Patterico's Pontifications

8/23/2015

“Human Action” and Robert Murphy’s “Choice,” Part 2: What Is Action?

Filed under: Economics,General,Human Action and Choice — Patterico @ 10:31 am

This is Part 2 of my ongoing series of posts summarizing Bob Murphy’s excellent book Choice: Cooperation, Enterprise, and Human Action. The idea is to popularize and spread the word about Austrian economics and educate the public. Part 1 is here.

So what do we mean when we say economists study “human action”? First, the action must be purposeful behavior; reflex actions do not count, for example. It can even be inaction. Rush fans will recognize the quote: “if you choose not to decide, you still have made a choice.” Right?

Remember yesterday, I said: “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.” So what can we deduce from purposeful behavior?

Well, some of these are going to seem obvious. But it’s still necessary to state them — because it’s all foundational for what comes in the future.

First, obviously, if there is human action, then there must be a mind behind it. Human action is different from the mindless falling of a rock that we see in physics. Second, the actor must have goals, or preferences, in taking an action.

So far, pretty obvious. Here is another implication that is perhaps less obvious, but is very important: preferences are subjective and not objective. A related concept is that preferences are ordinal and not cardinal.

OK, I’m going to have to explain this one.

Cardinal numbers are “counting numbers” that measure things in units. In the equation 2+2=4, the numbers two and four are cardinal numbers.

“Ordinal” numbers arrange things in a series. Joe is first in line. Chocolate is my 4th favorite flavor of ice cream. (It’s actually my favorite; this is a theoretical discussion!) These preferences can’t be measured in units. I can say chocolate is my fourth favorite flavor, and vanilla is my third favorite. But I can’t measure the difference between these preferences in units. I can’t coherently say I prefer vanilla three times as much as chocolate. More importantly, there is no way to compare, in units, one person’s preference to another’s. You can’t say “Murray likes Buicks twice as much as Joe does.” (You can say Murray is willing to spend twice as much on a Buick as Joe is, but that’s a separate discussion for a separate day.)

The bottom line is: preferences are ordinal and not cardinal. You prefer one good or service to another, but — just like Frank is a better friend to you than Pete — this can’t be expressed in units (cardinal numbers).

Finally, an acting man believes he can influence the future. This is a better way of expressing the concept at issue than saying “man acts rationally” — because the word “rational” is a term that is loaded with connotations not used by Mises. For example, Murphy argues that to Mises, a rain dance is a “rational” act. Why? Because the person doing the dance has a goal (making it rain) and is engaged in action that is directed towards achieving that end.

The fact that we know the action will not accomplish the purpose does not mean the action is not “human action” (or “rational” as Mises uses the term). That’s why I like Murphy’s formulation that the man engaged in “human action” must believe that he can influence the future. This way, we can avoid judgments about whether that action is based on correct information, or whether it actually will achieve the purpose he believes it will achieve.

That summarizes Chapter 2, and is enough for today. Remember, we are still in foundational mode. Tomorrow, we will address the issue of Mises’s economics being an a priori discipline.

UPDATE: Let me say, as I should have at the outset, that any errors in these summaries are mine and not Murphy’s. I am restating his points in my language, and that opens up the possibility of inaccuracy. Should that happen, blame me, not him.

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.

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