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Ayn Rand and Friedrich A. Hayek: A Side-by-Side Comparison – Article by Edward W. Younkins

Ayn Rand and Friedrich A. Hayek: A Side-by-Side Comparison – Article by Edward W. Younkins

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The New Renaissance HatEdward W. Younkins
August 1, 2015
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Ayn Rand and Friedrich A. Hayek did more than any other writers in the Twentieth Century to turn intellectual opinion away from statism and toward a free society. Although they are opposed on many philosophical and social issues, they generally agree on the superiority of a free market. Rand’s defense of capitalism differs dramatically from Hayek’s explanation of the extended order. In addition, Hayek approves of state activity that violates Rand’s ideas of rights and freedom. The purpose of this brief essay is to describe, explain, and compare the ideas of these two influential thinkers. To do this, I present and explain an exhibit that provides a side-by-side summary of the differences between Rand and Hayek on a number of issues.

In their early years of writing, both Hayek and Rand were dismissed by intellectuals, but they were heralded by businessmen. Hayek began to gain some respect from intellectuals when he published The Road to Serfdom in 1944. He wrote a number of scholarly books, attained formal academic positions, and earned the Nobel Prize for economics in 1974. Rand never did write scholarly works or hold a formal academic position. Her philosophy must be extracted from her essays and her fiction.

Hayek was read in college classes sooner, and to a much greater extent, than was Rand. He was viewed by intellectuals as a responsible and respected scholar, and Rand was not. His vision of anti-statism was more acceptable to intellectuals because he called for some exceptions to laissez-faire capitalism. In his writings he permitted concessions for some state interventions. In his immense and varied body of work, he touched upon a great many fields, including anthropology, evolutionary biology, cognitive science, philosophy, economics, linguistics, political science, and intellectual history. During the last 25 years or so, Rand’s works have been increasingly studied by scholars. There is now an Ayn Rand Society affiliated with the American Philosophical Association and a scholarly publication devoted to the study of her ideas—The Journal of Ayn Rand Studies. In addition, her writings are now being covered in college classes.

A Summary Comparison

Exhibit I provides a summary comparison of Rand and Hayek based on a variety of factors and dimensions. With respect to metaphysics and epistemology, Rand holds that “A is A” and that reality is knowable. Contrariwise, Hayek argues that reality is unknowable and that what men see are distorted representations or reproductions of objects existing in the world. The skeptic Hayek goes so far as to state that the notion of things in themselves (i.e., the noumenal world) can be dismissed. Whereas Rand’s foundation is reality, the best that Hayek can offer as a foundation is words and language.

Hayek supports the view that the human mind must have a priori categories that are prior to, and responsible for the ability to perceive and interpret the external world. He adds to this Kantian view by making the case that each individual mind’s categories are restructured according to the distinct experiences of each particular person.   Each person’s neural connections can therefore be seen as semi-permanent and affected by his or her environment and experiences. The mind’s categories evolve as each specific person experiences the world. According to Hayek, there is pre-sensory knowledge embedded in the structure of the mind and the nervous system’s synaptic connections which can be further created and modified over time. For the neo-Kantian Hayek, knowledge always has a subjective quality.

Reason for Rand is active, volitional, and efficacious. It follows that she sees rationality as man’s primary virtue. She sees progress through science and technology as the result of the human ability to think conceptually and to analyze logically through induction and deduction. Rand also contends that people can develop objective concepts that correspond with reality.

In his philosophy, Hayek relegates reason to a minor role. He argues for a modest perspective of people’s reasoning capabilities. He contends that reason is passive and that it is a social product. Hayek’s message of intellectual humility is primarily aimed at constructivist rationalism rather than critical rationalism. As an “anti-rationalist,” he explained that the world is too complex for any government planner to intentionally design and construct society’s institutions. However, he is a proponent of the limited potential of critical rationalism through which individuals use local and tacit knowledge in their everyday decisions. Hayek views progress as a product of an ongoing dynamic evolutionary process. He said that we cannot know reality but we can analyze evolving words and language. Linguistic analysis and some limited empirical verification provide Hayek with somewhat of an analytical foundation. His coherence theory of concepts is based on agreement among minds. For Hayek, concepts happen to the mind. Of course, his overall theory of knowledge is that individuals know much more than can be expressed in words.

Rand makes a positive case for freedom based on the nature of man and the world. She explains that man’s distinctive nature is exhibited in his rational thinking and free will. Each person has the ability to think his own thoughts and control his own energies in his efforts to act according to those thoughts. People are rational beings with free wills who have the ability to fulfill their own life purposes, aims, and intentions. Rand holds that each individual person has moral significance. He or she exists, perceives, experiences, thinks and acts in and through his or her own body and therefore from unique points in time and space. It follows that the distinct individual person is the subject of value and the unit of social analysis. Each individual is responsible for thinking for himself, for acting on his own thoughts, and for achieving his own happiness.

Hayek denies the existence of free will. However, he explains that people act as if they have free will because they are never able to know how they are determined to act by various biological, cultural, and environmental factors. His negative case for freedom is based on the idea that no one person or government agency is able to master the complex multiplicity of elements needed to do so. Such relevant knowledge is never totally possessed by any one individual. There are too many circumstances and variables affecting a situation to take them all into account. His solution to this major problem is to permit people the “freedom” to pursue and employ the information they judge to be the most relevant to their chosen goals. For Hayek, freedom is good because it best promotes the growth of knowledge in society. Hayek explains that in ordering society we should depend as much as possible on spontaneous forces such as market prices and as little as possible on force. Acknowledging man’s socially-constructed nature, he does not view individuals as independent agents but rather as creatures of society.

According to Rand, the principle of man’s rights can be logically derived from man’s nature and needs. Rights are a moral concept. For Rand, the one fundamental right is a person’s right to his own life. She explains that rights are objective conceptual identifications of the factual requirements of a person’s life in a social context. A right is a moral principle that defines and sanctions one’s freedom of action in a social context. Discussion of individual rights are largely absent from Hayek’s writings. At most he says that rights are created by society through the mechanism of law.

Whereas Rand speaks of Objective Law, Hayek speaks of the Rule of Law. Objective laws must be clearly expressed in terms of essential principles. They must be objectively justifiable, impartial, consistent, and intelligible. Rand explains that objective law is derived from the rational principle of individual rights. Objective Law deals with the specific requirements of a man’s life. Individuals must know in advance what the law forbids them from doing, what constitutes a violation, and what penalty would be incurred if they break the law. Hayek says that the Rule of Law is the opposite of arbitrary government. The Rule of Law holds that government coercion must be limited by known, general, and abstract rules. According to Hayek certain abstract rules of conduct came into being because groups who adopted them became better able to survive and prosper. These rules are universally applicable to everyone and maintain a sphere of responsibility.

Rand espouses a rational objective morality based on reason and egoism. In her biocentric ethics, moral behavior is judged in relation to achieving specific ends with the final end being an individual’s life, flourishing, and happiness. For Hayek, ethics is based on evolution and emotions. Ethics for Hayek are functions of biology and socialization. They are formed through habits and imitation.

