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Are Austrian Economics and Objectivist Concepts of Value Compatible?

By Jared Meyer

December 21, 2022

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Book Review: Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism, by Edward W. Younkins, University Press of America, 2011

 

Edward W. Younkins’s book, Flourishing and Happiness in a Free Society, does an excellent job at integrating key insights from various philosophic and economic traditions to formulate a consistent moral framework for society. The book is best suited for those familiar with philosophy and inclined to support a minimal state. While Younkins does not write for the general public, he does a great job of educating readers who have the intellectual power to tackle difficult topics but lack prior exposure to the details of the material he discusses.

Even those knowledgeable in the free-market literature will walk away from his book with a deeper appreciation for the theories that helped to shape their world view

The book is repetitive at times, which may bother those well-schooled in the arguments he covers, but this is a strength of his writing. Because Younkins is always careful to define terms and restate his argument, the book is easy to understand in a single reading. Even those knowledgeable in the free-market literature will walk away from his book with a deeper appreciation for the theories that helped to shape their world view.

That being said, his argument does cover a significant amount of work, as any proper integration should. In order adequately to grasp Younkins’s reasoning, it is necessary to retrace the outline of his argument. In what follows, I provide a distillation and interpretation of that argument, and conclude with praise for Younkins’s unwavering defense of free markets based on ethics rather than economic utility calculations.

Two powerful schools of thought in the individual liberty tradition are the Austrian school and Ayn Rand’s Objectivism. Often, they are deemed incompatible since Austrians emphasize the subjectivity of value, while Rand argues for its objectivity.

Two powerful schools of thought in the individual liberty tradition are the Austrian school and Ayn Rand’s Objectivism. Often, they are deemed incompatible since Austrians emphasize the subjectivity of value, while Rand argues for its objectivity. Younkins shows that upon further examination, it is clear that Austrian economics and Objectivism are not just compatible but inextricably linked. This integration leads to a stronger understanding of natural law, human flourishing, and natural rights. These three concepts all build upon one another and are able to form the moral foundation for a free society.

Ludwig von Mises provides a solid basis for economics through his theory of human action—namely, through his a priori and universal principle that humans act purposefully. From this fundamental axiom, it is possible to deduce general principles of economic behavior, but impossible to infer the concrete consequences or details of particular human actions (p. 31).

Economists qua economists do not approve or denounce individuals’ ends.

Mises’s economics does not study what is in objects, as the natural sciences do, but instead studies what is in subjects. Economists qua economists do not approve or denounce individuals’ ends. They do nothing more than ask whether the means chosen are appropriate to those ends. Mises’s subjectivist approach takes personal values as given and assumes that individuals have different motivations and prefer different things; buying and selling takes place precisely because people value things differently. Since each human constantly values and acts purposefully, all human actions can be viewed as volitional attempts to create more satisfactory states (pp. 38-39).

Murray Rothbard argues that Mises’s law of human action can be viewed as a law of reality instead of as a law of thought. In other words, he justifies the action axiom as a law that is empirical rather than a priori. It is empirical in the sense that it is self-evidently true once stated, consistent with human experience, and not empirically falsifiable. Initially, the concept of action is inductively derived from perceptual data. The whole systematic structure of economic theory can then be deduced from that notion (p. 22).

Aristotle and Ayn Rand are both naturalistic realists who affirm reality, reason, and the strictly this-worldly value of human life. Rand’s Objectivism, echoing the insights of Aristotelian logic, is founded on the axioms of existence, identity, and consciousness. As with the Austrian axiom of action, Objectivism holds that the denial of its axioms is illogical because their denial entails their affirmation: to attack the axiom is in that act to affirm it. For Rand, concepts or essences are epistemological, which means that they are contextual and relational. This differs from the metaphysical view of concepts often ascribed to Aristotle. Essences, for Rand, are epistemological products of classification processes that reflect the best knowledge a person possesses about particular entities. They are ideas or concepts about some part of reality, but do not themselves exist in reality. Forming these abstractions and discovering the nature of real things existing in the world requires the use of mental effort—it is not automatic (pp. 45 – 46).

Rand agrees with the Austrian economists that the concept of value is only meaningful in relationship to some valuing consciousness. However, she goes further and extends her analysis beyond economic to moral value. Her ethics of egoism is derived from man’s nature as a rational being and as an end in himself. What is good is an evaluation made by one’s consciousness, informed by the facts of reality, which guides the agent’s pursuit of flourishing. Obtaining objective knowledge of both facts and values is possible since concepts are produced by a person’s consciousness in accordance with reality (p. 47).

Austrian claims of value-subjectivity and Objectivist claims of value-objectivity are compatible because they involve different levels of analysis.

