Mises on Utilitarianism

The Austrian school in fact incorporates differing subgroups of ideologues, who differ not only on certain economic ideas but also on ethics. There is a divide between Austrians who support some version of utilitarianism/consequentialism and those who support natural rights or Hoppe’s argumentation ethics.

Leland B. Yeager provides a useful summary of the Austrian perspective on utilitarianism in the The Elgar Companion to Austrian Economics. Ludwig von Mises, for example, rejected natural rights, and used utilitarianism to justify a minimal state and limited interventions like fire regulations:

“There is, however, no such thing as natural law and a perennial standard of what is just and what is unjust. Nature is alien to the idea of right and wrong. “Thou shalt not kill” is certainly not part of natural law. The characteristic feature of natural conditions is that one animal is intent upon killing other animals and that many species cannot preserve their own life except by killing others. The notion of right and wrong is a human device, a utilitarian precept designed to make social cooperation under the division of labor possible. All moral rules and human laws are means for the realization of definite ends. There is no method available for the appreciation of their goodness or badness other than to scrutinize their usefulness for the attainment of the ends chosen and aimed at” (Mises 1998 [1949]: 716).

“Economics neither approves nor disapproves of government measures restricting production and output. It merely considers it its duty to clarify the consequences of such measures. The choice of policies to be adopted devolves upon the people. But in choosing they must not disregard the teachings of economics if they want to attain the ends sought. There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of a meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule” (Mises 1998 [1949]: 741).

The Austrians who endorse some version of consequentialism are thus freed from the ethical paradoxes like the asteroid dilemma, a logical consequence of adhering to a natural rights theory where absolute rights to property are placed above even the continued existence of the human species.

This modern split in the Austrian libertarian tradition was preceded by a similar divide in Classical liberalism: while Adam Smith adhered to natural rights, later Classical Political economists adopted utilitarian ethics.


BIBLIOGRAPHY

Mises, L. 1998 [1949]. Human Action: A Treatise on Economics, Ludwig von Mises Institute, Auburn.

Yeager, Leland B. “Utilitarianism,” in P. J. Boettke (ed.), The Elgar Companion to Austrian Economics, Elgar, Cheltenham, UK. 328–336.

Coercion and the “Taxation is Theft” Argument

I see one of the latest responses to one of my previous posts is this:

“You statists simply refuse to analyze human activity as voluntary on the one hand or the result of hostile force and/or fraud on the other, the Rothbardian test. That is because unsophisticated people understand the difference quite well and would see what a nest of theft and fraud the Keynesian program is.”

I am well aware of the difference between forced and voluntary behaviour, and the simple truth is that you cannot live in a world without some degree of reasonable force and coercion (the operative word being “reasonable”). For example, your wife or child is about to walk in front of a speeding car, and there is no time to yell a warning. Do you:

(1) Use coercion to stop them from being killed or injured by grabbing them, or

(2) Do nothing because coercion is always wrong.

If you do what any normal, moral human being does, you do (1), and that course of action can be defended as a moral and right thing to do on many ethical theories. If you choose (2), on the grounds that nobody can be subject to involuntary coercion at any time, you are revealed as an utterly immoral idiot, to my mind. The crucial point is that when coercion occurs it must be justifiable. To say that coercion is reasonable is to say that it is justifiable in a convincing way, on some grounds.

We are told by some Austrians (perhaps not the more intellectually sophisticated ones) that nobody should be subject to involuntary coercion at all, and usually they appeal to natural rights arguments and nature. But I doubt whether such libertarian concepts really are consistent with nature. Take this libertarian insistence that we must be free from any coercive authority, done without our consent. This is a radical violation of one fundamental part of human nature: the relationship of parents to children. How can you raise children without using coercion without their consent? You can’t. The alternative is letting children run wild. Reasonable coercion is necessary, in so far as it does not conflict with the legal rights that all human beings are given under the law.

But to return to the comment above, it is a typical version of the “taxation is theft” argument.

First of all, how would Austrians know that all people who pay taxes regard this as theft? It is natural to dislike paying taxes, but evidence suggests that many people – a majority – think it is the moral thing to do:

“The IRS Oversight Board conducted an independent poll in 2005 that found 96 percent of the respondents agreed ‘it is every American’s civic duty to pay their fair share of taxes.’