Rand advocates a social system of laissez-faire capitalism in which the sole function of the state is the protection of individual rights. Hayek, or the other hand, allows for certain exceptions and interventions to make things work. He holds that it is acceptable for the government to supply public goods and a safety net.

For Rand, the consciousness of the individual human person is the highest level of mental functioning. For Hayek, it is a supra-conscious framework of neural connections through which conscious mental activity gains meaning. He states that this meta-conscious mechanism is taken for granted by human beings. The set of a person’s physiological impulses forms what Hayek calls the sensory order. Perception and pattern recognition follow one’s sensory order which is altered by a person’s own perception and history of experiences

Aristotle is Rand’s only acknowledged philosophical influence. They both contend that to make life fully human (i.e., to flourish), an individual must acquire virtues and make use of his reason as fully as he is capable. Hayek was influenced by Kant and Popper in epistemology, Ferguson and Smith in evolutionary theory, Hume in ethics, and Wittgenstein in linguistics.

Although Rand and Hayek are opposed on many philosophical questions, they generally agree on the desirability of a free market and are among the most well-known defenders of capitalism in the twentieth century. The works of both of these intellectual giants are highly recommended for any student of liberty.

 Exhibit I

A Summary Comparison

 

Rand

  

Hayek
Foundation Reality Words and Language
Knowledge Reality is knowable. Skepticism – The idea of things in themselves can be dismissed.
Reason Reason is active, volitional, and efficacious. Reason is passive and a social product.
Progress Based on power of human reason and conscious thought Evolution and social selection
Analytic Method Logical analysis, including induction and deduction Linguistic analysis and empiricism
Theory of Concepts Objective concepts that correspond with reality Coherence or agreement among minds
Freedom Positive case for freedom Negative case for “freedom”
Free Will Man has free will. Man is determined but acts as if he has free will.
Subject of value and unit of social analysis Individual happiness Perpetuation of society (i.e., the group)
The Individual Independent Dependent—man is socially constituted
Rights Based on the nature of the human person Created by society through law
Law Objective Law Rule of Law
Ethics and Morality Rational objective morality based on reason and egoism Evolutionary and emotive ethics based on altruism which is noble but cannot be implemented because of ignorance. Established through habits and imitation
Desired Social System Laissez-faire capitalism Minimal welfare state that supplies public goods and safety net
Highest level of understanding and mental functioning Consciousness of the Individual Meta-conscious framework—neural connections
Philosophical influences Aristotle Ferguson, Smith, Kant, Hume, Popper, Wittgenstein
Universal Physical and Moral Laws, With No Lawgiver – Video by G. Stolyarov II

Universal Physical and Moral Laws, With No Lawgiver – Video by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
May 20, 2015
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Mr. Stolyarov endeavors to refute the common argument that any law, be it a physical law or a law of morality or justice, requires a lawgiver – an intelligent entity that brought the law into being. While some laws (termed manmade or positive laws) do indeed have human lawmakers, a much more fundamental class of laws (termed universal or natural laws) arise not due to promulgation by any intelligent being, but rather due to the basic properties of the entities these laws concern, and the relations of those entities to one another. To the extent that positive laws are enacted by humans, the purpose of such positive laws should be reflect and effectuate the beneficial consequences of objectively valid natural laws.

References

– “Universal Physical and Moral Laws, With No Lawgiver” – Article by G. Stolyarov II –

– Formula for the Universal Law of Gravitation: F = G*m1*m2/r2, with F being the force between two masses, m1 and m2 being the two masses, r being the distance between the centers of the two masses, and G being the universal gravitational constant.

– “Commonly Misunderstood Concepts: Happiness” – Essay by G. Stolyarov II

– “Commonly Misunderstood Concepts: Happiness” – Video by G. Stolyarov II

– “Indiana Pi Bill” – Wikipedia

Universal Physical and Moral Laws, With No Lawgiver – Article by G. Stolyarov II

Universal Physical and Moral Laws, With No Lawgiver – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
May 13, 2015
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Here I endeavor to refute the common argument that any law, be it a physical law or a law of morality or justice, requires a lawgiver – an intelligent entity that brought the law into being. While some laws (termed manmade or positive laws) do indeed have human lawmakers, a much more fundamental class of laws (termed universal or natural laws) arise not due to promulgation by any intelligent being, but rather due to the basic properties of the entities these laws concern, and the relations of those entities to one another. To the extent that positive laws are enacted by humans, the purpose of such positive laws should be to reflect and effectuate the beneficial consequences of objectively valid natural laws. For instance, it is a natural law that each human being possesses a right to life. A positive law that prohibits and punishes murder of one human being by another would reflect the natural law and therefore be desirable. On the other hand, if any positive law were to mandate murder (as various edicts by tyrannical regimes throughout history, targeting political dissidents or disfavored minority groups, have done), then that positive law would be contrary to the natural law and therefore illegitimate and harmful.

The physical laws of nature pertain to all entities, including humans, and describe the regularities with which these entities will behave within applicable situations. Examples of physical laws include Newton’s Three Laws of Motion, the law of gravitation, the law of conservation of matter and energy, and the law of conservation of momentum. If it is asserted that these laws require a lawgiver, then the lawgiver would hypothetically be able to alter these laws on a whim at any time, thereby depriving them of their universality and predictable application. Such a state of affairs would not only be highly inconvenient (to say the least), but also completely incompatible with the reality that these laws are derived from the nature of entities as they are.

We can draw upon ubiquitous observation and the fact that these laws of nature can indeed be harnessed so precisely that every functional technology ever invented works because it takes advantage of them. The argument that the laws of nature could change tomorrow depends on a false perception of what those laws are – a kind of Platonic view that the laws of nature are superimposed upon the world of objects. In reality, however, objects (entities) and their qualities and relationships are all that exist at the most basic level. The laws of nature are relationships that are derived from the very properties inherent to objects themselves; they are not some higher layer of reality on top of the objects that leads the objects to behave in a certain way. That is, the laws of nature are what they are because the things whose behavior they describe are what they are.

The truth that the laws of nature are a function of the objects whose behavior they describe pertains to fundamental physical laws, such as the law of gravitation. While the law of gravitation and the equation [1] describing that law apply universally, the very existence of the law is dependent on the existence of entities that have mass and therefore exhibit gravitational attraction. Were there no entities or no entities with mass (incidentally, both logically impossible scenarios), then the concept of gravity would not have any relevance or applicability. Likewise, the amount of mass of particular entities and their distance of separation from one another will determine the extent of the gravitational force exerted by those entities upon one another. The gravitational force arises because the entities are as massive as they are and located where they are relative to one another; it does not arise because a supernatural lawgiver imposed it upon entities who would otherwise be completely static or random in their behavior in relation to one another.

The key parallel with the laws of morality is that, as the laws of gravitation stem from the objective properties of entities themselves (i.e., that they have mass – which is a universal property of all entities), so do the laws of morality stem from the objective properties of human beings themselves – namely, the biological and physical prerequisites of human survival and flourishing. Different specific decisions may be the appropriate moral decisions in different contexts, but because of the essential similarities of humans along many key dimensions, certain general moral truths will hold universally for all humans.  But again, were there no humans (or similar rational, sentient, volitional beings) with these essential attributes, the concept of morality would have no relevance.

