Fundamentals of Human Action

0:00Now, Rothbard begins with a discussion of what action is. Remember, the fundamental axiom of praxeology is that man acts, human beings act. So, he defines action as purpose, he says on page one, human action is defined simply as purposeful behavior. And he then goes on to say that everybody acts. So this is a characteristic of human beings. Now, in the questions that the fellows submitted, there were some interesting questions about this. At this point, Alex Weller, I think, has some questions.

0:46He asks, supposing you have an investment firm that has a computer program that is able to make investments, would you say that the computers are then acting? Well, that would really depend on what views you might take about artificial intelligence. I would tend I begin to think that since one of the requirements for acting is that the person, that the actor have desires, the computers wouldn't be acting. I mean, there are various arguments on whether computers can reason or think, but I don't think they've got computers that have desires yet, so I'd say no, they wouldn't.

1:34Now, another question he had was, supposing someone is under medicine to control schizophrenia, would that, would his behavior still count as action? Well, I think it would, as long as he still had certain purposes that he was trying to achieve. It isn't a requirement for action that you have just unmodified purposes or purposes that aren't the result of someone else trying to induce you to do things. It's just that you have to have purposes in your behavior. You have purposes. Now, there was one question rather surprising, although it was a very interesting one, that was raised by Mr. McCaffrey, and he thinks there's a possible divergence between Mises and Rothbard, where Rothbard says that all human beings act. He says on page two, we could not conceive of human beings who did not act purposefully, who have no ends in view that they desire an attempt to attain.

2:46Now, Mr. McCaffrey points out that Mises says about, when he talks about the socialist economy, he says only the dictator acts, no one else acts, so he says, well isn't this a contradiction, you know, because Rothbard is saying we all act, but Mises says in the socialist economy only the dictator acts, but actually there you see, I think Mises is using action in in a kind of a, he doesn't mean it in a strict way, Rothbard is, what he says, what Mises says in this passage, it's on, in Human Action, where he says that all the other people are following orders, it's only the dictator has original ideas, he's the one who's formulated the plan, everyone else is following orders. So following orders counts as action in the This is the sense Rothbard is intending. Of course, Mises uses this sense also for most of human action, but here in that particular passage he just means that people are responding to what the dictator says.

3:53So, action then is any kind of purposeful behavior, and Rothbard points out that it doesn't have to involve any doing something. If you're waiting, that also counts as action. You're just sitting, say you've decided you're just going to not do anything, you're going to stay where you are. or that counts as action. You don't have to change what you're doing to act. Now another point, it's interesting, I once heard this from a lecture by Elizabeth Anscombe, who's one of the great 20th century philosophers. Action, other than waiting, doesn't have to involve physical movements at all.

4:40For example, suppose I said all those who want to vote for me for president signify by remaining seated. So suppose you, I see everyone who voted for me will remain seated. So by remaining seated, you voted. That's an action, you see. So you don't have to actually, you don't have to do anything. You don't have to change your physical movement in order to act. Now, what Rothbard is going to do with this fundamental point that human beings act, he's then going to derive the whole body of economics from that axiom with a few, with help of some subsidiary axioms as well, such as that leisure is the good, which don't follow from the axiom.

5:38Now, some people have, a lot of people have problems with this view. They say, well, and there were some of the questions that we had were critical, were raising points on this. The main question was, how can you say that, if you, I think Edward Perry raised this point, how can you say that if you're talking about the empirical world, how can you say that you're deriving truth about it a priori? A priori would mean apart from experience, but then how can it apply to the empirical world? I think he also raised the point, doesn't Rothbard himself say that the conclusion of economics applies to the empirical world, so how can he then say that it's a priori?

6:33Well, here I think you have to, some people also ask, I think Mr. Diorio asked, isn't there a difference between Rothbard and Mises? He thinks that Mises sometimes allows that parts of economics is to be tested empirically, but Rothbard seems to want to derive all of economics deductively, thinks there's a difference there. So, I wanted to just say a few things on what's involved in the praxeology, the praxeological method. Method Now, when you say something is a priori, what you're talking about is how, say, proposition is a priori, you're talking about how you know the proposition to be true.

7:24Say if you say 2 plus 2 equals 4, how do we know this is true? Well, you know it just by thinking about it, you see that it's true, you don't have to Test it out to see whether it's true. You don't have to keep taking collections of two objects, another collection of two objects, and adding them up to see whether you get four objects. You see right away, you realize the proposition is true. The key point to realize here is that, as I say, this is a matter of how you know that the proposition is true. It's not a matter of how you get the concepts that you're using. It isn't a requirement for an a priori truth that you don't get the concepts from experience.

