Reconciling the Political Philosophies of Austrian Economists Mises, Rothbard, and Hayek
A Sabbatical Report
John B. Egger, Economics
April 19, 1996

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Economists whose conception of their field and its method are those first clearly presented in the Viennese economist Carl Menger's 1871 Principles of Economics, are often identified as comprising the Austrian School. Among its tenets are methodological individualism, the subjective nature of value, and choice with incomplete knowledge.

These shared beliefs imply no particular political philosophy, and one can identify economists of the Austrian tradition with strong socialist convictions.(2)

But the School's emphasis on the subjective natures of both value and knowledge, which make it impossible for anyone but the acting individual to know what his own values and knowledge are, lead most scholars who embrace these methodological strictures also to support the free market. In my University Lecture a couple of years ago I identified "the free market" with the recognition and enforcement of "individuals' natural rights," but in our present context I'd better drop the adjective "natural." The free market is still defined by respect for individual rights like private property, but while individual rights are embraced by the three economists whose views I address here, only one of the three explicitly endorses the position that these rights are somehow "natural."

This paper is, in part, an examination of reasons for this political position, but here's a quick sketch of a subjectivist utilitarian argument. Suppose one wished to identify that social system likely to produce the greatest well-being, but thoroughly understood the implications of the subjective theory of value: first, individuals' utilities cannot be known by an observer; second, the utility of one individual cannot be compared to the utility of another; and third, every individual's voluntary choice makes himself better off than he would otherwise have been. Since the free market provides the greatest scope for individuals to make utility-improving choices, and the subjective natures of value and knowledge prevent any well-meaning observer from countermanding them, this set of propositions contains the core of one utilitarian argument for the free market.

If support for the free market is widespread, nearly universal, among economists sharing the Austrian School's methodological positions, there is considerable controversy over the reasons for this political position. The utilitarian perspective, one variant of which I just sketched, is consistent with a strong and long affinity between economics and utilitarianism, and it appears to have the most adherents within the modern Austrian School. The leading figure within the Austrian School during this century, Ludwig von Mises, clearly and explicitly proclaimed himself a utilitarian. One of his students, Friedrich A. Hayek, seems to have a wider following among young Austrian economists, who identify him with utilitarianism despite his own occasional dismissals of it. Hayek is best known for his work, late in his life, identifying political and moral beliefs with an evolutionary process that, in some respects, seems outside of both the classic utilitarian position and that of a third prominent Austrian economist: Murray Rothbard. Rothbard, like Hayek a dedicated student of Mises, sharply rejected both Mises' utilitarianism and Hayek's evolution. He attempted to remain "value-free" in his pure economics, but based his political advocacy of the free society on a natural-rights position deductively reasoned from axioms about the nature of man.

For many years I have had the highest respect for all three of these scholars. They share the important methodological tenets of the Austrian School that I have long been convinced are proper to the study of economics. But their apparent differences on the justification of their common political preference for free markets finally became sufficiently distressing to prod me into a form of action, and this work is the result. It is an attempt to reconcile the three political philosophies--those of Mises, Hayek, and Rothbard--while acknowledging and respecting the contributions of each. I hope, eventually, to illustrate that what is involved is a difference of perspective--casually speaking, three different ways of looking at the same thing.


Ludwig von Mises (1883-1973) studied under Carl Menger in Vienna and brought the Austrian tradition in economics to America when he emigrated from Europe shortly before the United States entered World War II. His best-known works are Human Action (1949), Socialism (1924), and The Theory of Money and Credit (1912). Mises' comments on the utilitarian foundation of his political philosophy are scattered throughout his works, and he offered no explicit and detailed presentation of it.

His observations make clear, though, that what appealed to him about utilitarianism was its ontological nature--that is, it focused on consequences or outcomes, rather than some conception of "essential natures." Moral rules and political legislation are to be judged by their effects, by their consequences. In his often-praised 1957 work Theory and History, for example, Mises writes of the transformation of the older natural-law approach into utilitarianism:

Hidden in a heap of illusions and quite arbitrary prepossessions was the idea that every valid law of a country was open to critical examination by reason. About the standard to be applied in such an examination the older representatives of the [natural-law] school had only vague notions. They referred to nature and were reluctant to admit that the ultimate standard of good and bad must be found in the effects produced by a law. Utilitarianism finally completed the intellectual evolution inaugurated by the Greek Sophists. (48-49)

This passage places Mises apart from both of his students: from Hayek, who was later to identify "the idea that every valid law of a country was open to critical examination by reason" as part of that "heap of illusions," and from Rothbard, who embraced "the natural-law school."

