Even Advanced Technology Cannot Explain Human Action or Predict Markets

For more than a century, the world has been caught in the grip of social engineers and political paternalists who are determined to either radically remake society along collectivist lines or to modify the existing society with regulatory and redistributionist policies that are in accordance with “social justice.” Both are based on false conceptions of man and society.

One of the leading voices who challenged twentieth-century social engineers and statists in the twentieth century was the Austrian economist, Ludwig von Mises. In such important works as Socialism (1922), Liberalism: The Classical Tradition (1927), Critique of Interventionism (1929), Planning for Freedom (1952), and in his monumental treatise, Human Action (1949; 1966), Mises demonstrated the economic unworkability and unintended negative consequences that result from attempts to impose central planning on society, as well as the social quagmire brought about by introducing piecemeal regulations and interventions into the market economy.

But it was in his often-neglected work, Theory and History: An Interpretation of Social and Economic Evolution, that Ludwig von Mises systematically challenged the underlying philosophical premises behind many of the socialist and interventionist presumptions of the last one hundred years. This year marks the sixtieth anniversary of the publication of Theory and History in 1957, so it seems worthwhile to appreciate Mises’s arguments and their continuing relevance for our own time.

The Elusive Search for Meaning and The Rise of Modern Science

The world is a confusing and uncertain place. We all live in communities with values, traditions, customs, and routines for daily life. We have grown up in them and tend to take certain aspects for granted. Our communities provide us with degrees of orienting certainty and predictability in our everyday affairs. Yet they still fail to answer a variety of “big questions.”

Among these big questions are, why am I here? What is the meaning of life? What is it – life and reality – all about? Why do bad things happen? Who’s to blame? How do we make a better world? Ludwig von Mises argued that attempts to find and pursue answers to these questions have sometimes brought upon society disaster and destruction.

Over the ages, people have turned to religious faith and philosophical reflections to try to understand it all and how it fits together, to find ways to live with the unchangeable, and to try to improve those things in society that seem to offer avenues for personal and social betterment.

The development of the scientific method was and has been transformative.

In the nineteenth-century, Mises explained, there arose new ideas about man, society, and social change. Out of the Enlightenment era came a freeing of the human mind from superstitions and political prohibitions on discovery of the natural world. The problem is that the unaided human mind is not only limited in its power to see the world as it really is, but that same human mind is often filled with ghostly fantasies and thought-confining superstitions about the universe and man’s place in it.

In place of fantasy and superstition, there arose modern science with its method of observation, conjecture, and empirical testing. The physical world around us has shape, form, and size. If we are to know this world, we need to quantify and measure its magnitudes and dimensions, to have benchmarks for understanding outside of any one person’s subjective, imperfect, and unreliable belief systems.

The development of the scientific method has been transformative. It has enabled man to understand many of the past mysteries of physics, biology, and chemistry. And now, knowing more of the objective “laws of nature” and their workings, men were and have been able to harness them for changes and improvements in the physical and social surroundings of humanity.

The Error of Reducing Man to Measurable Matter

Man has something that most of Earth’s other life forms lack – a self-reflecting, conceptualizing, and planning mind.

But, as Mises argued, a fundamental misstep was taken when a further conclusion was drawn. If we needed to give up our imperfect impressions and step out of ourselves to see the objective and quantifiable characteristics of reality, then we need to similarly ignore the mind’s pretentious beliefs about itself, and study man in terms of the measurable and quantifiable as well.

Man too is a physical, biological, and chemical entity, just like everything else in the world. But man has something that most of Earth’s other life forms lack – a self-reflecting, thinking, conceptualizing, and planning mind.

Even with the twenty-first century’s scientific advancements, including accelerating attempts to develop “artificial intelligence,” the workings of the human mind and the mysteries of physical world remain obscure.

Some developers of artificial intelligence consider the development of a computer with a problem solving “mind” to be an achievable goal. The robot’s complex computer “mind” will enable it to absorb external data and then devise solutions to unique problems and situations not already programmed into the machine.

If this point were ever reached, then the robot’s “mind” would have a degree of unpredictability similar to the human mind that had created it. Just like man, the robot’s mind would be an autonomous source of non-deterministic causal change which, even the human creator of the mechanical brain cannot fully predict.

At that point, it may still be inappropriate to assert that such a robot has transcended its origin as a machine, and now possessed human-like consciousness, and therefore “human rights” (as some are already suggesting). But it would no longer be a mere “calculating machine” in the traditional meaning of that concept.

“Observations” Can’t Explain Human Action

Human action is nothing more than our reason applied to the pursuit of our purposes under conditions of scarcity.

Mises insisted that if man is to understand himself and the social world, he must accept the fact that the workings of the human mind cannot merely be reduced to physical matter and its measurements, by which human actions may be predicted and manipulated.

In Theory and History, Mises pointed out that there is one fact that man can know about himself if he but reflects on the workings of his thought processes: there exists a logical structure to the mind which guides thought and action. It tells us that two plus two cannot equal five, that a triangle cannot have four sides, and that “A” cannot simultaneously be “non-A.”

