With Google’s dominance in the online search engine market we entered the Age of Free. Indeed, services offered online are nowadays expected to be offered at no cost. Which, of course, does not mean that there is no cost to it, only that the consumer doesn’t pay it. Early attempts financed the services with ads, but we soon saw a move toward making the consumer the product. Today, free and unfree services alike compete for “users” and then make money off the data they collect.
Data has always been used, but what’s new for our time is the very low (or even zero) marginal cost for collecting and analyzing huge amounts of data. The concept of “Big Data” is taking over and is predicted to be “the future” of business.
There’s a problem here, and it is the over-reliance on the Law of Large Numbers in social forecasting. Statistical probabilities for events may mathematically converge to the mean, but is it applicable in the real world? The answer is most definitely yes in the natural sciences. Repeated controlled experiments will weed out erroneous explanations or causes to phenomena, at least assuming we’re good enough at separating and controlling those causes.
What about the social sciences? In this age of scientism, as Hayek called it, we’re told “Big Data” will completely transform production, logistics, and sales. The reason for this is that vendors can better target customers and even foresee what they might want next. Amazon.com does this on their web site in crude form, where they make suggestions based on your purchase history and what others with similar purchase histories have searched for. Sometimes it works, and sometimes it doesn’t.
There is some regularity to our interests and behavior. All of us are, after all, human beings — and we’re formed in certain cultures. So one American with interests x, y, and z may have other interests similar to another American who also has an interest in x, y, and z.
Human Behavior Is Unpredictable
But similarity is not the same thing as prediction. Amazon.com’s suggestions or the highly annoying ads following you around web sites are useful methods for sellers because they can somewhat accurately identify what not to offer. Exclusion of very low-probability interests increases the probability for suggesting something that the person behind the eyeballs focusing on the computer screen may be interested in.
To use as prediction, however, exclusion of almost-zero probability events is far from sufficient. Indeed, prediction requires that we are able to accurately exclude all but one or a couple highly probable outcomes. And we have to be able to rely on that these predictions turn out to be true. Otherwise we’re just playing games, and so we’re making guesses. Sure, they’re educated guesses (because we’ve excluded the impossible and almost-impossible), but they’re still games and guesses.
Where Big Data Fails
Speaking of guesses, Microsoft’s Bing search engine, which powers the Windows digital assistant Cortana among other things, has produced a prediction engine with the purpose of predicting sports and other results. They rely on very advanced algorithms and huge amounts of collected data.
Amazingly, they did very well initially and predicted the outcomes of the World Cup perfectly. So maybe we can use Big Data to get a glimpse of the future?
No, not so. The Bing teams are learning a lesson only Austrians and, more specifically, Misesian praxeologists, seem to be alone in grasping: that there are no constants in human action, and therefore that predictions of social phenomena are impossible. Pattern predictions, as Hayek called them, may not be impossible, but predictions of exact magnitudes are. For instance, we can rely on economic law (such as “demand curves slope downward”) to estimate an outcome such as “the price will be lower than it otherwise would have been,” but we can’t say exactly what that price will be.
When it comes to sports, reality shows and other competitions between individuals or teams, the story is exactly the same. The team with a better track record doesn’t always win. Why? They have objectively performed better than the other team, perhaps exclusively so, but this doesn’t say anything about the future. We’re not here referring to the philosophical doubt as in “will the sun shine tomorrow?” (maybe something changes completely the sun’s ability to shine during the night).
The Social Sciences Are Different
In the social sciences we’re dealing with complex phenomena. Action and, especially, its outcome is the result of a complex system of social interaction, psychology, and much more. Are the players in both teams as motivated and focused as they were before? Did anything in their personal lives affect their mindsets or psyches? How do the players within their teams and players in other teams react on each other before and during the game? A team with a poor track record can upset a team with an objectively better track record; this happens all the time. Sometimes for the sole reason that the better team underestimates the worse team, or because the underdog feels no pressure to perform and therefore plays less defensively.