It seems to me as if some insight into Mises' position might emerge from contrasting the Austro-German philosophical climate, in which he spent the first sixty years of his life, with that of England. German philosophy of the nineteenth century was dominated by Hegel, who identified freedom as subservience to the state,(3)

and by Kant, who has been identified as an "individualistic, secular natural law philosopher" (Gonce 1973, 492). Hegel's arguments were presumably based in some conception of nature and natural law, yet their practical consequence was the Germany of Hitler, with its racism, nationalism, and its fascist economy. The appeal to nature seemed to produce quite different consequences in England, in the form of John Locke's justification of individual rights to the ownership of property. To Mises, a foundation for legislation and rules of proper conduct that could produce either the liberalism of England or the fascism of Germany, based on unprovable claims about whose view of "nature" was accurate, was not to be trusted. Besides, while England and Germany both could claim some association with natural law, only England had a strong utilitarian tradition. Mises saw this as the key difference:

The fact that German science had rejected the utilitarian social doctrine of the eighteenth century explains the success of Marxian social doctrine in Germany. (Mises 1925, 111)

and further:

The fact that the sociology of utilitarianism was generally rejected in Germany undoubtedly offers an explanation for this great influence [of Marx on German social sciences]. (Mises 1925, 119 )

If it is true that Mises did not trust natural-law theories of rights because he perceived how they had been used in Germany, the defenders of that principle may respond simply that German philosophers used it wrong. After all, Mises often argued that the science of economics itself has been used incorrectly to justify policies he considered mistaken, and he never suggested the potential for misuse even as a shortcoming, much less cause for dismissal.

Rather than shape a society's legislation according to somebody's subjective and untrustworthy perceptions of "nature," Mises embraced the modern proposition that one must judge legislation according to its probable consequences. The invaluable contribution of the science of economics is to identify those consequences, using its concepts of subjectively perceived value and cost and--in general--its analysis of incentives. One conceives of a legislative change, employs the best economic theory to predict how it would affect individuals' judgments of costs and benefits and therefore their behavior, and describes the probable resulting consequence. One then judges whether this consequence is "better" or "worse" than the outcome that would have obtained in the legislation's absence. This is the ontological or consequences-based nature of Mises' policy analysis. Look at what consequences the law would produce, and apply some standard to judge the proposed law good or bad according to one's judgment of its conseqences.

But what standard? As perhaps the greatest of history's Austrian economists, Mises could not explicitly embrace any hint of interpersonal utility comparison. He seemed aware of the difficulty:

We may try, for the sake of argument, to interpret the concept of welfare in such a way that its acceptance by the immense majority of nonascetic people would be probable. The better we succeed in these endeavors, the more we deprive the idea of welfare of any concrete meaning and content. It turns into a colorless paraphrase of the fundamental category of human action, viz., the urge to remove uneasiness as far as possible. (Mises 1966, 833)

Mises relied, for his own normative propositions about policy, on his reasonable judgment that nearly everyone (at least "nonascetics") prefers material comfort to poverty, and that one can more readily pursue so-called "higher" non-materialistic goals like literature, art, and music if one is not continually on the verge of death from exposure and starvation. His defense of freedom was on the consequentialist ground that it had these good results. He rejected the proposition that freedom itself was an ultimate value (a view held by none of those I discuss here), convinced instead that his Austrian-School's economics had demonstrated that the consequences of freedom--material productivity, principally--were clearly superior to the inefficiency and poverty resulting from socialism.

Not everyone within the Austrian School agreed with his rationale. But a powerful group within the School found Mises headed in the right direction, if perhaps not the last word. These utilitarians, who should more fully be called rule-utilitarians, include Henry Hazlitt, Leland Yeager, and many others, perhaps including Dominick Armentano and Roy Cordato. F. A. Hayek, whose emphasis on evolution warrants separate treatment, probably belongs in this group also.