Human action, Mises said, is nothing more than our reason applied to the pursuit of our purposes under conditions of scarcity. And, thus, the logic of choice and action, are not something “out there” in the physical world to be learned about through observation, measurement, and empirical testing.

With physical observations alone, all of men’s actions can only be seen as movements, no different than billiard balls bouncing off the felt sides of a pool table or a rock falling to earth. We know that our own actions are not such because our consciousness tells us that they are intentional actions. We make the same assumption about the “movements” of others based on the observation that what we observed is a conscious human being like ourselves.

Therefore, the fundamental relationships and laws of economics, are not “out there”; they are inside each of us, derived from the inescapable way that our minds work. Weighing alternatives, comparing costs and benefits, and deciding on desirable trade-offs are all aspects of the logic that guides our actions when we discover that means are too scarce to satisfy all of our imagined ends.

The human mind remains the unpredictable agent of imagination, possibility, and change.

But Mises also emphasized that what men may imagine, what specific ends they may want to pursue, what terms of trade do or do not justify entering into an exchange, are not known a priori. These depend on the empirical realities of the physical and social world. We discover these things through our lived experiences with society and other humans who are also making choices and taking action. The logic of choice and action is the template for decision-making. It provides us with an interpretive method for discerning the logic that underlies the actions of others.

But within all this, the human mind remains the creative and unpredictable agent of imagination, possibility, and change. The ideas that form in the mind drive the course of human events. They are the source of all the products of human history. The future of ideas can not be predicted from the actions of people in the past. All of history is a consequence of ideas. And so it remains.

Furthermore, it is only individuals who have minds, who conceptualize and imagine, who project themselves into possible futures, who design mental blueprints for possible action, and then attempt to bring worthy goals to fruition.

Marxism and Imaginary “Laws” of History

So what does all of this have to do with the collectivists, social engineers, and “social justice” regulators of our time? The task that Ludwig von Mises primarily set for himself in Theory and History was to show the ideological house-of-cards upon which political paternalists construct their plans.

Fascinated by the successes of the scientific method in the natural sciences, some thinkers wondered if the same tools might be used to discover some law of societal development and change. At the same time, if such laws could be discovered, perhaps man has the power to bend society into the shape of his desire? This could give meaning to the “whys” of life and provide hope that the world can be redesigned for greater happiness and the illusive security for which many yearn.

Mises argued, the most revolutionary of these theories of societal evolution, in terms of its impact on twentieth-century history, was Karl Marx’s theory of dialectical materialism. Marx offered an image of the social world in which technological means and methods of production follow an autonomous trajectory of evolutionary development that leads to a final state of mechanical sophistication. At which point, machines will produce such a degree of material abundance that work and human hardship will finally be a closed chapter in the history of mankind.

But each step in this technological evolution requires its own institutional setting for full transformative development before the next stage requires a different set of institutions to sustain its further development.

Hence, the slave society, feudalism, and the capitalist system of profit-oriented production have all been necessary and inescapable stepping-stones to the final stage of societal change, that being post-scarcity socialist and communist societies. Here was a vista that could make sense of it all for the poor and the weary – and especially to the intellectuals who are always looking at the world asking “why.”

And if human blood had to flow to bring it about, the collective interest took precedence over the individual’s.

The poverty and hardships experienced by many are part of history’s preordained path, Marx explained. But the abuse and misery born by untold generations under the boot of a feudal lord or capitalist exploiter would all come to an end with the arrival of socialism and communism. The world of material plenty would belong to all of humankind once technology reached the point at which they could shed the last vestiges of the cruel, unjust, and exploitative institution of private property. Salvation is coming – the “laws of history” dictate it. Praise Marx, for “scientifically” showing us the way, the truth and the collectivist light at the end of the capitalist tunnel.

The revolutionary Marxist high priests saw it as their duty and destiny to be the “midwife” of radical change. Their task, as the “vanguard” of the revolution, was to guide and impose the new collectivist order on “the masses,” too ignorant or brainwashed by their former capitalist bosses to know where their interests lie. Freedom for mankind would come through a transitional period of proletarian dictatorship. And if human blood had to flow to bring it about, the collective interest took precedence over the individual’s, even if the individual’s interest was peace and voluntary association with others.

Men Make Machines, Machines Do Not Impose Ideas on Men

While claiming to be objectively scientific, at the heart of Marx’s conception of “history” is an unspoken mystical notion of “technology gods” who decide on how and when they will develop, and what they will dictate as the social arrangements that they need and want at each stage of their pre-ordained path to a final stop at the doorstep of socialism. Machines become the acting agents of history, and man the mind-passive entity carried on the back of technological transformations outside of human understanding and control.

