Ludwig von Mises was right about how markets operate but wrong to limit the scope of his analysis to human activity, for what he defines as “human action” must, for consistency and completeness, be assumed to underly all action in nature. Otherwise his analysis gets wrong what constitutes labor, value and production.
The Anthropocentrism of Praxeology In Historical Context
I do not believe von Mises could have missed the true universal generality of his theory of praxeology in its application to all animal behavior, but I believe he chose to focus his discussion of its scope on the actions of humans because he was writing in the context of what he perceived as a concerted effort by purveyors of the more popular economic and social theories of the time to suppress the application of praxeology to human activity.
Social darwinists, national socialists, communists, Marxists, New Deal liberals, psychoanalysts, psychologists, positivists and fascists were the dominant theorists of the human condition and the strongest intellectual influences on agents of government and business at the time von Mises published Human Action.
All of these dominant rival theorists accepted without question the assumption that humans differed from other animals and certainly from non-animal organisms and forces of nature in some basic way. To engage with them von Mises would be foolish to have rejected that common assumption, for to do so would assure that his theory would be brushed aside as ridiculous or, at best, irrelevant since it did not concern itself with the special province of human behavior.
Moreover, von Mises was missing a critical element required to broaden his theory of praxeology to shed its anthropocentrism. He lacked a mathematical definition of wilful behavior. Forced to rely on the psychological notion of “purposefulness” to distinguish wilful action from mere mechanism, his theory generally failed to refute the claims of most of his rivals — the social darwinists, the historical materialists, the psychoanalysts — that human will is nothing but a useful illusion masking the underlying mechanism by which some collective intelligence dictates the parameters within which individual choices are constrained to the point of theoretical irrelevance.
Bear Praxeology from von Mises to Muir
The monumental task von Mises undertook in writing and publishing Human Action was to restore the recognition of the theoretical significance of individual choice into the management and planning of human society. In Human Action von Mises claimed:
He who acts under an emotional impulse also acts. What distinguishes an emotional action from other actions is the valuation of input and output. Emotions disarrange valuations. Inflamed with passion, man sees the goal as more desirable and the price he has to pay for it as less burdensome than he would in cool deliberation. Men have never doubted that even in the state of emotion means and ends are pondered and that it is possible to influence the outcome of this deliberation by rendering more costly the yielding to the passionate impulse. To punish criminal offenses committed in a state of emotional excitement or intoxication more mildly than other offenses is tantamount to encouraging such excesses. The threat of severe retaliation does not fail to deter even people driven by seemingly irresistible passion.
When approached in the wilderness by a bear, the general advice is to stand tall and steady and look firmly at the approaching bear in the eyes. The bear will almost always stop and retreat. Why? Clearly the bear has altered its cost-benefit analysis of whatever action it intended to take with its approach. Perhaps its fear of its target’s gesture of supremacy has tilted its calculation against direct attack. Perhaps its recognition of and socialized respect for the human’s bear-like gesture of territorial assertion has signaled it to divert from what was actually just an innocent choice to pass through the woods along a certain path, perhaps with some intended enjoyment of scent or feel or taste along the way. Either way, the bear is engaged in action every bit as much as the human, according to von Mises’ definition of action. He writes:
We interpret animal behavior on the assumption that the animal yields to the impulse which prevails at the moment. As we observe that the animal feeds, cohabits, and attacks other animals or men, we speak of its instincts of nourishment, of reproduction, and of aggression. We assume that such instincts are innate and peremptorily ask for satisfaction.
But it is different with man. Man is not a being who cannot help yielding to the impulse that most urgently asks for satisfaction. Man is a being capable of subduing his instincts, emotions, and impulses; he can rationalize his behavior. He renounces the satisfaction of a burning impulse in order to satisfy other desires. He is not a puppet of his appetites. A man does not ravish every female that stirs his senses; he does not devour every piece of food that entices him; he does not knock down every fellow he would like to kill. He arranges his wishes and desires into a scale, he chooses; in short, he acts. What distinguishes man from beasts is precisely that he adjusts his behavior deliberatively. Man is the being that has inhibitions, that can master his impulses and desires, that has the power to suppress instinctive desires and impulses.