Henry Hazlitt's The Foundations of Morality, originally published in 1964, deserves the great praise accorded it by its seemingly small group of readers; it is, indeed, an undiscovered classic. Hazlitt, differing with Kant, embraced the position that he had traced back in British philosophical history and that is shared by Mises:

There is no way, in fact, to adopt or frame moral rules except by considering the consequences of acting on those rules and the desirability or undesirability of those consequences. (Hazlitt 1972, 145)

But, again, by what standard does one judge "the desirability or undesirability of those consequences"? Although Hazlitt is explicitly addressing moral rules, he endorses the proposition that legislation is a subset of moral rules:

...Bentham has left us an illuminating simile: 'Legislation is a circle with the same center as moral philosophy, but its circumference is smaller.' And Jellinek in 1878 subsumed law under morals in the same way by declaring that law was a minimum ethics. It was only a part of morals--the part that had to do with the indispensable conditions of the social order. The remainder of morals, desirable but not indispensable, he called 'an ethical luxury.' (Hazlitt 1972, 66)

Hazlitt's conclusion about both moral rules and their legislative subset:

The chief function that the common morality serves is to reduce social conflict and to promote social cooperation. (Hazlitt 1972, 186)

As legislation is a subset of morality, so market exchange is a subset of "social cooperation."(4)

Hazlitt concludes that, because "social cooperation" is indisputably beneficial to human life, it serves as an appropriate foundation for both moral rules and legislation. Since "social cooperation" includes institutions that constitute the market system (such as specialization and division of labor, and money) or make it possible (such as property rights and attitudes of respect for them), Hazlitt's standard provides a consequentialist foundation for property rights and the implied freedom of exchange.

The most sophisticated and consistent contemporary proponent of Mises' consequences-based rule utilitarianism is indisputably Leland B. Yeager. In a 1993 article, Yeager writes:

Ludwig von Mises was a utilitarian and has been criticized for being one. Utilitarianism is a particular approach to ethics in personal life and public affairs. It compares alternative sets of institutions, laws, traditions, patterns and maxims and rules of behavior, and traits of personal character. It approves of those that support and disapproves of those that subvert the kind of society that affords people relatively good opportunities to make satisfying lives for themselves. Institutions and practices and attitudes that facilitate fruitful cooperation among individuals as they pursue their own diverse specific ends score ahead of ones that make for destructive clashes. 'Social cooperation' (so called by Mises and many other thinkers in the utilitarian and libertarian traditions) is so nearly essential to individuals' success in their own diverse pursuits that it is a nearly ultimate criterion of institutions, ethical precepts, character traits, and so forth. On this criterion, truth-telling and promise-keeping command approval. So does respect for justice, property rights, and other human rights. (Yeager 1993, 321)

While rights are the foundation of all social cooperation, fully as much to Mises and his fellow utilitarians as to Rothbard and Hayek, the notion that they must be natural rights, in the traditional meaning of the term, is dismissed. As Yeager notes:

With characteristic bluntness, Mises denies that utilitarian philosophy has anything to do with the doctrines of natural rights. He has a point: respect for rights is ill served by a faulty defense. (Yeager 1993: 325)

In the system of Mises and the sizable--probably dominant--group of Austrian economists who find utilitarian reasoning convincing, individual rights (particularly to own property) are so essential to widespread social cooperation, and social cooperation is so valuable to human life and broadly-conceived happiness, that they deserve the greatest possible respect. Indeed, Hazlitt, Mises, Rothbard, and Hayek each considers individual rights so important that they hope people would consider them "sacred" and with "reverence." But the rules that we distinguish with the name "rights" deserve our respect not because they are somehow "natural" or conform to somebody's idea of "nature," but for their consequences, for what they do, for the kind of actions and the kind of society that results from them. To be more specific, our confidence that even total strangers with whom we might deal will abide by these rules makes social cooperation (in the form of division of labor and mutually-beneficial trade) possible on a scale that would be inconceivable if it were restricted to family-style interaction.