Bing’s prediction engine struggles with this, just as we would predict. As Windows Central reported recently, the prediction engine had its “worst week yet” picking only four of fourteen winners in the NFL. Overall, its track record was approximately two-thirds right and one-third wrong (95–53). It’s definitely better than tossing a coin, but pretty far from actually predicting the results.
In other words, if you’re placing bets you may want to use the Bing prediction engine. That is, unless you have the type of tacit, implicit understanding of what’s going on that the engine is missing. Maybe you can beat it, or maybe not. In either case, you cannot count on coming out a victor each and every time.
The reason for this is that the outcome simply cannot be predicted perfectly — or even close to it. Even the players themselves cannot predict who’ll win a game, but they may have inside information about whether their own team seems motivated and focused. It is not a perfect method, however, and it certainly cannot be scientific.
Even with Big Data there’s no predicting of social events — there’s only guessing. Yes, guessing with access to huge amounts of data is easier, at least if the data is reliable and relevant. But a good guess is not the same thing as a prediction; it is still a guess, and it can be wrong. Winning every time requires luck.
Per L. Bylund, PhD, is Assistant Professor of Entrepreneurship and Records-Johnston Professor of Free Enterprise in the School of Entrepreneurship at Oklahoma State University. Visit his website at PerBylund.com.
This article was originally published by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.
The debate whether or not cryptocurrencies are “money” has put a spotlight on the Menger-Mises Regression Theorem. As stated, the theorem posits that a non-fiat money must have had value before it became a money. Some have used currencies’ lack of antecedent value as knocking it off the money pedestal or as forcing cryptocurrencies to ignominiously piggyback on fiat currencies’ own regressions.
In a 2013 post Konrad Graf makes the excellent point that such critiques misread the Regression Theorem. In reality, Graf argues, the theorem is not a hypothesis to be tested, rather the theorem tells us that cryptocurrencies such as Bitcoin indeed had some antecedent value. At which point our task is to discover what that antecedent value was. Graf suggests several alternatives, including utility of Bitcoin as a geek toy, as art, or as social marker. Because of these non-monetary uses, Graf writes, bitcoin and the theorem do not threaten each other, but “merely gaze across the intellectual landscape at one another with knowing smiles.”
While I agree with Graf on his main point that the theorem implies cryptocurrencies did have antecedent value, I believe that both the original critique and Grafs’ response fall into a trap of misreading the theorem as requiring non-monetary and previously realized (“bought and sold”) benefits.
Money Is a Useful Good
Among Menger’s greatest contributions in his Principles is the realization that money is fundamentally a good like any other — demanded for its usefulness in enabling transactions and store of value — with an actual price dictated by its scarcity.
If money, like any other good, derives its value from the benefits it offers, it’s hard to see why the money, even those benefits, require an antecedent. Just as the internet can be valuable without a “pre-internet,” a cryptocurrency enabling anonymous, irreversible, low-regulation transactions and savings can be valuable without a precursor.  If there is no regression requirement for value in any other good, why does money alone bear this burden?
Must Money Have a Non-Monetary Use?
Instead, I would argue for a reading of the Regression Theorem with two important liberalizations. First, benefits provided by a money needn’t be non-monetary. That is, the benefits can reside in the good’s use as money itself — no need for geek-chic art. Second, antecedent demand needn’t have been realized — the use needn’t have actually occurred. It’s the antecedent demand, even latent, not the previous buying and selling, which counts in importing value via the Regression Theorem.
To give an example that satisfies both liberalizations, a benefit such as anonymous wire transfers is both a money-related benefit and is also a service that didn’t previously exist. In a liberalized Regression Theorem, this benefit would count as the antecedent demand giving the spark of life to a scarce cryptocurrency.
A concrete historical example of a currency offering both mainly monetary value and offering it only at moment of birth is Tang China’s paper money. Called “flying cash,” paper offered the key benefit of portability, set against its other risks compared with bullion coins (flammability, uncertain redemption). We could surely seek out non-monetary antecedent value for Tang cash — toilet paper comes to mind. But it seems a stretch to reach for artistic or hygiene uses, compared to the natural conclusion that flying cash was demanded because of its monetary benefits. The fact that demand for portable money was unrealized would simply increase paper money’s value to the unfortunate customer who lacked alternative light-weight money.