The Pew Research Center in a similar study in 2006 found 79 percent of the respondents said that cheating Uncle Sam was ‘morally objectionable.’

Certainly, Americans pay they taxes because they have to: ever since 1945, taxes have been automatically withdrawn from pay-checks. But people also comply because they think it is fair. Polls show that most Americans think only ‘a few’ people cheat on their taxes. Paying taxes, just like leaving a tip, is a social norm” (Maxwell 2000: 146).

Yes, Americans might dislike paying tax, but it appears a majority think it is both fair and right, just as you might dislike looking after a troublesome, obnoxious teenage child, even though you recognise that this is the right thing to do and the law says you must do so as a parent.

With regard to modern taxes which pay for public goods, it appears to me that it is the Austrians/libertarians who are in the minority. But, of course, just because a majority of people think something is moral, this does not necessarily make it so. You need a defensible moral theory to justify some action as right. This issue cuts right to questions about philosophy of ethics.

If two people (a libertarian and Keynesian, say) wanted to seriously debate, they would have to ask:

(1) Is there an objective theory of ethics?

If one person does not believe in objective ethics, then the debate collapses into whether ethics is objective or subjective. Also, anyone who believes that morality is subjective can just appeal to David Gauthier’s Morals by Agreement and come up with some contractarian theory in which, if a majority of people assent to living by certain rules, then this is perfectly defensible ethics. If one takes David Gauthier’s Morals by Agreement as a method for ethics, then modern social democratic states already have a majority that supports basic principles like progressive taxation, so it appears to have ample justification.

But the statement “taxation is theft” seems to require that some objective ethical theory is true, however, so:

(2) If both people agree that ethics is objective, then what ethical system is true?

Our morality cannot be justified by an appeal to nature: that is why most natural rights/natural law based ethics collapse, and why natural rights ethics in the Rothbardian or Randian tradition won’t fly.

In my opinion, the workable objective theories of ethics that are not obviously flawed are Rawl’s human rights ethics, or rule consequentialism/utilitarianism (as in Brad Hooker, 2000, Ideal Code, Real World, Oxford University Press, Oxford). Some claim that a modern form of Kantian ethics is defensive, though I have my doubts.

Since taxes are levied to provide public goods and services (e.g., universal health care in all industrializied nations except the US), it is not difficult to justify them morally under Rawl’s human rights ethics or rule consequentialism.

Also, since in every ethical system some values will conflict, where does human life and the preservation of human life rank in these systems?

The belief that taxation is theft obviously implies that property rights are absolute or at least high in value. But why on earth should property rights rank above human life? Under rule consequentialism even the initiation of force involved in taking wealth might be perfectly justified, e.g.,

(1) If a village of 100 people has one well which is in the possession of one man, who suddenly refuses to give water to anyone else, and there is no rain or any other water and people are dying of thirst, can the dying people use force against the man (but not kill or wound him) to take what water they need just to survive? (leaving him of course with his proper share).

If a person said “no,” I would conclude that the person is morally bankrupt (since I regard rule consequentialism as defensible theory). If “yes,” then it is obvious that rule utilitarianism allows the use of reasonable force to take some reasonable amount of property, if people's lives or welfare are at stake.

In fact, utilitarianism as a moral theory was also held by Ludwig von Mises, who rejected natural rights, and used utilitarianism to justify a minimal state and limited interventions like fire regulations:

“There is, however, no such thing as natural law and a perennial standard of what is just and what is unjust. Nature is alien to the idea of right and wrong. “Thou shalt not kill” is certainly not part of natural law. The characteristic feature of natural conditions is that one animal is intent upon killing other animals and that many species cannot preserve their own life except by killing others. The notion of right and wrong is a human device, a utilitarian precept designed to make social cooperation under the division of labor possible. All moral rules and human laws are means for the realization of definite ends. There is no method available for the appreciation of their goodness or badness other than to scrutinize their usefulness for the attainment of the ends chosen and aimed at” (Mises 1998 [1949]: 716).

