Patterico's Pontifications

8/22/2015

“Human Action” and Robert Murphy’s “Choice,” Part 1

Filed under: Economics,General,Human Action and Choice — Patterico @ 7:54 pm

Regular readers know that I increasingly believe that having a firm grasp of basic economics is one of the most important duties of a citizen. Placing religion to the side, the free market has been the greatest engine for improving the lives of humanity in recorded history. Understanding it is central to being a responsible citizen.

For a couple of years now, I have been studying Austrian economics, which offers (in my judgment) the best set of tools with which to battle the Keynesians and those who seek to regulate and manipulate the economy. And I think it’s beyond question that the most important figure in Austrian economics is Ludwig von Mises, and his most important work is “Human Action.” (Hayek is certainly more well known, and “The Road to Serfdom” should be required reading for every citizen, but Mises is still #1.)

The problem is that Human Action is a monstrously intimidating work. Not only is it long, but Mises assumes that you are familiar with the work of previous economists like Carl Menger or Eugen Böhm von Bawerk. And if you’re like most people, you aren’t.

Economist Robert Murphy has done the world a great service in writing a book that communicates to the general public, in crystal clear English, the basics of “Human Action.” Murphy’s book is called Choice: Cooperation, Enterprise, and Human Action. At $23.70, it is on the pricey side, which is an unfortunate side effect of the fact that it is likely to be used as a textbook. (Ironically, this treatise against coercion gains value by virtue of the fact that many students will be compelled to buy it!) But I consider it to have been well worth the price, and urge anyone interested to buy it.

Murphy ends the book by quoting Mises to the effect that civilization depends upon every citizen studying basic economics. Murphy notes that this is the point of his book, and urges readers that if they convinced that Mises is right, it is their “duty to relay this precious knowledge to others.”

I have made some attempts at discussing Austrian economics here and there on the blog, and in particular I have always wanted to take a stab at discussing the Austrian theory of the business cycle. But that’s a hell of a post to write, and I could never find a way to put it all in one post. [UPDATE 8-29-15: Perusing my old posts, it appears I did try this once after all. Hubris!] Well, it took Bob Murphy this entire book to do it right. And the end result is compelling. And you need to hear about it.

Hence this planned series of posts. I intend to summarize Murphy’s summary of Mises, chapter by chapter. Since Murphy’s book has 17 chapters, I plan 17 posts.

In part this is for my benefit, as I believe that the best way to thoroughly master complex material is to try to restate it to others in your own words. You soon learn where the gaps in your understanding are. But in a larger sense, I am undertaking this project because I think it’s important to relay this knowledge to you, the blog reader, and get you interested in Murphy’s book.

And maybe some of you are interested in reading something that isn’t about Donald Trump or the Republican primary race.

My summary of Chapter One will be in the extended entry. It is short, but foundational to the project.

In Chapter 1, Murphy simply explains Mises’s views about what economics is really about. The answer may surprise you, as it is quite different from what you might assume, reading almost any modern mainstream economist.

Let’s start with what it is not. Economics, in the view of Mises, is not a science of measurement. It is not a collection of tables, charts, and graphs. It is not a science in which, like physics, one forms a hypothesis and then runs experiments to prove or disprove the hypothesis.

No. To Mises, economics is fundamentally a study of, well, human action. (Hence the title of his treatise.) It is the study of why men and women make decisions in order to carry out defined goals, and then implement those decisions in action.

What’s more, Mises thought of economics as a deductive discipline, in which one divines, through analysis and reflection, the fundamentals of why humans act, and derives the necessary logical implications of these fundamentals using a deductive and logical chain of reasoning. Kind of like geometry (but I’m getting ahead of myself).

Some people object that this has nothing to do with the real world. They’re wrong. But that’s a future post.

I hope everyone will be interested in this project and will follow it. And I hope folks are interested enough to get Murphy’s book, or even to start reading the free copies of Human Action itself available online (at Mises.org, which I financially support for the good work they do).

It should be fun!

UPDATE: Well, this is satisfying:

Screen Shot 2015-08-22 at 10.44.55 PM

UPDATE x2: Note well: any errors in these summaries are mine and not Murphy’s.