This mistaken focus on non-money-related and realized antecedent value is understandable, since even Mises seems to be mixing historical and praxeological discussion in Human Action (chapter 17, sec. 4) where Mises writes, “No good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments.”
Here Mises seems to clearly state that Menger’s Regression Theorem requires a currency to have historically represented a commodity having non-money use. This is a natural interpretation, especially in context of Mises’s subsequent discussion of precious metals, clearly useful commodities that you can flash at parties.
But we must take care here to separate Mises’s historical generalization from the praxeological core of his statement. Because Mises has metal on his mind, he suggests the “other employments” must have been antecedent (“did not have”) and, in his subsequent discussion of metals, seems to imply the commodities should be both concrete and previously in use (realized) for non-money purposes.
Money Benefits Are as Useful as Non-Money Benefits
Again, praxeologically, none of these requirements are essential. Money benefits are as useful as non-money benefits, and a useful commodity could conceivably be created and become a medium of exchange at the same moment. So long as the commodity offers “employments” in the form of benefits to users. Cryptocurrencies’ anonymity, regulatory treatment, algorithmically fixed rate of growth, fee structure, and irreversibility of transfer are all money-related benefits, many unrealized before cryptocurrencies came along.
On this reading, and in agreement with Graf, cryptocurrencies are not at all a challenge to the Regression Theorem. They are a confirmation. At birth, cryptocurrencies offered useful features. These benefits function as “employments,” giving cryptocurrencies demand via transaction and store of-value benefits, which in turn import durable purchasing power.
Perceptions Are Important
That “seed” of demand can then be amplified by marketing — by framing the subjective benefits of the currency. Again like any other good, if individuals exert effort to communicate and frame the benefits of a cryptocurrency, then we might expect demand to increase. These individuals may be the owners of businesses that benefit from the currency, or they simply may be enthusiasts.
Now we can simply match these subjective benefits to scarcity to yield a price of a cryptocurrency. Below zero and the currency isn’t “good enough” — it’s not perceived to offer enough benefits. It’s not cool and it’s not art. Above zero and a currency is born: now Satoshi Nakamoto t-shirts are all the rage.
As technology lowers the costs of producing cryptocurrencies, broadening the Regression Theorem’s value requirement to accept novel money-related benefits opens up enormously the range of currencies that are possible in the future. It should be an exciting few decades in the world of currency innovation.
1. Cryptocurrencies benefit from a perception of anonymity, although whether or not there is actual anonymity in practice is another matter.
Peter St. Onge is an assistant professor at Taiwan’s Fengjia University College of Business. He blogs at Profits of Chaos.
This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.
A major problem with the mainstream framework of thinking is that people are presented as if a scale of preferences were hard-wired in their heads. Regardless of anything else this scale remains the same all the time. Valuations however, do not exist by themselves regardless of the things to be valued. On this Rothbard wrote,
There can be no valuation without things to be valued. 1
Valuation is the outcome of the mind valuing things. It is a relation between the mind and things.
Purposeful action implies that people assess or evaluate various means at their disposal against their ends. An individual’s ends set the standard for human valuations and thus choices. By choosing a particular end an individual also sets a standard of evaluating various means.
For instance, if my end is to provide a good education for my child, then I will explore various educational institutions and will grade them in accordance with my information regarding the quality of education that these institutions are providing. Observe that the standard of grading these institutions is my end, which, in this case, is to provide my child with a good education. Or, for instance, if my intention is to buy a car, and there are all sorts of cars available in the market, then I have to specify to myself the specific ends that the car will help me achieve. I need to establish whether I plan to drive long distances or just a short distance from my home to the train station and then catch the train. My final end will dictate how I will evaluate various cars. Perhaps I will conclude that for a short distance, a second-hand car will do the trick.
Since an individual’s ends determine the valuations of means and thus his choices, it follows that the same good will be valued differently by an individual as a result of changes in his ends. At any point in time, people have an abundance of ends that they would like to achieve. What limits the attainment of various ends is the scarcity of means. Hence, once a larger variety of means become available, a greater number of ends — or goals — can be accommodated (i.e., people’s living standards will increase).
