'Austrian Economics and Objectivism' by Prof. Edward W. Younkins
The Liberal Institute

Austrian Economics and Objectivism

By combining and synthesizing elements found in Austrian economics, Ayn Rand’s philosophy of Objectivism, and the closely related philosophy of human flourishing that originated with Aristotle, we have the potential to reframe the argument for a free society into a consistent, reality-based whole whose integrated sum of knowledge and explanatory power is greater than that of its parts. In other words, the Austrian value-free praxeological defense of capitalism and the moral arguments of Rand, Aristotle, and the neo-Aristotelians can be brought together, strengthen one another, and result in a powerful, emergent libertarian synthesis of great promise.

After I finished writing my 2002 book, Capitalism and Commerce, I came to the realization that virtually all of what I had to say in it fit within the fields of Austrian Economics, Objectivism, or the Aristotelian philosophy of human flourishing. This prompted me to read widely and deeply in each of these fields. The more that I read, the more that I realized that these “schools” had much in common, if one looked in the right places.

Ayn Rand’s neo-Aristotelian philosophy of Objectivism is the primary impetus and inspiration for the contemporary libertarian movement. Not far behind in terms of their influence are the Austrian thinkers, who were political and social philosophers as much as they were economists.

Carl Menger was Aristotelian and had a lot in common with Rand. Ludwig von Mises was off base with his Kantian epistemology, but his excellent deductive use of the action axiom, as shown by Murray Rothbard, could be derived using induction and a natural law approach. I also discovered how Austrian praxeology’s emphasis on subjective value and value-freedom are compatible with Rand’s objective value and value-relevance. My conclusion was that praxeological economics and Objectivism are complementary and compatible disciplines, and that when they are used together to explain reality, the case for a free society is strengthened.

Much of this developing model is rooted in the work of Aristotle, who influenced so many thinkers from Aquinas to Locke to the Founding Fathers, to Menger, Rand, and Rothbard, and beyond. The roots of freedom and individualism can be traced back to Aristotle, who acknowledged their moral significance and the value of each individual’s life and happiness.

Austrian praxeology (i.e., the study of human action) can be used to make a "value-free" case for freedom. Such an 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. Austrian Economics consists of a body of logically deduced, inexorable laws of economics, beginning with the axiom that each man acts purposefully. Austrians proclaim the central human element in economic life and search for universal laws that can be expressed in a natural language, rather than in mathematical equations and formulas.

The Austrian school is an alternative to the positivistic neoclassical school, which uncritically applies the methods of the physical sciences to the social sciences. The neoclassicals try to make economics look like physics by employing the quantitative approaches of the natural sciences and by searching for quantitative laws, predictive ability, and the statistical significance of changes in variables. Austrians are contemptuous of, and attack, mainstream economists for their pretensions to science and for their development of mathematical models that disregard a great deal of human nature and the uncertainty of expectations. Empiricism is appropriate for the purposeless realm of the natural sciences, but not for the field of purposeful human action. Because the Austrians see man as a purposeful being who thinks, plans, decides, and acts, they repudiate the neoclassical, positivist, and historical ideas of man as a dependent variable in a system of equations, as a mere quantitative physical object, or as passive objects controlled by history.

Austrian Economics is an excellent alternative way of looking at 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; this enhances or hinders our flourishing as human beings. Rand’s philosophy of Objectivism is a systematic and integrated unity in which ethics is related to the concept of value, which, in turn, is related to an objective epistemology and a reality-based metaphysics.

Both economists and ethicists are concerned with human choice and human action. Human action, the subject of both economics and morality, is the common denominator and the link between economic principles and moral principles. Both economic law and moral law are derived from natural law. Because truth is consistent, it follows that economics and morality are inextricably related parts of one indivisible body of knowledge. Because natural law regulates the affairs of men, it is the task of both economists and philosophers to discover the natural order and to adhere to it. There is an intimate connection between economic science and an objective, normative framework for understanding human life.

My current book, Philosophers of Capitalism: Menger, Mises, Rand and Beyond, looks to the future and to the potential interaction and integration of Austrian economics and Objectivism into a logical and systematic worldview. In particular, a model is offered that combines Misesian Austrian praxeology and methodology, as rehabilitated by the natural-law-oriented Rothbard, with Rand’s Objectivism and the Aristotelian philosophy of human flourishing. An attempt is made to integrate these seemingly disparate areas of thought into a broad natural law and natural-rights-based analytic and normative science of liberty.

EDWARD W. YOUNKINS is a professor at Wheeling Jesuit University
and has written three recent books on economics