47 Responses to ““Human Action” and Robert Murphy’s “Choice,” Part 1”

  1. I think I’ll go write Part 2 right now. Might as well get started while I’m this excited about it.

    Patterico (3cc0c1)

  2. Wow, Patterico — thanks so much for doing this!

    Amy Alkon (2c1ee8)

  3. Thanks for tweeting about it, Amy!

    Will I see you in a couple of weeks? :)

    Patterico (3cc0c1)

  4. Oh — one thing I meant to say in the post, but will say here: one thing I find very attractive about Mises and Austrian economics is that it is so much more realistic than classical economics, because it treats human beings as human beings. Often humans act in ways that are at odds with the Samuelson/Nordhaus classical concept of man as a “rational choice” actors, running around “maximizing utility” under constraints everywhere he goes. Mises recognizes that people have all manner of different psychological triggers motivating their actions, and does not treat a man as a variable to be plugged into a model.

    But more about this in the future.

    Patterico (3cc0c1)

  5. ok i got the kindle version for like $3

    happyfeet (831175)

  6. If it makes you happy to read it on Kindle, that’s fine, and probably worth a paltry $3. iBooks is not user-friendly when it comes to keeping one’s place, transferring it across devices, and so forth.

    Patterico (3cc0c1)

  7. Having started on Part 2, I find that the beginning chapters seem very straightforward to the point where some might think their intelligence is being insulted. Not so — it’s all foundational for the future.

    Patterico (3cc0c1)

  8. When I was a young lawyer, one of my mentors was an older lawyer who’d gone to Harvard College, where he’d been graduated magna cum laude, then to Texas Law School, where he’d been graduated magna cum laude again, been selected to the Chancellors’ Society, and served as an Articles Editor of the Texas Law Review. He was one of the smartest people I’ve ever met, but like me, he was from a small town in Texas. He figured out, quite perceptively, that I was subject to many mistakes he’d already made and learned from.

    “Bill,” he told me one day, when I was trying out on him an argument I intended to make to a jury, “That’s very smart stuff, and I’m persuaded. But you’ve got to keep the hay where the goats can reach it.”

    Your above-the-fold description of the project upon which you’re embarking, Patrick, gives fair warning that it’s an ambitious undertaking, as will be reading your posts. I was therefore a little surprised that your below-the-fold summary of Murphy’s first chapter comprises only a few very short paragraphs.

    If you’re willing to do this, then this old goat will try to stretch his neck for it.

    Beldar (fa637a)

  9. I love that story.

    Patterico (3cc0c1)

  10. I’m in.

    htom (4ca1fa)

  11. Thanks for your efforts.
    I look forward to learning and appreciate the distillation.

    steveg (fed1c9)

  12. UPDATE: Well, this is satisfying:

    Screen Shot 2015-08-22 at 10.44.55 PM

    Patterico (3cc0c1)

  13. Mises recognizes that people have all manner of different psychological triggers motivating their actions

    What I find fascinating is the way that people’s desire to be compassionate and generous, but in terms not so much of their own actions alone but that of the society around them (including that of its public figures and politicians) — more than the effects of simple human greed alone, which is found everywhere (and which is at the heart of unethically managed companies and employment practices or criminality of all stripes) — can ultimately and ironically undermine the very prosperity and decency of a nation that its people may be so concerned about, or presumably protective of. There’s no better example of that than Euro-sclerotic France or Greece, ultra-liberal Venezuela or blue-blue urban America.

    The “psychological trigger” behind that is why lousy characters like a Barack Obama or a Hillary Clinton receive far more benefit of the doubt from far too many Americans than such public figures ever deserve.

    Mark (e187ae)

  14. tl;dr

    next?

    redc1c4 (a6e73d)

  15. Count me in. I could stand to learn a little about economics. Question: since it’s an Austrian discipline we’re looking at, will we need to know any Austrian?

    Bill H (2a858c)

  16. Bernie Sanders: “I hate Mises to pieces.”

    Tom Van Dyke (b78be6)

  17. For those who have only 4 or 5 minutes, here’s a short von Mises essay from 1940 which is very relevant today and might even touch on the politics we’ve been discussing on the other threads. https://mises.org/library/source-hitlers-success Don’t let the URL tag scare you.

    nk (dbc370)

  18. Thank you, Patterico and nk. There is nothing I like more than thinking about why people do what they do.

    DRJ (1dff03)

  19. Thanks for the book tip, I piss away $25 at the drop of an accusation of racism.

    DNF (8d7072)

  20. thanks, gentlemen.

    mg (31009b)

  21. It’s amusing that my degree is in economics yet after college I really didn’t consciously think about it often until I was in my 3o’s. I was always in business and always self employed so economics always played a part however it was not forefront on my mind that economics was helping to determine my decisions. BTW, The Road To Serfdom was the first new book my father ever gave me. I still have that tattered tomb in my office.

    I am excited for and look forward to following this series. Thanks a million.