Another limitation on attaining various goals is the availability of suitable means. Thus to quell my thirst in the desert, I require water. If no one willing to sell water is nearby, any diamonds in my possession will be of no help in this regard.
- 1. Murray N. Rothbard, Toward a Reconstruction of Utility and Welfare Economics.
Frank Shostak is an adjunct scholar of the Mises Institute and a frequent contributor to Mises.org. His consulting firm, Applied Austrian School Economics, provides in-depth assessments and reports of financial markets and global economies. See Frank Shostak’s article archives.
This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.
By integrating features found in the writings of Aristotle, Austrian economists, Ayn Rand, and a number of contemporary thinkers, we have the potential to develop a powerful, reality-based argument for a free society in which individuals have the opportunity to flourish and to be happy. Modern contributors to this approach include Tibor R. Machan, Douglas B. Rasmussen, Douglas J. Den Uyl, Frederick D. Miller, Roderick T. Long, Chris Matthew Sciabarra, George Reisman, Eric Mack, Neera K. Badhwar, Lester H. Hunt, Geoffrey Allan Plauché, among many others.
At the big-picture level, it can be argued that Aristotelian and neo-Aristotelian theories of morality and human flourishing can be compatible with Objectivist teachings regarding the nature of reality and man’s distinguishing characteristics of reason and free will and with Austrian ideas with respect to value theory, decision making, action, and social cooperation. It may be possible to construct an integrated conceptual framework that coordinates the ideas of Aristotle, the Austrian economists, Ayn Rand, and a number of current philosophers, economists, political scientists, positive psychologists, and others.
My inquiry in my book, Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism, does not extend beyond a systematic level that relies heavily on logic and common sense. My purpose has been to outline the essentials of a worldview leaving it to philosophers and economists to fill in the details and to evaluate, critique, revise, refine, and extend my systematic understanding. What follows here is a brief summary of my attempt to formulate ideas and to relate them logically to other ideas and to the facts of reality. Although a person’s ideas are derived from reality and are about reality, there are differences between one’s ideas and the identity of the things that we can know. The rules of logic are determined by the facts of reality. In a sense, logic is both epistemological and ontological.
A proper philosophy must appeal to the objective nature of human beings and other entities in the world. There is a world of objective reality that exists and that has a determinate nature that is intelligible. Reality will not yield to permit a person’s subjective desires. Reality establishes the conditions for objectivity. It follows that realism is a necessary, instrumental means for a person’s success in the world. To be morality efficacious, a person must discern and use proper means to attain his truly valuable ends.
There is a human nature and it is man’s nature to be individual, volitionally conscious, rational, and purposive. Because each individual has a specific identity as a human being, we can say that there are particular things and actions that are appropriate to him and for him. Individuality is essential to one’s nature. Possessing reason and free will, each individual has the capacity and responsibility to choose to try to actualize his potential for being a flourishing, individual human being. Each person is a metaphysically unique self who is responsible for discerning what is good for himself. A person discovers his individual strengths and virtues through a process of moral development. A particular man’s own life is his purpose or goal. One’s aspirations are the aspirations in the only life he has to live. One’s entire life can be viewed as a project or overall goal which is subject to continual evaluation.
The goal or function of an individual human being is to perfect himself by fulfilling the potentialities that make him who he is. One’s flourishing is teleological consisting in fulfillment of his unique set of potentialities to be a mature human being. Each person has an innate, unchosen potentiality for his mature state along with the obligation to attempt to actualize that potentiality. Each person is responsible to discern and to live according to his daimon (i.e., true self) which includes his aptitudes, talents, and so on. This involves a process of progressive development, unfolding, or actualization in which a man attains goals that are in some way inherent in his nature as an individual human being. What constitutes a person’s daimon at a given point in time is a function of his endowments, circumstances, latent powers, interests, talents, and his history of choices, actions, and accomplishments. We could say that the fulfillment of one’s daimon is not static or fixed. An individual uses his practical rationality to assess himself and to work on his life in accordance with the objective standard of his flourishing as a singular human person. He can increase his generative potential to attain his own flourishing. A person is able to critique what he has done in the past and can change what he does with respect to the future development of his potentialities. Possessing free will, a man can adjust his actions in response to feedback that he has received.
