Objectivism versus “Austrian” Economics on Value
This was originally written in 2006; I have made a few additions and revisions.
Abstract: One could easily do either too much or too little of the differences between Ayn Rand’s philosophy of Objectivism and the “Austrian” school of economics. One could do too much of it by saying the “Austrians” are subjectivists, which is obviously anathema to Objectivism (and vice versa: an objective theory of value has to be anathema to the Austrians); or one could do too little of it by simply denying and/or ignoring the differences that do exist. But in fact, there is only one amendment that should be done by the “Austrians” to bridge this gulf: they should acknowledge that, while our valuation of things certainly takes place within our minds, the values that we identify as values exist “out there”, in the world. This is the subject of this essay.
There are two false theories of value. The first one says that value is in the object, and the second one says it is in the subject. Furthermore, those two theories are regarded as mutually exclusive and jointly exhaustive. It is either the first falsehood or the second one – tertium non datur.
According to the first view, there is (so to speak) a little “package” of value in the valuable object. How did this package get there? According to the religious view, it is put there by God. This view plays no role in economics; but a secularized version does: the idea, propounded by Karl Marx, that human labor is packaged into the object, and that an object is therefore more valuable, the more work has gone into its production. (The contradictions involved in this view are not the subject of this essay; read some good critic of Marx, such as Böhm-Bawerk.)
On the second view, value is not in the things; it is in the mind (“in the eye of the beholder”). On this view, an object is valuable merely because we think or feel it is valuable. As one proponent of the theory puts it, value is an attitude we take toward an object; and an attitude is certainly not in the object itself, but in the mind of the subject.
This false alternative was blasted by Ayn Rand.
In her essay “What is Capitalism” (in Capitalism: The Unknown Ideal) she writes:
There are, in essence, three schools of thought on the nature of the good: the intrinsic, the subjective, and the objective. The intrinsic theory holds that the good is inherent in certain things or actions as such, regardless of their context and consequences, regardless of any benefit or injury they may cause to the actors and subjects involved. […] The subjective theory holds that the good bears no relation to the facts of reality, that it is the product of a man’s consciousness, created by his feelings, desires, “intuitions,” or whims, and that it is merely an “arbitrary postulate” or an “emotional commitment”. […] The objective theory holds that the good is neither an attribute of “things in themselves” nor of man’s emotional states, but an evaluation of the facts of reality by man’s consciousness according to a rational standard of value. […] The objective theory holds that the good is an aspect of reality in relation to man – and that is must be discovered, not invented, by man. Fundamental to an objective theory of values is the question: Of value to whom and for what?
The intrinsic and subjective theories are of course the two false alternatives presented above. (Adherents of the subjective school insist on calling the intrinsic theory “objective”, but this is false all the same and merely introduces terminological confusion.)
Ayn Rand’s objective theory of values recognizes the very objective fact that there are both objects and subjects in the world – and that the question of value is a question of a relation between an object and a subject. “Value”, according to Ayn Rand’s fundamental definition, is “that which one acts to gain and/or keep”. A value, on this definition, might certainly be an emotional state (such as happiness or joy), but it is fully as much (or perhaps more) a thing that one acts to gain (or, if one is already in possession of it, acts to keep). The “thing” here could be anything, from a toothbrush to a spouse to a fortune. The point I want to make here is that this thing exists out there, in the world, not merely in one’s mind.
And I would like to point out that even when the value sought is an emotional state (such as joy or happiness), people do not pursue this state directly. “Pursuit of happiness” is a nice term, but what people actually pursue is things that will make them happy. Wanting a happy marriage is a good example here. Marrying the right person is certainly most conducive to happiness, but the value one pursues (“acts to gain and/or keep”) is the person one wants to marry (or stay married to). (If one actually tried to achieve happiness “directly”, by-passing the things that would make one happy, one would fail miserably.)
A value is thus not a value “in itself”; it is always a value to someone, and it is always a value for something – for an end or a purpose. The toothbrush mentioned above is a value for the purpose of keeping one’s teeth clean; and clean teeth in its turn is a value for the purpose of keeping one’s health; but health (like life and happiness) is an end-in-itself: one keeps one’s health for no other purpose than keeping one’s health. The fortune mentioned above is obviously not an end-in-itself but a means to other ends one may have. The spouse mentioned above is so obviously connected to one’s happiness in life that no further elaboration is necessary.