Austrian claims of value-subjectivity and Objectivist claims of value-objectivity are compatible because they involve different levels of analysis. The Austrian’s value-subjectivity complements Rand’s sense of objectivity because human flourishing on an objective level transcends subjective value preferences (p. 137). Austrians emphasize value-neutrality in the context of economic inquiries about efficiency—whether agents are choosing the right means to attain values taken as given. On the other hand, Objectivist philosophy is concerned with the moral evaluation of the underlying values themselves. The Objectivist metaphysics and epistemology also turn out to be consistent with the Rothbardian—that is, empirical, or a posteriori—interpretation of Mises’s action axiom.

While Younkins acknowledges that Mises’s view of economics is a value-free science concerning instrumental (means-end) rationality, he also argues that, “although the world of praxeological economics, as a science, may be value-free, the human world is not value-free” (p. 50). On the Objectivist view, value is conditional upon the antecedent phenomenon of life, and value’s objectivity derives from those specific actions that tend to promote human life or flourishing. Human action, the subject of both economics and morality, can be seen as the common denominator and critical link between economic and moral principles. When objects or actions help a person to reach his particular form of well-being, those objects or actions are objectively good. In other words, value is a relational quality dependent on the subject, object, and context or situation involved (p. 49).

Austrian economics is suited for evaluating situations with respect to appraising means but not ends. However, Misesian praxeology and its value-free economics is not enough to establish a moral argument for a free society. Instead, the truth of a systematic, reality-based, ethical system must be demonstrated. Younkins argues that natural law provides groundwork for such a theory; both Objectivism and the Aristotelian idea of human flourishing are based on natural-law-type ideas.

Natural moral law derives from the nature of humans and the world. Discoverable through the use of reason, it is applicable to all persons. Its basis on the nature of the entity to which it relates provides its objectivity. Human nature comes from rational agents with free and self-determinative wills who are capable of deliberation and choice. Humans’ distinctiveness from other living species is their ability to initiate and maintain conceptual levels of awareness (pp. 111 – 12). As a result, they can make choices about right and wrong, and this leads to the requirement of a sphere of authority others must respect. Natural law theory provides grounds for establishing what government’s proper role is and subjects government itself to morality. The moral force behind a constitution is the idea of higher laws restricting governments’ operations (p. 118).

Natural law opposes the ideas of conventionalism and positivism to the effect that the principles of morality are relative, subjective, and changeable. Instead, it provides universal criteria by which positive laws can be judged since, through natural law, a standard or measure is offered for assessing whether something (e.g., a human being) is functioning well or not (p. 115). Natural law provides the groundwork for an Aristotelian concept of human flourishing and links moral commitments to objective facts about the world.

Aristotle holds the position, based on philosophical realism, that eudaimonia (or human flourishing) is the natural end of individual human actors. Younkins follows Henry Veatch’s reading of Aristotle and emphasizes this end’s inclusivity, which means that good is objective, but not identical, for everyone (p. 107).1 An individual’s pursuit of flourishing is driven by reason, and reason requires consistent practice of the virtues. As neo-Aristotelian scholars Douglas Rasmussen and Douglas Den Uyl argue, such a “virtue ethics” is agent-relative, meaning contextual and relational. Individuals need correctly to understand, desire, and strive to attain objective values in trying to live flourishing lives.2 Virtuous activity is a part of an individual’s good; it is guided by reason in identifying, deliberating upon, and choosing one’s ends and means.

Aristotle also states that eudaimonia is achieved through purposeful, rational conduct. Human flourishing is always particularized and there are inextricable connections between virtue and self-interest, meaning that individuals are, ontologically, the primary beings. Thus, Aristotle’s eudaimonia is formally self-perfectionist since normative reasons for individuals choosing particular actions stem from their pursuit of flourishing. Rand clearly belongs to the Aristotelian tradition.

Neo-Aristotelian, self-perfectionist approaches to ethics provide a better understanding of natural rights that leads to foundations of a morally defensible state. A primary question of political philosophy is, “How is it possible to have an ethical basis for a diverse society that will not require that one form of human well-being be preferred to another?” This attempt to avoid moral cannibalism may be termed the problem of integrated diversity. The solution to the problem is found in a necessary condition for, and operating condition of, human flourishing. That characteristic is self-direction, and without it no other instances of individualized flourishing can take form. This requires the political order’s primary focus to be securing the possibility of self-direction.

Natural rights are concerned with regulating conditions for human flourishing. They are not directly concerned with promoting the attainment of human flourishing. This is because, as political principles, they are uniform and establish general rules of social interaction (p. 127). The naturally justified state is concerned only with outward conduct rather than virtuousness of inner states of being. In other words, the state’s concern is with protecting rights, not promoting morality. The natural negative right to liberty favors no particular form of human flourishing while concurrently providing contexts within which diverse forms of human flourishing can be pursued. Rights are not principles about how people should live their lives; they are restrictions on an individual’s actions while pursuing his or her own good. Self-directedness is universally necessary and central to all manifestations of human flourishing. The natural right to liberty gains moral significance since it is a social and political condition necessary for the ultimate moral standard in Aristotelian ethics (pp. 119-20).