Morality is an essential functional component of one’s existence as an individual human being. Moral knowledge is possible and can be derived from the facts of reality including human nature. Possessing rationality and free will, a person needs a proper moral code to aid him in making objective decisions and in acting on those decisions in his efforts to attain his true self-interest. Morality and self-interest are inextricably interrelated. Morality is concerned with rationally determining what best contributes to a person’s own flourishing and happiness.
Flourishing is a successful state of life, and happiness is a positive state of consciousness that flows from, or accompanies, a flourishing life. The legitimate function of every human person is live capably, excellently, and happily. This involves an ethic of aspiration toward one’s objective well-being that is actively attained and maintained. A person should aspire to what is best for him taking into account his given potentialities, abilities, and interests. Limits for self-fulfillment are set by reality including the type of being that we are and our individual characteristics.
Rationality is the foundational means to the end of human flourishing. Rationality is necessary to effect the appropriate means to a person’s ends and to integrate them. To be rational, a man must be committed to reality, truth, and logic. Not solely instrumental with respect to a person’s flourishing, rationality can also be viewed as partially constitutive of his flourishing. Rational introspection by a specific individual can enable him to determine the type of life that he should be leading.
Practical wisdom, an aspect of rationality, involves the ability to discern the relevant and important aspects of one’s circumstances in order to make the most proper response to them. The use of practical wisdom (or prudence) can only take place through self-direction or human agency. An individual requires practical wisdom to contend with the specifics, contingencies, and circumstances of one’s life. Practical wisdom is needed to guide oneself regarding the progressive fulfillment of his own potential to flourish. A prerequisite for one’s flourishing is self-direction or autonomy. Human flourishing requires self-direction and practical wisdom.
Natural rights are based on the common attributes of human beings and, therefore, apply universally to all people and to all actions. A metanormative system of negative rights that provide a context of self-directedness can be derived from a proper conception of human nature. Such a system of rights allows for value pluralism and for a variety of approaches to living one’s life. A conception of negative rights emphasizes where one individual’s life begins and another individual’s life ends. A political and legal order that protects natural rights is a necessary precondition for individual self-direction and for the possibility that human flourishing can take place in a social context. Protected self-directedness is necessary for social cooperation, specialization and trade, freely-chosen productive work, private property, free markets, voluntary contracts, and so on.
There is an important interrelationship and complementarily between the ideas of natural rights and human flourishing which together comprise a two-level ethics. At a metanormative level, rights protect people’s liberty to pursue (or not to pursue) their own good. They simply regulate the conditions under which moral conduct may (or may not) occur. In turn, what is good for the life of each individual person is found in the realm of personal virtue, morality, and flourishing. The ideas of natural rights and human flourishing describe different but related sides of what it means to be a human being. Together they provide a rational ethical framework.
The only enforceable limits on one’s actions are other people’s rights. We must recognize other individuals as purposive beings with ends of their own choosing. It would be contradictory to advocate my own rights and not to recognize the rights of other individuals. If a person does not acknowledge the rights of others, then he cannot declare that his own rights are valid. Each individual is thus permitted and limited in both the private and social spheres with respect to the types of actions in which he can engage.
People are born with physical, philosophical, and psychological needs specific to them as individual human beings. Human beings have needs embedded in their nature. We could say that value derives only to the extent that something satisfies an objective human need. The term value implies the personal importance or significance of an activity or object. Self-interest refers to the objective needs of a flourishing human life. Values promote and constitute one’s life and happiness. They have a metaphysical foundation in the nature of reality. There is an inextricable connection between values and natural facts. A value relationship exists due to the nature of a living beings and the nature of other existents in the world. Something in the world can be a value to a specific man even though he does not view it as valuable or even if he is not aware of its existence.