The best-known of Mises' American students is Murray N. Rothbard (1923-1995), who attended Mises' seminars at the New York University business school while he was working on his doctorate at Columbia in the late 1940s. Rothbard found the Austrian-School perspectives on the nature and method of economics absolutely convincing, with its consistent adherence to the subjective nature of value and methodological individualism leading incontrovertibly to laissez-faire capitalism. Furthermore, Rothbard had the utmost respect for Mises as a person, particularly for his courageous defense and advocacy of his ideas at great personal cost. The title of a pamplet published shortly before Rothbard's death expresses his reverence well: "Ludwig von Mises: Scholar, Teacher, Hero." About 15 years ago Rothbard founded The Ludwig von Mises Institute, at Auburn University, with the partnership of businessman Lew Rockwell. Rothbard (until his death) and scholars officially associated with the Mises Institute have been the staunchest, some might say the most intractible and unyielding and curmudgeonly proponents of Mises' method in economics. The most energetic and influential critics of the Mises/Rothbard method, really a larger group with more influence among the youth of the American Austrian School, rally around Mises' best-known European student Friedrich Hayek and are usually associated with George Mason University.

Although Rothbard respected and embraced nearly all of Mises' economics, he could not accept the philosophical position from which Mises believed that economics necessarily followed. Mises maintained that the core principles of human action were Kantian "synthetic a-priori" categories. I haven't brushed up on "the analytic-synthetic dichotomy" recently but as I recall "synthetic" implies meaningfulness, contrasted to "analytic" which indicates something tautologically following from another proposition and therefore without meaning of its own. The "a priori" means prior to, or before, experience. Mises seemed to believe there was something built into the very nature of the human mind, a structure that inclined it to reason in a particular way, even though it was a tabula rasa with respect to specific empirical fact. Exactly what this all means still provokes occasional controversy. If it means simply that the neurological properties of human minds incline them to work in some ways rather others, it seems indisputable. If it means that Mises thought people could really be said to have knowledge prior to any experience, that's more problematic, and Rothbard didn't buy it.

Rothbard could not accept Mises' explicitly Kantian belief about the origin of the principles of human action on which economics was founded. Perhaps in part because he lacked Mises' Germanic upbringing, Rothbard identified the proper philosophical foundation for the economics that he largely shared with Mises as Aristotelian. Interestingly, the founder of the Austrian School, Carl Menger, also explicitly embraced Aristotle. Menger, however, combined an Aristotelian framework with some aspects of the German historicist tradition; Rothbard likes Menger's Aristotelianism and is suspicious and sometimes dismissive of Historicist elements of Menger's thought, while Hayek largely takes the opposite view, liking the characteristic that Rothbard dismisses and treating with apparent suspicion the Aristotelian attribute of Menger that Rothbard likes. It's all very curious and fascinating.

Meanwhile, although Rothbard rejected the Kantian epistemology that Mises accepted, Rothbard embraced the Kantian natural-rights anti-utilitarian ethics that Mises rejected. Both Mises, with his utilitarianism, and Rothbard, with his natural rights ethics, identified Greek origins of their thought. Rothbard, it seems to me, was more right than Mises on this. Just to stir up a story that already abounds in twists and turns, a provocative 1973 Southern Economic Journal article by Dick Gonce argues that despite Mises' pro-utilitarian anti-"natural law" rhetoric, he was actually a strong natural-law theorist. If Gonce is correct, Mises' claim of Greek heritage would be understandable.

It was impossible for Rothbard--and his probable-minority of followers within the modern American Austrian School--to divorce utilitarianism from the interpersonal comparison and aggregation of utility, a proposition no consistent subjective-value theorist could accept in any form. His examples tended toward dramatic illustrations of the potential consequences of simple act-utilitarianism, not the more sophisticated rule-utilitarianism proposed by Mises, Hazlitt, and Yeager: Suppose it could be shown that aggregate utility would rise if one randomly selected red-headed person were killed each month. The utilitarian (meaning the crude act-utilitarian), Rothbard claims, would have no grounds to object. Examples like these offer easy targets for Rothbard, but may or may not be relevant to the sophisticated rule-utilitarian's defense of abstract rules.