Neither morality nor gravitation require the existence of entities outside of those exhibiting moral behavior or gravitational attraction. A system of physical or moral laws is not dependent on an outside “lawgiver” but rather on the objective natures of the entities partaking in the system. Objective moral laws include the principles of ethics, which address how a person should behave to maximize possible well-being, as well as the principles of justice, which address how people should relate to one another in respecting one another’s spheres of legitimate action, rewarding meritorious conduct, and punishing destructive conduct against others. There is a natural harmony between adherence to objective moral laws and the attainment of beneficial consequences for one’s own life, material prosperity, and happiness – provided that one adheres to a view of long-term, enlightened, rational self-interest, which does not allow one to sacrifice the lives, liberty, or property of others to achieve a short-term gain.

Some would assert that principles of behavior that tend to maximize well-being and serve one’s rational self-interest may be part of prudent or practical conduct, but are not the same as morality. In the minds of these individuals, morality (typically, in their view, willed by an external lawgiver) is independent of practical means or consequences and often (as, for instance, in Immanuel Kant’s outlook on morality) inherently divorced from actions conducive to self-interest. I, however, strongly reject any notion that there might be a dichotomy between morality and practicality, happiness, or prosperity – when a long-term, enlightened, and multifaceted outlook on the latter conditions is considered. Some might be so short-sighted as to mistake some temporary advantage or fleeting pleasure for true fulfillment or happiness, but the objective cause-and-effect relationships within our physical reality will eventually disappoint them (if they live long enough – and if not, their punishment – death – will be even greater). If some or even many humans might be drawn toward certain pleasurable feelings for their own sake (which is an evolutionary relic of a very different primeval environment inhabited by our ancestors – but a tendency ill-adapted to our current environment), this is not the same as achieving truly sustainable prosperity and happiness by using reason to thrive in our current environment (or to create a better environment for human flourishing). One of the objectives of a good moral system is to guide people toward the latter outcome. My essay and video “Commonly Misunderstood Concepts: Happiness” offer more detailed thoughts on key elements of a life of flourishing and the concept of eudaemonia – the actualization of one’s full potential, as Aristotle and later virtue-oriented philosophers described it.

Objective moral law, derived from the fundamental value of every innocent rational, sentient being’s life, posits an essential harmony of the long-term, enlightened self-interests of all who earnestly pursue truth and goodness. Unlike many proponents of an externally legislated moral framework (for which the alleged lawgiver might be a supernatural being, a single human ruler, or a collective of humans), I would not consider self-sacrifice to be a component of morality. I align more with Ayn Rand’s view of sacrifice as a surrender of a greater value (e.g., one’s life) to a lesser value (e.g., abstractions such as nation-states, religions, or perceived slights from another nation-state or religious or cultural group). A person can behave morally – promoting his own life, respecting the rights of others, and contributing to human flourishing – without ever surrendering anything he values (except as an instrument for obtaining outcomes he might justifiably value more). Morality should therefore not be seen as the subordination of the individual to some higher ideal, be it a divine order or a manmade one. Rather, the individual is the ideal for which moral behavior is the path to fulfillment.

A person who behaves morally advances himself while fully respecting the legitimate prerogatives of others. He improves his own life without damaging anybody else’s. In the process of pursuing enlightened self-interest, he also benefits the lives of others through value-adding interactions. Indeed, he may enter into an extensive network of both formal and informal reciprocal obligations with others that result in his actions being a constant, sustainable source of improvement in others’ lives. The virtue of honesty is part of objective ethics and impels a moral individual to strive to honor all commitments once they have been made. The key to a morality based on objective, natural law, however, is that these obligations be entered into freely and not as a result of the self being compromised in favor of an alleged higher ideal. Consequently, a key component of natural law is the liberty of an individual to evaluate the world in accordance with his rational faculty and to decide which undertakings are consistent with his enlightened self-interest. When positive laws are crafted so as to interfere with that liberty, positive law becomes at odds with natural law, leading to warped incentives, institutionalized sacrifices, and painful tradeoffs that many individuals must make if they seek to abide by both natural and positive laws.

Objective natural laws – both physical and moral – do not require a lawgiver and antecede manmade, positive laws. Some natural laws, however, may require positive laws – such as prohibitions on murder, theft, and slavery – in order for the desirable outcome brought about by the natural laws to be reflected in actual (rather than simply hoped-for) human behavior. In order to improve human well-being, positive laws should be developed to advance and effectuate natural laws, instead of attempting to resist them or contravene them. Just as a law that redefines the value of pi as 3.2 (one actually unsuccessfully attempted in Indiana in 1897) is rightly seen as absurd on its face, even if a majority votes to enact it, and would result in many failed constructions if implemented by engineers and designers of machines, so would a law that abrogates the natural liberty of individuals to peacefully pursue their own flourishing result in damage to good human beings and increases in physical harm, suffering, and injustice. A good human lawmaker should respect pre-existing objective natural laws and not attempt to contradict them.

[1] F = G*m1*m2/r2, with F being the force between two masses, m1 and m2 being the two masses, r being the distance between the centers of the two masses, and G being the universal gravitational constant.

This article may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. See Mr. Stolyarov’s biographical information here.

Dawn of the New Renaissance, Op. 21 (2003) – Musical Composition and Video by G. Stolyarov II

Dawn of the New Renaissance, Op. 21 (2003) – Musical Composition and Video by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
September 20, 2014
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Mr. Stolyarov composed this work in 2003 in an effort to herald the beginning of a new era – the return to harmony, melody, meter, and heroic grandeur, the revival of an upright, luminous vision of human potential.

This work was remastered using the SynthFont2 software, with the Evanescence 2 and GMR Basico 1.1 instrument packs.

Download the MP3 file of this composition here.

See the index of Mr. Stolyarov’s compositions, all available for free download, here.

The artwork is Mr. Stolyarov’s Abstract Orderism Fractal 61, available for download here and here.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.
Minuet #3 (Systematic Minuet), Op. 34 (2004) – Musical Composition and Video by G. Stolyarov II

Minuet #3 (Systematic Minuet), Op. 34 (2004) – Musical Composition and Video by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
September 18, 2014
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This minuet for piano, composed by Mr. Stolyarov in 2004, conveys intricacy through directed melodies within a rigorously logical structure.

This work was remastered using the SynthFont2 software, with the Evanescence 2 and GMR Basico 1.1 instrument packs.

Download the MP3 file of this composition here.

See the index of Mr. Stolyarov’s compositions, all available for free download, here.

The artwork is Mr. Stolyarov’s Cube of Cubes, available for download here and here.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational high culture to others.

Plot Holes in Fiction and in Life – Article by Sanford Ikeda

Plot Holes in Fiction and in Life – Article by Sanford Ikeda

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The New Renaissance Hat
Sanford Ikeda
August 23, 2014
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Fans of J.R.R. Tolkien’s trilogy The Lord of the Rings (LOTR) have long been aware of a possible plot hole. The central narrative concerns the hero, Frodo Baggins, who must destroy a powerful ring by walking through forbidding terrain and defeating or eluding monstrous foes and throwing the ring into a live volcano. The journey takes many months and costs Frodo and his companions dearly.