A flourishing life, including the happiness that accompanies it, is a person’s ultimate value. Everything else in life is aspired to because of this chief value. All of a man’s other values are instrumental and/or constitutive of the ultimate value. Means that serve the end of a flourishing life can be part of that end. Constitutive values such as a productive career, friendships, and so on are not simply means to a flourishing life but are also vital parts of such a life.
In order to flourish and to be happy, each man must select values, place them in a hierarchy, and strive to attain them. A person must experience many aspects of reality in order to discover values that are proper for him and that interest and inspire him. This active learning process highlights the exploratory nature of individual human interests and values. A person decides to live a particular type of life because he sees the value of it. He should select and pursue specific meaningful values that are metaphysically appropriate for him. He needs to identify the positive relationships in which things exist in relationship to his life. The meaning of particular projects in a person’s life is a function of his individuality.
There are differences among needs, values, and goals. Whereas needs are inborn, values are acquired. Values prioritize needs. People require a value hierarchy in order to be able to make choices. Goals are values applied to particular circumstances. Goals achieve values and values fulfill needs. A person’s goals and values should be consistent with his needs. Values are translated into reality through the means of goals. Value attainment requires setting and pursuing goals. Needs lead to values, values lead to goals, and goals lead to action.
Human beings are goal-directed. Goals are specific forms of values. Values provide a strategic underpinning for a person’s goal-setting activities. They supply meaning and purpose to a person’s goals. We could say that goals depict values as related to particular states of affairs. Because not all goals are equally valid, a person needs to examine the values underlying his goals. It is important to realize that goals are not isolated from one another. A person should strive to create a rational system of goals aimed at his flourishing and happiness.
Human flourishing is related to a number of general goods and virtues that provide structure but not specific direction or content with respect to living one’s life. Because there is a wide diversity of human beings, it follows that a flourishing life is not universal. Generic goods such as knowledge, health, and friendships need to be integrated in various measures and the virtues need to be applied in specific circumstances.
Each person needs to consider a variety of values, goods, and virtues in order to determine the relationship among them that will best achieve his flourishing as an individual human being. This requires rational insight into the particular and the contingent. Reason is the basic means used by human beings to create the values necessary for life and to interrelate and integrate goods and virtues into their lives. Virtues may be viewed as a set of fundamental principles that a rational person uses to guide the long-term course of his life.
Virtues can be viewed as principles of action which promote the flourishing of an individual who, by following them, engages in consistent actions that are in alignment with practical rationality. Virtuous actions enable a person to gain (and keep) the values he pursues. The virtues are required for one’s practical efficacy and happiness. Of course, virtue, by itself, is not enough to guarantee practical efficacy. A person also needs to have the relevant skills, resources, and so on. The fundamental virtue is rationality and the other virtues are particular expressions of that basic virtue. The virtues are both instrumental to, and a constitutive part of, an agent’s flourishing. They are valuable, not merely as means to flourishing, but also as partial realizations of it. Virtuous action begins with the ability to discern the aspects of a situation that are the most relevant and that fit the circumstances at hand. A man needs to possess the ability to decide which virtues are required in a particular situation and the optimal way of applying them. Virtuous actions tend to foster further virtuous actions. Applying the virtues is heavily dependent upon the context of a situation. People tend to take pleasure in virtuous actions—affect is related closely to virtue especially when one’s emotions are properly aligned with his rationality.
Ayn Rand makes a powerful case that the rational pursuit of one’s flourishing requires the consistent practice of seven essential virtues—rationality, honesty, independence, justice, integrity, productiveness, and pride. She saw rationality as the master virtue and the other six virtues as derivative from the primary virtue. Some scholars have pointed out that Rand did not specifically discuss the intellectual virtue of practical wisdom (i.e., prudence). It is likely that she considered practical wisdom as part of rationality. Others have suggested that her version of virtue ethics might be improved by including positive qualities such as benevolence, kindness, generosity, charity, tolerance, and so on in her prescription for moral perfection.