In sum: there is nothing intrinsic about value; and there is nothing subjective about it either. To be kind, I may say that the intrincisists are right on one point: values do exist “out there”; and the subjectivists are right on one point: values do have a relation to a subject. (But it is very kind of me to say that. A false coin is false on both sides!)
When economists talk about “value”, they are using the concept as it applies to economics. They are talking about value as it is expressed in the price of a product or service. And, of course, this is what should be of concern to an economist qua economist. But “economic value” is still a fairly narrow sub-division of the concept value. To borrow a definition I once heard in a lecture by Northrup Buechner: “An economic value is a value that is bought and sold.”
A value is not always bought and sold. To take an obvious example: a happily married person might very well call his/her spouse his/her highest value. The same person would of course never dream about putting his/her spouse on the market!
The same reasoning applies to friendship. It also applies to pets. If you are a dog-owner, you probably paid a sum of money to buy him as a puppy; but would you say the dog’s value to you has anything even remotely to do with that amount of money? And whatever economic value the puppy had at the moment of buying, it quickly disappears. If, for some reason, illness or death or whatever, you can no longer keep your dog, you will have to give him away for free.
Or take another example, just to highlight the difference: suppose you are in the economics department of a bookstore and you see two books of approximately the same size and accordingly costing the same; but one of the books is Human Action and the other is Das Kapital. Their actual value to you as a reader has virtually nothing in common with their economic value.
Of course, an economic value is also something one “acts to gain and/or keep”. It is only that the action here is simply handing over some money – while gaining and keeping a spouse or a friend requires you to show, continually and in action, what a nice and virtuous person you really are.
Nevertheless, “Austrian” economists sometimes come close to the truth that “life is the ultimate standard of value”. Take the following from Böhm-Bawerk:
I think I need no proof for the fact that in the relationship between means and end it is the end that lends the means its importance, not vice versa. It is self-evident that a man who is shipwrecked values a life-belt highly if and because he values his life highly which he hopes will be saved by the life-belt; of course, nobody will assume that he values his life highly because of the life-belt. And it is equally unquestionable that in this relationship we do not value the end because the means for its attainment is important to us, but the means becomes important because the end is important to us. (Capital and Interest, Vol. III, p. 111; emphasis added.)
But Böhm-Bawerk (who undoubtedly was one of the greatest economists of all time) never formulated an ethics based on this insight.
The same thing can be observed in Hayek’s The Fatal Conceit – where he actually mentions that life is an end in itself; and where his big point against socialism is that it actually kills people. But it never enters his mind to formulate an ethics based on life as an end in itself; in ethics, he falls back on the most horrendous idea ever uttered on the subject: David Hume’s idea that “the conclusions of ethics are not the conclusions of our reason”.
And, of course, there is this famous line from Mises:
Whoever prefers life to death, happiness to suffering, well-being to misery, must accept society. And whoever desires that society should exist and develop must also accept, without limitation or reserve, private property in the means of production. (Human Action, p. 515.)
But – unlike Ayn Rand – Mises never makes an effort to validate this preference for life over death. In fact, he denies any possibility of validating it. Ultimate ends, according to Mises, fall outside the domain of reason. (Well, we should be grateful he was such a nice person, despite this. Whether his preference was subjective or not, he certainly did not prefer that we suffer and die!)
Menger on Value
The following passage from Carl Menger’s Principles of Economics is said to have inaugurated the Austrian “subjective” school of economic value:
Value is thus nothing inherent in goods, no property of them, nor an independent thing existing only by itself. It is a judgement economizing men make about the importance of goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men. [Emphasis added.] It is, therefore, quite erroneous to call a good that has value to economizing individuals a “value”, or for economics to speak of “values” as of independent real things, and to objectify value in this way. For the entities that exist objectively are always only particular things or quantities of things, and their value is something fundamentally different from the things themselves; it is a judgement made by economizing individuals about the importance their command of the things has for the maintenance of their lives and well-being. Objectification of the value of goods, which is entirely subjective in nature, has nevertheless contributed very greatly to confusion about the basic principles of our science. (Principles of Economics, p. 120f.)
Undoubtedly, those lines represent a great advance compared with the view prevailing earlier: that “value” is somehow “inherent” in goods. Nevertheless, what Menger says here is not true: he jumps from one side of the false coin to the other.
