Continuing from where I left off yesterday, it was Adam Smith who first noticed something unique about us humans: that we are all gifted with “a natural propensity to truck, barter and exchange.” You see little children gainfully exchanging toys and stuff amongst themselves, like “give me some of your chips and I’ll give you a sip of my cola.” Dennis the Menace and his buddy L’il Joey are often to be seen running their lemonade stall – and neither has been to school.
Since the time of Adam Smith, our understanding and appreciation of this uniquely human propensity has advanced greatly. Thanks to Carl Menger and then Ludwig von Mises, we now focus on the “logical structure of the human mind” to lay the foundations of a true science of Economics. This is not Psychology. Nor is it Logic.
This “natural propensity” that Adam Smith noticed occurs on account of some “mental categories” all our minds possess.
The first of these is Property. Notice the possessive pronouns in the sentence: “Give me some of your chips and I’ll give you a sip of my cola.” If we did not respect Property, trade would be impossible, and we would all snatch and grab – like the animals.
Now, because of this mental category of Property we all specialize in the “division of labour” and “become” bakers, brewers, butchers, tailors, singers, writers or what have you. We sell one thing – and buy everything else from others who are also specialized. This is how wealth is created. No one is “self-sufficient.” Even kindergarten children, if you asked them what they want to be when they grow up will answer: Actor, dancer, singer, pilot… and so on. None will say, “I want to grow up and be self-sufficient.” None will want to spin yarn to make his own t-shirt. They want to "become" someone - and the division of labour is the great law of cosmic change and becoming.
This division of labour, this specialization, is not “theory.” It is simply the “datum.” It is what we “see” all around us. Gandhi was blind.
It is from this division of labour that “society” comes about – a Market Society, in which each serves others – his customers. Then, the Law of Association comes into effect – the First Law of Sociology – but that is another story, for another post. This society is not "community." Rather, it is how strangers interact gainfully as well as politely, albeit impersonally. Foreign tourists are welcome.
Second: It is also from this “trading mind” that money comes about – and this is proved by the fact that so many commodities have served as money in the past, from animal hides to bags of cocoa beans to scarab beetles to salt and then gold and silver. Money was never created by any king or any chieftain. Even as late as 1776, Adam Smith’s “three duties of the sovereign” makes no mention of money. Money was gold then: private money. Everyone had his own gold hoard. The king could not “create gold.”
Let us now turn to the second mental category, which is Arithmetic. All our exchanges in the market economy are “calculated actions.” Our minds can “count.” The logic of the four operations of Arithmetic are within our minds. It all began with counting our herds and flocks – so little English children were told to “count sheep” while going to sleep. Wool was England’s staple export even up to the time of Adam Smith.
From this second mental category of Arithmetic all else follows: we can differentiate between Capital and Income, which enables us to see that we are not “consuming capital” but accumulating it instead: the herdsman must see that the size of his herd keeps increasing. We are also able to perform mental operations to differentiate between Profit and Loss and so on. This is how civilisation progresses, with capital accumulation in private hands. Each minding his own business.
All this is inside all our minds.
Indeed, these categories have been inside our minds since the beginning of recorded time. The Book of Genesis contains the word property, and even the expression “deeded property,” while referring to a cave and a field that is bought for a burial ground. In another section of this same book, there is a passage where outsiders are invited to an area and asked “to trade and to acquire property.” And in Proverbs, there are many exhortations to “never move an ancient boundary stone.”
It is the mental category of Arithmetic that also allows us to engage in “calculative action” using money. The Book of Genesis speaks of “talents” and “shekels” as units of money – gold and silver – and these were “weighed” before any exchange. There is also a Book of Numbers.
Further, the Book of Proverbs repeats ever so often how God loves accurate weights and measures and despises false ones. Thanks to Keynes and the Keynesians, money today has ZERO WEIGHT!
Think about it – do you want Theory or History to decide what money should be?
Now, once we have this “constant” of the logical structure of our human minds, the laws of Economics follow – as “laws of thought.” It is these laws of thought that guide our actions in the market. This is Science – but its predictions are “qualitative” and not “quantitative” as in the case of Physics. So, if prices rise, we can predict with absolute certainty that demand will fall – but not by how much.
This true Science of Economics is a purely “logical science” and has nothing to with “measurements” of the external world. There are no “statistical laws” at all. If there were, statisticians would be very rich. As would be econometricians. Indeed, the bestseller Freakonomics proves this – for the authors use the same statistical data to reach their “freaky” conclusions.
Thus, what this true Science of Economics indicates is that the Market Society is all about Private Property and Private Economies. We must each “mind our own business.”
It indicates, also, that socialism is anti-social and anti-human, even. Collective property is fiction – see Air India, and see the latest scam about “allocations” of coal. Both were “nationalized” by Indira Gandhi. The root of all these corruptions lies in this evil, corrupt and anti-social ideology.
Mises wrote the following about why all must study Economics – that is, this true science he laid the foundations of:
Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilisation and of man’s human existence.
And it was Sudha Shenoy who said, some years ago:
Almost every Economics department in the world could be shut down immediately without having any ill-effect on the world of ideas.
The world is in economic and political turmoil because of a very false economics – Keynesianism, positivism, empiricism and all that. These are all an “intellectual cover” for the personnel of the State who wish to control our economic lives. They are all causing “capital consumption.” They are destroying civilization itself.
Someone said “the truth can set you free.”
And it was Bastiat who said:
To believe in Liberty is to believe in God – and have faith in His creation, Man.
Think about it.
The State is NOT God. Never worship at the altar of the State.