Emotions are an important part of one’s life experience and are relevant to his moral character. A case can be made that many emotions are the products of a person’s judgments of value as integrated by his subconscious mind. Such emotions stem from a person’s values and estimates which, in turn, depend upon his knowledge. They are about personally meaningful values and circumstances. These emotions are directed by one’s chosen values. It follows that a change in one’s values can bring about a change in his emotions. Emotions can encourage or discourage goal-directed actions. Correctly programmed positive emotions can be indicators that we have located objective values. Such emotions both signal and promote a person’s optimal functioning and flourishing. Justified positive emotions are fundamental conditions of human existence. We could say that emotional and psychological well-being is a crucial part of human flourishing.
Happiness occurs to the extent that one leads a flourishing life. We could say that happiness is an emergent effect of living a good life. Happiness has both cognitive and affective dimensions and depends upon the degree to which a person responds realistically, morally, and efficaciously to his life circumstances. Successful people tend to be happy people who continue to intentionally seek new, not-yet-attained goals. There are various degrees of personal growth, development, and happiness. A person can be happy and still strive to be even happier. Happiness is an issue of living a particular type of life—it is not just a case of having positive feelings. However, happiness is related to emotion-laden experiences such as flow and self-esteem.
A person is apt to be in a psychological state of flow when he is engaged in meaningful, self-controlled, and goal-related activities. Flow involves focused immersion in an activity, lack of self-consciousness, and the merging of awareness and action. A man is in the flow state when he is vitally engaged in enjoyable activities that offer him scope.
Self-esteem refers to a person’s legitimate attitude of self-affirmation. Self-esteem is connected to a sense of agency and control of one’s environment. A person with self-esteem tends to be competent, optimistic, and virtuous, and to have self-respect. A person who does not practice the virtues (such as rationality, honesty, justice, and so on) is not likely to possess self-esteem. Virtuous action leads to self-respect and self-esteem.
People should take virtuous actions in alignment with their objective values. A person must use his practical wisdom to examine and judge the context of a situation before freely choosing to exercise virtuous action. Deliberation itself is an action aimed at an end. The final end of the actions of a human being is his own flourishing life. People are capable of taking self-directed, deliberate, reasoned, and planned actions directed by a notion of an ultimate end. Of course, they can choose to act and live in a variety of ways that are not conducive to a flourishing life.
Austrian Economics and Objectivism agree on the significance of the ideas of human action and values. The Austrians explain that a person acts when he prefers the way he thinks things will be if he acts compared to the way he thinks things will be if he fails to act. Austrian Economics is descriptive and deals with the logical analysis of the ability of selected actions (i.e., means) to achieve chosen ends. Whether or not these ends are truly objectively valuable is not the concern of the praxeological economist when he is acting in his capacity as an economist. There is another realm of values that views value in terms of objective values and correct preferences and actions. Ayn Rand’s Objectivism is concerned with this other sphere and thus prescribes what human beings ought to value and act to attain.
Austrian economists contend that values are subjective and Objectivists maintain that values are objective. These claims can be seen as compatible because they are not claims about the same phenomena. These two senses of value are complementary and compatible. The Austrians view actions from the perspective of a neutral examiner of the actions and Objectivists suggest values and actions for an acting human being as a moral agent himself. The Austrian economist does not force his own value judgments on the personal values and actions of the human beings that he is studying. Operating from a different perspective, Objectivists maintain that there are objective values that stem from a man’s relationship to other existents in the world. For the Objectivist, the purpose of ethics is to live a flourishing and happy life by recognizing and responding to the significance of human action.
It is possible for these two schools of thought to be combined into an integrated framework. At a descriptive level, the Austrian idea of demonstrated preference agrees with Ayn Rand’s account of value as something that a person acts to gain and/or keep. Of course, Rand moves from an initial descriptive notion of value to a normative perspective on value that includes the idea that a legitimate or objective value serves one’s life. The second deeper level view of value provides an objective standard to evaluate the use of one’s free will.
Austrian praxeological economics (i.e., the study of human action) has been used to make a value-free case for liberty. This economic science deals with abstract principles and general rules that must be applied if a society is to have optimal production and economic well-being. Misesian praxeology consists of a body of logically deduced, inexorable laws of economics beginning with the axiom that each person acts purposefully.