John Muir’s accounts of his direct experience with wild animals in Yosemite resoundingly refute the above assertions by von Mises, most strikingly in his account of his killing of a rattlesnake in his cabin, an action he later regretted:
Returning from my long walks, I usually brought home a large handful of plants, partly for study, partly for ornament, and set them in a corner of the cabin, with their stems in the stream to keep them fresh. One day, when I picked up a handful that had begun to fade, I uncovered a large coiled rattler that had been hiding behind the flowers. Thus suddenly brought to light face to face with the rightful owner of the place, the poor reptile was desperately embarrassed, evidently realizing that he had no right in the cabin. It was not only fear that he showed, but a good deal of downright bashfulness and embarrassment, like that of a more than half honest person caught under suspicious circumstances behind a door. Instead of striking or threatening to strike, though coiled and ready, he slowly drew his head down as far as he could, with awkward, confused kinks in his neck and a shamefaced expression, as if wishing the ground would open and hide him. I have looked into the eyes of so many wild animals that I feel sure I did not mistake the feelings of this unfortunate snake. I did not want to kill him, but I had many visitors, some of them children, and I oftentimHes came in late at night; so I judged he must die. http://www.sierraclub.org/john_muir_exhibit/writings/our_national_parks/chapter_6.aspx
Similarly Muir recounts a bear hunter’s explanation to him of bear behavior, including bears’ inexplicable refrain from attacking or eating sleeping men camped out in the wilderness:
“Whenever,” said the hunter, “I saw a bear before he saw me, I had no trouble in killing him. I just took lots of time to learn what he was up to and how long he would be likely to stay, and to study the direction of the wind and the lay of the land. Then I worked round to leeward of him, no matter how far I had to go; crawled and dodged to within a hundred yards, near the foot of a tree that I could climb, but which was too small for a bear to climb. There I looked well to the priming of my rifle, took off my boots so as to climb quickly if necessary, and, with my rifle in rest and Sandy behind me, waited until my bear stood right, when I made a sure, or at least a good shot back of the fore leg. In case he showed fight, I got up the tree I had in mind, before he could reach me. But bears are slow and awkward with their eyes, and being to windward they could not scent me, and often I got in a second shot before they saw the smoke. Usually, however, they tried to get away when they were hurt, and I let them go a good safe while before I ventured into the brush after them. Then Sandy was pretty sure to find them dead; if not, he barked bold as a lion to draw attention, or rushed in and nipped them behind, enabling me to get to a safe distance and watch a chance for a finishing shot.
“Oh yes, bear-hunting is a mighty interesting business, and safe enough if followed just right, though, like every other business, especially the wild kind, it has its accidents, and Sandy and I have had close calls at times. Bears are nobody’s fools, and they know enough to let men alone as a general thing, unless they are wounded, or cornered, or have cubs. In my opinion, a hungry old mother would catch and eat a man, if she could; which is only fair play, anyhow, for we eat them. But nobody, as far as I know, has been eaten up in these rich mountains. Why they never tackle a fellow when he is lying asleep I never could understand. They could gobble us mighty handy, but I suppose it’s nature to respect a sleeping man.”
Bears and rattlesnakes, according to both hunter and conservationist, in accounts by Muir that were famous and widely read long before von Mises published Human Action, display plenty of evidence of what von Mises describes as “purposeful action,” including restraint from the immediate satiation of their appetites. They “adjust their behavior deliberately.” Indeed, one can hardly imagine how any animal in a wilderness crowded with every sort of creature competing for resources could have managed to survive even a few minutes without “adjusting their behavior deliberately,” and without being the sort of creature who, as von Mises describes humans:
does not ravish every female that stirs his senses; he does not devour every piece of food that entices him; he does not knock down every fellow he would like to kill. He arranges his wishes and desires into a scale, he chooses; in short, he acts.
Animal, Vegetable and Mineral Action
The behavior of animals, and indeed of all agents of force in nature, can only be interpreted as “action” by von Mises’ definition, for the very presence of potential energy in nature being held and released according to patterns that are not computable and therefore not purely mechanistically predictable constitutes deliberative action in its most essential form, and that deliberative action forms the basis of the production of all that is valued for use or consumption by anyone in the world, human or not.
In fact von Mises argues that in the absence of a scientifically proven causal reduction of human action to some mechanism, we must assume human action is “an ultimate given” yet the very same argument could and should be made for considering non-human action an ultimate given:
In the face of this state of affairs we cannot help withholding judgment on the essential statements of monism and materialism. We may or may not believe that the natural sciences will succeed one day in explaining the production of definite ideas, judgments of value, and actions in the same way in which they explain the production of a chemical compound as the necessary and unavoidable outcome of a certain combination of elements. In the meantime we are bound to acquiesce in a methodological dualism.
Human action is one of the agencies bringing about change. It is an element of cosmic activity and becoming. Therefore it is a legitimate object of scientific investigation. As—at least under present conditions—it cannot be traced back to its causes, it must be considered as an ultimate given and must be studied as such.
But instead of acknowledging the powerful generality of praxeology to encompass all causally unreduced force and motion in nature, von Mises falls back on the unproven assumption that only human causally unreduced force and motion in nature can achieve the efficiencies of the division of labor for the purpose of “raising himself above the level of animals and plants”:
It is true that the changes brought about by human action are but trifling when compared with the effects of the operation of the great cosmic forces. From the point of view of eternity and the infinite universe man is an infinitesimal speck. But for man human action and its vicissitudes are the real thing. Action is the essence of his nature and existence, his means of preserving his life and raising himself above the level of animals and plants. However perishable and evanescent all human efforts may be, for man and for human science they are of primary importance.
He does not define what “level” he means here, but elsewhere in his tome he makes it very clear:
In order to comprehend why man did not remain solitary, searching like the animals for food and shelter for himself only and at most also for his consort and his helpless infants, we do not need to have recourse to a miraculous interference of the Deity or to the empty hypostasis of an innate urge toward association. Neither are we forced to assume that the isolated individuals or primitive hordes one day pledged themselves by a contract to establish social bonds. The factor that brought about primitive society and daily works toward its progressive intensification is human action that is animated by the insight into the higher productivity of labor achieved under the division of labor.