“Economics neither approves nor disapproves of government measures restricting production and output. It merely considers it its duty to clarify the consequences of such measures. The choice of policies to be adopted devolves upon the people. But in choosing they must not disregard the teachings of economics if they want to attain the ends sought. There are certainly cases in which people may consider definite restrictive measures as justified. Regulations concerning fire prevention are restrictive and raise the cost of production. But the curtailment of total output they bring about is the price to be paid for avoidance of greater disaster. The decision about each restrictive measure is to be made on the ground of a meticulous weighing of the costs to be incurred and the prize to be obtained. No reasonable man could possibly question this rule” (Mises 1998 [1949]: 741).

Perhaps is time for Austrians to attack Mises as an “evil” statist who advocated using coercion to enforce fire codes?

Progressive taxes and Keynesian macroeconomic management of an economy are justifiable on utilitarian grounds. As for the libertarian minority who disagree, there is no reason why a minority of people with a debased sense of morality should not pay their share.


BIBLIOGRAPHY

Maxwell, S. 2000. The Price is Wrong: Understanding What Makes a Price Seem Fair and the True Cost of Unfair Pricing, John Wiley & Sons, Hoboken, N.J.

Mises, L. 1998 [1949]. Human Action: A Treatise on Economics, Ludwig von Mises Institute, Auburn.

Economics and Ethics: A Brief Survey

In the previous post (see “Rothbard on Mises’ Utilitarianism: Why the Systems of Mises and Rothbard both Collapse”), I pointed out that Rothbard’s natural law theory is untenable, and once that is recognised his whole case for anarcho-capitalism also collapses. While I will publish a longer post soon refuting natural law and natural rights theory, I present here a brief introduction to ethics. This post was also published as a guest post on the Cynicus Economicus blog ( “Guest Article: Economics and Ethics,” May 4, 2009).

For a number of economic systems (e.g., libertarianism, free market economics, neo-liberalism, social democracy, democratic socialism, communism etc), in intelligent debate many people justify their preferred system as public policy by appealing to some ethical theory, to convince other people of the morality or superiority of their system.

The Austrians who follow the praxeological system of von Mises claim that economic science is value-free, and that the inferences of praxeology are justifiable as economic laws independently of ethics, though that remains a questionable idea. But, as a public policy prescription, even Austrians will often require an ethical theory, and Rothbard explicitly used natural rights theory to justify his anarcho-capitalism.

In the end, when an economic system is urged as a policy it must often be justified or limited by an ethical/moral theory, and one needs an objective theory of right or wrong to do this. For the only effective theories available to justify a larger philosophical system in a consistent way are objectivist theories of ethics (that is to say, a subjectivist or relativist theory of ethics is self-defeating).

In essence, an objectivist theory of ethics holds that:

– moral judgements are propositions that have an objective value, either true or false (e.g, “The unjustified killing of another human being is wrong”);
– the truth of a moral proposition remains true regardless of the subjective opinions of a person or the values of a different culture (e.g., “Slavery is wrong”);
– morality is not subjective or relative.

If we want an objectivist theory of our morality, we essentially have these options:

(1) Moral absolutism

(a) Divine Command Theory

(b) Categorical Imperative ethics (Kantian ethics)

(2) Moral Universalism (minimal/moderate moral realism)

(i) Deontological theories:

(a) Natural law theories (Plato and many Christian philosophers)

(b) Thomist ethics

(c) Pluralistic deontology, the non-absolutist ethics of W.D. Ross

(d) Human rights objectivism (Rawls)

(ii) Consequentialist theories:

(e) Utilitarianism (act utilitarianism; rule utilitarianism)

(f) Ayn Rand’s objectivism?

(3) Ayn Rand’s objectivism?

(4) Utilitarian Kantian Principle of James Cornman (this combines deontology and utilitarianism).

All of these objectivist theories of morality/ethics can be divided into two basic groups as follows:

(1) Deontological theories (= duty or obligation based morality): the basis of morality is duty and some acts are always right no matter what consequences they can cause (the best example of which is Kantian ethics or some forms of divine command theory; Kant famously said that it is always wrong to lie, no matter what the circumstances).