To begin with: if I value something (be it my spouse, or a nugget of gold, or something as mundane as a cone of ice-cream), I value the thing. It is the thing that I value that is the value. I do not value my own valuation of the thing. (If anyone thinks so, it would quickly lead to an infinite regress: “I value my valuation of my valuation of my valuation…”)
Now, those things that I value certainly exist outside of my consciousness. (Suppose I said to my spouse: “You are my highest value; but this value only exists in my consciousness.” What would she think of me? Would she even have reason to feel flattered?)
The truth is that value does not exist in the things apart from our consciousness of them; and if that is what Menger actually means to say, fine; but that is not what he is literally saying. But neither do they reside in our consciousness apart from their actual properties; the best I can say about that view is that it is ridiculous.
Menger’s mistake is that he simply does not have the definition of the objective as “an evaluation of the facts of reality by man’s consciousness according to a rational standard of value”. He confuses the objective with the intrinsic.
The last thing I want to do is denigrate Carl Menger. His mistake here is a subtle one – and may be ascribed to the fact that he never had the opportunity to read Ayn Rand – but it still is a mistake.
Subtle mistakes do have consequences. An example of this is provided by an interesting article by Gene Callahan, Carl Menger: The Nature of Value, published on the Ludwig von Mises Institute’s web site.
Callahan begins with an acute observation. He quotes the following from Aristotle:
Money, then, acting as a measure, makes goods commensurate and equates them; for neither would there have been association if there were not exchange, nor exchange if there were not equality, nor equality if there were not commensurability.” (All emphases Callahan’s.)
Callahan then points out that this implies an intrincisist view of value (although he does not use that term). The idea is that if two goods exchange for one another, they must be equal in value. This value must be there, “in” the goods, before the exchange takes place, and their equality makes the exchange possible.
The truth here is the exact opposite: an exchange takes place precisely because the parties to the exchange value the respective goods differently. When I pay $1 for a cone of ice-cream, the very act of paying implies that I value the ice-cream above the dollar; and, as obviously, the ice-cream vendor values the dollar above that cone of ice-cream (why else would he sell it?).
Now, this does not imply subjectivism. I need the ice-cream, because the weather is unbearably hot; the vendor needs my dollar bill because he needs to make a living. The only thing “subjective” about this is that I and the vendor are two different subjects. And that there is more than one subject in the world is also an objective fact.
To make this point starkly clear, imagine the following scenario: two men meet in the middle of a desert. One of them is starving to death and has only a keg of water; the other one is thirsting to death and has only a loaf of bread. This certainly makes the basis for an exchange! And the exchange takes place precisely because the loaf of bread and the keg of water have a vastly different value to the two men!
But note also that there is nothing subjective about this. That man needs food and water to survive is an objective fact.
The examples given above, by the way, are my own, not Callahan’s. Callahan merely points out Aristotle’s mistake and notes that it has played havoc with economic theory, until Menger arrived on the scene.
But then Callahan, like Menger before him, jumps to the other side of the false coin:
Despite his intellectual roots in Aristotelian thought, Menger was wise enough to see that Aristotle had erred in regard to exchange. One can make no sense of the relationship of value to market prices if one regards value as a property of goods themselves. Since the properties posited as “inhering” in goods, such as land and labor, are themselves traded on the market, such explanations must always beg the question as to how those “determinants” of value are priced.
So far, so good.
Menger’s breakthrough insight was to realize that “[v]alue is… nothing inherent in goods, no property of them, but merely the importance that we first attribute to the satisfaction of our needs… and in consequence carry over to economic goods as the… causes of the satisfaction of our needs.” (Principles of Economics)
Here, the subtle mistake creeps in. Let us put a magnifying glass to Menger’s words here:
It is certainly true that it is the “satisfaction of needs” that lends value to goods, not the other way round. (I would not buy an ice-cream, and no-one would sell it to me, if it did not satisfy a need: my need for refreshment on a hot summer’s day, and the seller’s need to make his living.) But is this an importance that we merely “attribute”? Certainly not. Needs are objective; needs are needs, whatever we “attribute” to them. Suppose someone is like Blaise Pascal – who thought one should attribute no importance whatsoever to the food one is eating. Food is still an objective need: without it, one would die.
In other words, there is still nothing subjective about values; they are not “merely in the mind”. But this is not Callahan’s conclusion; he continues:
In other words, value is the name of an attitude or disposition that a particular person adopts toward a good: he chooses to value it. […] For example, it is quite common to refer to money (or gold, or financial assets) as a “store of value.” But an attitude cannot be stored! You cannot pour some of your attitude towards goods into a bar of gold, put it in a vault, and hope it “keeps.” You can, of course, store the gold bar. And you will certainly hope that when you decide to take it from the vault and sell it, that others will choose to value it as well. But only the gold was stored.