8:15It's just how, once you've got whatever the concepts in the proposition, how you then know the proposition is true. So you see, here's the real difference between Mises and Rothbard. They're really the way they do it. The economics is the same. They start off with the action axiom, and then they deduce various theorems from it. And it's not true that, say, Rothbard thinks the whole of economics is deductive, because remember he says that the one that leisure is a consumer's good is not something that falls from the action, it's exactly the same, but the key difference is Rothbard thinks that we get our concepts from experience, but then once we get the concepts then we can think about them, we can reason about them, and we can realize that there's certain necessary relationships that apply among these concepts, but Mises was more influenced by Kant and he thought that the mind structures experience in a certain way, unless it's structured experience in this way, we wouldn't be able to have coherent experiences at all.

9:33So what Mises thinks is that what we're doing in our prior reasoning is just applying a a certain structure that the mind gives to experience, whereas Rothbard takes a view more from Aristotle and St. Thomas Aquinas, that we get our concepts by abstraction from experience. That's a rather three or four minute summary of differences between Kant and Aristotle. That's Walter that said I should give some jokes, so that would be my first joke trying I'm going to give a summary of those two philosophies in a couple minutes. All right, now, after Rothbard goes and explains what action is, he has a very important point about action.

10:28He says, page 7, another fundamental implication derived from the existence of human action is the uncertainty of the future. What does he mean by that? Well, supposing I want to do something, whatever it is I have some end in view and I have means that I propose to achieve it, I can't think that what's going to happen is fixed regardless of what I do. Say, if I say I want to end this lecture immediately, run out of the room, I have to think it's possible for me to do that. If I thought it was fixed that I couldn't possibly do that, that I have to remain here, then I wouldn't be able to, it would not make sense for me to act.

11:21The notion of action presupposes that the future is open, at least in the sense that I think it's possible for me to realize whatever it is I want to do. do. There are some economists like Ludwig Lachmann as an example, isn't it, who was an Austrian economist, and then G.L.S. Schackel, who was not an Austrian, but who was a friend of Lachmann, who take this in a very, this notion of uncertainty of the future, very radical, since they say we just don't know anything at all about the future. This is not part of Austrian economics. This is just a particular view that they hold, but this is not what Rothbard means by uncertainty of the future.

12:16All it means is that when you're acting, you have to allow for the possibility that what you want to do can be achieved. If you think that the course of the world is absolutely fixed, regardless of what you do, then it would not make sense for you to act. You think that everything is fixed. Now, in action, what we're doing is we have a choice between various goals that we want. We have alternative actions open to us. So what Rothbard contends is that we rank our alternatives.

13:05We say, what are the things I would most want to do? What are the alternatives to open to me? And we always choose the one that's highest on our list of preferences. Say, if I have a choice, say, between giving this lecture, say, going and checking my computer messages, well, I'm going to choose to give a lecture because otherwise I won't be paid for my week here, and we wouldn't want that to happen. That just, that wouldn't bear thinking about. So, what we do, we rank our alternatives and we always choose the one that ranks highest. Now, Rothbard points out that we can't, when we're ranking these alternatives, we're not, we're just ranking one above the other, we're not measuring them in any way.

14:06we're just saying one alternative is higher than the other so what he says it's an ordinal rather than a cardinal measurement or utility so we're saying this is first this is second this is third there's an ordinal measure cardinal measure would be saying I prefer this five times as much as the second Alternative. So Rothbard said, there isn't any such unit. It doesn't say that we have some sort of constant unit that we can measure all the actions, all the choices on. So this This really knocks out one type of moral philosophy, at least, I shouldn't say knocks it out, it just makes things difficult for certain types of utilitarianism, propose that the way we should decide things is to maximize the happiness or pleasure, something, whatever, something else we maximize.

15:14Some types of utilitarianism, not all of them, assume that you can measure utility, and even worse than that, if it's a sin to think you can measure utility, even worse is to think you can measure utility among persons, make interpersonal comparisons of utility. You can't do that according to Rothbard. You just rank the alternatives in order. Now, there's a very interesting question, I think, in Bob Murphy's excellent study guide, I think, in one of his study questions. I think it's number five. He asked something. This, he says here, let me quote this. He said, suppose someone said, I like steak more than burgers, and I like burgers more than hot dogs, but my preference for steak over burgers for Burgers is definitely stronger than my preference for burgers over hot dogs.