(2) Consequentialist theories: the basis of morality is the evaluation of the consequences of acts on people (the most famous such theory is Utilitarianism). The greatest happiness of the greatest number of people is one way of describing it.

(I will not address the question whether Ayn Rand’s objectivism is consequentialist or in a category by itself, since this is disputed.)

Use your intuition and find out whether you subscribe to (1) a duty-based ethical theory or (2) a utilitarian or consequentialist ethical theory by thinking about this moral problem:

A known murderer comes to you and asks to know where a person he wants to kill is, and you are aware of his desire to commit murder. Do you:

(1) Lie to protect the innocent person and say you do not know, or
(2) Tell the murderer where that person is in the knowledge that a murder may occur?

Decision (1) makes you a utilitarian, and (2) a believer of duty-based ethics. Immanuel Kant held that (2) is the moral course of action, since lying is always immoral, under all circumstances.

Ethics as Applied to Economics

Divine command theory is easily refuted: e.g., if god orders someone to commit genocide, then this suddenly becomes a “moral” action, because God has ordered it. Thus divine ethics turns out to be a subjective theory of ethics: what is moral and what is not actually depends, in the end, on the arbitrary whim of God, not the goodness of actions or their consequences. If God’s moral laws are not arbitrary, then there must be some independent, objective standard or method he uses to determine what is right and wrong. But, if there is an independent, objective standard, then it is this system that tells us what is right or wrong, not the commands of God. We could presumably use reason to apply the standard ourselves to discover what is right and wrong, without any need for instruction from God. (And Kantian ethics was in fact partly an attempt to create an objectivist ethics that could defend Christian morality, but remove this problem by basing morality on moral principles derived from human reason.)

Many libertarians rely on a natural law/natural rights theory of ethics.

Thus they often argue that state intervention is bad when it violates private property rights, and that this government action is always immoral, irrespective of the good or bad consequences that state intervention has or may have.

Natural law as a theory can be traced back to Plato, the ancient Stoics, and many Christian philosophers. (Contrary to popular belief, the most widely-held theory of ethics in the Middle Ages in Christian philosophy was the natural law theory, not the crude divine command theory.)

Natural law was famously attacked by the English utilitarian philosopher Jeremy Bentham as “nonsense on stilts.”

One of the main weaknesses of natural law theory is that its main historical justification was the belief in a “divine order” and a divinely-created human nature that makes us conform to “natural law.”

For Plato, the divine soul made human beings conform to the natural law of the universe. In ancient Stoicism, all humans had a divine reason given by the gods to make them adhere to divine “natural law.”

When natural law theory was taken up by Christian theologians, they simply substituted the Christian god for the gods of the Greek and Romans.

In the early modern period, rationalist European philosophers like Grotius tried to defend natural law theory by removing God and the previous supernatural justification for it.

However, in doing so, they destroyed the only convincing explanation for belief in natural law (Tawney 1998: xxv-xxvi).

Thus anyone who accepts an atheistic and naturalistic scientific view of the universe, and who rejects all religion, has no reason to believe in natural law or natural rights.

I would note here that just because we appear to have an innate sense of right and wrong, this does not provide us with an objective system of ethics. That some scientists believe they can identify an innate sense of right and wrong, which humans have evolved through social life in communities during our evolutionary history, does not mean that they have found an objectivist theory of morality that can function as a consistent, logical and universal system for justifying our moral choices, both now and in the past. The well-known fact that there is a vast chasm between what can be regarded as moral in one society and immoral in another demonstrates that, like our language faculty (which also has a biological basis), our innate moral intuition can lead to quite different systems of morality in different cultures in different times (just as our core language faculty leads to vastly different languages, with different words, grammar and syntax). For instance, in ancient Greece and Rome, the killing of unwanted children by exposing them (i.e., leaving them at crossroads or abandoning them at birth) was widely accepted. Human sacrifice and slavery were also widely practised in many ancient societies, and this was apparently perfectly compatible with the “innate moral sense of right and wrong” that ancient people had, although it is no longer accepted today.

