Tag Archives: austrian economics

Libertarian Law and Legal Systems Part Three – Consent and Contract

Libertarian Law and Legal Systems Part Three – Consent and Contract

By Duncan Whitmore

We will begin our survey of the causative events of legal liability in a libertarian legal system with those that arise from consent because, even though people may view “the law” as being synonymous with wrongs such as crimes and torts, consensual legal relations are, in fact, the most frequent types of legal interaction that arise in an individual’s life.


The predominant form of legal relations arising from consent is, of course, the contract; a person may enter tens of these contracts every single day by, for example, just purchasing a coffee, a bus ticket, or lunch, whereas most people would scarcely commit a single crime in their entire lives (although we might note that today states are happy to spill oceans of ink in criminalising, through legislation, even the most innocuous of actions). While any good legal system must have strong proscriptions against horrific acts such as murder and rape, it is the contract that is the primary preoccupation of everyone’s daily lives.

The first question to consider, then, is what exactly is a contract? Although it should be clear that all contracts concern some sort of bilateral arrangement, different legal systems have varying and often elaborate definitions. Read more


“Austrian” Business Cycle Theory – an “Easy” Explanation

“Austrian” Business Cycle Theory – an “Easy” Explanation

 By Duncan Whitmore

Compared to the simple and straightforward siren songs of “underconsumptionist” and “underspending” theories of boom and bust, “Austrian” business cycle theory (ABCT) can seem unduly complex. The former types of theory, associated with “mainstream” schools of economics, at least have the advantage of the veneer of plausibility, in spite of their falsehood. A glut of business confidence and spending will, it seems, naturally lead to an economic boom, a boom that can only come crashing down if these aspects were to disappear. For what could be worse for economic progress if people just don’t have the nerve do anything? Add in all of the usual traits of “greed” and “selfishness” with which people take pride in ascribing to bankers and businessmen (again, with demonstrable plausibility) and you have a pretty convincing cover story for why we routinely suffer from the business cycle. ABCT, on the other hand, with its long chains of deductive logic, can seem more impenetrable and confusing. Is there a way in which Austro-libertarians can overcome this problem? Read more

Misesian Man: Neither a Rock, nor an Island (or why Traditionalists should learn Austrian Economics)

“I am a rock, I am an island” bellows Paul Simon. This man is apparently the man of economics according to some traditionalists– deracinated and purely rational with absolutely no animality whatsoever.  An interesting cultural critic and theologian Alastair Roberts essentially argued he’d learnt lots of economics but then read anthropology which severely undermined economic doctrine. Whilst this criticism is to some extent justified with respect to the utility maximising, mathematicised man of neo-classicism, it is not justified regarding the Austrian school. There is no ex nihilo creation of an idealised economic man in the Austrian school to explain the world but rather it works from visceral features of reality to discover underlying truths.

Let’s take a paradigmatic economic question which vexed the classical economist, “Why is water so cheap and diamonds so expensive when water is essential but diamonds are mostly decorative?” Well, the jeweller has to pay for the uncut diamonds and his overheads. The mining firm has to pay their miners and buy their digging equipment. So far so good, but who are you ultimately paying to create the equipment in the first place? It must be the labourer who initially transformed nature (land in economic terms) into a tool (a capital good), for example sharpening a stone into an axe head. This reasoning begat the Labour Theory of Value – that the market price of a product is determined by how much labour has been expended into the creation of the product. The problem is, why would anyone want to create diamonds in the first place? Either the miners themselves wanted them or they knew someone else they could sell them to. Therefore it is the demand for the product which ultimately determines costs since entrepreneurs will bid for factors of production based upon their expected future revenues.

Demand, broadly speaking, relates to being willing and also able to purchase a product at a range of prices – essentially it is a trade of one piece of property for another, but whose property?  Today you have corporations who at least de jure own property, however this does not imply that these institutions demand as a complex grouping since only an individual possesses a will. When we say De Beers are investing in a new diamond mine, it is a short hand for saying the board of directors authorised this spending and the board of directors’ decision is made up of individual votes based ultimately on an individual will. In a literal sense you can only ever think for yourself.[i]

To return to the diamond water paradox, diamonds have a higher market price than water, not simply as a direct result of water’s physical properties but because the sum total of individuals’ demand is higher than that of water. Yet this still seems bizarre since most people are not stupid – why die in a diamond encrusted coffin when you can drink and live? The error here is that individuals do not choose between water or diamonds in general but rather discrete units thereof. When an individual acquires his first bottle of water he will put this means to his most highly valued end, so in most cases it will be drinking it to survive. At least in England, the superabundance of water means that whoever sells it will have achieved many of their most highly valued ends which can be realised by water so the value to him of his 1000th unit of water is rather insignificant, therefore he will accept a small price for it. In contrast, the owners of diamonds have so few that they only obtain a few of their most highly valued ends, so the price they are willing to exchange the marginal unit of diamonds for is significantly higher than that of the marginal unit of water. Thus the answer to the diamond water paradox,  and the essence of economic analysis, is marginal analysis and subjective valuation realised in concrete choice – the logic of human action. Since man has to choose between any ends or means at all implies a scarcity of resources and/or time and the choice itself demonstrates preference – the marginal unit of diamonds is worth more to the subject than the marginal unit of water. Further, considering he needs to use an instrumental means[ii], toiling in the field to earn an income to purchase diamonds, implies some form of disutility. All this is to say work can be hard work.

