Log in

Previous Entry | Next Entry

Originally published at Quantum Matrix Scribe. Please leave any comments there.

This is the quintessential random post. This thought just flew into my head and I feel the need to write it down. There’s another one coming too, but that’s more about categorization.

There are two major schools of thought that influence modern libertarianism. They are not the sole schools of thought for libertarianism, nor even the leaders, necessarily–though their impact is gigantic. The two schools of thought I am writing about are Ayn Rand’s Objectivism, and Austrian Economics.


Don’t get me wrong. I actually like Objectivism quite a lot. I like a philosophy that not only puts individual freedom, but reason too, at the top. There is far too little reason and rationality in the human race today, which is why we’re embroiled in so many problems today. If we join reason and individual freedom hand in hand, it will lead to eudaimonia, the ancient Greek concept of “human flourishing.” To do this, Objectivists believe that the best way to organize human society and the economy is through laissez-faire capitalism, and let each individual human develop him or herself without threats of force (or the use of force) from others. It’s a pretty good philosophy.

But Objectivism has one glaring flaw in it that I think undermines the entire philosophy, an Achilles Heel that threatens to topple it utterly.  That is, the rejection of what is called “subjective value” (and is one of the big ideas of the other school of thought I’ll talk about, Austrian Economics). Subjective value, in a nutshell, is the idea that everyone values things differently. Here is Don Boudreax of George Mason University explaining the concept:

Objectivism rejects all of that. Here is what Leonard Peikoff, founder of the Ayn Rand Institute, has to say about value:

Objectivism holds that value is objective (not intrinsic or subjective); value is based on and derives from the facts of reality (it does not derive from mystic authority or from whim, personal or social). Reality, we hold—along with the decision to remain in it, i.e., to stay alive—dictates and demands an entire code of values. Unlike the lower species, man does not pursue the proper values automatically; he must discover and choose them; but this does not imply subjectivism. Every proper value-judgment is the identification of a fact: a given object or action advances man’s life (it is good): or it threatens man’s life (it is bad or an evil). The good, therefore, is a species of the true; it is a form of recognizing reality. The evil is a species of the false; it is a form of contradicting reality. Or: values are a type of facts; they are facts considered in relation to the choice to live.

In the objective approach, since every fact bears on the choice to live, every truth necessarily entails a value-judgment, and every value-judgment necessarily presupposes a truth. As Ayn Rand states the point in “The Objectivist Ethics”: “Knowledge, for any conscious organism, is the means of survival; to a living consciousness, every ‘is’ implies an ‘ought.’” Evaluation, accordingly, is not a compartmentalized function applicable only to some aspects of man’s life or of reality; if one chooses to live and to be objective, a process of evaluation is coextensive with and implicit in every act of cognition.

Here is another rebuttal of subjective value, which also quotes Rand, by Per-Olof Samuelsson:

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.

On the first view, there is (so to speak) a little “package” of value in the valuable object. How did this package get there? On 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 on 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.

Both writers (and their intellectual godmother, Ayn Rand) reject subjective value, and determine that value does not depend on the person and what he or she wants, but it is simply “out there,” waiting to be discovered.

The problem with that theory, though, is that it completely destroys their argument for laissez-faire capitalism. If it were true that value was objective, just waiting to be discovered, then we could not only very easily have a command economy, we should have a command economy. The government would conduct research to determine what the value of everything in the world is, and a central authority would then keep prices at those values. In fact, said authority would also probably run every producing business, to provide for every consumer. It would simply be far more efficient and easier.

Thing is, though, that value just doesn’t exist out there. If that were the case, then why do people value things differently? Why do we always bitch about things being so expensive? Why am I thinking of cutting the cable and replacing my Comcast service with Roku? If value was truly subjective, we would never go bargain hunting. Ever.

That alone disproves objective value theory in one blow. It knocks the legs out from underneath Rand’s argument for laissez-faire capitalism. There would be no reason to trade if both sides didn’t get something they wanted out of it.