I certainly would not dispute the fact that we choose our values; but choices may be right or wrong; and if we choose the wrong values, it will lead to disaster. (There is another favorite subjectivist error here: that as soon as choice is involved, this makes everything subjective. But why on earth should that be so? Because the choice is always made by a subject? By that logic, all knowledge would be subjective, too, since it is always a subject that knows.)
Now, of course Callahan’s reasoning here is perfectly logical, given his premises. If “value” means “attitude or disposition”, then one could not store it. But my point with regard to that is already made: it is not. In his example, the bar of gold is the value, not my attitude toward the bar of gold.
Callahan goes on:
Another common, troublesome phrase claims that in free markets, people “trade value for value.” But if we realize that value names an attitude or disposition, we see that the phrase is misleading. I can trade some gold that I value with you for a sheep you value. If such a trade takes place, you must also value my gold and I your sheep. In fact, you must value my gold more than you value your sheep, and I must value your sheep more than I value my gold.
I cannot know whether Callahan had Objectivism in mind when he wrote this; but “trading value for value” is certainly a stock Objectivist phrase, often used by Ayn Rand. And, by my analysis above, we do trade value for value. The example Callahan uses is of course quite as correct as my ice-cream example above. The sheep and the gold must be valued differently by the two parties to the exchange.
But why should “trading value for value” imply that the values are exactly equal? It does not. All it implies is that the values are values.
Callahan “goes on in his woolen stockings”:
When we exchange these goods, my attitude toward the gold does not transfer to you with the gold, nor does your attitude toward the sheep become mine. If that occurred, we would wind up immediately trading them back again, since before the first trade you valued the gold I was offering more than the sheep, and I valued the sheep you offered more than the gold I made available.
Again, Callahan is right, given his wrong premise. And, again, the point I want to make is that his premise is wrong. It is the nugget (or coin) of gold and the sheep (to stay with Callahan’s own examples) that is the value, not my “attitude” or “disposition” to them. Of course, the good in question is not a value “in itself”, regardless of its relation to me; it is a value because it enhances my life. To repeat: “the good is an aspect of reality in relation to man“. It is not “an aspect of man in relation to reality”. The good exists out there, not merely “in our minds”.
Böhm-Bawerk on value
Since Böhm-Bawerk is the second giant of “Austrian” economics, I should say some words about him as well. (The third giant, of course, is Mises; and the fourth is George Reisman.)
In his recently re-issued book Basic Principles of Economic Value, Böhm-Bawerk begins his introduction with those words:
People who wish to study economic value face a problem from the outset, i.e., the ambiguity of the word “value”. (P. 1.)
Now, this is the drawback of not having Ayn Rand’s definition of “value”: “that which one acts to gain and/or keep”. There is nothing ambiguous about this definition. (True, there are homonyms. When we speak about the value of a variable in a mathematical equation, there is no “gaining and/or keeping” involved. But that is not what we are speaking of here.)
Since Böhm-Bawerk did not have the opportunity to read Ayn Rand, he has no choice but to delve into the different “meanings” of the term “value” employed in his time. For economics, he says, there is one distinction that is important: the distinction between subjective and objective value. Let me reverse Böhm-Bawerk’s own order and quote him on “objective value” first:
Value in the objective sense means the power or ability of a good to achieve an objective result. In this sense there are as many kinds of value as there are results. There is a nutrition value of food, a heat value of wood and coal, a fertilizer value of various manures, a blast value of various explosives, etc. All these value terms lack any reference to the well-being of an individual. When we say that beech wood has a higher heat value than pine, we state a purely objective or “mechanical” fact. We are simply stating that a certain quantity of beech wood yields more heat than the same quantity of pine wood. Therefore, instead of the value term we also use the synonyms “power” or “capacity”, which point up the purely objective relationship. Instead of “nutrition value” we may say “nutritional potency”, “heat capacity” instead of “heat value”, “blasting force” instead of “explosive value”, etc. (P. 4.)
He goes on:
I mentioned these examples only to illustrate more clearly that objective value plays an eminent role in economics: the objective exchange value of goods.