Misesian man is the man of reality. He is not an abstract utility maximiser who cares solely about the lowest possible price. He is a breathing, feeling and fallible man– on his death bed the multimillionaire could regret his goal to be rich since the related hundred hour work weeks caused him to miss his children growing up. Less problematically, man could choose the wrong means to achieve his end – attempting to sell bacon in Bradford to make his fortune. Such a man could well be irrational in the general sense but as long as the behaviour is purposeful, it is in fact rational in the relevant sense.

Further, explanatory value subjectivism (explaining behaviour in terms of the actor’s own values) does not necessarily imply normative value subjectivism – that ethics is mere subjective, content-less preference. This is a mistake made by some traditionalists when interacting with Austrian Economics although it is understandable in some cases given the ethical relativism of thinkers such as Mises himself and in particular some online Austrian keyboard warriors – on a similar note Austrian economics does not imply egoism, individualist anarchism or general libertarianism. The traditionalist political philosopher who is also an Austrian economist is a perfect coherent possibility. Mises and Rothbard do make some ethical claims in some of their economics works but this is the voice of the political philosopher, not the economist. To abandon Austrian economics because of some political statements would be deeply unwise. Whether there is objective value, or more precisely the good, the true and the beautiful in reality itself, is outside the scope of Austrian economics. That said, such a view is in fact more complementary than a hardcore relativist position. Within a purely relativistic position you don’t value diamonds because of certain objective qualities but rather diamonds have value simply because you choose them to have value – your values are purely arbitrary.[iii] On the other hand, an objective external reality which is sifted by the individual actor to then create his value scale is more consistent with Misesian man as he can have genuine reasons for his choices (This is of course consistent with a softer relativism too). Thus economics is consistent with other avenues of investigation such as history, anthropology and sociology to understand why the individual acts as he does – contingent factors regarding  geography, genetics, sex and the family matter for what the acting man chooses, it is just outside the scope of economics. Further, whilst economics studies individual action (methodological individualism) it does not necessarily preclude the existence of any social ontologies in other areas of study. Economics is perfectly consistent with families, nations and other institutions having a form beyond just the individuals who comprise them, all it will insist is that only individuals can act. Thus the complaint that economics causes you to see man as an atomised individual is simply a category mistake.

In conclusion, Austrian economics is a vital component of any social study of mankind. To neglect it in favour of sociology or anthropology is to think that since I have a bowl and soup I do not need a spoon to eat it. Economics isn’t above psychology, sociology and anthropology but an equal and necessary partner in social science. Therefore I implore everyone: learn basic Austrian economics and the scales will fall from your eyes.


[i] One could attempt to go behind the individual’s will by investigating biology, chemistry and ultimately physics. Such a view implies a grand form of determinism in which the base unit(s) of reality determine everything thereby making choice a mere illusion. This is clearly counter intuitive since we act everyday believing that our choices are genuinely our own.  More substantively, genuine choice (a choice which is caused by an individual human, where the human is more than just the chemicals that constitute his body) can only be denied by choosing to declare your opposition to it. Now it is conceivable that choice is an illusion and that you just happened to declare this at the right time in a debate on the subject. Probabilistically this seems highly unlikely and secondly, if choice was an illusion you couldn’t prove it: you would use your mind to follow appropriate methodology to prove this, only to simultaneously discover that you did not follow the correct rules of inference but were rather pushed along by the irresistible forces of fate; thus your belief in determinism was justified not by reason but fate which cannot justify anything. Thus we have the bedrock foundation upon which economics is built – human choice: the choice between a myriad of ends and also the choice between various means to achieve the end(s).

[ii] A means used only for the sake of achieving a goal. This is in contrast to a constitutive means which is one where the means is in a sense part of the end – for example, playing all the notes to perform Chopin’s Prelude in C Minor is internal to the end in a way that working in the field to purchase diamonds is not.

[iii] Hulsmann makes a similar point in his masterful Realist Approach to Equilibrium Analysis (https://mises-media.s3.amazonaws.com/qjae3_4_1.pdf?file=1&type=document) although it isn’t in the context of objective ethics: it merely states that individuals choose certain means and ends for particular reasons beyond just choosing such means or ends, yet ex post their internal valuation system could recognise these choices as successful or as a failure.