Von Mises is entirely correct here that no social contract nor any innate need to socialize were required to motivate humans to take advantage of the productive efficiencies of the division of labor. But he is wrong to assume that any of “the animals” in the world spends his life “searching like the animals for food and shelter for himself only and at most also for his consort and his helpless infants”. Very few animals’ behavior even remotely resembles this description, which seems more like The Flintstones than any animal species known to biologists. It is a biological fact that all non-human animals, and indeed humans also, rely on a deep, vast and complex division of labor in nature for the sustenance of their ecosystems, and this was well understood by biologists when von Mises published Human Action in 1949. Indeed, von Mises seems to acknowledge this fact here:
The principle of the division of labor is one of the great basic principles of cosmic becoming and evolutionary change. The biologists were right in borrowing the concept of the division of labor from social philosophy and in adapting it to their field of investigation. There is division of labor between the various parts of any living organism. There are, furthermore, organic entities composed of collaborating animal individuals; …”
Unfortunately he completes this sentence with a gargantuan fallacy:
“… it is customary to call metaphorically such aggregations of the ants and bees “animal societies.” But one must never forget that the characteristic feature of human society is purposeful cooperation; society is an outcome of human action, i.e., of a conscious aiming at the attainment of ends. No such element is present, as far as we can ascertain, in the processes which have resulted in the emergence of the structure-function systems of plant and animal bodies and in the operation of the societies of ants, bees, and hornets.
Here von Mises asserts that he can assume only humans engage in “purposeful cooperation” because he sees no evidence of purposeful cooperation “as far as we can ascertain” in the “structure-function systems of plant and animal bodies and in the operation of the societies of ants, bees, and hornets.”
Well, biological research since von Mises’ time certainly provides ample evidence of “purposeful cooperation” among ants, bees and hornets. And no biologist today would dispute that the use of the term “society” for these species’ groupings is literal, not metaphorical, precisely because their individual behavior is clearly both purposeful and cooperative.
Yet ignorance of later biological research does not explain his error. Ample evidence in his own time was available to show that he was wrong about the purposefulness of the cooperation of non-human animals.
It is clear, in fact, that von Mises intended to divide humans from the rest of nature in a metaphysical and moral way, not just an empirical way:
Human society is an intellectual and spiritual phenomenon. It is the outcome of a purposeful utilization of a universal law determining cosmic becoming, viz., the higher productivity of the division of labor. As with every instance of action, the recognition of the laws of nature is put into the service of man’s efforts to improve his conditions.
He sets up a definition of economic activity that expressly and prejudicially excludes all non-human consumption and production. For von Mises, all consumption and production by non-human agents in nature is merely a state of inertia governed by “the laws of nature” which, through the “purposeful cooperation” of humans with other humans “is put into the service of man’s efforts to improve his conditions.” He ignores the fact that no scientific evidence existed in his time (nor does it exist now) to support his assumption that non-humans behave mechanistically.
Von Mises made his assumption crystal clear in his later volume Theory and History:
Leaving aside for the present any reference to the problem of the human will or free will, we may say:
Nonhuman entities react according to regular patterns; man chooses. Man chooses first ultimate ends and then the means to attain them. These acts of choosing are determined by thoughts and ideas about which, at least for the time being, the natural sciences do not know how to give us any information.
He offers no argument, empirical or rational, to justify his assertion that “Nonhuman entities react according to regular patterns”. He seems to be asserting it here as a postulate. It is a postulate from which he derives clearly untenable conclusions:
For animals the generation of every new member of the species means the appearance of a new rival in the struggle for life. For man, until the optimum size of population is reached, it means rather an improvement than a deterioration in his quest for material well-being.
His departure here from the known biological facts at the time of his writing these words about how nature is replete with mutualism not only among members of the same species, but among members of different species (a level of harmonious division of labor humans have yet to achieve to any great extent) can only be attributed to his singular focus on defending the cause of individual liberty in human society from the onslaught of received opinion in intellectual circles at the time that nobody, human or non-human, operates outside the reach of the self-appointed architects of human social and economic behavior.
Indeed he names his opponents, including the most famous positivist of all:
Bertrand Russell resorts to such figurative speech: the atom “will do” something, there is “a definite set of alternatives open to it, and it chooses sometimes one, sometimes another.” The reason Lord Russell chooses such inappropriate terms becomes obvious if we take into account the tendency of his book and of all his other writings. He wants to obliterate the difference between acting man and human action on the one hand and nonhuman events on the other hand. In his eyes “the difference between us and a stone is only one of degree”; for “we react to stimuli, and so do stones, though the stimuli to which they react are fewer.”