This is the objective significance of goods in exchange, or in other words, their capacity to obtain in exchange a quantity of other economic goods. In this sense we may say, this house is worth $100,000 or that horse $500 because in exchange we may obtain $100,000 or $500 respectively. Again, as in the case of heat value, we do not refer to the effect the goods may have on the well-being of an individual. We merely denote the objective fact that a certain good obtains a certain quantity of other goods in exchange. And we may observe again that the word “value” can be replaced by the synonym “power”. The English speak of “purchasing power”. The Germans are beginning to use the word “Tauschkraft”. [And the Swedes “köpkraft”, I may add.] (P. 5.)
I can only agree with Böhm-Bawerk here. Here, the word “value” is used “homonymously”, just as in my mathematical equation example above.
Now, what does Böhm-Bawerk have to say about “subjective value”?
Value in the subjective sense is the significance which an economic good or a number of goods possesses for the well-being of an individual. In this sense a good is valuable to me when I perceive it to be significant for my well-being. This means that its possession satisfies a want, affords a pleasure or comfort, or saves me from a pain which I would have to suffer without the good. In this case, possession of the good constitutes a gain and its loss signifies a reduction of my well-being. It is important to me, it has value for me. (P. 4.)
Eminently true. I would like Böhm-Bawerk to have used the expression “life-and-well-being” to stress and highlight the connection between well-being and life. And I object to the term “subjective value”. Again, the only thing subjective about this is that only a subject can perceive his own well-being or the significance a good may have for his well-being. Only subjects perceive; this does not make all perception subjective. Apart from this, the substance of Böhm-Bawerk’s reasoning is entirely correct.
And (as I discovered after writing the above) Böhm-Bawerk actually hits the nail on the head a few pages later:
As frequently mentioned before, economic value is neither an objective quality inherent in goods, nor is it a purely subjective phenomenon that resides in the inner self of man. Instead, it is a particular relationship between an individual and an object. If I call this concept “subjective value”, I do not mean to deny the existence of objective factors. (P. 15.)
Why the fuss?
Now, you may ask me: why do I make such a fuss about this issue? After all, it seems I am saying that the differences between Objectivism and “Austrianism” are a matter of terminology. The Austrians are simply using the term “subjective”, when they could have chosen a better term.
Well, to begin with, the terminology is confusing. And clarity is a value to be gained and/or kept. Even merely verbal clarity.
Subjectivism, in its serious philosophical sense, is a very bad thing. It is the notion that “what is true for you is not true for me”. In ethics, it is the notion that no objective ethics is possible, that values have no connection to facts, and that one could not even decide between a normal, decent person’s desire to preserve his/her life and a mass murderer’s desire to extinguish it. (David Hume once said that there is no “value difference” between scratching one’s nose and the destruction of the world. If you think (to make a gross understatement) there is some slight difference, you would be right. Nevertheless, this is what subjectivism is preaching.) I do not want a good economic theory (and this is what “Austrian” economics is) “married” to such a philosophical framework.
But there is more to it. George Reisman continually stresses that the two giants whose influence might save our civilization are: Rand and Mises, Mises and Rand. Since this is so, one would expect Objectivists and “Austrians” to be allies. But is this so? How many experts on “Austrian” economics are also Objectivists? Sadly, I can only think of George Reisman. How many experts on Objectivism are also “Austrians”? Equally sadly, I can only think of George Reisman.
I rather perceive antagonism (sometimes even hostility) between the two “camps” here. But why should this be so? Well, sometimes it is due to personal grudges. (Murray Rothbard, for example, was very hostile to Objectivism – merely due to the fact that Ayn Rand and her then-associate Nathaniel Branden once confronted him with the fact that he was guilty of plagiarism). But as for the antagonism sometimes showed by Objectivists toward “Austrians”: remember that Ayn Rand recommended Mises’ works. She did so with reservations regarding his philosophical framework; but those were precisely the kind of reservations that I have presented here. (There were more than I have covered here; I hope to find time to cover another one later.) His economics she fundamentally agreed with. To quote her:
Q. What do you think of the Austrian School of Economics?
A. I think they are a school that has a great deal of truth and proper arguments to offer about capitalism – especially von Mises – but I certainly don’t agree with them in every detail, and particularly not in their alleged philosophical premises. They don’t have any, actually. They attempt – von Mises particularly – to substitute economics for philosophy. That cannot be done. (Ayn Rand Answers, p. 43.)
