Bold statement, I know.
When people ask me what I mean by Austrian economics I usually say that it considers economic problems without assuming the existence of a central control (a central bank) and thus attempts to analyze the impact (damage) caused by the centralized control and other non-market (government) factors in addition to analyzing more mundane things like supply and demand. Austrian economics is thus unadulterated, holistic economics that considers the impact of the actions of the central planners in addition to those of the market participants. Austrian economics includes everyone, including government actors, in its calculus.
One of the most important Austrian observations is the notion of praxeology. Praxeology is the value-neutral idea that individual economic choice (economic free will) always involves a qualitative element that cannot be quantified. Put perhaps too simply for most serious Austrians, praxeology to me is the notion that the value of any individual economic choice is immeasurable and thus incalculable. Put another way, praxeology is the “discovery” of the almost self-evident idea that one person can buy something and pay $1.20 and someone else can buy the exact same thing and pay $1.00 and both transactions can be a win-win for everyone involved. Over the last twenty years wise and frugal old school Austrians like Gary North may have chosen to exchange every dollar they earned for things like gold, silver, unencumbered real estate and income-producing assets. Others may have spent their dollars on highly-leveraged McMansions, Crocs and Cold Stone Creamery franchises. A lot of the rest of us are somewhere in between. Life is the sum of our choices, ethical and economic.
Although praxeology is a value-neutral observation, current economic realities (the abject failure of Keynesian central planning based on “aggregate” measurements) are proving that it is a discovered truth that, when recognized by a majority of people, could have as much impact on the next century as Einstein’s value-neutral theory of relativity had on the last. Students of the relationship between physics and metaphysics know that Einstein’s theory led Fr. Georges LeMaitre and others to “discover” that the universe was expanding (a notion rejected by Einstein who created the fiction of the cosmological constant to make his equations make internal sense) and deductively show that the universe had a First Cause and thus a Creator.
If praxeology—individual economic choice—cannot be accurately quantified, so the Austrian argument goes, then central economic planning of things like “aggregate” supply of and demand for credit and the equilibrium price of money (interest rates) are impossible. This simple idea means that no central planning can ever be effective and that all central economic planning is injurious to ALL individual economic choice. When the Federal Reserve centrally sets and/or influences interest rates (the price of money) it affects everyone in the American economic system and does damage to the individual economic decision-making of everyone in the system, lenders and borrowers, producers and consumers by influencing the overall price of money.
Stated in terms of my own Christian faith, praxeology is free will economics. Christianity, like Austrian economics, is all about individual choice. We Christians are zealous believers in free will and the notion that our worldly and spiritual outcomes are structured by the choices we make, particularly the most fundamental choice: to accept a relationship with God and to understand that the only way to develop and grow that relationship is through a prayerful and interactive relationship with His earthly emissary, Jesus Christ.
Once a Christian chooses the relationship, that unfortunately is not the end of the story. Developing their individual relationship, like developing any relationship, requires trust and faith. Building that trust requires a lifetime of good, selfless decisions. Christians ardently believe that God smiles on those who make fearless choices and live life with a firm belief in the promises of Jesus Christ. Furthermore, Christians find their path not by following the positive laws laid down by central planners, but through their contemplative and prayerful relationship with Christ and regular reference to the Bible. Christ admonished the misguided positive-law Pharisees who put religious form over faithful substance.
Another important similarity between Austrian economics and Christianity is the belief that its ethics are universal and apply to everyone, including government agents, religious authorities and non-Christians. Just as Christ observed that positive laws and positive law enforcement cannot make bad men (tax collectors, Pharisees and other miscreants) good, Austrians know that central planners cannot compel wise economic decisions. Indeed, their planning actually harms and distorts individual economic decisions. Even when the Federal Reserve acts “responsibly” by “raising interest rates” and “taking the punch bowl away,” this harms entrepreneurs who need and can make use of the capital that the free market would provide right now. When praxeology is understood as the key that unlocks all central economic planning, the result is the conclusion that only the free market (the sum of billions of free-will economic decisions) can compel individuals’ wise and efficient economic decisions. Praxeology is thus the highly distilled free-will antidote to all central planning poison. Praxeology lifts the veil from all central economic planning and exposes for what it is: a means to transfer wealth from the many (innocent, hard-working Americans) and direct it to the few (Goldman-Sachs, Citibank, JP Morgan et al.).
Praxeology not only shows the inefficacy of central planning; it also shows that the effect of central planning on the individual is often morally catastrophic. When the innocent individual is making his praxeological economic choices in the bubble of “irrational exuberance,” he does not know that the current state of low-cost money is an artificial condition and so makes long-term economic decisions based on central planner-induced false assumptions. When the unforgiving market compels reality, that reality often becomes unbearably painful and individuals who made economic choices based on assumptions they did not understand and could not control commit suicide, divorce their spouses and abandon their children. That is the patently immoral result of central planning.
Need more evidence that Austrian economics is revealed truth? For a Christian, one need only look to Christ’s parables to understand this. When discussing the proper relationship with God and stewardship of one’s Christian life, Christ repeatedly drew upon examples of good and proper stewardship of private property and individual economic decisions. Christ’s parables provide examples of good, faithful and responsible free will decisions, including decisions relating to thrift, entrepreneurship, the productive use of capital, negotiation of debts, respect for others’ property, responsible stewardship of one’s own private property and freedom of contract.
Most interesting to me is the parable of the vineyard, where the vineyard owner (the capitalist) pays workers the same pay for different quantities of work. When one of the workers complains that others received the same pay for less work, Christ recited the vineyard owner’s free-will praxeological response:
But he replied to one of them, 'Friend, I am doing you no wrong; did you not agree with me for a denarius? Take what belongs to you, and go; I choose to give to this last as I give to you. Am I not allowed to do what I choose with what belongs to me? Or do you begrudge my generosity?'"
Most socialists use this story to argue in favor of state-sponsored wealth distribution. Had the parable spoke of the brave Pontius Pilate who compelled the vineyard owner to pay equal pay for unequal work, they would have a point. Instead, the parable speaks of the property owner’s choice. The point of the parable of the vineyard is that economic decisions, and particularly charitable decisions, most be voluntary and must be made by the holder of the capital.
© 2009 Bill Butler, reprinted with permission