Liberty's Need for Economics

by Angelo Mike 

Exclusive to STR

April 10, 2007

Economics is frequently dismissed as being the subject of mere opinion, whim and arbitrariness, or mathematics and statistics. Often when I mention that I’m an economist, I’m asked about cost/benefit analysis, the stock market, or what economics is in the first place. People know economics not as a philosophical science, which traces its thought back to Aristotle or the late scholastics, but as one for use in government and labor statistics.  

When I’m then asked about what field in which I want to work, people often are surprised that my answer isn’t the government. Most economists work for or are subsidized by the government or central banks, which it needs to support an intellectual middle class of people who will believe that there is anything that makes sense about the government’s use of economics.  

It’s perfectly natural for people to have an aversion not to economics, then, but to what economics is popularly held to be, which is a mathematical science of businessmen or bureaucrats. And I’m sure most people would be surprised if they came to the realization of Mises that “Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.”  

I want to clarify here why economics is essential to the problems of politics and philosophy, and why the problems of these sciences cannot be answered without economics.  

I had a legal philosophy professor who I consider philosophically an anarchist. In his class we had no lectures, but discussions in which the students could challenge each other, and no answers could be outright dismissed because they had uncomfortable implications.  

He based his personal view of ethics around purposefully acting individuals, as anarchists do when we do when we combine free market economics with libertarianism. As a philosopher, he was not interested so much in upholding the state as in finding universally valid truths. He could see, for instance, that law and security have existed without the state for most of history.  

He would follow a line of thought as far as he thought he could take it to see what its conclusion was, but would stop where legal philosophy stops and economics must start. For instance, He’s published an essay describing how he thinks health care should work. After describing some of the major advances in health care in the last century, he fails to say what causal forces were instrumental in bringing them about, and which acted in opposition to it.  

He concludes his essay by saying that health care should be a universal right, but I don’t impugn him as being a statist, so to speak, for this. For he finishes his explanations of the right of universal health care by begging the question of how to ration medical care and resources. He recognizes that socialized health care faces grave problems of how to justly allocate resources if we are not to all go back to a 1960s era level of health care.  

He’s claimed not to be an economist, and appropriately tries to skirt issues of economics. But, by the time he would finish asking how resources should be rationed in health care, the answer is just begging to be said: Market prices! Mises exploded this problem of rational allocation of goods 87 years ago with his “Economic Calculation in the Socialist Commonwealth.” He gave a detailed explanation of money and prices in both The Theory of Money and Credit and Human Action, and it’s a scandal that these two treatises on both economics and liberty aren’t part of the study of every philosopher. These texts give radical implications about what, if anything, our governments can do to improve our welfare or provide security anywhere. They leave no ambiguity or room to come to differing conclusions if properly and soberly studied.  

Not surprisingly, my international economics professor recently tried to defend socialist calculation by employing the very arguments that Mises refuted in 1920 in an essay which she’s completely ignorant of.  

Back to my legal philosophy class, in which economics seemingly was outside the scope of our discussions. Presumably, my professor thought of economics as most non-economists do – as a science of anything but philosophy. Yet it is most suited to philosophers and least suited to mathematicians. Philosophers seek a valid ethic for all human conduct in all places, times, and circumstances, and are seemingly best disposed to accept such a universal science of causation in human action.  

That most aren’t, in fact, and actually are anti-capitalist and prejudiced against freedom isn’t relevant as far as I’m going here. It’s true that, by virtue of being intellectuals, philosophers often believe that the subjectivity and crassness of the mass of consumers mean that their professions and doctrines ought to be widely accepted since they’re verifiably true, whereas entrepreneurs are successful because they cater to the whims of consumers. By virtue of being philosophers, they often believe that their duty is not to cater to consumers, but that they ought to be deemed inherently valuable.  

But again, this is irrelevant here. What matters is that their objections and questions are met and answered by economics, which flesh out the workings of a free society.  

Questions about free speech? Speech is a problem only when it’s on another’s property. When it’s no one’s property, as in a government road, there are necessarily problems that will follow from the government then either censoring people such as Klansmen who wish to protest on it, or approve of possibly explosive situations, such as Neo-Nazis deciding to rally on a street in a Jewish town. This is a problem not only for a legal theorist, but for an economist, who can explain how roads can and must be privatized to settle these problems and maximize social welfare.  

What about the questions posed by government regulation of food in The Future of Food, a documentary about the government cartelized food industry and the devastating consequences of it? My philosophy club watched the documentary, which was boundlessly confused, backwards, and evil in its advocacy of further government regulation of industries which it has given monopoly privileges to, creating a huge mess of problems in the first place.  

The discussion was pretty quiet except for comments from myself. I pointed out that the government created the problems posed in the documentary by being a sole dispenser of law and violence, and will always act in opposition to our welfare by creating conflict and granting violently backed privileges to industries. What else would people expect from such a power?  

Yet most people in my group were at a loss to explain what to conclude from this movie, other than a general message of “be careful what you eat.” The moderator of the philosophy club (with whom I debated here) said that, while, yes, the state is at fault here, so are corporations. People being weak, perhaps they need the state for corporations’ and their lack of strength.  

I begged the question: What can we infer from this? Should corporations be abolished? Or is this systemic to the state? And, people being as weak as they are, won’t creating these monopolies of force be the worst solution when they stand to be used for exploitation by anyone fit to wield them?  

In economics, we understand that there’s nothing inherently problematic in food production. Its course of progress, as in any industry, will be guided by our subjective valuations, consumers, producers, interest rates, capital goods, and unlocking the laws of nature. What is needed for the food industry is not the partial deregulation that The Future of Food’s compliant tools for the state scoff at, but a complete repudiation of all state activity and a restoration of private property.  

Again, the answers are all in economics. If people want food safety, it will be profitable to provide it and education. And what if people are ignorant? We know that ignorance isn’t the uniquely problematic issue the state faces, so we can’t criticize any system for mere ignorance.  

Ethical issues aside, insurance companies would have every reason to rate and review food companies on a free market, and insure them based on how risky their products are to the health of consumers. Correct appraisals will be rewarded with fewer payouts to victims of food companies, and incorrect appraisals will be punished, as they should be. As economists, we know the state exists with a fundamental disconnect between this input and output. Wherever its sphere of activity is, the state’s activities do not rest on consent or service, but thwarting and hindering. And none of this analysis is predicated on intelligence or philanthropy, but on market prices and private property.  

No cursory examination of the issues of food production will avail ourselves to this insight. Yet, answering the questions posed by them demands an explanation rooted in economics. When we address these issues without its aid, we inevitably smuggle in theories about cause and effect in human action that we aren’t openly saying and scrutinizing. We fail to assess their validity. We insert judgements of value that we don’t verify, and thus can justify our beliefs as so much more “realistic” than theoretical inquiries.  

These theories of cause and effect may go unsaid, yet they are no less stated and adhered to. Their refutation does not involve idle theory, but sober analysis when their implications are exposed and refuted in the light of day. Our answers to these political questions are determined by our beliefs about economics, however unenlightened about them we may be.  

Thus, Mises says, “As conditions are today, nothing can be more important to every intelligent man than economics. His own fate and that of his progeny is at stake.”