16:15What do you think Rothbard would say about this statement? And I think he naturally wants the answer. Rothbard would reject this because you can't have measurements of utility. But the question one might raise here is, aren't statements like that ones we make all the time? time, we would say something like, well, I really like watching professional wrestling. If the choice between wrestling and watching the Republican convention, I'm going to really like wrestling much better. Who wouldn't? So, all right, so we say that, and then suppose it's a choice though between watching one Program, and another you say, well, I really don't care that much which program I'm watching.

17:14Don't we make statements like that all the time? And you see, I think that's perfectly consistent with what Rothbard is saying, because what Rothbard's point is, when we make statements, would be when we make statements like that, we're not claiming there's some unit of measure. This is just in an ordinary language sense we can indicate we have strong preferences for certain things. and other things, that's not at all ruled out by ordinary, by praxeology, this is just an ordinary expression. Now we now, I want to get into one of the most important parts of Austrian economics that Rothbard discusses in this chapter, the law of marginal utility, diminishing marginal utility, which he derives from the concept of action.

18:06Now, he says, supposing we have a number of different units of the same good, now we have, here before we can go on with explaining a dimension, marginal utility, we have a problem here, and this is one I think Harry David raised this problem, other people have raised this also. Rothbard says, when you talk about units of the good, he says, page 23, in these examples, the units of the good have been interchangeable from the point of view of the actor, and he says later in that, in the same paragraph, when a commodity is in such a way available in specific homogeneous units, equally capable of rendering the same service to the actor, This available stock is called a supply. A supply of a good is available in specific units, each perfectly substitutable for every other. So, you have here the notion of supply.

19:08All the units are perfectly substitutable for each other. Now, the problem that Harry David raised is, well, isn't it also one of the teachings of Austrian economics that You can't demonstrate indifference in action, so if supposing you have two identical units of the same good, say you pick one over the other, wouldn't you have to at least think that one is somehow better than the other, otherwise you couldn't choose one over the other? So is there a problem here? This point actually was raised in an article by Robert Nozick, who was one of the outstanding great 20th century philosophers, an article he did called On Austrian Methodology.

20:00I think it came out originally around 1974. You can look at that in his book Socratic Puzzles. It's a very important article. Walter Block had a reply to this article. I think came out in a different, it knows its article, it created it out originally, a journal called SinFest and then I think Walter's article was in a different journalist theory and decision, but you see what the problem is, it's supposed to be, how could your, you can't demonstrate indifference in action, but according to Rothbard, you can have a supply where you have, you're considering all the units of the good the same, it's a homogeneous good, Incidentally, one thing people should watch, this is worthy of the death pouncy.

20:48Some people pronounce, instead of saying homogeneous, they say homogenous. I mean, that's, if that isn't worthy of the death pouncy, I don't know what is. I, I, although I, one could think of probably, one could think of worse things, but that's really approaching the bottom. But, you see, there isn't really, I don't think there are various ways The key to it is what Rothbard says on the next page where he says the interchangeability of units in the supply of a good does not mean the concrete units are actually valued equally. They may and will be valued differently whenever their position in the supply is different.

21:36So what's the case when you say that you have identical units of a good, you're not Valuing the good at all, it's that you're just considering them as units of good. Now, what happens, say, if you're assigning one that you have to pick one of these units, well, somebody said, bring me a copy of Man Economy and State. You see, there are a number of them on the shelf. Well, wouldn't you have to pick one of them, so wouldn't you have to value one of these more than the other? Well, I don't think that's what's meant when people are talking about choices as value is showing non-indifference.

22:26What there, you're talking about a choice between different goods. You're saying what you're really talking about is you're picking one value over the other. When it's a case of goods that you just regard as perfectly identical, it isn't a question of choosing one thing over the other, you're certainly picking one numerical unit that's different from the other, but that doesn't involve choice in the same way that's being used in this other proposition, when you say indifference can't be demonstrated in action. Now, so what happens then, suppose you do have units of the same good, then according to the law of diminishing marginal utility, well, what you do is you would apply the first unit of the good to your most valued use, then next unit would be to your next most The last unit would be your least valued use. Now supposing you lose one of the units, somebody takes away one from you, it doesn't matter which one they take away, you're going to change things around so that you're only going to suffer the loss of the least valued of the uses.