Russell wrote the words von Mises quoted here in 1936, while he was still in the early throes of his struggle to reconcile himself to the ultimate philosophical implications of the 1931 publication of Godel’s Incompleteness Theorems. In his 1956 book Portraits from Memory Russell explained:
I wanted certainty in the kind of way in which people want religious faith. I thought that certainty is more likely to be found in mathematics than elsewhere. But I discovered that many mathematical demonstrations, which my teachers wanted me to accept, were full of fallacies … I was continually reminded of the fable about the elephant and the tortoise. Having constructed an elephant upon which the mathematical world could rest, I found the elephant tottering, and proceeded to construct a tortoise to keep the elephant from falling. But the tortoise was no more secure than the elephant, and after some twenty years of arduous toil, I came to the conclusion that there was nothing more that I could do in the way of making mathematical knowledge indubitable.
So von Mises was a lonely voice in his time calling for the courage to accept the unpredictability of human behavior. We follow in the tradition of both the ultimate consistency of his theory of praxeology and his moral courage in standing up for the intrinsic superiority of societies that operate on the basis of individual freedom against the ideological justifications for collectivist tyranny when we remove the crippling restriction of anthrpocentrism from the science of praxeology.
Von Mises’ Appeal to Kantian Anthropocentrist Apologism
To be sure, von Mises would not approve of this extension to praxeology. He resorts to a distinctly Kantian justification for his rejection of a broader scope to praxeology than human action:
Both primitive man and the infant, in a naïve anthropomorphic attitude, consider it quite plausible that every change and event is the outcome of the action of a being acting in the same way as they themselves do. They believe that animals, plants, mountains, rivers, and fountains, even stones and celestial bodies, are, like themselves, feeling, willing, and acting beings. Only at a later stage of cultural development does man renounce these animistic ideas and substitute the mechanistic world view for them.
So he thinks animism is naive. He continues:
Mechanicalism proves to be so satisfactory a principle of conduct that people finally believe it capable of solving all the problems of thought and scientific research. Materialism and panphysicalism proclaim mechanicalism as the essence of all knowledge and the experimental and mathematical methods of the natural sciences as the sole scientific mode of thinking. All changes are to be comprehended as motions subject to the laws of mechanics.
So he thinks that history proves mechanicalism serves human action to alleviate human unease better than animism. He continues:
The champions of mechanicalism do not bother about the still unsolved problems of the logical and epistemological basis of the principles of causality and imperfect induction. In their eyes these principles are sound because they work. The fact that experiments in the laboratory bring about the results predicted by the theories and that machines in the factories run in the way predicted by technology proves, they say, the soundness of the methods and findings of modern natural science. Granted that science cannot give us truth—and who knows what truth really means?—at any rate it is certain that it works in leading us to success.
So he invokes a Humean skepticism, a la Kant, to declare mechanicalism a useful fiction summarizing past experience but having no purely rational basis. He continues:
But it is precisely when we accept this pragmatic point of view that the emptiness of the panphysicalist dogma becomes manifest. Science, as has been pointed out above, has not succeeded in solving the problems of the mind-body relations. The panphysicalists certainly cannot contend that the procedures they recommend have ever worked in the field of interhuman relations and of the social sciences. But it is beyond doubt that the principle according to which an Ego deals with every human being as if the other were a thinking and acting being like himself has evidenced its usefulness both in mundane life and in scientific research. It cannot be denied that it works.
So he invokes Fichte’s assertion that the sameness of others’ consciousness to one’s own is a necessary condition of consciousness, but demotes it from a transcendentally deduced truth (the status Fichte gave to it) down to an empirically validated useful fiction alongside mechanicalism. For von Mises, naive animism is as useful a fiction when its application is restricted to humans as mechanicalism is when its application is restricted to non-human entities. He continues:
It is beyond doubt that the practice of considering fellow men as beings who think and act as I, the Ego, has turned out well; on the other hand the prospect seems hopeless of getting a similar pragmatic verification for the postulate requiring them to be treated in the same manner as the objects of the natural sciences.
So he thinks mechanicalism will never prove to be a useful fiction for modeling and predicting human behavior. He continues:
The epistemological problems raised by the comprehension of other people’s behavior are no less intricate than those of causality and incomplete induction. It may be admitted that it is impossible to provide conclusive evidence for the propositions that my logic is the logic of all other people and by all means absolutely the only human logic and that the categories of my action are the categories of all other people’s action and by all means absolutely the categories of all human action.
So he thinks even logic falls to the blade of Humean skepticism, and along with it his own theory of action, praxeology. Logic and praxeology are both useful fictions. He continues:
However, the pragmatist must remember that these propositions work both in practice and in science, …
So he warns pragmatists not to reject the inherent human-restricted animism of praxeology, the assumption that other humans think like oneself, because it is a useful fiction upon which the historically successful operation of both logic and praxeology in human thinking depend. He continues:
… and the positivist must not overlook the fact that in addressing his fellow men he presupposes—tacitly and implicitly—the intersubjective validity of logic and thereby the reality of the realm of the alter Ego’s thought and action, of his eminent human character.
So he warns positivists, by which he means absolute mechanicalists who attempt to reduce all truth to pure logic, that their entire project presupposes the useful fiction that other humans think like oneself. But Von Mises makes a point once again to assert, without justification, that “the realm of the alter Ego’s thought and action” characterizes “human character” and makes it “eminent,” by which he can only mean morally superior to non-humans in the Kantian sense of morality. He continues:
Thinking and acting are the specific human features of man. They are peculiar to all human beings. They are, beyond membership in the zoological species homo sapiens, the characteristic mark of man as man.
