|Montreal, July 6, 2002 / No 106
by Edward W.Younkins
Ludwig von Mises' utilitarianism is a priori by nature. He deduces the idea that individuals cooperate because work performed under the division of labor is more productive than work done in isolation. Not only are men innately unequal in their ability to perform various types of labor, nonhuman factors of production (i.e., natural resources, raw materials, and climatic conditions) are unequally distributed around the world and there are many endeavors which simply exceed the capacities of any one person. Mises proclaims that the discovery that higher productivity results from a division of labor is one of the greatest achievements of mankind. Cooperative action based on the division of labor recognizes and gains from the innate inequality of persons and increases the output per unit of labor expended.
In effect, Mises extended Ricardo's Law of Cooperative Advantage. Ricardo
had illustrated the profitability of division of labor to all market participants
even in the case where one individual is more productive in every instance
and respect. For Mises, the law of cooperative advantage becomes the law
of human association through which each person finds his most profitable
niche in the collaborative activities of production and exchange. Mises
argues that social cooperation under the division of labor is the fundamental
source of man's success in the quest for survival and flourishing and in
his efforts to improve his material conditions. Social cooperation is deemed
to be essential to individuals' accomplishments of their own diverse and
freely chosen pursuits. According to Mises, social cooperation is essential
to the survival and prosperity of the human race.
Mises views society as the concerted action or cooperation of individuals that is a product of their conscious and purposeful behavior. A product of human reason and volition, society is the total complex of mutual relations created by collaborative action for the attainment of individual ends. Human society is a rational phenomenon because it is through reason that people are able to grasp the benefits of social cooperation which results when people are free to know, choose, and act. Human society is an association of persons for cooperative action resulting in greater productivity and mutual benefits. Mises contends that the recognition of the mutual benefits resulting from specialization was the origin of society and the beginning of the development of civilization. The gain which a society of social cooperation provides is the basis for its origin and persistence of existence.
Mises teaches that social cooperation is a more effective and efficient mean to attain one's self-interest than is social conflict. Conflicts are naturally resolved through the division of labor and the substitution of economic competition for biological or Hobbesian competition. What makes friendly relations possible and preferable is the high productivity of the division of labor which eliminates conflicts of interest. Mises wanted men to have the chance to pursue their happiness successfully. That chance presupposes social cooperation meaning a peaceful and secure society in which individuals can interact to their mutual benefits while seeking their own diverse projects, specializations, and forms of flourishing.
Mises contends that prosperity is expressed by the fulfillment of diverse human purposes. His ultimate concern is the survival of the human race which he views as prosperity in the broadest sense. Mises maintains that social cooperation is required for the achievement of human prosperity and happiness. Mises' utilitarian benchmark to be applied to social institutions, law, and moral codes is effectiveness with respect to human welfare. Mises' utilitarianism focuses on outcomes or consequences. It follows that political legislation and moral rules are to be judged based on their consequences or effects. Mises offers the proposition that one must judge legislation according to its logically deduced probable consequences. Rules, therefore, derive their value as preconditions to social cooperation.
According to Mises, social institutions, law, and normative rules of conduct are the outcomes of an evolutionary process and the product of efforts by individuals to purposively and rationally adapt their behavior to the demands of social cooperation under the division of labor. In Mises' view the type of society we live in is a product of reason and choice. Through the deliberate use of reason people grasped the idea that the division of labor is the essence of society and consciously used that idea to improve their welfare. The idea of the division of labor has been progressively extended and intensified over time to include ever greater numbers of individuals and groups and to achieve an ever increasing variety of individual goals. Mutual prosperity is increased through the facilitation of social cooperation. By taking advantage of individual circumstances and talents through specialization the total quantity and quality of the output of society can be increased.
