Thursday, January 31, 2013

Reasoning Preferred to Rational Theorising

Mikko I Arevuo posts "Ayn Rand and the Free Market Revolution" on the Adam Smith Institute Blog
HERE and reports on Dr Yaron Brook, president of Ayn Rand Institute, the advocate for Objectivist philosophy, about his new book co-authored with Don WatkinsFree Market Revolution: how Ayn Rand’s ideas can end big government.” However, Mikko I Arevuo, who advocates of free markets and small government parts company with the Ayn Rand Institute because it is atheistic, but what he agrees with is more sympathetic to its objectivist philosophy and provides a one paragraph explanation of it outlined by  Dr Edward Younkins:
“Hierarchically, philosophy, including its metaphysical, epistemological, and ethical dimensions, precedes and determines politics which, in turn, precedes and determines economics. Rand bases her metaphysics on the idea that reality is objective and absolute. Epistemologically, the Randian view is that man’s mind is competent to achieve objectively valid knowledge of that which exists. Rand’s moral theory of self-interest is derived from man’ s nature as a rational being and end in himself, recognizes man’s right to think and act according to his freely-chosen principles, and reflects a man’s potential to be the best person he can be in the context of his existing circumstances. This leads to the notion of the complete separation of political power and economic power – that proper government should have no economic favours to convey. The role of the government is, thus, to protect man’s natural rights through the use of force, but only in retaliation and only against those who initiate the use of force. Capitalism, the resulting economic system, is based on the recognition of individual rights, including property rights, in which all property is privately owned.  For Rand, capitalism, the system of laissez-faire, is the only moral system.
I read most of Ayn Rand’s paper-back philosophy books and novels in the 50s-60s.  I was struck then by her fatal weakness: to “save the world” she requires the world to adopt her objectivist philosophy, or at least behave as if they did, a most unlikely outcome.  Therefore, it ain’t likely to happen.
For Rand, capitalism, the system of laissez-faire, is the only moral system.  That may well be logical, given her philosophy (ignoring for the meanwhile that ‘laissez-faire’ is a dubious fork of morality). Laissez-faire’s leading advocates in the 19th and 20th centuries were mostly spokesmen for capitalist owners who considered laissez-faire only to mean freedom for them to oppose legislation (such as the Factory Acts) seeking to protect employees from their employers’ low wages, unsafe working practices, and the use of child labour.  Smith in WN noted how merchants secretly combined to resist employee wage demands while opposing the rights of employees to combine to pursue their collective interests.

Adam Smith’s advocacy of the philosophy of Natural Liberty was quite different from laissez-faire (words he never mentioned). Natural Liberty, as expressed by Smith, equalised the rights of all participants in commercial society, employers, labourers and consumers.  This does not prevent modern economists from associating laissez-faire with Adam Smith’s name, a habit that goes right back to the early 19th century and continues into the 21st. Many, I find, conflate laissez-faire to mean both freedom for employers and governments.  The lobbying of government is big business and by big business in many countries

Rand’s assertion that her “moral theory of self-interest is derived from man’ s nature as a rational being and end in himself” sits comfortably with neo-classical theories of ‘rational’ beings (who ‘Max U’ in everything).  That belief in rational Homo economicus is unfounded.   Humans are capable of reasoning (not the same as having a common rational faculty) because their individual ability to reason is not the same as all of us arriving at the same answers or choices. Jails are full of the victims of their own ‘rational’ choices given their desperate or opportunistic circumstances and many more prisons would be required if judicial processes were applied for the rational choices of those in government who intentionally or unintentionally inflict misery on their innocent victims. Our behaviour in different circumstances may be considered individually to be reasoned, given our individual perceptions of specific situations, but there is no reason to believe our individual actions from our perceptions of the circumstances are subject to a universal rationality.  Humans in human societies are not like that.  We do not all rationally act in accordance with some theory of rational choice.

It is in this area that I parted company with Ludwig von Mises in his 1966  “Human Action: a treatise on economics” – a very large tome I read some years back – in which he derives everything that follows in his book from a rigorous logic of the consequences of proposition. 

I prefer Smith’s approach of studying what happened since some humans left the forest and then as a minority, at first, moved to shepherding and farming.  Another minority  (“at last”) moved from country life to live in towns, inevitably and indubitably, creating (“at last”) commercial society that first processed food and raw materials from the country in traded exchange for processed food and later in exchange for manufactured goods. It was that historical development of traded exchange that laid the basis for the creation of capital that led to commercial development.  Those that remained in the forest, or in shepherding or farming, mostly remained there for millennia.  There is nothing ordained about what humans do, nor is there a particular direction by which they pass their lifetimes, as their archaeological remains testify.

Smith did not require the conversion of everybody to new morality or to a universal conformity to logic.  In fact he wrote of humans as they were.  He made no predictions about the future  (except about the future of the former British colonies in North America becoming the wealthiest economy in the world by around 1875).  Instead he studied the past to understand within the limitations of knowledge the present; we might be better doing the same.  


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