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In our little corner of Austrian Economics and Libertarianism we were very clear from the beginning that our approach is neither Moral nor Ethical. It must necessarily be so because these concepts are subjective and personal, hence variable from person to person. In order for a political or economic system to have a chance of adoption, it must answer to basic and universal needs. Our goal is to show you how Austrian Economics and Libertarianism provide rules for co-existence based mostly on biological principles. This leaves people free to pursue any Ethical or Moral decision or point of view they may choose. Austro-Libertarianism is a natural system designed to maximize freedom of choice, including any moral or ethical inclinations one may have.

Having said that, there are people that remain unconvinced of our proposal because they are either deeply religious or possess strong biases towards fairness and justice.

This piece is for them. We will provide a tiny glimpse into the Ethics and Morality of Austro-Libertarianism.

DEFINITIONS

Before we begin, we need to define the topics we will be analyzing. They are:

  • Morals: notions of right and wrong that guide each person individually and subjectively in their daily lives. They are typically associated with a religious belief.
  • Ethics: norms of right and wrong shared by a group on the basis of mutual and usually reciprocal recognition.
  • Laws: norms about right and wrong formally issued by a political authority that are enforceable through a legal process based on a formal justice system.

As laws are simply codifications or formalizations of human decisions which include moral and ethical considerations, we will simply disregard them in our discussions.

THE VIEW

As we have explained many times, Austrian Economics depends or it is a spin-off from Libertarianism. Free markets can only operate if people have the freedom to choose, but in order to do that, they need to be free. As such, we will freely switch from Libertarian to Austrian Economic arguments and back since they are morally and ethically indistinguishable.

Note: in this piece we will mention the use of mathematics implying its use to model and forecast economic parameters. However, it must be clear that we do not reject mathematics as fact-finding tools. There is a gigantic difference. The former is used to derive relationships between economic parameters; the latter is used simply to find facts (not to discover cause and effect processes). For example, mathematical modeling may tell you that if we decrease the price of a product by 10%, its sales will increase by 8.756 %. This is a relationship. We can use this model to forecast that if the drop in price is 20% then the increase in sales will be of 15.672%. That is what they do. For us, these relationships are just the beginning. We look at them as facts. We are interested in the reasons and the processes people will go through to buy more when the price drops. We are looking for causes and their effects because they are comprehensive and universal. These cannot be mathematically modeled (at least for the time being).

Mechanistic view

Economic theories typically treat the market as a mechanical machine. Economists strive to take this machine apart, analyze its parts, map it, model it and use this information to make forecasts (this is called a reductionist approach because it attempts to reduce a phenomenon into it components). All mainstream economic theories do just that. As such, these methods are disconnected from any ethical or moral considerations. All such considerations are add-ons imposed by other political, moral, ethical or religious views. Politicians add or more precisely, attach ethical and moral considerations to economic policies. These attachments are nothing more than eye candy designed to win votes and do not carry any real ethical or moral weight. These attachments are after-the-fact (or ex post-facto as economists call it) attempts to demonstrate that certain policies are ethical or moral, but they clearly do not originate within the theories themselves.

Individuality

Austrian Economics is different. The center of our theory is people. Our method is the method of human action. We study how people act in an unhampered market. If there are ethical or moral principles present in Austrian Economics it is because they are embedded in our main protagonist: human beings.

Therefore if Austrian Economics indeed has ethical or moral principles, they originate within the theory and are an inextricably part of it.

The fact that Austrian Economics and Libertarianism are based on human beings is important. However, the critical fact is that both theories embrace individualism and the differences between people that it implies.

Mainstream Economic Theories consider people simply pieces or components of a homogeneous mass that can be understood “on average” or “statistically”. They need this assumption to be able to use mathematics. We, on the other hand, regard individuality and the uniqueness of each individual as critical. It is this uniqueness of each individual that prevents us from using mathematics. It is not that we reject mathematics because we “feel like it”, but because nature prevents us from doing so.

Note #1: the word homogenous comes from the Greek homos same, and genos kind. So it means same kind. In practice it means mixed or blended without any individual recognition. For example, pizza dough is homogeneous, while the mix of oil in water is not.

Note #2: the word heterogeneous also has a Greek origin and means different kind. In practice it means scrambled but individually recognizable. A mix of oil and water is heterogeneous while pizza dough it is not.

Best option

And so the question is this: given two theories, one that values individuality over homogeneity and one with the opposite view, which one is more moral or ethical?

We are stating this key question in comparative terms because that’s what we have in real life. Two options. Although it is possible to argue morals or ethics in absolute terms (i.e. without comparing to anything – this would be an axiom), the point of this exercise is to help you make a decision. Since a choice needs at least two options, it is practical and instructive to understand which one of them is the best.

Note: please see the Glossary if you are unfamiliar with certain words.

Continue to Austro-Libertarian morals and ethics - Part 2

 

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