Over the years, many readers have noticed a much easier and less dangerous solution. Why, they ask, didn’t Frodo just have Gandalf ask his friends the mighty eagles to fly him swiftly over enemy territory so he could then simply toss the ring into the volcano? I’ve run across this post on Facebook a few times, which cleverly patches that hole with only a slight change in the narrative. (Others argue that there’s really no hole to patch because the “eagle solution” itself has flaws. And so the debate continues.)

Anyway, it occurred to me that the kind of social theory that I and many Austrian economists engage in could usefully be framed in terms of plot holes.

What’s a plot hole?

I’ll define a plot hole as a failure of logic, a factual mistake, or an obvious solution to a critical problem central to a story. (Here’s a slightly different definition from Wikipedia.) Of course, any particular plot hole may involve more than one of these errors of fact, logic, or perception, and there may be more kinds of plot holes than these. But here are examples of each of the ones I’ve mentioned. They come from movies, but some of them, such as the plot hole in Lord of the Rings, have literary counterparts.

Factual hole: In the movie Independence Day, key characters survive a massive fireball by ducking into the open side-door of a tunnel just as the inferno blasts by. Anyone who knows about firestorms would tell you that the super-heated air alone would instantly kill anyone in that situation.

Logical hole: In Citizen Kane, miserable Charles Foster Kane dies alone. How then does anyone know that his last word was “Rosebud”? Keep in mind that it’s a reporter’s search for the meaning of that word that drives the story forward.

Perceptual hole: The LOTR problem mentioned above is an example of this. No one seems to realize that there may be a much safer and effective way to defeat the enemy.

I would think that one of the things that makes writing fiction difficult is that events and characters have to hang together. The writer needs always to keep in mind the rules of the universe she’s creating, to recall what her characters know and when they know it, and to make sure that these details all constrain every action and event.

Life is full of “plot holes”

In real life, we make mistakes all the time. I think it’s interesting that those mistakes appear to fit neatly into the three categories of plot holes I’ve identified.

Factual hole/error: A person who doesn’t know the difference between liters and gallons buys a 100-liter barrel to hold 100 gallons of rainwater. No explanation necessary.

Logical hole/error: Thinking that since you’ve made a string of bad investment decisions, your next decision is therefore more likely to be a good one. But it’s quite the contrary: If you’ve been consistently making bad decisions, it follows that if nothing else changes, your next decision will also be bad one. (See “gambler’s fallacy.”)

Perceptual hole/error: Selling your car for $15,000 when, unbeknownst to you, you could have sold it for $20,000. The better deal simply escapes your notice and, if you were ever to learn about it, you would feel regret.

Here’s the difference though: In fiction, a writer can get away with any of these three plot holes as long as no reader sees it. Even if you do notice one, but you otherwise enjoy the story, you might be willing to overlook it. But in real life, you can’t ignore factual or logical plot holes. If you try to, they will come back and bite you. It will be painfully obvious that you can’t put 100 gallons of water into a 100-liter barrel. And if you bet on your next investment being a winner because you’ve just had a bunch of losers, it’s very likely that you’ll be disappointed. These kinds of holes you’re bound to discover.

I wrote about errors in an earlier column, but the distinction comes from my great teacher Israel Kirzner. He identifies a class of errors that derive from “overoptimism.” The more optimistic you are, the more likely it is that you’ll deliberately pass up solid opportunities for gain and thus the more likely it is that you’ll be disappointed. That’s not to say that optimism is a bad thing. If you weren’t optimistic and so never acted on that optimism, you’d never know if that optimism were warranted or not. You would never learn.

The other kind of error, what Kirzner calls “overpessimism,” happens when you’re so pessimistic that you unwittingly pass up a realizable opportunity. And because you don’t take chances, you don’t learn. This type of error is akin to a perceptual hole. Thinking you can only get $15,000 for your car means not selling to someone who would in fact pay more. Here, it’s not inevitable that you will discover your error because, after all, someone does buy your car (for $15,000). But you could have done better if you’d been more alert.

So errors of overpessimism, what I’m calling perceptual holes, are very different from factual and logical holes in that they are much harder to detect.

Plot holes and social theory

For many Austrian economists like me, economics, as a branch of a social theory, accepts as a datum that people are prone to make mistakes. But given the right rules of the game—private property, free association—they can discover those mistakes and correct them via an entrepreneurial-competitive process. Unlike plot holes in fiction writing, then, plot holes in living social systems are a feature, not a bug.

So our challenge as flesh-and-blood people, and what makes our lives interesting, is to discover plot holes, especially perceptual ones, and to fill them in. The challenge of social theorists is to understand as much we can about how that happens. In novels it’s the people outside the story who discover holes; in society it’s the people living the story who do.

Plot holes in novels spell failure. Plot holes in real life mean opportunity.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
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This article was originally published by The Foundation for Economic Education.
A Brief History of Western Liberalism – Article by Kyrel Zantonavitch

A Brief History of Western Liberalism – Article by Kyrel Zantonavitch

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The New Renaissance Hat
Kyrel Zantonavitch
June 1, 2013
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This is a brief history of the philosophy and culture of liberalism. It describes a life-style and civilization which lifts human beings far above that of animals, chimpanzees, hominids, and even tribalist hunter-gatherers. Liberalism features man at his best. Liberals are clear-thinking and rational men: natural, sound, healthy, happy, uplifted, and heroic.

Liberalism is a fundamental category of philosophy and life-style – something broad and general. It constitutes a definitive concept – beyond which one cannot venture or improve – like life, happiness, greatness, transcendence, virtue, beauty, pleasure, thought, reality, existence, and the universe. Liberalism’s subsidiary concepts are also ultimate and final: rationality, egoism, and liberty.

In the story of mankind, first come bonobos, then semi-human Homo habilis, then primitive man Homo erectus, then highly advanced Neanderthals, then truly intelligent and impressive Cro-Magnons – who used their 100 IQs to exterminate their brutish competitors, invent sophisticated arrow technology, and make art such as those Venus statues and cave paintings.

By 9000 BC the last Ice Age ended, and humans immediately converted from hunter-gatherers to rancher-farmers. After domesticating multitudinous plants and animals, by 3300 BC human beings further cultivated them with irrigation on their new private property, backed by their revolutionary social institution called government. By 1700 BC men had well-established written laws, well-developed literature and art, easy personal transportation using horses, and elaborate international trade using sophisticated great ships.

All of this constituted impressive advances in humans’ quality of life; but none of it constituted philosophical or cultural liberalism.

Finally, by about 600 BC, the ancient Greeks created the indescribably magnificent phenomenon of Western liberalism. They invented rationality or “Greek reason” or syllogistic logic – or pure thought or epistemology. This is usually described as “the discovery of science and philosophy.”

But along with the stunning and wondrous epistemology of reason – naturally and inevitably and inherently – came the ethics of individualism, and the politics of freedom.