So without fanfare he raises to the level of a grand postulate his assertion that only humans, as defined empirically by zoologists, think and act.
Anticipating the objection that the intersubjective “I” has no inherent marker by which to associate itself with “the zoological species homo sapiens” von Mises continues:
It is not the scope of praxeology to investigate the relation of thinking and acting. For praxeology it is enough to establish the fact that there is only one logic that is intelligible to the human mind, and that there is only one mode of action which is human and comprehensible to the human mind. Whether there are or can be somewhere other beings—superhuman or subhuman—who think and act in a different way, is beyond the reach of the human mind. We must restrict our endeavors to the study of human action.
So he follows Kant’s masterful sleight of mind in ducking the question of whether there is any basis apart from anti-scientific prejudice in his elevation of human consciousness above non-human consciousness. Like Kant, von Mises feigns humility and human metaphysical limitation of mind as a justification for excluding non-humans, zoologically defined though they be by humble human logic and observation, from his intersubjective recognition of logical and deliberative thought.
How Anthropocentrism Distorts von Mises’ Concept of Savings
When calculating the total savings in an economy available for the production of capital goods, von Mises will first and foremost consult his zoological handbook and inspect the anatomy and physiology of each entity contributing matter or energy to the economy, and for those he determines to be non-human he will enter a zero in the savings column on his ledger, for according to his anthropocentric praxeology only zoologically human contributions of energy and matter proceed from a choice to defer present consumption in preference for establishing the means for future consumption.
Von Mises concludes:
This human action which is inextricably linked with human thought is conditioned by logical necessity. It is impossible for the human mind to conceive logical relations at variance with the logical structure of our mind. It is impossible for the human mind to conceive a mode of action whose categories would differ from the categories which determine our own actions.
So like Kant he somehow manages to delineate the exact contours of what he claims no human can comprehend.
The only way to make any sense of this Kantian transcendental deduction, of any transcendental deduction, which purports to define the exact contours of the great unknown it demurs it can never in the least comprehend, is to interpret it to mean that this great unknown is the complement of the class of recursively enumerable sets, which in turn consist of all knowable propositions.
It is certainly a proven theorem of the mathematics of incomputability that the complement of the class of recursively enumerable sets is beyond the computational reach of the class of recursively enumerable sets. And it is interesting to suppose that Kant’s transcendental deduction came from an intuition of what later would become Godel’s Incompleteness Theorems and the mathematics of incomputability. But that hardly justifies associating either of these incomputable classes to a zoological classification that is, if not simply finite, most certainly recursively computable.
An irrational way of making sense of von Mises’ exclusion of non-humans from the subject of praxeology would consider his attempt to walk a fine line between pragmatism and positivism, much as Kant attempted to walk a fine line in his day between rationalism and skepticism.
Following Kant, von Mises limits his object of inquiry to humans because he chooses to rely on the lack of scientific evidence that non-humans think logically and morally. Yet he also chooses to ignore the lack of scientific evidence that humans think logically and morally.
It is certainly for this reason that his self-professed nemesis Bertrand Russell is considered perhaps the greatest philosopher of the twentieth century while von Mises is never mentioned in any history of philosophy. Russell correctly concluded that empirical evidence can provide no categorical distinction between how humans and stones respond to stimuli, whereas von Mises weakly fell back on the assertion that human behavior is too complex to be understood helpfully in a mechanistic manner.
Thank goodness von Mises does not follow Kant further to classify different races of humans and different nationalities among races of humans into different levels of moral rationality (and I highly doubt von Mises just after World War II would have agreed with Kant that Germans exhibited the most refined development among humans of the faculties of moral reasoning).
Sadly for praxeology von Mises crippled it by amputating it on an anthropocentric Procrustean bed, much as Kant amputated his architectonic of human reason on a racist, sexist and nationalist Procrustean bed. This amputation denies praxeology its full and complete application to the entirety of economic activity that contributes to human satisfaction and the progress of human society, an entirety that must encompass both human and non-human economic activity.
Breaking Down von Mises’ Final Defense of Anthropocentrism
But von Mises offers one last justification for this amputation. He goes so far as to acknowledge that animals behave as if they were making choices with purposes in mind, but insists there is no evidence of consciousness in animals when they do it, so he calls it “quasi-action” and suggests that while praxeology would be the only way to make sense of such animal behavior, it should not be used to explain it. Instead, we should fall back on what he freely admits to be a “makeshift,” which is to say that when animals act as if they were making choices with purposes in mind they are merely acting on “instincts” which for mysterious reasons happen to correspond to their self-interest in improving their well-being. He writes:
There are types of behavior which on the one hand cannot be thoroughly interpreted with the causal methods of the natural sciences, but on the other hand cannot be considered as purposeful human action. In order to grasp such behavior we are forced to resort to a makeshift. We assign to it the character of a quasi-action; we speak of serviceable instincts.