    Rev. Barack Hussein Hoagie (f4eb27)

  22. Did they reset the Kindle version price overnight? I just paid almost $12 for it at 10am EST on 8/23. I see earlier commenters claiming a $3 price. Bought it anyway, just curious about the fast reaction if indeed there was one.

    Richard (01a2f5)

  23. I look forward to this series, and have alerted my freshman daughter at U Chicago, an Econ major, to check it out. Also, I know a guy whose blog is called, Austrian Economics Addict (austrianaddict.com). I’ve alerted him as well, since he might want to link his readers to your summaries.

    Tired Mom (f9132d)

  24. Greetings:

    And somewhat alternatively, in one of my attempts at a college education, I think it was my third but I’m not much quant-wise, I decided to be a Psychology major, more than anything else because there were about three times as many females as guys in those classes and some of the guys weren’t really all that guy-ey, if you get my drift. So, when my Big Sister, who though only a year, a month, and a week older than me found out, I was summoned into her presence.

    Initially she expressed some almost sincere concern but not long after, her inner Little M(is)s CPA began to emerge and then to dominate and not in the way that menfolk dominate the workforce. When she detected my rapidly diminishing interest in the profound truth she was so unappreciatedly dispensing, she shifted grammatically and rhetorically to the tense that earned her her status as the capital B, capital S, Big Sister. “Well,” she started, “if you insist on taking a Psych major, for God’s sake, take an Economics minor. That way you might actually figure out how to make a buck.”

    And, when exactly, has a Big Sister ever been wrong ???

    11B40 (6abb5c)

  25. 17. God could he write. What’s happened to us?

    DNF (755a85)

  26. 25.17. God could he write. What’s happened to us?

    Sixty years of union run, leftist propaganda masquerading as education, DNF.

    Rev. Barack Hussein Hoagie (f4eb27)

  27. #17: nk, that’s a very interesting link. I particularly appreciate the fact that it was written before the course of the war was determined (Pearl Harbor, the invasion of the Soviet Union.) The discussion of the historical linkages between the socialist- and communist appeals to the “workers” is only too relevant today. Fortunately the union movement in the U. S. has collapsed except for the government workers, so the class identity isn’t as applicable. But the yearning for the new, for “hope and change” are still strong motivators. And the need for leadership in the opposition party (let us call it the Republican Party for argument’s sake) that understands this phenomena and doesn’t accidentally amplify with for calls for “compassionate conservatism” is clear. I enjoyed the dissection of Chamberlain’s policy which was based on a belief that the “workers” in Germany would overthrow their masters. This is akin to our administration’s belief in a democratic base in Iran that will somehow moderate the maniacal goals of the mullahs. Magical thinking is very dangerous when dealing with stone cold killers.

    bobathome (6f310e)

  28. I’m looking forward to this, Patrick. Thank you for doing it. I read The Road to Serfdom thinking, well, these righties are always raving about it, I might as well give it a try, but it’s probably some crazy guy. Wrong! One of the most important books I’ve read, along with Paul Berman’s Terror and Liberalism.

    Patricia (5fc097)

  29. I like the definition of economics being a study of human action. I’ve watched Milton Friedman rip arguments to shreds on lots of videos, and the thing that has impressed me most about his arguments is that they are based on human behavior, not market behavior. Friedman was foremost an observer of human behavior, particularly in the economic arena. That’s why lefties are so frustrating to try to educate on economics, because they don’t understand human behavior on a fundamental level, making it nigh unto impossible to get them to see how markets function in the real world.

    windbag (1e4f3d)

  30. Fortunately the union movement in the U. S. has collapsed except for the government workers, so the class identity isn’t as applicable. bobathome

    I don’t know if you’re trying to convince yourself or the rest of us but the public labor unions definitely do compose their own “class”. They are untouchable, impregnable, unable to be dealt nor reasoned with and make their own rules even to the point of being excluded from rules they don’t like. They really have become a mini-aristocracy. They threaten/support pols, use agencies and laws (EPA, OSHA, etc.) to intimidate and harm independent workers and contractors and do it all while spitting at the public which pays them.

    Rev. Barack Hussein Hoagie (f4eb27)

  31. Reverend Hoagie, I am concerned about the public labor unions, and for all the reasons you state. But they remain a small portion of the electorate. Gov. Walker has challenged them and won a series of important victories, in a “labor” heavy state. My hope is that we can find leadership that will takes this process and apply it successfully across the nation. I believe there is a vast and intense dislike of almost everything the government provides. It is shoddy and abusive. Consider inner city public schools or the Veterans Administration. We need to take the lids off these cesspools and return them to the control of their customers.

    bobathome (6f310e)

  32. Placing religion to the side, the free market has been the greatest engine for improving the lives of humanity in recorded history. Understanding it is central to being a responsible citizen.

