-do and the industrious rich that makes a difference. As long as those people have a low time preference and a correspondingly high degree of future orientation, they will invest their money, and it is those investments that move the economy forwards.

According to George Reisman’s theory, the level of profit in the economy as a whole is equal to the net consumption of the capitalists (I leave net investment aside, because I don’t think it changes my point). As long as the capitalists have a low time preference, net consumption stays at this low level; the greater part of their wealth goes to productive investments. And the richer they become, the lower becomes their time preference, the more gets invested, the more gets produced, the more workers get employed and the higher their wages become.

But assume that the capitalists’ time preference would increase (and their future orientation would correspondingly diminish); this could happen if there were to be a serious threat of confiscation of their wealth by a socialist government (or if there were certain indications that doomsday was approaching and the world would come to an end). Then the opposite would happen: they would consume their wealth instead of investing it; production would diminish or cease altogether; unemployment would rise; and so would the general level of profit and interest.

And this is why time preference is not a direct but an indirect cause of the level of profit and interest. It works through the net consumption of the capitalists.

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Update December 26, 2015: As George Reisman has pointed out to me in a private message, it is not entirely true that capitalists will continue saving and investing indefinitely. As long as a capitalist is building his fortune, he will save and invest heavily out of his income and consume correspondingly less. But once his fortune is sufficiently large to make his own future – and even his children’s and his grandchildren’s – secure, he will have no incentive to further enlarge it, so he will save and invest less and less and finally may come to the point where he will consume all of his income. (For an extensive discussion of this, see Capitalism: A Treatise on Economics, pp.  739–744.)

I think (this is my own reflection) that this explains why so many of the greatest capitalists establish educational or other foundations (for example Rockefeller and Carnegie, and today Bill Gates and George Soros). From the point of view of the capitalist, this is consumption, since the purpose is not to make more money and enlarge his fortune, but simply to make the best use of the money he no longer needs.

George Reisman also tells me that

capitalists continue to save to the extent that the rate of profit/interest exceeds the rate of their consumption (the rate of net consumption). What causes this is the continuing increase in the quantity of money and volume of spending in the economic system. If the quantity of money and volume of spending ever stabilized at some given level, accumulated capital would grow to the point at which the consumption of the capitalists exhausted the whole of their incomes; at that point, saving out of  income would be zero.

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The honor of having discovered the role of time preference goes to Eugen von Böhm-Bawerk. Later “Austrian” economists, such as Mises, have considered his explanation of the causes of time preference as not quite satisfactory. But the one who nails it is, once again, George Reisman:

The nature of human life implies time preference, because life cannot be interrupted. To be alive two years from now, one must be alive one year from now. To be alive tomorrow, one must be alive today. Whatever value or importance one attaches to being alive in the future. one must attach to being alive in the present, because being alive in the present is the indispensable precondition to being alive in the future. The value of life in the present thus carries with it whatever value one attaches to life in the future, plus whatever value one attaches to life in the present for its own sake. In the nature of being alive, it is thus more important to be alive now than at any other, succeeding time, and more important to be alive in each moment of the nearer future than in each moment of the more remote future. If, for example, a person can project being alive for the next thirty years, say, then the value he attaches to being alive in the coming years carries with it whatever value he attaches to being alive in the following twenty-nine years, plus whatever value he attaches in the coming year for its own sake. This is necessarily a greater value than he attaches to being alive in the year starting next year. Similarly, the value he attaches to being alive from next year on is greater than the value he attaches to being alive starting two years from now, for it subsumes the latter value and represents that of an additional year besides.

The greater importance of life in the nearer future is what underlies the greater importance of goods in the nearer future and the perspective-like diminution in the value we attach to goods available in successively more remote periods of the future. (Capitalism: A Treatise on Economics, p. 56.)

To put it in shorter words: To be alive today and this year is the necessary pre-condition of being alive tomorrow or in fifty or a hundred years. Everything else equal, we have to value life in the present over life in the future, for if we don’t, there will be no life in the future. Thus we have to have goods or money to survive the day before we can start thinking about saving for the future.

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I originally wrote this some years ago, when I was pulled into a discussion with an idiot not too well-informed person, who claimed that George Reisman could not be a real “Austrian”, since he does not share the conventional “Austrian” view om time preference.

(Other schools than the “Austrian” have no inkling of the role of time preference.)

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See also my earlier blog post Christianity and Time Preference.