All of this can be fairly, accurately, and usefully denominated as the thought-system and life-style of Western liberalism – of liberal philosophy and culture, especially as exemplified by Aristotle, Epicurus, and Zeno the Stoic. These three theorists, ironically, were labelled by their intellectual opponents as “dogmatic.” This was not because these scientifically minded open debaters claimed to know everything based on faith, but because they claimed to know anything at all based on evidence and analysis.

By the 100s BC in Greece, the general ideology of liberalism was well-established in the middle and upper classes. Then the Romans conquered the Greeks and within a century made liberalism their own. They even advanced the noble ideas and ideals a bit, with such thinkers as Cicero, Lucretius, Virgil, Horace, and Aurelius.

But skepticism of reason ascended rapidly by the 200s AD, and with it came the decline of the greatest country in human history. The new phenomenon of monotheism began to dominate in the 300s AD, especially Christianity or “Plato for the masses.” By the middle of the 400s, the philosophy and culture of liberalism were dead, and so was Rome. A long, terrible Dark Age ensued.

This irrational, illiberal nightmare of Western civilization lasted for a millennium. The wretched and depraved philosophy of Jesus ruined everything.

But a bit of reason and hope came back into the world in the 1100s of northwest Europe with the mini-Renaissance. High-quality Greek thinkers were gradually reintroduced. Then came the 1300s and the Italian Renaissance.

By the 1500s a whole Europe-wide Renaissance began with France’s conquest of northern Italy. The French brought their reborn art and philosophy to everyone in the West. The beautiful general philosophy of liberalism ascended still higher while the ghastly evils of fundamentalist skepticism, Platonism, monotheism, and Christianity declined. The classical liberal era was brought about by radical and heroic innovators like Francis Bacon, John Locke, Voltaire, Adam Smith, and Thomas Jefferson.

The late 1700s Enlightenment and Age of Reason in Britain, France, Holland, and America featured liberalism at its height. But it was gradually and massively undermined by the irrational, nonsensical philosophers Bishop Berkeley, David Hume, Jean-Jacques Rousseau, Immanuel Kant, and Friedrich Hegel.

During and after the 1790s the French Revolution went astray and embraced ideological dogmatism, and self-sacrifice to the cause. It also converted itself into an early version of modern communism; as well as the false, evil, and illiberal ideologies of right-wing conservatism and left-wing progressivism. In the art world this was manifested by the slightly but definitely irrational Romantic movement of 1800-1850. Paintings started to turn ugly again.

Socialism and communism fairly quickly went into high gear after Karl Marx’s Communist Manifesto of 1848. Religion also somewhat revived in the late 1800s. These two monstrous ideologies backed the moral ideal of self-destruction, or the “Judeo-Christian ethic,” or, even better, the “religio-socialist ethic.” The fin de siècle of the 1890s was the giddy, despairing, hopeless, lost end of a noble era in the West – a dynamic, heroic, rational, liberal era.

A practical, real-world, irrational, illiberal dystopia was achieved in the mid-1900s with Stalin, Hitler, and Mao. Later in the 1900s there were Pol Pot, Idi Amin, Ayatollah Khomeini, and countless other despots. Illiberalism reached a hellish trough around 1985.

Then came Ronald Reagan in America, Margaret Thatcher in Britain, Mikhail Gorbachev in Russia, and Deng Xiaoping in China. These four political semi-revolutionaries, in four leading nations, used their governments to change world culture in a liberal direction.

These liberal leaders emerged on the world scene because theory always precedes practice, and the theory of liberalism began to rise again – at least intellectually, and in certain recherché circles – around the early 1900s. It began anew with Austrian economic thinkers like Ludwig von Mises, Henry Hazlitt, and Friedrich Hayek. In addition to the dry, mechanical realm of economics, these three addressed the fields of politics and sociology – and even ethics and epistemology. They filled in many of the gaps, and corrected many of the weaknesses and failures, of Locke, Smith, and company.

The Austrians also attacked the communism, socialism, and progressivism of Woodrow Wilson, Franklin Roosevelt, and Lyndon Johnson, among others. And they taught the fiery intellectual novelist Ayn Rand.

Rand converted from fiction to philosophy from the late 1950s to the late 1970s. She was by far the most liberal thinker in the history of man. She created the philosophy of Objectivism. Ayn Rand advanced human knowledge about as much as Bacon, Locke, Voltaire, Smith, and Jefferson combined.

Sadly, however, Rand undercut her liberal ideology with a heavy atmosphere and subtext of cultism and religiosity in her propaganda movement. This was understandable, considering how revolutionary and hated her philosophy was, but hardly rational or legitimate.

However, Rand died in 1982, and a highly rational and non-religious organization, organized around her discoveries, emerged in 1989. This brought the world Objectivism as a thought-system, not a belief-system; and Objectivism as a rational, benevolent, effective philosophy – not an irrational, malicious, weird cult.

There are currently three separate but related avant-garde liberal ideological movements: Austrian economics, libertarian politics, and Objectivist philosophy. All three are tiny but, based on historical intellectual standards, seemingly growing solidly.

Pure liberalism – a pure, clean, complete comprehension that reason was 100% right in epistemology, individualism was 100% right in ethics, and freedom was 100% right in politics – began in the early 21st century. Randroid illiberalism began to die out. A New Enlightenment is about to begin.

Kyrel Zantonavitch is the founder of The Liberal Institute  (http://www.liberalinstitute.com/) and a writer for Rebirth of Reason (http://www.rebirthofreason.com). He can be contacted at zantonavitch@gmail.com.

Always Think! – Video by G. Stolyarov II

Always Think! – Video by G. Stolyarov II

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Mr. Stolyarov explains why thinking is essential and indispensable for everyone; that includes you. He discusses the fundamental purpose of his videos – to cultivate an broadly oriented intellectual mindset among viewers, in an effort to further the progress and maintenance of human civilization.

Remember to LIKE, FAVORITE, and SHARE this video in order to spread rational discourse on this issue.

What Happened Before the Big Bang? The New Philosophy of Cosmology – Article by James B. Wright

What Happened Before the Big Bang? The New Philosophy of Cosmology – Article by James B. Wright

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The New Renaissance Hat
James B. Wright
June 3, 2012
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In the telephone conversation between Ross Anderson, of Atlantic, and Dr. Tim Maudlin, of NYU, entitled “What Happened before the Big Bang?” I was intrigued by his statement “Physicists for almost a hundred years have been dissuaded from trying to think about fundamental questions.”, and “The asking of fundamental physical questions is just not part of the training of a physicist anymore.”  The result of this training is the furious reaction you get if you suggest to a physicist that the Big Bang is nonsense, as is the Expanding Universe.  But could not the Cosmological Redshift be caused by something other than a Doppler frequency shift?  It could, indeed, but because of the Physicists having accepted space as a pure vacuum they couldn’t find the answer.