Although Misesian economists hold that values are subjective and Objectivists argue that values are objective, these claims are not incompatible because they are not really claims about the same things—they exist at different levels or spheres of analysis. The value-subjectivity of the Austrians complements the Randian sense of objectivity. The level of objective values dealing with personal flourishing transcends the level of subjective value preferences.
The value-freedom (or value-neutrality) and value-subjectivity of the Austrians have a different function or purpose than does Objectivism’s emphasis on objective values. On the one hand, the Austrian emphasis is on the value-neutrality of the economist as a scientific observer of a person acting to attain his “subjective” (i.e., personally-estimated) values. On the other hand, the philosophy of Objectivism is concerned with values for an acting individual moral agent himself.
Austrian Economics is an excellent way of looking at methodological economics with respect to the appraisal of means but not of ends. Misesian praxeology therefore must be augmented. Its value-free economics is not sufficient to establish a total case for liberty. A systematic, reality-based ethical system must be discovered to firmly establish the argument for individual liberty. Natural law provides the groundwork for such a theory and both Objectivism and the Aristotelian idea of human flourishing are based on natural-law ideas.
An ethical system must be developed and defended in order to establish the case for a free society. An Aristotelian ethics of naturalism states that moral matters are matters of fact and that morally good conduct is that which enables the individual agent to make the best possible progress toward achieving his self-perfection and happiness. According to Rand, happiness relates to a person’s success as a unique, rational human being possessing free will. We have free choice and the capacity to initiate our own conduct that enhances or hinders our flourishing as human beings.
A human being’s flourishing requires the rational use of his individual human potentialities, including his talents, abilities, and virtues in the pursuit of his freely and rationally chosen values and goals. An action is considered to be proper if it leads to the flourishing of the person performing the action. A person’s flourishing leads to his happiness. Each person is responsible for voluntarily choosing, creating, and entering relationships in civil society that contribute toward his flourishing.
Long ago, Aristotle observed that social life and social cooperation in a community are essential conditions for one’s flourishing. Today, it is generally held that a person’s social networks have strong effects on a person’s well-being. Mediating institutions such as charitable societies, fraternal organizations, churches, clubs, and so on, provide individuals and communities with valuable interaction networks. Most people hold memberships in a number of value-providing associations. It follows that civil society is important to the pursuit and attainment of our individual ends.
Unlike the state, which is based on coercion, civil society is based on voluntary participation. Civil society consists of natural and voluntary associations such as families, private businesses, unions, churches, private schools, clubs, charities, etc. Civil society, a spontaneous order, consists of a network of associations built on the freedom of the individual to associate or not to associate. The voluntary communities and associations of civil society are valuable because human beings need to associate with others in order to flourish and achieve happiness.
One’s personal flourishing requires a life with other people. Sociality is essential to a man’s attempt to live well. Benefaction (i.e., charity) can be viewed as an expression and specific manifestation of one’s capacity for social cooperation.
The interpersonal realm is integral to a well-lived life. We love our friends because we appreciate their potential to advance our well-being. Friendship and love have an egoistic basis in a person’s love for, and pride in, himself. The well-being of a person who is a value to an individual increases the individual’s own ability to flourish and to be happy. The fundamental reason for performing other-regarding actions is to enhance one’s own well-being. Other people’s interests can be viewed as contributive to, or interrelated with, one’s own interests as evidenced in the case of production and free trade. It can be said that a person’s authentic self-interest cannot conflict with the self-interests of other people.
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], Philosophers of Capitalism: Menger, Mises, Rand, and Beyond [Lexington Books, 2005] (See Mr. Stolyarov’s review of this book.), and Flourishing and Happiness in a Free Society: Toward a Synthesis of Aristotelianism, Austrian Economics, and Ayn Rand’s Objectivism [Rowman & Littlefield Pub Incorporated, 2011] (See Mr. Stolyarov’s review of this book.). Many of Dr. Younkins’s essays can be found online at his web page at www.quebecoislibre.org. You can contact Dr. Younkins at firstname.lastname@example.org.