Mises emphasizes that priorities are those of individuals. It is individual men who endeavor to advance their priorities and to attain prosperity. For individual persons, social cooperation is a means to attain all of their ends. Through specialization and division of labor the independent individual becomes a social being. Mises maintains that only a system based on freedom for every person elicits the greatest productivity of human labor and is in the interest of all individuals. It follows that Mises assigns importance to social cooperation achieved impersonally through the free market process. Free markets promote prosperity by allowing individual purposes to be fulfilled. As act of exchange achieves prosperity by simultaneously fulfilling the purposes of both involved parties. Free markets permit and enable men to achieve their own goals through mutual cooperation and exchange. Mises' defense of individual freedom is on the consequentialist grounds that freedom leads to good results. Mises' kind of individualism is thus utilitarian individualism.
Mises distinguishes between social cooperation based on freely-made contracts and social cooperation based on subordination. If social cooperation is voluntary it is contractual and if it is based on subordination and command it is hegemonic. Mises favors contractual social cooperation because the maximization of individual free choice is a means to achieve greater prosperity for everyone in society. Any interference with the free market is interference with the freedom of human choice and action. Mises thus concludes that the free market and the social order based on it comprise the only viable system of social cooperation and division of labor. He argues that men's potential for cooperation depends upon freedom, peace, private property, individual rights, limited government, and inequalities of wealth, income, talents, and natural resources.
Utilitarianism is based on the notion that happiness (i.e., human flourishing) is good and that suffering is bad. Utilitarianism favors institutions, laws, rules, and traditions that underpin the types of society that permits people to make satisfactory lives for themselves. Such institutions and practices facilitate cooperation among persons as they pursue their diverse specific goals. Utilitarianism views social cooperation as valuable to human life.
Mises maintains that the survival of the human race hinges on the recognition and application of economic truth. He sees economic knowledge as a necessary condition for the continuing existence of human civilization. It follows that the goal of economic inquiry is the promotion of the survival of the civilized human race. For Mises, economic theorizing and evaluation are deductive, stable, definite, and totally unaided by experience. He insists upon the purely aprioristic and scientific character of economics.
Mises was a passionate advocate of the free market while at the same time insisting upon the value – neutrality of economics and the economist. He believed that it was possible and desirable to have a clear-cut boundary between an economic scholar's analysis and his personal and political value judgments. For Mises, economics is a neutral or value-free theoretical science. Such ethical neutrality means that economics is concerned with deductively tracing the consequences of market activities and economic policies. Economics, like any scientific project, must be conducted in a manner severed from the investigator's motivations, values, beliefs, and preferences. Mises was truly a philosopher of economics who wanted to systematize and make explicit the nature of economics.
Mises explains that economic theory examines the efficiency and effectiveness of the means selected to attain chosen ends. Since action pursues definite chosen ends, it follows that there can be no other standard for evaluating actions but the desirability or undesirability of their effects. The given purpose of economics is to preserve the order of social cooperation and social harmony. This is done by deducing the outcomes of purposive actions undertaken within the framework of the division of labor. Actions, institutions, laws, and so on are correct if they sustain social cooperation which is a precondition of the happiness of individuals within society. In the other words, social cooperation facilitates and contributes to human flourishing and happiness.
Mises contends that economics is the foundation for politics even though economics itself is value – free and apolitical. He explains that the political doctrine of classical liberalism is a direct application of the scientific findings of economics. Mises' case for classical liberalism is a utilitarian one because when an economist proclaims that a certain economic system or policy is bad he is saying that it is inappropriate to the desired goal. In assessing an economic doctrine, one only has to ask if it is logically coherent and if its practical application will enable people to attain their desired goals. Mises' concern is with whether or not policies and institutions serve or undermine social cooperation and individuals' happiness. He thus sees classical liberalism, a political doctrine, as an application of theories developed by praxeology and based on rational economics. According to Mises, classical liberalism is a coherent theory of man, society, and the institutional arrangements required to provide social harmony and cooperation.