And the answer is perfectly logical and not at all complicated.  The scientists have calculated that this space has the characteristics of permeability (µ) and permittivity (ɛ), and that these characteristics determine the speed of light (C), which in turn, determines the wavelengths (λ) of light.  So we set up a test range on the moon (which we suppose to be in a vacuum) with a light transmitter and a light receiver a mile away.  There will be N waves of light at frequency (F) traveling through that one mile of space.  Now, if we imagine that the space around the moon actually contains some sort of medium, and that that medium is becoming slowly more dense causing its µ and ɛ to increase, then C will steadily decrease, λ will gradually shorten, and N will be gradually increase.  Consequently, fewer waves will exit the one mile path than enter it, each second, and the light seen at the receiver will be lower in frequency than the light being transmitted, which is fixed, of course.  Move the receiver two miles away and a similar frequency shift will occur over the second mile, adding in a compound fashion to the first one-mile frequency shift.

So we not only have a redshift but we have a compound redshift, precisely as we observe in the Cosmological Redshift.  Our problem is now to determine what this medium can be, and how it could continually increase in density without becoming bogging down after a while?  But it certainly does change the appearance of our Universe, with the Big Bang and the Expanding Universe being discarded.  Before using the evidence at hand to answer this question it may be helpful to use a philosophy available to us to see what we may be able to find that could be useful.

In her philosophy of objective reality Ayn Rand starts it all off with the axiomatic concepts of Existence, Consciousness, and Identity.  We must exist having a consciousness with which we may identify that which exists.  Miss Rand builds her whole philosophy using these concepts, insisting on causal chains.  I use only Existence (openly) to establish a starting point in the science of Cosmology, here again insisting on causal chains.

“Existence Exists.”, as a self-evident axiom.  Our Earth, our Solar system, the Universe, all exist and have existed for the tens of billions of years that our telescopes reveal.  And, if we rule out any such thing as Creation or Annihilation, Existence must have existed for an eternity past, and will exist for a future eternity.  Similarly, it must extend outward from here to the infinite reaches of space.  It is infinite and eternal, which, of course, rules out any sort of a beginning or an end.  And, now we may re-examine the evidence without the need to make it fit into an Expanding Universe.  We will observe that the Galactic Clusters which fill this Universe in some tens of millions, can be expected to extend outward into an infinite ocean of such clusters.  Nothing new or unusual should be anticipated “out there” that’s not already found within our Universe.  And, our Observable Universe should be seen as a very adequate sample of Existence.

One more conclusion we should draw from our Universe, with its hundreds of billions of stars in more hundreds of billions of galaxies all apparently being burned up.  Unless there were mechanisms at work taking the ashes of these old galaxies and renewing them into new galaxies, we wouldn’t be here asking these questions.  We’d be down some “black hole” somewhere.  And the Galactic Clusters are those mechanisms, scattered as they are throughout the Universe and into the endless ocean of Existence.

Gravity is the universal force, a Prime Mover at work everywhere.  It builds the galactic clusters, starting with two galaxies and growing to perhaps three or four thousand galaxies, drawing in not only the galaxies themselves, but also the gaseous masses within the galaxies and the dark masses within the clusters’ outer boundaries, all moving towards the center-of-gravity for each cluster.  And as these masses are being drawn in from the surface of the cluster towards its center they undergo a continual compression until, in time, the central volume develops into a massive spiral galaxy called a Seyfert.

These masses, the ashes of the thousands of galaxies all being moved in toward the central Seyfert galaxy, causing it to eventually reach the point where its central pressure and temperature becomes critical and a nuclear explosion occurs, and after another 7.5 billion years of growth another explosion occurs, etc., etc.  These explosions expels two quasars in opposite directions, usually at escape velocity, quasars that evolve into normal galaxies (per H. Arp), only to become fuel for the galactic clusters.  This transformation must be 100% efficient, with the Universe (and Existence) appearing essentially as we see it today, for all of eternity.

Pausing at this point, it is helpful to envision these galaxy clusters as they are located in the Universe.  If the Universe has 200 billion galaxies and a galactic cluster has 4 thousand galaxies we may roughly estimate that there are about 50 million such clusters spread homogenously throughout the Universe, each doing its job of galactic renovation in its own locale.  And, of course, this mechanism will be at work throughout all of Existence.  It may also be concluded that there would be about 50 million Seyfert galaxies, one for each mature cluster.

A Gravitational Lens is the result of the formation of a Galactic Cluster.  Ideally, a Galactic Cluster is an sphere with some 4 thousand galaxies and their masses of gas and energy, all being drawn inward toward a center-of-gravity.  At the surface of the sphere one may envision wisps of the various masses, being drawn inward quite slowly.  As these masses move inward their density increases gradually until the cluster reaches the critical mass at the center of its Seyfert.  If we look back at the whole of the sphere we find that we have just described a Luneburg Lens, one that is being perpetually rebuilt as the masses are continually moving inward to the nucleus of the Seyfert.  Then as light moves into the lens from (say) a Quasar far beyond the cluster it is refracted inward to a focal point (the Observer) on the other side of the Lens.  While gravity forms the lens it is the lens that focuses (bends) the light.

But note that the light path through the mass is affected by the constant increase in the density of that mass and undergoes a redshift.  Note also that the mass in the path of the light is constantly being renewed with fresh mass coming in from outside that space as it flows towards the center of the cluster so that there isn’t the problem discussed earlier, of a build up mass.  The Cosmological Redshift remains essentially unaffected.

Attention must be paid to the energy mass that leaves the stars along with the stellar winds.  For the Sun it is reported as being 96% winds and 4% energy.  The discussion now takes up with the planets that surround our Sun that are awash in these Winds and Energy.

In high school we were told that “a moving charge generates a magnet field”, and proceeded to build a solenoid and, by passing a DC electric current (a flow of negative charge) through the turns of wire on the solenoid, made an electromagnet having the usual North and South Poles.  One ampere flowing through each of (say) one thousand turns of wire gave us 1000 ampere-turns.  We also found that this same effect could be envisioned as 1000 amperes flowing through one turn of wire, say using a sheet of copper with a cross section area equivalent to the cross-sectional area of the 1000 turns of wire.  Electrons were the “moving charge”.

Now, suppose we were to imagine the Earth as a single turn solenoid, one that was electrically charged with that charge moving (effective) as a flow around the Earth by its rotation.  We would have our Earth generating an electromagnet!  And, by using the solenoid formula we would be able to determine the size of the charge necessary to give that electromagnet it’s observed 0.4 gauss field strength and, furthermore, by noting where the North and South poles were located we could determine whether that charge was positive or negative.

It turns out that all planets have charges that are a function of their surface area and that, except for the Earth, those charges are all positive.  Knowing that our geologists had determined long ago that the Earth had undergone several pole reversals over time it seemed that the ionosphere was acting as a huge capacitor enveloping the Earth and that it intercepted the positive charge, leaving the Earth’s surface negative.  As the Earth itself rotated, not its ionosphere, the magnetic Poles would be determined by this negative charge and would be opposite that of the other planets.  Periodically a massive Solar Storm would short out this ionospheric capacitor allowing the positive charge to drop to the Earths surface and allowing its magnetic North/South poles to agree with that of the other planets.  [Note that only five of the planets (Earth, Jupiter, Saturn, Neptune and Uranus) had characteristics that allowed their charges to be calculated.]