We observe two things: first the inherent tendency of a living organism to respond to a stimulus according to a regular pattern, and second the favorable effects of this kind of behavior for the strengthening or preservation of the organism’s vital forces. If we were in a position to interpret such behavior as the outcome of purposeful aiming at certain ends, we would call it action and deal with it according to the teleological methods of praxeology. But as we found no trace of a conscious mind behind this behavior, we suppose that an unknown factor—we call it instinct—was instrumental. We say that the instinct directs quasi-purposeful animal behavior and unconscious but nonetheless serviceable responses of human muscles and nerves. Yet, the mere fact that we hypostatize the unexplained element of this behavior as a force and call it instinct does not enlarge our knowledge. We must never forget that this word instinct is nothing but a landmark to indicate a point beyond which we are unable, up to the present at least, to carry our scientific scrutiny.
So he acknowledges that much of animal behavior can only be explained teleologically, by which he means in terms of individual deliberation and choice of means towards conscious ends, and not causally, by which he means not mechanistically. But he insists nonetheless on marking out all of that animal behavior as a mystery ultimately to be explained causally, mechanistically. So even behavior by non-humans that he cannot explain in any other way than as consciously purposeful action, he chooses to assume to have some hitherto as yet undiscovered mechanistic explanation.
Unfortunately von Mises’ anthropocentrism simply opens a gaping hole in his entire project through which his rival theorists of the positivist persuasion can drive their entire train of thinking like a herd of cattle – robotic cattle.
For if we are justified in assuming that any non-human behavior we can only explain as purposeful is in fact mechanistically driven, then we can just as well assume the same of all human behavior. The only differentiator von Mises offers is the glib and question-begging generalization that “we found no trace of a conscious mind behind this behavior.”
Well, where would one look for a trace of a conscious mind behind the behavior except in the behavior itself? Introspection is no less empirical observation of behavior than observing gorillas or smashing atoms. And didn’t he just say that the very reason we attribute this behavior to the empty teleological marker “instinct” is because we find nothing but perfect evidence of purposeful action in it and not a trace of mechanistic causality?
Not Throwing Out the Baby With the Bathwater
Far from rejecting von Mises’ work, however, I mean to build upon it. I believe von Mises’ anthropocentric praxeology was a courageous and brilliant defense of human liberty against the forces of totalitarianism, and I believe by liberating von Mises’ praxeology from the political strait-jacket of its anthropocentrism we can reveal how praxeology not only provides the best basis for economics and sociology, but also provides the best basis for physics, chemistry, biology and engineering.
As we proceed to analyze all non-human force and motion along with human force and motion as “action” defined as von Mises defined it, we will be able to settle once and for all every argument ever laid down against von Mises’ assertion that economic prosperity is only possible through an economics that finds its basis in praxeology.
For example, consider the principle that only savings can generate both capital goods and the demand to consume what those capital goods produce. This principle is the key to understanding why fractional reserve banking necessarily results in malinvestment and the ultimate degradation of an economy through successively larger and more catastrophic boom-bust cycles.
The way von Mises defines savings really amounts to defining it as “work” in its Newtonian mechanical meaning—the conversion of potential energy into kinetic energy in a system. By limiting the scope of this definition to human contributions, von Mises grossly distorts the ultimate calculations that would prove his theory of value to be as emprically valid as the Second Law of Thermodynamics has proven in Physics. In fact, shorn of its anthropocentrism, his principle that savings forms the sole basis for unwasteful capital goods production simply becomes a restatement of the Second Law of Thermodynamics as applied to economics.
The Second Law of Thermodynamics and von Mises’ Theory of Savings
So let us consider the Second Law of Thermodynamics. It continues to be the source of much controversy in Physics, as everyone agrees it is generally confirmed by experiment but they do not agree on what it means or whether certain controverting experimental results amount to true exceptions. The basic idea is that physical systems do not become more orderly on their own, and usually become less orderly when they move from energy disequilibrium to energy equilibrium.
Another way of saying this is that all local potential energy in a closed system converts to kinetic energy in whatever ways it structurally can. The classic example is but a simplistic limiting case, to wit, two volumes of the same gas (meaning tiny totally inelastic spheres), at the same pressure but at different temperatures, combine, and the Second Law of Thermodynamics requires heat to flow only from the hotter to the colder gas until the temperature ultimately reaches equilibrium.
In the general case that encompasses more observed real conditions, when the measurable impact of the complexities of molecular and atomic structure obstructing the release of potential energy are taken into account, the Second Law only requires that a local minimum of potential energy across the system be achieved, and that this local minimum need not consist of equal distribution throughout the system of the residual unreleased potential energy.
In other words, the “savings” in any realistically modeled physical system is typically more than zero and not evenly distributed throughout the system. This is true even at temperatures as close to absolute zero as we can achieve.
Compare this to the basic premise of von Mises’ theory of capital, which states that the time preferences of economic agents are an “ultimate given” that cannot be predicted based on any causal mechanism. Each economic agent “saves” whatever it “saves” and which economic agents saves how much is not susceptible to any operably accurate predictive deduction, be that statistically deterministic or absolutely deterministic.