Only an objectivist theory of morality can demonstrate that these things are immoral now and also immoral in the past. So it turns out the innate sense of right and wrong is not the same thing as an objectivist theory of morality.

Nor does appealing to “nature” give us any objective standard of right and wrong. For example, cannibalism is observed in many species: does this make cannibalism moral for humans? It certainly does not, and anyone who thinks so has committed the fallacy of appeal to nature, a fallacy of relevance.

I will note here too that a very good starting point for why natural law and natural rights are untenable is Kai Nielsen, “The Myth of Natural Law,” in S. Hook (ed.), Law and Philosophy: A Symposium, University Press, New York. 1963.

Also relevant is L. A. Rollins, The Myth of Natural Rights (Loompanics Unlimited, 1983), which is an attack on the natural rights theories of Rothbard and Ayn Rand.

It follows that all modern types of libertarianism or free market economics based simply on a “natural law” or “natural rights” foundation are severely flawed systems (e.g., the systems of Adam Smith or Murray Rothbard). There is no reason to believe that the “natural law” that justifies placing inviolable property rights at the centre of our modern political or economic systems has any validity whatsoever.

In my opinion, Kantian ethics has no real consequences for economics: it can be used to justify numerous economic systems and is fully compatible with social democracy. However, Kantian deontological ethics has severe problems.

A better ethical theory, in my view, is a modern form of utilitarianism called rule utilitarianism (which is quite different from its crude early form as advocated by Jeremy Bentham). Some libertarians or advocates of free market economics actually do use utilitarian arguments to justify their positions and economic systems, e.g., Ludwig von Mises (although Mises’ praxeology was an a priori system of deductive reasoning, independent of his utilitarianism), the earlier Friedrich von Hayek (Gregg 2003: 21–22), and Milton Friedman (Frederick 2002: 23). Thus anyone who uses a utilitarian argument to support ideas about economics will ultimately have to examine the good and bad effects of the policies they advocate.

In these theories, there is no reason in principle why state intervention could not be moral and successful. Any economic argument, then, essentially becomes an argument about empirical reality: the consequences of economic policy today and in the past. The good consequences of state intervention and social democracy fully justify these policies. Of course, philosophical objections have been raised to utilitarianism as well.

One solution may be that we should adopt James Cornman’s Utilitarian Kantian Principle of ethics: this (as I understand it) has caused a great deal of excitement amongst modern philosophers, because it combines the best elements of Kant’s deontological ethics with utilitarianism. It is perfectly compatible with state intervention in economics.

APPENDIX 1: WHAT WAS MARX’S ETHICS?

Marx himself, as I understand it, rejected the utilitarianism of his day for some very confused ideas on ethics (Alan Gilbert, Democratic Individuality, Cambridge University Press, 1990, p. 240). And, at the very least, the question of what ethical theory he believed in is debatable (N. Churchich, Marxism and Morality: A Critical Examination of Marxist Ethics, James Clarke & Co., 1994, p. 139).

Since I don’t advocate communism as preached in the Communist Manifesto, it has nothing to do with my moral argument for certain types of state intervention.

Furthermore, the means Marx advocated to achieve communism (i.e., dictatorship, destruction of freedom of speech and civil liberties) can be rejected on utilitarian grounds anyway, since the abolition of freedom of speech and dictatorship have harmful effects on everyone.

BIBLIOGRAPHY

Cornman, J. W., Lehrer, K. and G. S. Pappas. 1992. Philosophical Problems and Arguments: An Introduction, Hackett, Indianapolis.

Frederick, R. 2002. A Companion to Business Ethics,, Blackwell, Malden, Mass.

Gregg, S. 2003. On Ordered Liberty: A Treatise on the Free Society, Lexington, Oxford and Lanham, Md.

Nielsen, K. 1963, “The Myth of Natural Law,” in S. Hook (ed.), Law and philosophy: A Symposium, University Press, New York.

Rollins, L. A. 1983. The Myth of Natural Rights, Loompanics Unlimited.

Scruton, R. 1994. Modern Philosophy: An Introduction and Survey, Penguin Books, London.

Tawney, R. H. 1998. Religion and the Rise of Capitalism, Transaction, New Brunswick, N.J. and London.