The fact that all of these planets had positive charges suggested that the Solar Wind must be the source of these charges and must itself be positive.  This, in turn, would suggest that the energy mass leaving the Sun was carrying away the negative charged, in some way, and was perhaps intrinsically negative?

So we now may have a negative energy mass leaving the stars as they burn, and a candidate for the “dark matter” of space.  It also gives us a tangible medium that allows the transmission of electro-magnetic waves (TV, Etc.), and one for a magnetic field as an electro-magnetic warp in the dark matter, as well as the dark mass we “feel” in the galactic rates of rotations.  We don’t know what this dark mass is, any more than we know what gravity is, but we do know some of what these forces do.

We now need the mathematicians and the scientists to try afresh using this new Universe, existing within Existence.  If only they would ask the questions that Tim Maudlin claims they are avoiding.

James Burton Wright writes on physics and philosophy on his blog, Cosmological Musings, utilizing a reason-based, Objectivist approach.
Objectivist Virtue Ethics in Business – Article by Edward W. Younkins

Objectivist Virtue Ethics in Business – Article by Edward W. Younkins

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The New Renaissance Hat
Edward W. Younkins
April 24, 2012
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Virtuous actions can lead to the achievement of values. When one’s context is reduced to business, virtue theory contends that pursuing virtuous principles, strategies, and actions can result in firms realizing their values including their mission, purpose, profit potential, and other goals. Virtuous employees tend to carry out their roles in a competent manner that is congruent with the firm’s goals. Virtues are instrumental allowing a person to act to gain values. When business people conform to the Objectivist virtues, they increase the likelihood of achieving their values and goals. Virtue ethics stresses the importance of each individual employee being able to make contributions of value. Valid virtue concepts are required to describe what it means to be an excellent director, leader, manager, or employee. To be successful, a business needs to espouse a set of virtues that are reality-based, non-contradictory, integrated, and comprehensive.

Virtue theory holds that ethics is an inherent part of business and that it is necessary to integrate moral theory into management theory and practice. The role of the virtues in business is to direct and motivate behavior toward the success of the business. Strategic management and business ethics converge because each area has an explicit interest in the nature and goals of business. In business, the virtues facilitate successful management and cooperation and enable a company to attain its goals. The Randian virtues can provide a moral framework and integrating strategy to guide a business in achieving its goals.[1]

The virtues connect ethics to business positively and provide a sound logical foundation for business ethics. Given the laws of nature and of human nature, there exists a set of virtues that fit reality and that are most likely to lead to success and happiness in business. Ayn Rand’s Objectivist ethics specifically recognizes production as the central human value. In addition, the personal virtues that she advocated have a direct bearing on work: rationality, honesty, independence, justice, integrity, productiveness, and pride. These virtues can be used as guiding forces in a business career and in the management of a business. They define the excellent manager (or other employee) and provide the principles that a corporation should adopt with respect to investors, employees, customers, vendors, and others.

A case can be made that virtue ethics has priority over, and perhaps grounds, other competing ethical approaches to business. In most cases being virtuous will be sufficient for leading a morally decent life in the world of business. Virtue theory is more attractive, positive, unified, comprehensive, and practical than are traditional approaches to business ethics because it is concerned with the type of person that one should be rather than with rules that tell people how they ought to act. Virtue theory is concerned with the cultivation of character and provides a framework through which a person can lead a flourishing and happy life. Moral growth comes from choice rather than from conformity to rules or codes.

Traditional approaches to business ethics (i.e., deontology, consequentialism and codes of conduct) are viewed as formulaic, prescriptive, constraining forces that legislate the form of moral deliberation. Conventional approaches focus on a set of prohibitive principles or rules that tell people how they ought to act. Kantian and utilitarian act-oriented approaches concentrate only on the development of principles while neglecting the cultivation of an individual’s character. Neither deontic nor consequentialist judgments are apt to supply sufficient action guidance for resolving particular dilemmas. Virtue ethics should be viewed as a precondition of, and complement to, moral reasoning based on a deontological focus on one’s obligation to act and on a teleological focus on the consequences of an action. Virtue ethics is more fundamental, and in many cases, preempts the consideration and application of deontic and utilitarian rules. An emphasis on virtuous behavior is motivational because it depends upon a person’s ability to aspire to excellence through virtuous acts. Virtue ethics emphasizes the process of individual moral character development. Above all, virtue ethics is concerned with the flourishing and happiness of the human agent (Mintz 1996, 537-38; Arjoon 2000, 159-78; Whetstone 2001, 101-14).

Virtue theory provides a context in which strategies, plans, tactics, policies, and procedures can be developed to attain a business’s stated mission and other relevant values. Virtues can play a causal role in achieving economic success. Virtues-driven firms tend to maximize profits. However, acting virtuously does not always result in wealth creation because other factors can come into play. Despite such an occurrence, virtuous employees still can experience the internal rewards of pride, self-esteem, and the joy of knowing that they did their jobs well.

The achievement of a firm’s telos, mission, purpose, ultimate end, or ultimate value requires virtuous action on the part of the company’s employees. The ultimate value for a business is financial value. The purpose of a business is to maximize owner value over the long-term by selling goods and/or services. Most corporation mission statements explain this purpose explicitly, or at least implicitly. It is necessary to recognize a business’s distinctive purpose when organizing and integrating human effort into purposeful long-term activities. Purposeful behavior requires a single overarching valued objective function. In a corporation market price per share can be a surrogate for owner value. More specifically, the ultimate purpose of maximizing total long-term market value can provide a criterion for management decisions and choices among competing alternatives, Virtues are instrumental and support a firm’s overall telos.

To accomplish a corporation’s ultimate purpose requires the attainment of a number of goals within a business. It is possible look upon both a firm’s ultimate purpose and its goals as values that need to be achieved. Although technically a value is an object of goal-directed action, in general parlance, the terms, goals and values, are often used interchangeably. For our purposes, we can consider both the ultimate end of a corporation (i.e., the long-term maximization of firm value) and the goals that can lead to the ultimate end to be values.

Goals (sometimes referred to as objectives) are specific quantitative targets that a business needs to meet in a manner consistent with ethical principles in order to accomplish its purpose. Typical goal areas in a business include: profitability, sales, sales growth, return on investment (ROI), profit margin, cash flow, market share (or position), customer loyalty, productivity, efficiency, cost control, research and development, product leadership, employee development, employee attitudes, employee loyalty, expansion or contraction of product and service lines, reducing business risks, and so on. Each and every goal should be analyzed to determine the potential impact on firm value and whether or not they are contributing to the attainment of the firm’s target valuation. Goals whose achievement does not contribute to increasing shareholder value should be eliminated.

To succeed a business must have a superior vision and purpose to work toward and the strategic focus and direction of effort to achieve them. The Objectivist virtues can enable people to direct their actions toward the attainment of a company’s goals and values including the maximization of owner value. Virtuous actions can lead to better customer service, gains in productivity and efficiency, higher employee retention rates, reduction in employee absenteeism, improvement in employee morale, better communications both internally and externally, honest and reliable internal and external financial reporting, the flexibility necessary to adapt to market conditions, increased innovation and the more frequent and more timely launching of new products and services, higher sales and profits, sustainable competitive advantages, greater flourishing and happiness of the firm’s employees, and so on.

