I got into a verbal discussion/debate with a coworker today. As anyone who follows the Austrian school or the doctrine of natural rights may know, a casual discussion on the efficiencies of a market can be unpleasant when speaking with someone who holds the unfortunately conventional view that capitalism is defined by systematic exploitation. Proponents of this Marxist-based ideology typically fall back on declarations that corporations “rip you off” and will do “anything for a dollar.” Even worse, these statist advocates ceaselessly trumpet the cause of the “public good.”
But therein lies the true fallacy behind this type of thinking as it can easily be refuted through the use of individual methodology; a defining attribute of the Austrian school of economics.
One thought construct utilized in the treatises and work of such prominent Austrian economists as Ludwig von Mises, Murray Rothbard, and Hans Herman-Hoppe is that of the deserted island and Robinson Crusoe. Human action, the underlying basis for all economics, is best analyzed when put in the context of simplicity and in its barest conditions. Rothbard described this construct as “highly important” and “indispensable” in its uses. The very reason that the Crusoe construct is valuable is that while it’s based on an imaginative situation, the lessons derived from its use have greater implications when applied to a market economy. This is why the Crusoe model is often “derided” by those who take a collective or inherently conflictual view of economics. The notion that applying individual action or exchanges between individuals to complex system of billions upon billions of transactions a day takes the proverbial weight out of arguments coming from the point of view of “public” necessities and worker exploitation.
By using the Crusoe construct, we can observe how man’s action, completely unobstructed from modern day conveniences, must operate in the context of nature’s dominance. The choices Crusoe makes in order to better his well being can be deduced to the fundamental Mises axiom “human action is purposeful behavior.” Carried on to a broad sense, applying individual methodology is a requirement for fully understanding how a market economy can ultimately work efficiently.
Now back to the story of the debate with my coworker. After the baseless accusations of corporations ruthlessly taking advantage of hapless consumers and slave-like workers, I quickly gave an example of a remunerative transaction by pointing to his wrist watch and offering him a price of $20.00. I explained that if he went forth with the exchange, then he obviously valued the $20.00 more than the wrist watch and that I valued the watch more than the price I offered. The transaction must be mutually beneficial for if it wasn’t, then one or both of us would refuse to engage in the trade.
His immediate response was something along the lines of “what if I was greedy and charged $10,000 for the watch.” After taken aback at his quick and clearly not thought out reaction, I informed him that I wouldn’t purchase the watch for such a large sum and that if he had any desire at all to sell the wrist watch, he would have to lower his price in order for me to meet him at some agreed to margin. There is no force involved in this self adjusting procedure.
This example is taken from the simple transactions Crusoe and Friday, once introduced to the island, engage in. Crusoe may have a stash of berries he has accumulated that he may wish to trade for a few of Friday’s recently caught fish. If each came to an agreement that they will transact at a ratio of 5 berries per 1 fish, then each has their value scaled fulfilled in accordance with their subjective preference. Applied in the extreme broad sense, it becomes much easier to understand how the global economy composed of 7 billion individuals functions. What appears to be an overly complex system is nothing more than the culmination of individual transactions.
And then of course was the oft-incurred notion of the “public” good. According to my coworker, corporations have no incentive toward looking out for the public good; certainly not a new argument used by government apologists. But as I tried to explain, the notion of the “public” good is simply a metaphysical idea which bears no relation to accurately describing what people may actually desire. After all, only individuals ever act. Therefore only their needs can be satisfied by the actions of others. Mises explains:
First we must realize that all actions are performed by individuals. A collective operates always through the intermediary of one or several individuals whose actions are related to the collective as the secondary source. It is the meaning which the acting individuals and all those who are touched by their action attribute to an action, that determines its character.Unfortunately, this point did not sink in for my coworker who stuck by his ideals about the common good. Ironically, our conversation preceding this debate was on the modern state of music which he denounced as basically garbage and lacking in even the remote amount of talent. According to him, overly produced pop hits shouldn’t get the radio play or attention they garner from the public. For someone who is clearly out of sync with what the general public demands in the form of popular music, making grand statements on what the public needs is incredibly revealing of an inner contradiction in thinking. Because I immensely enjoy modern pop music, obviously my coworker does not know what is best for me. If he doesn’t know what is best for me in this narrow field of preference, then how can he possibly know where billions of other individual preferences lean toward?
Despite my failure in transforming my coworker into a full fledged Austrian disciple, the tool of methodological individualism provided a guiding light through fog and deceitful invocations of the non existent “public” good. The construct of Crusoe on the island with a subsequent alliance with Friday is insightful not just for individual action but when attempting to comprehend how a market economy operates. In the end, the debate was fruitful from the standpoint that it made that portion of the workday fly by (while arguing, we both worked on our respective tasks) and as any foray into a specialized task goes, practice makes perfect. It was certainly more casual than intellectually rigorous but changing minds won’t occur through infighting of blogs and academic journals only.
One mistake I am willing to concede is perhaps I should have picked a different way to describe the adoption of mandatory civil service for all high school graduates rather than “a horribly disgusting idea” and “the equivalent of slavery” when my coworker suggested it. Though I unapologetically believe those descriptions to be true, there is probably a more sophisticated way to describe what boils down to conscription.