Ludwig von Mises – An Annotated Bibliography

Ludwig von Mises – An Annotated Bibliography

By Duncan Whitmore

As an appendix to a series of three essays on the importance of Mises for libertarian thought, the following is an annotated bibliography of his major works.

There is little point in beating about the bush when it comes to the accessibility of Mises’ work for a prospective student – Mises can be relatively difficult to read, and one does require a considerable investment in time and mental effort to grasp the substance of his writing.

Mises is certainly not difficult in the sense that he is unclear, opaque, or inconsistent. In fact, he is remarkable for avoiding almost any lapse into one or more of all three, an ability that is largely sustained between his individual works as well as within each one. But his writing style is very different from that of say, Rothbard. To be sure, both writers are extremely systematic and logical in the progression of their ideas. With Mises, however, one can feel the years of thought and wisdom pouring off of every page, and, even in translation, oodles of meaning and ideas are packed concisely into very carefully chosen sentences. Thus, one must often invest an extended amount of time in absorbing every detail. With Rothbard, on the other hand, one almost feels as though he sat down at the typewriter, began tapping at the keys and didn’t stop until the book was finished. The result is that even Rothbard’s scholarly work is imbued with something of an improvisatory or, perhaps, conversational style that makes it more accessible to the lay reader.

Fortunately, some of Mises’ works are more accessible than others, and there are a number of study guides available to assist with the reading of the most difficult works. Read more

Why Libertarians Should Read Mises – Part Three

Why Libertarians Should Read Mises 

Part Three 

By Duncan Whitmore

In this final part of three essays exploring the importance of Ludwig von Mises’ for libertarian thought, we will examine Mises’ views on the fundamental importance of economics in society, and the meaning of this for understanding the particular nature of the state and statism in our own time. We will then conclude (in a separate post) with an annotated bibliography of Mises’ major works.

 The Fundamental Importance of Economics in Society

Mises had a particularly insightful understanding of the special, foundational status of economics and the influence of economic theory in human society. In his own words:

Economics […] is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man’s human existence.


Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.


The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutical achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.1

Read more

Why Libertarians Should Read Mises – Part Two

Why Libertarians Should Read Mises

Part Two

By Duncan Whitmore


In Part One of this series of three essays exploring the significance of Ludwig von Mises for libertarian thought, we examined the specific place that Mises holds in our tradition, and outlined the unique sophistication of his utilitarian theory in favour of freedom compared to that of other theories that can be grouped into this bracket.

In this part we will turn our attention to a detailed analysis of the action axiom – the keystone of Misesian economic theory – and its implications for concepts that we readily encounter in libertarianism.

Somewhat ironically, it was largely as a result of his influence that the wertfreiheit of Mises’ praxeology was regarded as a separate discipline from the search for an ultimate, ethical justification of liberty – a belief that was sustained by Murray N Rothbard.1 In more recent years, Hans-Hermann Hoppe has probably come closest to providing a link between the two through his derivation of “argumentation ethics” within the praxeological framework, and his identification of the pervasive problem of scarcity – a key praxeological concept – as underpinning any system of ethics.

Nevertheless, one may conclude that a full reconciliation, or synthesis, between the two is still wanting and that there remain other important commonalities to which this essay will seek to provide an introduction. Some of what we will learn below will have implications for a general understanding of right, and that the truths we reveal are inescapable for any political philosophy. Others will be specifically pertinent to libertarianism and will provide us with insights as to how we can further the libertarian goal. Read more

Economic Myths #15 – Unemployment

Economic Myths #15 – Unemployment

By Duncan Whitmore

One of the key indicators of the economic “performance” of any given country is its rate of unemployment. Low rates of unemployment are understood as a sign of prosperity while high rates are taken as a sign of recession and stagnation. Indeed, during the Great Depression, unemployment reached as high as 25% in the United States.

Politicians are particularly keen to monitor the rate of unemployment as low unemployment lends credence to the economic policies of those in power while high unemployment stocks the arsenal of those in the opposition. Given also that entire economic dogmas such as the so-called trade-off between full employment and inflation, not to mention the generation-long post-war Keynesian consensus are, at least, part rooted in the concept of unemployment, one would expect unemployment to be a unique and important category in economic theory.

This short essay will not explore in detail the state induced causes or aggravations of unemployment such as the minimum wage and excessive regulations heaped upon the shoulders of employers. Such topics have been examined countless times over by many economists, “Austrian” or otherwise. Rather, what we wish to concentrate on here is the validity of the very term “unemployment” itself and to determine whether it is really a useful concept in shaping so-called “economic policy” or whether it is really redundant and meaningless. Read more

« Older Entries