The proper source for the rules that govern interpersonal behavior, Rothbard believed, was nature--specifically, the nature of human life and the nature of the physical world in which it exists. This is a deontological theory, not based explicitly on consequences, but on essences or "essential natures." This natural-law or natural-rights approach has a clear origin in the Greeks and a long history through the Scholastics (who infused it with a strong religious component that it still has trouble living down) to Locke and German philosophers Kant and Fichte. In modern literature its best-known proponent is probably Ayn Rand. Although Rothbard and Rand were once very close, they were two strong and independent thinkers who were not very tolerant of signs of strength and independence in others, and parted ways during the 1950s. Rothbard never cites Rand, often saying Rand-like things but finding pre-Rand sources to whom to attribute them. Both Rand and Rothbard considered Mises' work the ultimate in economics, but both objected to his philosophical foundation--for largely the same reasons. Rand and Rothbard differed on the practical application of their philosophies, he convinced that their shared principles implied a zero-government anarchism and she deriving from them a constitutionally limited representative government, but otherwise their conflict seems strictly one of personalities.

Ultimate goals or ends in ethics or morality are, in a sense, arbitrary, as both the utilitarians and natural-rights theorists realize. Both Mises and Rothbard identify the goal of their ethic and its implied political philosophy as "human life on Earth," to use Rand's phrase. If a person or group or culture or creed wishes to believe that an afterlife will offer eternal rewards that are proportional to one's Earthly poverty, sickness, disfigurement, ignorance, and brevity of life, then a system of rules promoting Earthly prosperity, health, and longevity would be inappropriate. If, however, one seeks rules that are likely to optimize or maximize "life on Earth," these rules must at least be consistent with, or respect, the natures of "life" and "Earth."

Rothbard, like Mises, never considered it his obligation to specify carefully his underlying philosophy. Some applications of it appear in the early pages of his popular political manifesto For a New Liberty, but even in his unsatisfying 1982 book The Ethics of Liberty he defers to "a long history of philosophical argument" and devotes the work instead to many short chapters on applications. Since his ideas seem in every respect identical to Rand's, I will rely to some extent on her development.

Human physiology requires both nutrition and specific ranges of temperature, neither of which Earth necessarily offers up automatically. The human being has some shortcomings considered strictly as an animal, but he or she is blessed with reason. (This is why "man" is often defined as "a rational animal.") Accommodating the penurious nature of Earth by using one's reason is therefore natural to man, and any system of life-promoting rules must respect and facilitate the individual's use of reason. To apply his reason to the problem of maintaining his life on an often-forbidding Earth, man must be able to control and direct to his own use some material resources, which become his property. "Some material resources"? How many? Locke's hypothesis about "original acquisition" is familiar--that one acquires ownership of a previously unowned resource by "mixing one's labor with it"--and it is serviceable and acceptable to Rothbard and others, though "mixing one's reason with it" would be better. But the essence of property ownership is its consistency with, and facilitation of, the faculty of human reason. Natural-rights theorists hold that the fundamental rule, with which all others must be consistent, is "self-ownership," that each individual is the sole owner of his or her own body and mind.

Now it's one thing to think about these principles while imagining one human being somehow deposited on an otherwise empty continent, but the whole purpose of our quest for rules is to determine how best to treat others and what their obligations are toward us. It is at this stage that the Kantian "categorical imperative" or its equivalent enters. While we seek rules that maximize "the individual's" ability to use his own reason, what we mean is "every individual's" ability. In other words, our rules must be universalizable: capable of applying to every individual simultaneously. As philosopher John Hospers points out, universalizability may be a necessary condition for an appropriate system of rules, but it isn't sufficient. The rules that conform to the natures of life and Earth must not merely be capable of simultaneous application to everyone, but must maximize every individual's ability to rely on his or her own reason.

Since my purpose here is not to thoroughly present or to advocate any one of these systems, let me jump a few steps to conclude that the "natural rights" structures of Rand and Rothbard authorize "original acquisition" on Lockean grounds and the transfer of property (including labor) only by voluntary exchange (including gifts and bequests). Individuals inevitably recognize the benefits of "social cooperation" and market exchange, and these are fully consistent with the exercise of human reason and the "natural rights" based upon it.

The reason that market exchange and comparative advantage and division of labor have consequences that individuals generally consider to be good, according to Rothbard and other natural-rights theorists, is that the rules according to which they function are consistent with nature: the natures of human life and physical reality. One determines the proper rules governing legislation and moral conduct by rationally examining the essences of life and reality and using logical deduction to establish what these natures imply. The goodness of the consequences follows from consistency with nature, and to believe that they could be determined in any other way would require some illegitimate hypothesis like the aggregation and interpersonal comparison of utility. Rothbard wholeheartedly agreed with the Mises-Hazlitt-Yeager utilitarian conclusion about the virtues of individual rights and the free market, but to him their virtue derived not from their consequences but from their logical origin: the natures of human life and physical reality.