Virtuous behavior is required at all levels of a company from employees who realize that business is a natural and moral means by which they can satisfy their needs and attain their actualization as individual human persons. Virtuous employees are energetic, productive workers who: (1) focus on reality; (2) think objectively, rationally, and logically in applying relevant knowledge; (3) ask clear, pertinent, insightful questions and listen carefully; (4) search for facts in their total context before judging and evaluating business situations; (5) use time efficiently and effectively; (6) organize their lives and work toward accomplishing worthwhile endeavors; and (7) set value-producing goals and strive to accomplish them.

A virtuous employee begins by understanding what the facts are and does not evade the distinction between the real and the unreal. Evasion detaches a person from reality. Virtue begins with the effort to confront reality as it is. Given that there is no standardized algorithm for making business decisions, an employee needs to use his reason to make rational, logical decisions based on the facts of reality. One needs to apply conscious, prudent, rational judgments and choices in various business contexts in order to identify, execute, and implement profitable and ethical internal and external exchange transactions.

Much of morality in business falls under the rubric of honesty. Honesty means being in accord with reality. Honesty is basic to the structure of human relationships in virtually all contexts. Dishonesty is self-defeating because it involves being in conflict with realty. Morality in business involves objectively recognizing and dealing with customers, employees, creditors, stockholders, and others as autonomous rational individuals with their particular goals and desires. The trader principle should govern the course of all human interactions because voluntary value-for-value relationships are consonant with human nature.

Honesty is closely related to the virtue of justice. Justice, a form of faithfulness to reality, is the virtue of granting to each man that which he objectively deserves. Justice is the expression of man’s rationality in his dealings with other men and involves seeking and granting the earned. A trader, a man of justice, earns what he gets and does not give or take the undeserved. For example, a virtuous manager must make sure that customers get what they pay for. In addition, he needs to identify employees for what they accomplish and treat them accordingly. Employees should be objectively appraised and compensated based on their contribution toward achieving a firm’s mission, values, and goals. A virtuous manager will discriminate among all those that he deals with (i.e., customers, suppliers, workers, etc.) based on relevant qualities and personal merits such as ability, competency, performance, and character. He will not improperly discriminate based on irrelevant characteristics such as sex, race, nationality, and so on.[2]

Although individuals can learn from each other, the fact remains that each of us thinks and acts alone and is responsible for his own actions. Independence requires the acceptance of one’s intellectual responsibility for his own existence, requires that a man form his own judgments, and that he support himself by the work of his own mind. It is not a corporation’s fault if someone does not attain his goals. Each employee is responsible for his favorable or unfavorable outcomes in a business setting where responsibilities are defined by, and arise out of, his particular role. Of course, a goal may not be completely under one’s control. It may require interdependence with or on other employees who co-contribute to whether or not someone attains a goal. Positive change and innovation in a company are based on the creativity of logical independent thinkers. It is through such employees that a firm discovers and invents ways to improve the fiscal bottom line thereby increasing the firm’s market value.

Integrity is the refusal to permit a breach between thought and action. It means acting consistently with rational principles that will lead to success and happiness. In business, an employee’s rationally-made plans are integrated with his actions in order to bring values into existence. From more of a macro viewpoint, we could say that the integrity of a business is maintained if the purpose for which it was created is followed (i.e., the maximization of owner value).[3]

Productiveness, the virtue of creating material values, is the act of translating one’s thoughts and goals into reality. Productiveness comprises an important existential component of virtuousness and is a responsibility of every moral person. It involves a commitment to creating value and to being self-responsible for bringing what one needs and wants into existence. Workers in a business are committed to producing wealth and bringing about well-being by taking the actions required to achieve the firm’s mission. Profits are an indicator of productive work on the part of people who want to achieve, produce, and improve well-being. Because people differ with respect to their intelligence, talents, and circumstances, the moral issue becomes how a particular employee addresses his work given his facticity, including his potentialities and concrete circumstances. In a business, the Randian virtues (including productiveness) offer a set of principles for getting the most value from one’s work. Rand’s Objectivist ethics recognizes that individuals search for meaning and purpose in the various components of one’s life (i.e., one’s work life, love life, home life, social life, and so on). Each of these is an end-in-itself and a means to the end of one’s life in total. One’s life in total is an end-in-itself and an ultimate value.

Pride, also called moral ambitiousness, is a man’s commitment to achieving the best in his life thereby effecting his moral perfection. Pride is the reward we earn by living by the other six Objectivist virtues. A businessman’s drive for success is a result of his taking pride in the business portion of his life. Each employee needs to work in a way as to be able to be rightfully proud of what he has done. Work is needed not only for sustenance, but also for one’s psychological well-being—it can be viewed as a means by which a man can maintain an active mind, attain purposes, and follow a goal-directed path throughout his lifetime. Through work a man can achieve his highest potentials. Doing work well in accordance with the goals of a firm (which are aligned with the personal goals of the worker) can cause an employee to positively enhance his self-esteem.

Dr. Edward W. Younkins is Professor of Accountancy at Wheeling Jesuit University. He is the author of Capitalism and Commerce: Conceptual Foundations of Free Enterprise [Lexington Books, 2002]. Many of Dr. Younkins’s essays can be found online at his web page at www.quebecoislibre.org. You can contact Dr. Younkins at younkins@wju.edu.

 

[1] Ayn Rand’s Objectivist ethics is specifically related to business and business ethics in Kirkpatrick 1992; Greiner and Kinni 2001; and Hicks 2003.

[2] See Locke and Woiceshyn 1995 for an argument for honesty in business from the perspective of rational egoism.

[3] Paine 1994 provides an interesting perspective on how to manage for organizational integrity.

References

Arjoon, Surendra. (2000). Virtue theory as a dynamic theory of business. Journal of Business Ethics, no. 28: 159-78.

Greiner, Donna and Theodore Kinni. (2001). Ayn Rand and Business. New York: Texere.

Hicks, Stephen R.C. (2003). Ayn Rand and contemporary business ethics. Journal of Accounting: Ethics and Public Policy 3 (1) (Winter): 1-26.

———. (2009). What business ethics can learn from Entrepreneurship. Journal of Private Enterprise 24 (2): 49-57.

Kirkpatrick, Jerry. (1992). Ayn Rand’s objectivist ethics as the foundation for business ethics. In Business Ethics and Common Sense. Edited by Robert W. McGee. Westport: CT: Quorum Books 67-88.

Locke, Edwin A. (2001). and J. Woiceshyn. (1995). Why businessmen should be honest: The argument from rational egoism. Journal of Organizational Behavior 16: 405-14.

Mintz, Stephen M. (1996). Aristotelian virtue and business ethics education. Journal of Business Ethics, no. 15: 827-38.

Paine, Lynn Sharp. (1994). Managing for organizational integrity. Harvard Business Review 72 (March-April): 106-17.

Rand, Ayn.  (1964). Objectivist ethics. In The Virtue of Selfishness. New York: New American Library.

Whetstone, J. Thomas. (2001). How virtue fits within business ethics. Journal of Business Ethics, no. 33: 101-14.