The same is true of physical systems. When physicists quietly acknowledge that there may be “hidden” savings encased in pockets throughout a system due to the complex inhomogeneous structure of systems, including “as low as you please” low-energy systems, physicists acknowledge far, far more than that there are certain well-known structural causes of this energy hoarding that render it predictable.
No, this acknowledgment opens the door completely to the possibility that pockets of energy are stored locally within systems of any kind and in ways that may or may not ultimately be susceptible to quantitative analysis and prediction.
The triumph of mechanistic assumptions in physics cannot be attributed to Newton, for Newton never believed in a mechanistic universe. He spent nearly his entire career, in fact, battling against mechanistic interpretations of his Principia Mathematica. Newton believed the universe was the “divine sensorum” of God, and that no matter how mathematically elegant or accurate one’s mechanistic accounts of nature may be, they do not actually explain or predict with certainty any motion in nature.
If we step back from the unfounded premise of mechanistic reductionism, we can see the plain scientific superiority of assuming that there are unknown forces behind all observable motion or change. To assume we know all the forces at play in any given moment of change is to guarantee we are wrong. Newton’s genius, in fact, was that he opened his mind to mysterious principles of force and action in his explanatory narrative of observable motion on earth and in the heavens. To assume we know all the non-negligible forces at play may have practical utility, but only if we stay open to the empirical discovery that this assumption is wrong.
All working scientists treat their subjects of study as unpredictable agents, for that is what makes them worthy subjects of study. Their quest to identify the antecedents and consequences of those agents’ behavior in more predictable agents does not require that any of those agents’ conformity to the identified patterns be absolute and involuntary—they merely need to be statistically reliable within a couple standard deviations.
There is nothing in the actual practice of scientific research that requires, recommends or in any way profitably adopts a mechanistic worldview as its premise. Rather, the practice of science and engineering both require an acceptance of the limitations of all prediction, analysis and theory. The question of whether there is an ultimately mechanistic theory of everything or an ultimately mechanistic theory of anything is meaningless to a working scientist or engineer.
To put it more directly, the question is moot to the work of science and engineering whether things voluntarily or involuntarily behave in statistically reliable patterns, and whether in principle those things can or cannot decide spontaneously to defy those heretofore reliable patterns. In practice things do spontaneously defy known patterns of their behavior, for that is the very reason we have science at all, and assuming they are at all times free to choose to follow or not follow patterns of any kind is the only metaphysical assumption that provides a principled basis for both empirical vigilance and rational confidence.
We exercise the same empirical vigilance and rational confidence whenever we buy or sell anything, walk into a crowd, or step into an unfamiliar bit of urban or rural wilderness, and for the same reasons. We know that generally people have agreed to trade fairly and honestly, and according to known rules. But we are also aware that people can and sometimes do choose to disobey rules and frustrate our expectations, sometimes for reasons we can discern, sometimes for no apparent reason at all.
We also know that forces in nature have agreed to behave in certain patterns, but scientists’ lives are spent puzzling over the instances in which those forces have chosen to behave in ways that defy those patterns. Figuring what patterns, if any, those forces do agree to conform to within a couple standard deviations, does not require assuming they do so involuntarily. Indeed, it makes most sense to assume they do so voluntarily.
Whether one considers it voluntary or not, it’s clear that when energy remains kinetically unexpressed, it meets the definition of savings under praxeology. Energy, meanwhile, meets the definition of money under praxeology. And entropy meets the definition of consumption.
Entropy has a precise mathematical definition, which can best be described by saying that entropy is the size of the alphabet required to spell your uncertainty, to spell all the things that might happen next in a system. That alphabet consumes some of the complexity in the system. The rest of the complexity is free to flow into another system and hence to be used for work.
The total energy in a system minus its entropy, the energy it must consume to maintain its own integrity as a system that has its own specific proper subset of all possible states as its next possible state, is the savings it can direct to change its environment—in short, its will.
So entropy is the energy required to individuate oneself, one’s self-sustenance, and the remaining energy is what is available to change what is not oneself, one’s will. The ratio of one’s self-sustenance to one’s will is one’s time preference, which determines how much energy is required to reduce your self-sustenance energy by one unit of energy (the interest you would need to be paid in order to get you to forbear consuming more than you are willing to forbear at no interest—interest, like all prices, being marginal in nature).
Mutualism in biology is what von Mises calls “free exchange,” in which each party to the exchange values what they receive more than what they give. In energy systems, two systems that want what the other has more than what they must give the other to receive it will come into equilibrium with each other. Each exerts its will on the other, and the result is a change to each self that each was unable to cause to oneself without the other.
A loan is the starting step in an asynchronous exchange, which can only be completed if the borrowing system uses the borrowed energy to exchange with a third system and receives back some work in exchange that enables it to do work sufficiently useful to the loaning system to pay it back for the loan, with interest to compensate for the delay in the exchange.
Fractional reserve banking is loaning on the basis of the third party’s willingness to loan energy to the first party. It only works if all energy is loaned to the first party, including all the energy that the first party, called the banking system, loans out.
