Economics and The Free Market

Economics
"The most common misunderstanding about economics is that it is only about money and commerce...economics concerns everyone and everything." [1] Economics is not just a countries GDP, imports and exports; not just about making monetary profit and avoiding loss. It is about individuals, their interaction which each others and their environment. Ironically, although the economy can be studied, it cannot, with any degree of certainty and consistency, be controlled without relinquishing the liberty of individuals.

The Free Market
I am reluctant to use the term Capitalism, not necessarily because it carries negative attributes, but it does not accurately portray a Free Market. However, the terms are typically synonymous with one antother. "The free market is a summary term for an array of exchanges that take place in society. Each exchange is undertaken as a voluntary agreement between two people or between groups of people represented by agents. These two individuals (or agents) exchange two economic goods, either tangible commodities or non-tangible services." [2] A Free Market allows for free exchange and free entry, not to mention free exit.

Although there appear semblances of a Free Market in today's economy, there exists a ranging degree of control from central planners, ie politicians and government officials. Coercive and aggressive restrictions, regulations, and mandates, inhibit not not individuals, but firms from free exchange and free entry in the market. We live in a mixed economy, where many industries are more centrally controlled than others, yet where a free market attempts to thrive. The less restrictions, regulations, and mandates on a market, the better off a market will be able to self manage and self correct.

[1] Rockwell, Lew, The Free Market, Vol. 24, No. 1, January 2006
[2] Rothbard, Murry, The Free Market, Vol. 24, No. 1, January 2006

... more on historical materialism

As I mentioned within a comment to the last post of mine titled "Philosophers have merely interpreted the world," stated Marx long ago. "The point, however, is to change it," Paul Siegel's The Meek & the Militant and John Bellamy Foster's Marx's Ecology both informed my understanding of Marx's dialectical/historical materialism.

Foster indicates that "in developing historical materialism [Marx] tended to deal with nature only to the extent to which it was brought within human history, since nature untouched by human history was more and more difficult to find. The strength of his analysis in this regard lay in its emphasis on the quality of the interaction between humanity and nature, or what he was eventually to call the "metabolism" of humanity with nature: through production" (114). Foster later cites from Marx and Engels' Collected Works that humans "themselves begin to produce their means of subsistence, a step which is conditioned by their physical organization. By producing their means of subsistence [humans] are indirectly producing their material life" (7-8).

And as Siegel outlined after explaining the particular materialism of Feuerbach, "the older non-dialectical materialism did not see the historical process in which people collectively seek to answer social questions only when these questions are thrust upon them. In this historical process human activity is both the product of social development and a cause of social development. In transforming its social environment, humanity transforms itself, buts its transformation of society is limited by historical conditions, in the first place the level and power of the productive forces" (61). As Paul D'Amato indicates in the Meaning of Marxism, "the transformation from one mode of production to another was not smooth or automatic. Each ruling class would at first act to lead society forward, then as their rule progressed, would act to prevent any changes to the system from which they benefited" (35). Lastly, as I've indicated earlier within this blog, the working class, on the other hand, is in a unique historical position to liberate humanity from the exploitation, oppression, and misery created by the constraints of class society, particularly those consolidated under a market-based economic system.

Idealism: Ideas NOT Ideals

Idealism is a confusing term. It has two (perhaps more) meanings. But let's just settle in on the ubiquitous meanings. Many times, individuals may jump between the two meanings and not even realize it. One meaning invokes ideals, a conception of perfection. This meaning seeks the perfection, and that perfection is obtainable. The other meaning deals with ideas, that is, knowledge dependent on the activity of the mind. The mind, namely the human mind plays a central role. Praxeology does not deal with ideals, but rather requires ideas. Praxeology does not investigate perfection, per se, but instead examines the actions emergent from the human mind. Rene Descartes summed it up well, "Cogito, ergo sum" (Latin for "I think, therefore I am").

Reference: Dictionary Definitions

dialectical materialism
noun
the Marxist theory (adopted as the official philosophy of the Soviet communists) that political and historical events result from the conflict of social forces and are interpretable as a series of contradictions and their solutions. The conflict is believed to be caused by material needs.
source: New Oxford American Dictionary

idealism
noun
1 the practice of forming or pursuing ideals, esp. unrealistically : the idealism of youth. Compare with realism .
• (in art or literature) the representation of things in ideal or idealized form. Often contrasted with realism (sense 2).
2 Philosophy any of various systems of thought in which the objects of knowledge are held to be in some way dependent on the activity of mind. Often contrasted with realism (sense 3).
source: New Oxford American Dictionary

materialism
noun
1 a tendency to consider material possessions and physical comfort as more important than spiritual values.
2 Philosophy the doctrine that nothing exists except matter and its movements and modifications.
• the doctrine that consciousness and will are wholly due to material agency. See also dialectical materialism .
source: New Oxford American Dictionary

methodological individualism is a philosophical method aimed at explaining and understanding broad society-wide developments as the aggregation of decisions by individuals.
source: wikipedia.org

praxeology is a framework for modeling human action. The term was coined and defined as "The science of human action" in 1890 by Alfred Espinas in the Revue Philosophique, but the most common use of the term is in connection with the work of Ludwig von Mises and the heterodox Austrian School of economics.
source: wikipedia.org

"Philosophers have merely interpreted the world", stated Marx long ago. "The point, however, is to change it."