[1]) Mandeville claimed that this squandering would be a boon to the economy; but this is simply a version of the “broken windows” fallacy and has been refuted time and again by better economists.

A Review of George Reisman’s “Capitalism: A Treatise on Economics”

This is a slightly expanded version of a review I submitted to Amazon a few years ago. This review seems to be appreciated by readers, and it was much appreciated by Dr. Reisman himself, who suggested I make this expanded version for possible publication. (This version was originally written in 1999.)

George Reisman’s Capitalism: A Treatise on Economics is perhaps the greatest treatise on economics of all time; it certainly ranks with such works as Adam Smith’s The Wealth of Nations or Ludwig von Mises’ Human Action; and in one respect I think it surpasses them: even the great pro-capitalist economists in the past have had contradictions and/or inconsistencies in their reasoning that undercut their message and make it weaker than it could and should be. If there are contradictions or inconsistencies in Reisman’s treatise, I have yet to find them.

An achievement of this kind is always an integrated whole. But if I were to single out one insight as the greatest one, it would be the “primacy of profits” principle, the insight that wages are a deduction from profits, not vice versa. This lays the ground for the most thorough and fundamental refutation of the Marxian exploitation theory that is possible; it also lays the ground for what actually constitutes economy-wide profit (the “net consumption” theory of profits) and the actual relationships between profits, wages and investment, and for many other things as well. To make a comparison, I think this discovery ranks with Adam Smith’s original discovery of the principle of division of labor, or the early Austrians’ discovery of marginal utility. I sincerely hope that this principle gets thoroughly understood by economists in the future.

Some other highlights I could mention merely because I have not seen them mentioned by other reviewers:

The demonstration that the rise in the average standard of living rests entirely on lower prices for goods and services. This fact is obscured by the presence of inflation, and other economists (notably the Keynesians) have managed to create a lot of fog around this issue. Reisman’s analysis completely dissolves the fog. And this point also has a positive corollary. The only thing that actually does raise the average standard of living is a rise in the productivity of labor; behind such a rise stand saving, technological progress and capital accumulation; and behind these stands man’s reasoning mind.

Understanding the extent of the gulf between a pre-capitalist, non-division of labor society and a modern division of labor society. (E.g.: understanding why a rise in population would be a threat in the former kind of society, but a source of great benefit in the latter kind.)

The demonstration that one of the things capitalism is regularly denounced for – the concentration of great fortunes in relatively few hands – is actually to the benefit of everybody, not merely the owners of those fortunes.

The demonstration of what is wrong with modern “national income accounting”. To make a long story short, the “modern” accounting method makes it look like almost all expenditure in the economy is consumption expenditure, while the truth is that most expenditure in a modern advanced economy is expenditure for the sake of further production.

And those are just a few of the highlights.

Capitalism is not always easy reading, and a beginner would be well advised to start with The Government Against the Economy (the whole of this book, however, is incorporated into Capitalism as chapters 6–8), or with some of Reisman’s shorter pamphlets (or with one of Reisman’s own favorites, Henry Hazlitt’s Economics in One Lesson). Some previous knowledge of Classical and Austrian economics is a great help. But, particularly in the first chapters, dealing with the role of material wealth in man’s life, there are passages that made me cheer aloud when I first read them, and possibly others will cheer aloud, too. (One such observation is that we value automobiles and other means of transportation for basically the same reason that we value having legs over not having legs.)

As is probably known, George Reisman was not only a student of Ludwig von Mises but also a student of Ayn Rand, and her influence permeates his book in more ways than I have space to tell. You may recall that one of the strikers in Atlas Shrugged was “a professor of economics who couldn’t get a job outside, because he taught that you can’t consume more than you have produced”. Well, this is what George Reisman teaches, for a thousand double-column pages and better than anyone has done before him.

PS: Reisman’s words of appreciation are worth quoting:

I believe that my treatment of the subject of profit is the most important and original fea­ture of the book and that the reversal of the Marxist view of the relationship between pro­fits and wages is one of the most important appli­cations of my theory of profit. Those are pre­cisely the points your review stresses. So I come away from your review with the very gratifying feeling that here at last is someone who really understands the book and has hit the nail on the head in reviewing it.

PS. Here is my original Amazon review. (It was published in 1999 under my own name, and I don’t know why it has been changed to “A customer”.)

You may also read my review of The Government Against the Economy.