Of course, there are other issues with Objectivism, but they’re relatively minor compared to this. There’s the cult of personality surrounding Rand herself, and then there’s “dog-eat-dog” mentality that arises around Objectivism. I think the latter is merely a projection by anticapitalists, though; while Objectivism is about each person’s rational self-interest, I think it’s a tad overstated.

Austrian Economics

Austrian Economics is a great way of examining how people interact (which is what economics is really about.) It is certainly more on the ball than Keynesianism, whose central premise is that, to get economics started, a government must “prime the pump” by injecting stimulus into the economy–even though the government must first get that money by either taking it out of the already ailing economy, borrowing, or simply inflating the currency, none of which help anybody.

Austrian Economics recognizes as a central tenet that there is a cycle to business, a series of ups and downs, which is certainly more realistic than the “Everything will always be okay!” nonsense that is peddled by some neoclassical and Keynesian economists and by most politicians. It is also for hard money (i.e., the gold standard) and believes that because people can’t know everything in an economy, due to the “knowledge problem,” that central planning is impossible. All good things.

But there is one glaring problem with Austrian economics. It is not shared by all “Austrians,” but its shared by enough, and that’s the idea of “praxeology.” Taken literally, it’s the science of human action. But, if you take it the way that Ludwig von Mises, patron saint of the Austrian school of economics (and the namesake of its largest proponent in the US, the Mises Institute) meant it, praxeology also disregards empiricism and relies almost entirely on a priori reasoning. Summarized by a friend of mine who works at Cato, it’s “sitting around and thinking and ‘discovering’ new things in economics by such thinking.”

In that light, Austrian economics discounts the scientific method. It discounts data collection, it discounts econometrics, it discounts all of that stuff. Now, I agree with the Austrians–particularly Hayek–that it can go too far, and ignore the simple fact that people are people and do things that don’t match up in a model. Fine. But to ignore what is out there, in the world, the real-world evidence–that’s just idiotic. And that’s not where libertarians should be going.

If you need an example of this, look to this post from the Mises Institute:

Why do we accept that when we place a yardstick alongside one object, finding that the object stretches across half the length of the yardstick, and then place it alongside another object, which only stretches to a quarter its length, that this means the first object is longer than the second? Certainly not by empirical testing, for any such tests would be meaningless unless we already grant the principle in question. In mathematics we don’t come to know that 2 + 2 always equals 4 by repeatedly grouping two items with two others and counting the resulting collection. That would only show that our answer was correct in the instances we examined — given the assumption that counting works! — but we believe it is universally true. Biology pre-supposes that there is a significant difference between living things and inert matter, and if it denied that difference it would also be denying its own validity as a special science.


This is the great flaw in Austrian economics, and its rather terrible. I’ll be honest, any sane individual should reject it immediately. Just to “think” about it (see what I did there?) if we were just to sit around and think about things without collecting data, we could very well conclude that not only is socialism the right thing for the world, but unicorns are also very plentiful on the Earth.

Sure, Austrians will fire back that socialism violates many a priori deduced principles (I’m certain they would bring up the economic calculation problem) but that really doesn’t deal with my point. That is, we can’t have solely a priori reasonings for what we do, nor should we be entirely, 100% empirical. However, I lean more towards empiricism, since that is at least rational.

There is also, of course, another problem with Austrians, and that is the sub-strain of anarcho-capitalism, championed by Murray Rothbard and Lew Rockwell. I’ve already written about that before elsewhere, and I’m not in the mood to repeat myself for the umpteenth time. Suffice to say, while anarcho-capitalist works in theory, I don’t see it functioning very well in the real world, and libertarians would be wise not to bring it up in conversation outside the libertarian happy hours.


So there you have it. Two of the major schools of thought that influence American libertarianism, and my problems with both explained. I think that if Objectivism can drop the objective theory of value, and Austrian economics can get over praxeology, they will work well together. I also think, though, that Austrian economics is not the be-all end-all of libertarianism as some think; I’m concerned about maximizing individual liberty, not advancing one set of particular economic theory over another. Do I agree with some Austrian points? Yes, of course, but they’re not the end goal for me.

Anyways, just a random post.