To some extent overlapping, but to some extent distinct from, the political-philosophical positions of his fellow Austrian-School economists Mises and Rothbard is the argument advanced by Mises' most prominent student from their European years, F. A. Hayek. Hayek (1899-1992) participated in Mises' famous coffee-house seminars in Vienna during the 1920s and brought the Mises-Wicksell "monetary over-investment" theory of the business cycle to England in 1930. (His efforts to improve and promote it as a superior alternative to Keynes were so energetic that it is usually known today simply as "the Hayekian business-cycle theory.") It was for this work on monetary theory during the 1930s that Hayek was awarded the Nobel Prize in 1974 (jointly with Myrdal). The key to that theory was that under certain conditions a market price (in particular, the interest rate) could convey inaccurate knowledge of individuals' preferences, and that got Hayek to thinking. He went on--in several important works during the '30s and '40s--to focus on the relationships among prices, individuals' knowledge, and the free-market system. Especially significant was his argument that the inability of a socialist economy to create and use knowledge made efficient socialism impossible. (This was an expansion and reformulation of Mises' famous argument of 1920.) The key point of that work, however, is conveniently summarized for us in Hayek's last book (The Fatal Conceit, 1988), in which he brought his "knowledge" argument to bear on the issue of the nature and origin of proper moral rules and life-affirming legislation.

The precise meaning of this concise but difficult book is controversial. Unfortunately I must focus only on an aspect of it that I don't find very satisfactory. It is actually a very rich and valuable book, exploring--for example--the primitive early history of trade, markets, money, and the gradual evolution of the institutions necessary to them. But most significantly for our purpose, Hayek's greatest emphasis is the necessity of individuals' rights to life and property. He identifies them as abstract rules that make the individual's use of reason and "the extended order" of the market economy possible. In this he is, of course, consistent with both the utilitarianism of Mises and the natural-law approach of Rothbard. Since Hayek adopts a utilitarian defense of these abstract rules called "rights," one might be tempted simply to associate him with Mises. But he doesn't fit perfectly with either Mises or Rothbard, and to see why we must consider the role of reason in his system.

From his earliest 1930s work on socialist calculation, Hayek had emphasized that no one individual could acquire and integrate the knowledge--scattered among millions of individuals and sometimes not even consciously articulated--that would be required to rationally design a pattern of economic activities as efficient as a free market. The false belief that human reason could design a superior outcome was what he meant by "conceit," and he called it "fatal" because if ever implemented its disastrous inefficiency would literally spell death to millions of people.

But The Fatal Conceit does not simply allege that efficient catallactic outcomes are not susceptible to rational design. Hayek goes further to maintain that even the general, abstract rules that govern individuals' interactions, individual rights, are not capable of being designed or perhaps even understood. In this he opposed both Rothbard, who thought they could be reasoned out from the nature of nature and man, and Mises, who thought they could be reasoned out by logically deducing and evaluating their probable consequences. Both accepted the inability of reason to design efficient catallactic outcomes; indeed, Mises was the discoverer of that point. But when Hayek denied to human reason the ability to design or even to "reason out" abstract rules, he parted ways with both Mises and Rothbard.

Hayek's emphasis is on the process of social evolution, the gradual changing of moral and legal and other forms of institution over time. In this, he is consistent with his Austrian-School, Mengerian roots. Menger had integrated Aristotlian concerns with "essentials" and belief in the powers of reason with a German Historicist vision of society as an evolving, organic entity. (One finds this specifically in Menger's theory of the evolutionary origin of money.) Hayek criticized Aristotle for not appreciating the significance of evolution, and pointed out that the Greeks viewed economics as "efficient management" and had no concept of the undesigned order that dominated Scottish political economy and philosophy in the 1700s. This is why I maintained, earlier, that Hayek rather devalued the Greek element in Menger's work but emphasized the aspect that Menger broadly shared with Historicism.