Do Objectivists in general take Miss Rand ad notam here? Well, some of them do. (I obviously do.) But I have seen signs of a disturbing development within the “movement”: a tendency to “throw the baby out with the bath-water”, i.e. to discard everything in “Austrian” economics, including its greatest achievement: the “Misesian” theory of the trade cycle. They even go as far as to deny that “fractional reserve banking” is a sin. (How they reconcile this with the fact that “fractional banking” was not practiced by the Mulligan Bank in Galt’s Gulch remains a mystery.)
Once upon a time, George Reisman was kind of a “dean of economics” within the Objectivist movement. For reasons that are as smutty and small (i.e. evil) as the reasons behind Rothbard’s hostility, he no longer is; instead he is ostracized. The current “dean” seems to be Richard Salsman – who also seems to be an enemy of the “Austrian” school.
Is it any better on the other side? No, I do not think so. A good illustration is Israel Kirzner’s review of Reisman’s Capitalism. This review is a mix of lavish praise and the most bizarre objections; the following one is relevant here. Reisman writes on p. 36 in his book:
[O]ne philosophical question that must be briefly addressed here is the assertion that science and value should be kept separate and distinct—an assertion that is often made by advocates of socialism and interventionism when they are confronted with the advocacy of capitalism. This book obviously flies in the face of that demand, for it consistently seeks to forge a union between the science of economics and the value of capitalism.
Despite the prevailing view, this procedure is perfectly sound. The notion that science and value should be divorced is utterly contradictory. It itself expresses a value judgement in its very utterance. [Italics mine.] And it is not only self-contradictory, but contradictory of the most cherished principles of science as well. Science itself is built on a foundation of values that all scientists are logically obliged to defend: values such as reason, observation, truth, honesty, integrity, and the freedom of inquiry. In the absence of such values, there could be no science.
The leading historical illustration of the truth of these propositions is the case of Galileo and the moral outrage which all lovers of science and truth must feel against those who sought to silence him. It is nonsense to argue that science should be divorced from values. No one who makes this demand has ever been able consistently to practice it. What it is proper to say is that science should be divorced from mere emotion—that it must always be solidly grounded in observation and deduction. Irrational emotion should not be confused with dedication to values, however.
This is crystal clear. But not to Kirzner, who objects:
Reisman ends his opening chapter with a brief by emphatic rejection of wertfreiheit [the doctrine “that science and value should be kept separate and distinct”]. As is well-known, Mises strongly supported the importance for economic science of economists’ strictly maintaining their wertfreiheit. But Reisman is uncompromising. “It is nonsense to argue that science should be divorced from values” (ibid.). The character of Reisman’s book is decisively (and unfortunately) shaped by this insistence (central, of course, in Randian thought) upon the objective demonstrability of values. Regardless of the validity of this rejection of wertfreiheit (a rejection shared, as it happens, by many who would otherwise disagree with much that is in this volume), it has surely had predictably costly [italics mine] consequences for the book’s overall character.
This objection, of course, is utterly contradictory and itself expresses a value judgement in its very utterance – for what on earth does Kirzner mean by the word “costly” here, if it does not imply a value judgement? (I cannot believe that he merely means that Reisman’s rejection of “wertfreiheit” will hurt the sales of his book.) But what is the essence of his objection? Well: Mises defended “wertfreiheit“; so anyone who rejects it is not a true “Austrian”!
Now, if Mises (or “Austrians” in general) mean by the term “wertfreiheit” that “science should be divorced from mere emotion“, this is of course fine. But this is not what this German word means: it means literally: “freedom from value”. And this is obviously also how Kirzner interprets it; why else the objection? But one important thing has to be mentioned in passing here:
There is a close connection between “value” and “emotion”; values do trigger emotions. When you gain a value, you will feel happy; when you lose a value, you will feel sad; when a value is threatened, you will get angry or scared. This easily observable fact has led many philosophers to conclude that value judgements are merely expressions of emotions. (This is the basis of every “emotivist value theory”, from David Hume and forward.) But it is a reversal of cause and effect: it is the value that comes first, and the emotional state that follows.
Nevertheless, it is not the emotion that should play a role in scientific reasoning, even though value judgements should. To say “I’m infuriated with socialism” is fine, as far as it goes, but the phrase hardly belongs in an economic treatise; on the other hand, “socialism is bad” does (as long as it is backed up by the right arguments).