As long as the total free will energy in the world is loaned to the banking system at lower interest than the banking system charges for loans, the banking system does not actually need to pay back the energy loaned to it, and can hence loan out every iota of energy loaned to it. Meanwhile the banking system also receives energy back in installments from the loans it gives out. So it receives energy loaned to it and only ever gives a small fraction back in return, while it loans out the rest and receives in return more than it lends out.
This facilitates chains of exchange of kinetic energy for potential energy among the selves in the world. When a bank loans energy, it loans potential energy. The borrower trades that potential energy for kinetic energy directed in precise and sophisticated ways to accomplish a specific kind of work. The source of the kinetic energy turns around and trades that potential energy to a fourth party for kinetic energy, and so on and so forth.
The trick to fractional reserve banking is that only a fraction of the potential energy the banking system loans out is, at any given time, actually held outside the banking system. It is held outside it only in the moment of transaction. Once the transaction is completed, the potential energy returns to the banking system, just in a different depositor’s account.
Textbooks in fiduciary intermediation describe the dynamic differently. They imply that the banking system merely holds the potental energy belonging to its depositors in a trust relationship, allowing depositors to trust one another in exchange through their mutual trust in the banking system as a neutral third party to their transactions, and also facilitating the exchange in value through a central accounting system that relieves the parties from having to carry and exchange physical tokens or to maintain the bookeeping among all their trade partners themselves. While the conveniences and services provided by the banking system certainly are as just described, fractional reserve banking shifts the ownership of the deposited energy from the depositors to the banking system. The banking system actually owns all its deposits. Depositors exchange those deposits for claims against the banking system in the amount of those deposits, sometimes with rules limiting the time, place and manner of enacting those claims. Depositors, therefore, only actually own and control their deposits when they successfully execute a claim on some portion of them, usually for the purpose of a transaction. Thus, in effect, depositors only own the right to borrow their deposits from the banking system for the duration of a transaction. Their titular right to claim any amount or all of their deposits indefinitely is severely restricted by the simultaneous right of all other depositors, because typically the reserve ration is around three percent, so only three percent of deposits can actually be removed from the banking system at any time without collapsing the banking system as a whole. Thus the banking system will attempt to prevent excessive removal of deposits by offering zero interest credit in its place, thereby keeping the deposits in the banking system as the on-going basis for its reserve-ratio multiplier loans. The banking system is safest, in fact, when the vast majority of its depositors have borrowed more than they have deposited.
When a pocket of potential energy borrowed from the banking system is exchanged for kinetic energy, the kinetic energy may be partly from another pocket of potential energy borrowed from the banking system by another party, but it is always also at least partly from potential energy stored in nature, including from the living bodies of humans. Generally the goal of capital investment is for the work product from that kinetic energy to create value by facilitating greater extraction of potential energy from nature, which is then deposited back into the banking system, thereby increasing the total potential energy in the banking system. Malinvestment is when kinetic energy is squandered and a net loss of potential energy from the banking system into nature occurs.
In its anthropocentric strait-jacket, von Mises’ theory of savings, in fact his entire theory of economics, is doomed to fail. But liberated from that strait-jacket, it reveals itself to be as rock-solid a foundation for designing and maintaining human participation in nature’s market economies as the laws of Newtonian Mechanics and Thermodynamics have proven to be for designing and maintaining our built environment. By properly understanding Physics as the science of reliable contractual behavior in nature, we are able to see how von Mises’ theories merely applied the insights of Physics to relations of mutually beneficial energy exchange in nature.
Lifting Economics Out of the Superstition of Anthropocentrism
Certainly von Mises was well aware of the writings of John Muir, for Muir’s writings were world famous from before von Mises was born. And if von Mises had never heard of the author of the poorly circulated 1941 book Under the Sea Wind, surely he must have become aware of Rachel Carson’s writing after the publication of her blockbuster 1951 bestseller The Sea Around Us, along with its tremendously popular serializations in The New Yorker, Yale Review and Reader’s Digest and its Oscar-winning documentarization in 1953.
Yet von Mises does not engage with the conservationist movement in his published writings. Perhaps he missed its relevance to his subject matter, but he did not miss the relevance of his subject matter to the subject matter of conservationist thought. He makes it very clear in his writing the position in which he places all non-human activity in nature – they are raw material and not final goods, simply because they are not the result of human individuals transforming them.
When I am digging in my backyard to make a swimming pool and crude oil, black gold, Texas T, spurts out like in the Beverly Hillbillies, does not my discovery of this oil deposit on my land constitute capital accumulation? Yet how does that capital come from human preference for future consumption over consumption now? It doesn’t. This proves von Mises’ principle wrong, because he limits his principle to human action, and it is this very wrongness of that principle that has led to fractional reserve banking and the whole delusion that we can get something from nothing in this world.
The truth is, the principle that capital comes solely from savings is entirely correct, but only if one includes savings by all agents in nature, not just by humans. By dispelling the illusion that only humans save, we dispel the illusion that capital accumulates by the magic of fractional reserve banking or by any other magic. By removing the anthropocentrism from praxeology, we remove the superstition from economics.