I've recently started reading Jared Diamond's Germs, Guns, and Steel: The Fates of Human Societies.  For those of you who aren't familiar with this Pulitzer Prize winner, Diamond goes through 13,000 years of history on all continents.  More importantly, with an exceptional command of the disciplines of geology and evolutionary biology, he makes concrete connections between real world conditions and turning points in prehistory and history.  Diamond utilizes historical materialism, albeit not explicitly, to determine the development (and destruction) of civilizations.  In featuring the conscious and unconscious actions of humans as the real movements that have produced technological advancements and the subsequent superstructure, that is, "the institutions and culture considered to result from or reflect the economic system underlying society," Diamond grants the reader an objective look into the past that outlines what is possible for the future of human societies.  Where this potential is scientific socialism with the majority of people rationally planning their economy not for profit but for human need.

So while "some idealists believed great ides shaped the material world" and "others argued that conditions didn't matter because only ideas are important," the validity of any idea about society can only be tested in practice not through rhetorical jousting.  As Paul D'Amato indicates in the Meaning of Marxism, "whereas the idealist places the mind above and outside of nature, the materialists argues that mind itself is a product of natural developments.  Minds cannot exist apart from the material world, and the material world existed long before any mind was able to experience it" (23-24).  So with such a methodology, that is, with historical materialism (which is sometimes referred to as dialectical materialism), social classes contend for power as contradictions arise in their material conditions where, specifically under capitalism, immense wealth exists next to abject poverty.

Human Action

The methodology of Austrolibertarians is praxeology. Praxeology is the science of human action. Praxeology builds upon the a priori fundamental axiom that human beings act. In essence, individuals engage is conscious actions towards chosen goals. One can deduce the logical implications from the fact that individuals act. While valuation and judgement is in the minds of the individual, it is only apparent when acted upon.

Labor Theory of Value... capitalism has needs, too!

Before capitalism, most people produced essential items for their survival. These societies produced “valuable” goods, however they did not place values on these objects. To put it another way, all human societies produce useful things but they did not produce them for exchange. For that reason, as Paul D’Amato wrote in the Meaning of Marxism “value is a meaningless category outside of market relations” as value is a “historically evolved relations between human beings.” So with the advent of class society and a greater division of labor, commodities began to be exchanged at an increasing pace finally consolidated under capitalist relations.

Since the main dynamic of this profit-driven economic system, capitalism, is the accumulation of capital to make more profit, how do capitalists make more profit you may ask? It is done through paying workers less much less than the wealth they create. So while capitalism may be portrayed as a system of "equal" and "free" exchange of commodities in the market, instead, inequality and exploitation are inherent to market based economic exchange.

Simply put, humans need to eat, sleep, and (depending on the climate) need some form of fuel, clothing, and shelter. Although much of the commodities created under capitalism are not necessarily created to fulfill human needs. Instead, they are produced for a market. Not only are the majority forced to sell their labor on the market for the means (i.e., money) to purchase commodities, necessary or otherwise, available within the market, but also within the dynamic is the need for entrepreneurs/capitalists/rent seekers to make a profit through mass exploitation in order to accumulate more capital to continue this godawful economic relationship that benefits the few while immiserating the majority.

Value is in the Mind - Subjective Value Theory

Humans have free will. With that will, individuals can think and act accordingly, granted that the individual is not harming or coercing any individual. Value in turn, is subjective to each individual. Each individual decides on their own volition what objects, things, are valuable to themselves. What is valuable to me, is not necessarily valuable to you.

An object becomes valuable only because there exists at least one individual who believes that this object can help satisfy his or her subjective desires. Value is not inherent to an object for the fact that the value of an object changes over time. For example, salt used to be like gold, in that it was used to preserve foods, now it is a cheap commodity. Furthermore, value is not inherent in the production/labor process of an object. For example, think of the recent bombed X-Files movie, the cost of production/labor is far higher than actual returns. Since value is decided in the human mind, there is no objective measurement.

Jerald: However, all this talk of the "invisible hand" and "free trade" were rhetorical devices to push and prod the nobles who believed wealth came not from production but from the precious metals they extracted from abroad (think enslavement and genocide).

In the context of the quote above, the derivative of wealth is in err, suggesting wealth derives from production. Transpose wealth in terms of value, where individuals value wealth, implying that value comes from production/labor. However, actually value is only in the minds of individuals. On a side note, a libertarian frowns upon enslavement and genocide since it violates the Non-Aggression Principle.