Can the gulf that seems to exist between Objectivism and “Austrianism” ever be bridged? Well, since I write “seems to exist”, I obviously think it can. The main point I have been making here – my elaboration of Ayn Rand’s principle that “the good is an aspect of reality in relation to man”, with the implication that values do exist “out there”, not merely “in the mind” – is a point that to my knowledge had not been made before in connection with this subject. Therefore, I think there is something of value – something to be gained and/or kept – in this essay.
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PS: George Reisman (who has read this essay and generally approves of it) made the following suggestion:
I’d like to suggest that when you refer to Menger, you should include and perhaps quote his treatment of the requirements for a thing becoming a good and his distinction between real and imaginary goods. I think his discussion here is just about entirely along Objectivist lines.
I, too, agree with this, but I am afraid that a further elaboration would make my essay swell into a treatise on Carl Menger’s value as an economist. But it is true that Menger’s treatment of this subject (which is on p. 52ff of Principles of Economics) serves to cast light on the fact that values (although they exist “out there”, in the world) have to be discovered by man to actually become values.
(But read Reisman’s own essay Environmentalism in the Light of Menger and Mises, which takes up this very point.)
A commonly used example is that raw materials (such as iron or oil) are of absolutely no value, unless or until someone discovers how to make us of them. A similar example would be that the loveliest woman in the world would be of no value to me, unless or until I at least make her acquaintance. Or that the very subject of economics would be of no value, if nobody cared to study it.
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Another PS: A Swedish economist of my acquaintance, Richard CB Johnsson, has also addressed the question of “Austrian” economics’ compatibility with Objectivism; se his essays “Austrian” Subjectivism vs. Objectivism, Part I and Part II; also Subjectivism, Intrinsicism and Apriorism: Ayn Rand Among the Austrians? His reasoning differs from mine in details, but we are in agreement that a reconciliation is in principle possible.
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For those of you who are Scandinavians, I should mention that I approach this subject – from slightly different angles – in two essays in Swedish: Till frågan om den “österrikiska” skolans subjektivism och “Österrikarnas” subjektivism än en gång.
 Maybe this point requires some elaboration (I have discussed it with subjectivists, but it seems virtually impossible to get it across to them). Things like “health” and “happiness” are so closely connected to “life” that it would be wrong to call them means for the end of life; they are rather aspects of life. A man does not pursue health or happiness merely because he wants to prolong his life; if they do prolong his life, this is a kind of side effect (a desirable one, of course). Since a man may be ill or unhappy and still remain alive, one should perhaps call them aspects of a successful life. Still, illness and suffering are signs of impending death, so the close connection does exist.
 As Böhm-Bawerk writes in the book I refer to:
[E]conomic science must accept all those, and only those value concepts than have economic significance. (P. 3.)
No wonder he does not mention the value of a spouse, or a pet, or a concert, or even the value of his own books!
 This information is from a biographical essay written by Pascal’s sister.
 A nice Swedish phrase that I would like to introduce into the English language. – My Swedish-English dictionary gives the following phrases: “go ahead (on) doggedly (undauntedly); pursue one’s way unconcerned.” (Don’t ask me why the stockings are woolen; I don’t know.)
 He also writes:
We have been speaking of subjective and objective value as if they were two entirely independent concepts instead of two links of a single general value concept. Is this really the case? Is it not possible to develop a fundamental concept that encompasses both and thus saves our science the embarrassment of bestowing the same ambiguous name on two completely different concepts? […] I deem this utterly impossible. (P. 5f.)
But this is exactly what Ayn Rand has accomplished with her definition “that which one acts to gain and/or keep”!
 Weirdly enough, some of his followers are not. He is quoted extensively in Andrew Bernstein’s excellent book The Capitalist Manifesto; and Brian Simpson’s book Markets Don’t Fail – where Reisman’s influence is very openly acknowledged – is promoted and sold by The Ayn Rand Bookstore; and he has also appeared as a speaker at Objectivist conferences.
 To be exact, he is an enemy of modern Austrian economics. He explains his view fairly clearly on the Forum for Ayn Rand fans. My main objection to Salsman, however, is his outrageously dishonest treatment of George Reisman: see Reisman Insights Without George Reisman. He also objects to the 100% gold standard and defends fractional banking, a view I simply regard as fraudulent.
 There have been worse “Austrian” attacks on George Reisman, e.g. Alexander Tabarrok’s review in Review of Austrian Economics in 1997. But this review is so full of stupidity that I do not even want to touch upon it; besides, Reisman himself wrote a good answer.