Like Oil and Water

Some wonder why the blog has references to Ludwig Von Mises and some of his quotes in the upper left hand corner. The local socialist blog uses this as fodder on their site and I would like to set this blog – readers strait and maybe theirs as well, to explain the fundemental differing viewpoints surrounding Von Mises and Austrian economics. Ludwig Von Mises was one of the great Austrian economists of his time (1881-1973) and whose principals were paved by Carl Menger(1840-1921). Carl Menger and many who followed, were one of the first to cry out and depict economics not a as a mere numbers and mathematical phenomena but one that was emboldened by actual human beings, i.e. individuals. Individuals, me and you, are not crushed, divided, nor logarithmed into numbered blobs of aggregate demand, regression analysis, t-scores, or such like. Actual “humans” appear unmolested in most every discussion in framing the discussion of these Austrian economic postulates. As Carl Menger once said, “The attempt to provide for the satisfaction of our needs” is the most important of all human endeavors, since it is the prerequisite and foundation of all others.”

This focus on the individual, rather than the aggregation of the multitudes into a faceless number which responds to “input constraints” by changing its “r-squared”, is the hallmark of Austrian economists and the root cause of the present unpopularity. According to Menger, it is the essence of economics to focus on the individual because “man, with his needs and his command of the means to satisfy them, is himself the point at which human economic life both begins and ends” This is the origin of the economic character of goods”.

This last is of the utmost importance: the conclusion that human beings and their individual, subjective ever-changing valuation are the origin of all goods” economic character ” as reflected in prices. Adhering to such a philosophy immediately disallows one from professing allegiance to the labor theory of value ” the indispensable foundation of all socialist economic arguments. And, as any modern American knows, if you do not profess belief in the labor theory of the value and its implications for policy, you are heartless and repulsive or so say the progressives or modern day liberals.

The Austrian economists take the labor theory of value to task, accusing its adherents of putting the cart before the horse. Since a good – value is derived by the value of the satisfaction, a man intends to use that good to satisfy, it doesn”t really matter what labor, raw materials, or time was put into that good – production. There is no fair wage/price/outcome, only the voluntarily agreed upon wage/price/outcome. This voluntarily exchange – morality is under a no more light or scrutinization than that of a chemist – view of a chemical reaction. It is what it is.

The labor theory of value – thinking is one of the most egregious of the fundamental errors and have far-reaching consequences. That much is true, as the victims of communism and fascism can attest. Our last, wretched century was the direct result of brilliant men latching on to some deeply flawed ideas, and ideas have consequences.

“We all stand on the shoulders of giants. Menger wrote that “human life is a process in which the course of future development is always influenced by previous development.” “It is a process that cannot be continued once it has been interrupted, and that cannot be completely rehabilitated once it has become seriously disordered.”

Man is not now and never will be omniscient. There is no “one true way” because no man has the ability to see all. The modern day liberals believe otherwise. This stands in the face of Marx and Engels, and ignore their self-absorbed, egomaniacal preface to both the Communist Manifesto where they proclaimed it “a historical document which we no longer have any right to alter.”

The socialists do not like this news. The rejection of the theory of labor, the rejection of the socialists” claim to moral superiority along with the assertion that economic activity is done by individual men independent of human will takes the hope out of planning. And what – the fun of being a socialist without the hope of planning other men – lives. So the Austrian theory and the socialists get along like oil and water. And like oil and water, even after getting mixed, they will separate.

Are you an individual or are you a piece of the aggregation of the multitudes?

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