23:52This is, that's the marginal unit. Rothbard says that this is, this can be deduced from the notion of action. I think there was one of the questioners raised some question, how does this follow law diminishing marginal utility follow from the action action? Well, the way it follows, you see, remember you have human beings act, that action involves use of means to achieve ends. how we rank our ends in order we go for the, we try to achieve our highest valued end first. So then if we have units of a certain means, we'll apply that unit to the highest valued use. You see, that's the deduction. Now there was one question, I thought very interesting one, I think from Edward Perry, he asked the question, Supposing it wasn't true, as we'll later see how Austrian Economics explains it, that prices are determined by the people's subjective valuations.

24:53Supposing that wasn't true, supposing we had some objective measure of value, would the law of diminishing marginal utility still be true? So, I think it would be because, you see, even if, say, some, let's imagine some cost of production theory were true, some labor theory value were true, it would still be the case that when someone obtained certain units of the good, you'd apply the good to your first value use, then the next unit to your second value. So, regardless of how the price was determined, this law would still hold true. Now, there's a complication there. I like complication, most people don't, so I won't go into this too much. There is a complication that if you think that these laws of the Austrian view of price determination can be deductively established, you think it's necessarily true, then the question that was being asked is if this law isn't true, what would then be the case? It's a counterfactual condition with an impossible antecedent, and the semantics

26:04and that type of condition aren't very well understood, so you could get into all sorts of interesting complications there, but I'm not going to go into those, basically because I don't want to. So, all right, and probably people wouldn't find it that interesting anyway. So let me see, I think, I just touched on a few points, let me see what would be, oh, there was one point I touched on before, I think this will maybe be the last one before we open it up for discussion. Rothbard says that one of the extra assumptions that he's He's putting in that is not something deduced from concept of action, is that leisure isn't good.

26:56That's to say, he thinks we could conceive of a world in which people just devoted every spare hour that they physically could to laboring, they didn't value leisure at all. And he said, page 44, everyone would be eager to work to the maximum capacity, since increased work would lead to increased production of desired consumer goods. All time not required for maintaining preserving capacity for work would be spent in labor. And he said, well, this isn't the way the world is. We're not like this. Now, there is an interesting problem raised, I think, and Harry David was one to raise this. He said, well, in order to consume goods, don't we have to have, at least for most consumer goods, don't we have to have some leisure to consume them?

27:52So what would be the point of people just producing, as Rothbard says, to get desired consumers' goods if they wouldn't have any time to consume the goods? This is a very good question, and I think we could see that the denying that leisure is a good would have very radical consequences. I think we would have to say there that it would have consequences of what the type of good desired would be. The only consumer's goods, presumably, would be ones that would be needed for physical maintenance of the person, of the Person, so you would have people just constantly laboring to produce more and more goods they needed to maintain themselves or otherwise they would just save them all up, so that would be a very different world from the actual world.

28:46I think just one final point which I want to mention, I think it's a very important one which Rothbard is one of the keys to understanding the praxeological method that Rothbard discusses is on page 75, is why do you, why do we have in Austrian economics, why do we have a verbal logic, why we, we, in Austrian economics, everything is done through words, if you look at the text, standard textbooks in neoclassical economics, they'll all be equations, they It looks like a math textbook, except of course if it's in econometrics work, they look like railway timetables.

29:31But the neoclassical books look like math textbooks. So what's so great about verbal logic? And Rothbard has, I think, this is a very insightful passage, he says, What we're doing in verbal reasoning is each step of the argument is meaningful. Whereas in a math calculation, we're just interested in how do we get to the conclusion. We're trying to prove a certain conclusion. The steps are just applications of certain mathematical rules. They don't have independent meaning. He says, he says here, he's considering a suggestion which was raised to, that if, if economics is supposed to be deductive, why don't we make this in mathematical law, why don't we do economics as mathematical logic, he says, if a, if a logistic array of symbols were used, logistics is another term for mathematical logic, if a logistic array of symbols were used, each proposition would not be meaningful, Logistics, therefore, is far more suited to the physical sciences, where, in contrast to the science of human action, the conclusions rather than the axioms are known.

30:51In the physical sciences, the premises are only hypothetical, logical deductions are made from them. In these cases, there is no purpose in having meaningful propositions each step of the way, and therefore, symbolic and mathematical language is more useful. So he's saying each step is meaningful. Incidentally, it's unusual that Hegel makes exactly this argument where he criticizes mathematics on this ground. So Rothbard was generally opposed to Hegel, remember, in the second volume of his History of Economic Thought. He has a very good section, very critical of Hegel, but this particular case he was using the argument that Hegel had given before him.