Rights are required for moral activity since coerced action is not initiated by the agent and, thus, can never constitute a moral good. This means that “the right to liberty guarantees politically only the possibility of self-directedness which, in turn, maintains the possibility of personal flourishing” (p. 95). Unfortunately, since natural rights do not enforce themselves, securing them is the political and legal order’s principal task.

A political structure protecting individual negative rights answers the problem of integrated diversity by providing necessary prerequisites for the possibility of self-direction, which opens the possibility that human flourishing can occur on individual levels within social settings. Universal human characteristics of rationality and free will require self-direction and apply to everyone equally. Because law is properly limited to what is universal, the state should concern itself only with protecting self-direction. Mutual non-interference, which is required by the negative rights doctrine, is necessary for both free and virtuous societies (p. 70). Individuals must be accorded secure moral spaces within which they can exercise self-direction and pursue human flourishing. This leads to the requirement that people deal as traders giving value for value through free voluntary exchange to their mutual benefit.

In particular, the free market process—based on private property, security of contract, and mutual consent—reflects both social cooperation and voluntarism in human affairs by accommodating people seeking to improve their circumstances by trading goods or services in non-coercive settings. The free economy inspires people to seek out others who differ from them, treat differences as opportunities, and garner mutual gains through cooperative interaction.

Freedom for people to act in their own self-interest is the fountainhead for a diversity of ideas, innovations, and experiments that lead to discoveries of new products, services, and other means of production. As Friedrich Hayek shows, innovation requires widely dispersed knowledge that exists with respect to the unique circumstances, conditions, and preferences of individuals. Such knowledge is only useful if people are free to act upon it (p. 139).3

Any coercive interference—legal or illegal—with free market exchanges involves curtailing the freedom of human choice and action. State intervention diverts production from freely undertaken projects to those which require regulation and control (p. 43). People guided by rationality and self-interest cannot consume something before it has been produced and cannot produce without rationality. Production varies directly with the level of freedom people possess.

Capitalism is founded on the necessary conditions for personal flourishing. As Younkins says, “limited government is consistent with the nature of man and the world, recognizes the variety and diversity of man and his talents, and gives that diversity opportunity for full expression” (p. 69). People should have maximum freedom to select their own way of life barring encroachment upon the freedom of others to make their life choices. In short, capitalism is the political expression of the human condition.

I find Younkins’s argument compelling and agree that the Austrian and Objectivist schools complement one another. Their integration provides an outlook that informs our understanding of natural law, human flourishing, and natural rights. This produces a new paradigm from which a truly moral society can be built. What is certain from this insight is that individuals must be respected for the rational agents they are. The finer details of this society will have to be left to later research projects, but I believe Younkins has shown that the framework of this system is minimal government and free markets.

More scholars who advocate for liberty will have to brave the intellectual battle and tackle the specifically philosophical basis for their beliefs. Unfortunately, many arguments in support of a free society rely solely on empirical studies or watered-down utilitarianism. Those arguments may seem to fare well, but if those who favor a laissez-faire social order are winning the statistical battle, why has respect for individual liberty not increased? I contend that Younkins would agree that the issue comes down to a failure to address the moral concerns of individuals. I agree with Younkins that these concerns can only be addressed by building a moral rather than purely instrumental or economic case for the foundations of a liberal society. Arguments in favor of liberty need to value liberty as an end, not solely as a means for economic utility. People seek moral sanctions for their actions, and if there are not strong arguments in favor of liberty, it will not be accepted as a value.

Younkins ends with a call to action:

We must have a fierce commitment to reality and work individually and in concert with others in order to battle apathy and affection for the state, capture people’s imaginations, convince and convert people to the freedom philosophy, defeat statism, and reestablish freedom as the foundation for our political and economic systems. (p. 164).

By showing the inextricable relation between the Austrian school of economics and a consistent, fully formed ethical system, Younkins has moved the debate for a morally defensible free society in the right direction. Additionally, he has provided the moral ammunition to heed his call to action.
 
This review was originally published in Reason Papers Vol. 36, no. 1 (July 2014): 188 – 194.

 

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Notes

1 Henry B. Veatch, Rational Man: A Modern Interpretation of Aristotelian Ethics (Indianapolis, IN: Liberty Fund, 2003).

2 Douglas B. Rasmussen and Douglas J. Den Uyl, Norms of Liberty: A Perfectionist Basis for Non-Perfectionist Politics (University Park, PA: Pennsylvania State University Press, 2005).

3 Friedrich Hayek, “The Use of Knowledge in Society,” in Friedrich Hayek, Individualism and Economic Order (Chicago, IL: University of Chicago Press, 1948), pp. 77 – 91.

 
 

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