Applying to rights his apparent identification of reason with control, Hayek seems to conclude that the development of the specific nature of these rights is best left to an evolutionary process. Like precedent-shaped common law, these rights would presumably distill the wisdom of many individuals and generations, and not be limited to the rational powers of any one person or small group. Denying to reason the power to design or evaluate the abstract rules constituting rights, on either rule-utilitarian "social cooperation" grounds or deontological "consistent with nature" grounds, Hayek finds that he must judge moral and legal institutions by their ability to support human populations. This isn't as absurd as it may sound; presumably an efficient free economy could, ceteris paribus, support a larger population than one whose institutions established roadblocks to the individual use of reason. (Critics have, of course, inferred that he must consider the institutions of India and China superior to those of the West.) But an "ability to support a large population" is not observable, and increasing efficiency and wealth often mean that adults can afford not to bear large numbers of children. Hayek's attempt to replace reasoned evaluation of alternative institutions with a relatively crude measure like population (even potential population) has not been greeted warmly by those who, in many other respects, admire his work.


Mises and his two most prominent students, Hayek and Rothbard, are staunch proponents of free markets and the individual rights that define and support them, but their positions are founded in different political philosophies. I am still far, I think, from satisfactorily reconciling them, but I can report here the direction that I've been going.

First, it's important to dismiss the caricatures and straw-men raised by both the utilitarians and the natural-rights theorists. Simple "act utilitarianism" is not an accurate characterization of these utilitarian economists. They are "rule utilitarians," seeking abstract rules that maximize happiness by supporting markets. An act utilitarian might be able to justify theft because he thinks the recipient obtains more happiness than the owner; a rule utilitarian would understand the long-run wealth- and happiness-destroying effects that theft in general would produce by its destruction of trust and incentive to create capital. There may be difficulties with the utilitarian position, but when a critic raises a silly example to ridicule act-utilitarianism, the rule-utilitarian is likely to agree but wonder what that has to do with him. But the utilitarians adopt a similar tactic when they identify the natural-rights theorist as a superstitious mystic who is convinced that he, and he alone, has a direct pipeline to accurate knowledge of "natures." This question of how one determines what the natures of physical reality and human life are, how one acquires this knowledge, is one of the potential avenues for reconciling the three approaches (including Hayek's evolution).

Let us first consider the rule-utilitarianism of Mises, Hazlitt, and Yeager. The goal or reason for a system of rules of interpersonal conduct is the maintenance and facilitation of human life. But the contribution to human life of "social cooperation" is so great that life-affirming rules of interpersonal conduct, and rules consistent with "social cooperation," are identical or nearly so. These rules are principally individual rights to property and their corollaries, like the enforcement of contracts and prohibitions of fraud. Although one would not be surprised to find these rules somehow consistent with a reasonable interpretation of human nature, they derive their value as preconditions to "social cooperation." Interpreted as analogous to a capital structure with human life the ultimate consumers' good, value is imputed from it to "social cooperation" and then to that system of rights most consistent with cooperation. Any further backward linkage, perhaps with the hope of identifying an association between those rights best supportive of social cooperation and "human nature," might be interesting but is essentially superfluous and rests on arbitrary judgments about what human nature really is.

The ultimate goal or standard for establishing rules for interpersonal conduct is also the maintenance and facilitation of human life in the natural-rights perspective of Rothbard and Rand. But they are not quite as agnostic about the nature of human nature, identifying it as the use of reason in a world of scarcity, and establish the life-affirming rules governing interpersonal conduct by reasoning "forward," from human nature to those rules consistent with it. It is virtually inconceivable that individuals protected and empowered by these rights would not perceive the tremendous benefits of social cooperation and develop such institutions as markets and money. Nonetheless, the market would seem to be simply a way-station between the exercise of human reason and the maintenance and facilitation of human life. The market is immensely helpful, but it is not "of the essence" and in no sense can serve as a standard. Rights do not acquire value from their causal relationship to markets; markets acquire their value from their nature as the effects of rights. This was an implicit theme of my University Lecture of a couple of years ago.(5)