Mises maintains that sound, value-free, economic reasoning leads a person to favor laissez-faire economic systems. He deduces the nature and outcomes of human cooperation in a market economy based on private property and the division of labor and compares these with the means employed and outcomes achieved under alternative systems such as socialism and interventionism. As an economist, he employs the logic of praxeology to work toward his goal of comparing systems with regard to their capacity to attain ends. He thus advocates the market economy because economic reasoning shows that it best enables people to achieve their chosen ends.
Mises explains that a policy is bad when it can be deduced to generate results which are inconsistent with the objectives intended for the policy by the policy proposers themselves. He illustrates that statist interventions in the market bring about consequences which are worse than the state of affairs they were meant to improve. He demonstrates with deductive logic that every political intervention hurts some individuals and makes society less prosperous. Mises explains that well-intentioned government interventions interfere with the tendency of the free market to respect the sovereignty of the individual. Interventionist policies will fail to attain their objectives, generate unintended and undesirable results, and lead to further government controls. Interventionism involves regulations and controls that divert production from the projects that would have been undertaken if people were free to follow their own judgments. These interventions reduce the standard of living by disturbing the division of labor.
Mises observes that it is impossible to have rational central planning under socialism. This is the basis of his epistemological case against socialism. Without market-based prices, decision making by central planners would be irrational and arbitrary. Because of the elimination of market-based prices, a fully centralized planned economy would be unable to allocate resources rationally. Socialism, even more than interventionism, obstructs the operation of market processes thereby decreasing the rationality in the social system.
According to Mises, socialism is inherently unworkable, destroys individual motivation, and suppresses the means of economic calculation. Economic calculation through the use of market prices is a logical precondition for the existence of society. Reason and society develop together and it is impossible to have a society without calculable action. The rational calculation of costs and benefits is the basis for economic efficiency. Socialism lacks this mean to calculate and thus has to resort to irrationality.
Monetary calculation is a tool of action. Mises defines catallactics as the analysis of actions which are preformed on the basis of monetary calculations and prices. It is prices, articulated through the common denominator of money, that make economic calculation possible. The free market permits economic calculation – the mental tool that allows the development and evolution of the system of division of labor. It is through the system of division of labor that men are able to improve their earthly existence.
Socialism destroys the incentive of profits and losses, private ownership of property, and the benefits of competition. Mises explains that there is room for everyone in the market economy, even those with unexceptional abilities. He specifies that the function of competition is to designate to every member of a social system that position in which he can best serve. Competition is a method for choosing the most able men for each task. The competitive process is characterized by an absence of artificial barriers to entry (i.e., government-granted monopoly privileges). Competition requires freedom of entrepreneurial entry.
According to Mises, government is a necessary prerequisite for a free market society. The free market requires an institutional framework that identifies and protects individual rights. This framework includes private property, freedom to contract, and government monopoly of coercion. As the monopoly of violence in society, government maintains peace and enforces rules so that individuals can cooperate and enjoy the benefits of that cooperation. Although Mises saw a role for government, he vehemently maintained that the exercise of state function conveys no innate dignity, virtue, or prestige.
Mises' utilitarianism starts with the goal of human flourishing, moves to social cooperation and the existence of individual rights, but does not explicitly include natural law which he thought was unnecessary, problematic, and which he equated with intuitionism. Mises says that he is agnostic with respect to the nature of human nature. With regard to individual rights, he says that there exists a private domain in man which should not be regulated or violated. This realm constitutes what is deepest, highest, and most valuable in the individual human being.
Although he says he rejects natural law, Mises' approach to justifying the free society has a great deal in common with natural law constructs. The life-affirming rules for social cooperation and for interpersonal conduct that he deduced seem to be based on the essential nature of human life. For Mises, the reason or goal for this system of rules is to maintain and promote social harmony and human life. These rules for the protection of individual rights are essential for social cooperation on the part of rational human beings with free wills. In the end, Mises' utilitarianism appears to be based, at least implicitly, on a principled, categorical, natural-law-like framework.
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