Mises challenged this mystical belief in technologies and machines that followed autonomous paths of evolution and change. Machines do not make and dictate the actions and institutions of men. Machines are inanimate objects made of physical materials. It is the human mind that imagines and manufactures the machines that serve men’s purposes. How could a technology or method of production dictate the social conditions and thoughts of men, when it is human ideas about imagined productive possibilities that bring technologies into existence, and which are facilitated in their forms and uses by the social institutional setting within which they are applied? Mises emphasized:

A technological invention is not something material. It is the product of a mental process, of reasoning and conceiving new ideas. The tools and machines may be called material, but the operations of the mind which created them is certainly spiritual.”

Furthermore, Mises asked, on what basis do these purveyors of the “law” of predetermined historical transformation claim to know what are the “true” and “real” interests of “the workers” versus that of the property-owning capitalists? In each of his actions, the individual manifests and demonstrates what he considers to be his “interests,” whether this concerns the breakfast food he eats, the clothes he likes to wear, or the political and social ideas and beliefs he holds.

The Marxists, and all other collectivists like them, merely have shown their personal arrogance and dictatorial hubris, Mises said, in asserting and claiming the right to impose a particular set of values and governmental policies on all through the use of political force to make everyone conform to the central plans within which they wish to confine humanity.

The Planner’s Hubris vs. Unintended Consequences

All philosophies of history, including Marx’s, presume that “history” follows a particular course, a predetermined path that leads to a specific outcome. In analyzing these claims, Mises insisted upon playing the role of the boy in the story who announces loudly that the philosophical “emperors” have no clothes.

If history is on some predetermined course, it is beyond human understanding.

If history is on some predetermined course, it is beyond human understanding. History, Mises explained, is the story of human action, guided by ideas about which ends are worth wanting, the means chosen to attain them, and the consequences that have followed in the wake of men’s actions and interactions that we call the cumulative course of human events.

Human history is the record of the triumphs and tragedies of men. History recounts the beliefs and ideas men have held which guided their policies.

Mises pointed out that history also reminds us that much of what we consider to be the product of human design is, in fact, the unintended consequence of actions, with impacts that no human actors could have imagined. As Mises expressed it:

But the historical process is not designed by individuals. It is the composite outcome of the intentional actions of all individuals. No man can plan history. All he can plan and try to put into effect is his own actions that, jointly with the actions of other men, constitute the historical process. The Pilgrim Fathers did not plan to found the United States . . .

“The monumental tombs of the Egyptian kings still exist, but it was not the intention of their builders to make modern Egypt attractive for tourists and to supply present-day museums with mummies. Nothing demonstrates more emphatically the temporal limitations on human planning than the venerable ruins scattered about the face of the earth.”

How pretentious and presumptuous all recent and present-day social engineers and economic planners are!

As Mises also said:

The utopian author wants to arrange future conditions according to his own ideas and to deprive the rest of mankind once and for all of the faculty to choose and to act. One plan alone, viz., the author’s plan, should be executed and all other people be silenced…

“[The central planner] will… reduce all other people to pawns in his plans. He will deal with them as the engineer deals with the raw materials out of which he builds, a method pertinently called social engineering.”

Historicism and the Denial of Economics

One other variation of this theme, Mises argued, was that of the “Historicists,” the social philosophers who have insisted that there are no “laws” or patterns discover in the course of human events. Here we find, Mises explained, those who implicitly reject the notion of there being “laws of economics,” such as those of supply and demand and the order that tends to emerge out of the interactions of consumers and producers.

For the Historicist, governments may do anything they want, with no noticeable negative consequences. If workers’ incomes are “too low,” then simply impose a minimum wage above those wages set in the market. There will be no loss of jobs, they assert, when employers conclude that some workers are not worth the higher wage.

If some are “too poor” while others are “too rich,” then simply impose higher taxes on the wealthy, redistribute the wealth. This can all be done with no negative effects on the those who bear the greatest tax burden, and surely won’t affect their willingness to save and invest. Nothing would happen to the overall output of goods and services upon which everyone is ultimately dependent upon for material betterment and increased standards of living.

The economic logic of the human mind will prevail over the dictates of political paternalists and the hubris of the social engineers.

All such interventionist and redistributive policies, Mises insisted, ignore that there are patterns and coordinative regularities discoverable in marketplace competition. They are the interpersonal market manifestations of those basic, inescapable laws of economics that emerge from the logic of choice and action that starts in the minds of men, that we discussed earlier.

Government dictating what people must pay for something does not necessarily make it worth that amount to the person who decides. Hence, a worker may become unemployed once the government prices that worker out of the market. And taxing even the very rich does not change the fact that a wealthy individual will still weigh the trade-offs of continuing to save, invest, and produce as entrepreneurs when higher taxes reduce his or her marginal net gains.

As long as men think and act, there will be the “laws of economics” exchange. Governments may try to ignore these laws and impose restrictions on people in the marketplace. But, at the end of the day, the economic logic of the human mind will prevail over the dictates of political paternalists and the hubris of the social engineers.

These lessons are easier to learn and understand through the insights of Ludwig von Mises’s Theory and History. For this reason, sixty years after its original publication, the words on its pages are still relevant. They still speak to us in our own time.