The evolutionary perspective of Hayek highlights the issue of knowledge, characteristically enough. How, exactly, do natural-rights theorists, who want to reason from nature to rights, obtain their knowledge of human nature and physical reality? The caricature painted by their opponents is that they claim some mystical pipeline to true essences, denied to mere mortals. That is not completely undeserved, but it can't dismiss the theory. But it's true that this knowledge must have its source, and experience with human behavior under various historical conditions is a likely one. Even if one supposes that human nature and physical nature never change, our knowledge of them surely does. (The discovery of the electromagnetic spectrum is one of my favorite examples.) Jane Jacobs, in her fascinating Systems of Survival, wrote in a very Hayekian spirit of functional, useful rules and patterns of behavior being gradually discovered over time, and then being "codified by old geezers." These geezers come along after the fact, examine rules that have evolved without rational design, and identify the logic implicit in them. While the logical syllogism that the geezer constructs flows from the basic first principle that he has uncovered to the logical implication for action, the temporal sequence in reality may have been the opposite, and the "basic principle" would never have been discovered if people had not already discovered the implicit advantage of acting consistent with it--without even knowing what it was. We should, in short, interpret Hayek's evolution as offering us a way to learn: to the natural-rights theorist, to learn what human nature is; to the utilitarian, to learn what rules are truly consistent with "the extended order."

I have been grappling with a couple of questions that I hope will be helpful. Question one: Is it possible for a set of rules to have life-affirming consequences if those rules are not also consistent with the essential nature of human life? Suppose, for example, that we discover that there is something about the preservation of old-growth wilderness that contributes importantly to human life. Have we not also discovered some previously unrealized attribute of "human nature"? Question two: Is it possible for a set of rules to be accurately derived from the nature of human life without giving rise to life-affirming consequences? My view is that if some accurately-derived logical implication of my conception of "human nature" were proven deleterious to life in general, something important is probably missing from my view of "the essence of human life." Both of these questions are about the relationship between a thing's "nature" and its "consequences." My current thinking is to doubt that there can ever be a conflict, indeed that the two are fundamentally inseparable.

That's about where I am now. I have found all three perspectives valuable: Mises's consequences-based view, Rothbard's nature-based approach, and Hayek's evolution as a hypothesis about how we learn about both. Needless to say, this is an ongoing project--and probably always will be.

Return to start of sabbatical lecture; to top of my home page

1. This is a formal lecture, not a conversation or dialog. Formal or informal comments and suggestions are invited at its conclusion. It is also in the nature of a progress report. In this talk I will try to explain where I am and where I've come from, but I'm short on absolute conclusions. I don't know if anyone (good-naturedly, I hope) considers me "Often in error, never in doubt," but this time I'm also in doubt.

2. "We owe the most recent German discussion of our problem to Richard Strigl, a member of the Austrian School. Although not so outspoken as J. M. Clark, he too sympathizes with interventionism" (Mises 1923, 52-3).

3. "Kant is usually, and rightly, regarded as the arch antihedonist and anti-utilitarian..." (Hazlitt 1972, 131)

4. There seem to be those who actually consider them to be only partially- or even non-intersecting, to continue the set-theory metaphor, that "social cooperation" and "market exchange" are contradictory. It may be relevant to note that neither moral rules nor legislation make sense to a Robinson Crusoe, and to the extent that individual persons function as members of one group, rules among the individuals are just as irrelevant. It is only when persons act as individuals, to some extent independent of others and potentially in conflict with them, that rules governing interpersonal behavior--designed to prevent or resolve conflict--are relevant.

5. The logical relationship between these two perspectives may be suggested by arranging a few things around the circumference of a circle. Moving clockwise, picture a progression from "nature" at 10:00, to "rights" at 1:00, to "social cooperation" or "the free market" at 4:00, to "human life" at 7:00. The utilitarian perhaps can be said to move from the goal of human life, at 7:00, counterclockwise to "social cooperation" at 4:00 and thence to "rights" at 1:00. Any further move, to the 10:00 "nature," is problematic and unnecessary. The natural-rights theorist also begins with "human life" at 7:00, but moves from it clockwise to "nature" at 10:00 to "rights" at 1:00. To him, "nature" (specifically, human reason) derives its value from its causal link to human life, and rights derive their value from their causal link to human reason (specifically, the conditions under which it can function). Any further move, to the 4:00 "social cooperation," is understandable, valuable, and nice...but not essential.