    I would tweak that a bit and say that competition has been the greatest engine for improving the lives of humanity in recorded history. Of course, what makes the free market system so effective is that it harnesses competition. The reason I would nitpick your phrasing is that competition is also a powerful force outside the marketplace. Such as politics. A political system that harnesses competitive forces, such as an elected representative government, is also essential to improving the lives of its citizenry. A marketplace of ideas, as the expression goes.

    As long as the fascists don’t hijack it via unlawful means.

    Anon Y. Mous (8ec442)

  33. As long as the fascists don’t hijack it via unlawful means.

    or even lawful means…

    (see #Failifornia, for example)

    redc1c4 (cf3b04)

  34. I would say that enabling illegal aliens to vote is unlawful.

    Anon Y. Mous (8ec442)

  35. and i would say that lawfully voting citizens who lockstep seat and re-seat nanny state politicians election after election is totally lawful, albeit being an utterly ignorant thing for voters to do.

    redc1c4 (cf3b04)

  36. Capitalism is mankind working within its limits, i.e. unameliorable sel-interest.

    DNF (8d7072)

  37. Thank you for doing this, Patterico. I look forward to reading all your posts on this subject.

    felipe (56556d)

  38. From nk’s link at 17

    The “progressives” who today masquerade as “liberals”…

    Even truer today. Only the labels have switched places.

    felipe (56556d)

  39. Bernie Sanders: “I hate Mises to pieces.”

    Tom Van Dyke (b78be6) — 8/23/2015 @ 1:48 am

    Niiiiiiice :)

    Bill H (2a858c)

  40. Anything that is in tune with the principles of Maslow’s famous Hierarchy of Needs instantly rings true to me. I am not gonna buy a dang thing at Whole Foods if I only have money to scrape by at Aldi’s, or even a co-op. It matters not if the relative “value” is overwhelmingly in favor of WF. I have to take care of basics, first.

    Ed from SFV (3400a5)

  41. I appreciate the people thanking me for doing this. However, in large part, I am doing it for myself. I read a lot of books at one time these days, and I often worry that I am losing the thread. As I say, the best way to know whether I followed the arguments is to see if I could restate them. I decided today that this was definitely a book that was worth summarizing in its entirety — and then I thought: if I am going to do that, why not share it with readers? That forces my summaries to be more coherent, since they need to be readable by any reader — and forces them to be accurate, since, for all I know, Murphy (who has been retweeting my links) might happen in on any post to say: “How the hell did you get that from what I wrote?!”

    So it’s a selfish enterprise that just happens to (hopefully) benefit others.

    Which, come to think of it, is a pretty accurate descriptor of the free market as a whole.

    So.

    Patterico (3cc0c1)

  42. Another observation: after reading Ed from SFV mentioning Maslow, I did a Google search and came across this Communist’s utterly false description of Austrian economics.

    Having written 8 posts of the 17 in this series, there is part of me that worried that I was (because Murphy did, because Mises did) spending too much time on abstract and philosophical notions of what Austrian economics is, and is not.

    Having read the Communist’s link, I see I was wrong. Having read Murphy’s book, and written a summary of about half of it (so far), it was child’s play for me to spot the gazillion fallacies in the Communist’s piece.

    It’s my hope that, when you’re done, it should be child’s play for you, the reader, as well.

    Patterico (3cc0c1)

  43. the free market is my favorite

    (after babies)

    happyfeet (831175)

  44. so their is no crime in ‘socialist paradises’ like Cuba, that’s good to know, of course they have to deny the analytical tools, because marxism was like a fable in scientistic form,

    narciso (ee1f88)

  45. tell me a

    fable

    happyfeet (831175)

  46. Most people who call themselves communists are anything but. They ignore the basic tenet of Marxism that the source of all wealth is productive labor. Because that means they’ll have to get up and do a day’s work. They prefer “redistribution” which is divvying up the products of other people’s labor. But sooner or later, you run out of things to redistribute. I can see why they would consider the Austrians to be their natural enemies. Correct if I’m wrong, but it seems to me that von Mises is primarily concerned with the flow of wealth, and not the nuts and bolts of its creation? And that that flow should be to the production and preservation of wealth and not its dissipation for the benefit of parasites?

    nk (dbc370)

  47. [UPDATE 8-29-15: Perusing my old posts, it appears I did try this once after all. Hubris!]

    Patterico (3cc0c1)


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