Reason and Reality: The Logical Compatibility of Austrian Economics and Objectivism

Reason and Reality: The Logical Compatibility of Austrian Economics and Objectivism
by Heidi C. Lange

The Two Disciplines

The school of Austrian economics is well known for its “realistic” approach to the study of human action. This importance which Austrian economists place on reality is very similar to that which followers of the philosophy of Objectivism adhere to. The two schools of thought are very similar in that they both hold that “certainty is a relation between an individual mind and reality” (Kelley 2000, p. 70). That is to say, both Austrian economists and Objectivists believe that truth must be discovered and understood in the context of reality. Austrian economists are well known for their distaste for abstract models, and Objectivists are similarly famous – if also often mocked – for their rigid adherence to reason as a tool of perception.

Objectivism, then, can be seen as the logical philosophical and ethical extension of Austrian economics, much as laissez-faire Libertarianism can be seen as the logical political extension of Austrian economics. Or, viewed from the other side, the reality-based methodology of the Austrian school is the perfect tool for the Objectivist interested in economic studies. Austrian economics and Objectivism fit very well as two aspects of the same worldview.[1]

There are several important areas in which Austrian economists and Objectivists agree, including the importance they place on the virtue of rationality and a priori logic; their embracing of reality as a standard of action and the empirical world as a subject worthy of study; their advocacy of capitalism as the path to a more productive society; and the fact that each discipline (especially Objectivism) discovered a similar way to bridge the problematic mind-body gap, or dichotomy.

Austrian Economics Is:

The Austrian school of economics (so called because its early members lived in Austria) was founded in the late nineteenth century by Carl Menger (Callahan 204). It is the school of economists who pride themselves on basing their theories and policy recommendations on the reality of human action. In contrast to the followers of the more mainstream schools of economics, who have a tendency to get caught up in abstract thought experiments (commonly making false recommendations and/or inaccurate predictions as a result), Austrians believe that “economics ought to be relevant to real life” (Callahan 204). Austrians base their work on the “Action Axiom,” which states very simply that: “Humans act.” Ludwig von Mises states it this way:

"Human action is purposive behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the univers that determines life."(Mises 1963, p. 11).

For the Austrian, action is purposive, rational, goal-driven behavior. Only the actions of humans interest the Austrian economist, since he can only be certain of humans’ rationality. The study of the actions of animals and other apparently non-rational animals is left to the biologist who studies them with far different tools than the economist uses to address his work. Precisely because the economist can apply his knowledge of what it is to be human, he can study the actions of humans in a far different way than he could study the actions of, say, a dog. The economist not only uses his rational mind to address the problems of economics, but he assumes that his subjects have rationality – and employ it – as well. For this reason, the term “human action” is limited to purposive behavior.


The a priori, deductive nature of the Austrian economist’s method (using his reason as a tool) is what sets the Austrian school apart from other, more mainstream schools. Economics as a discipline focuses on observing the regularity of what may be called market phenomena. Human action is what causes market phenomena, and the Austrians believe that the best way to study the occurrences of the market is to study their cause; human action in the face of uncertainty. It is this application of reason which sets Austrian economics apart from most other disciplines, which attempt to imitated the scientific method of the biologist or the physicist. The reason-based methodology of the Austrian school is what makes it such an appropriate economic method for the Objectivist to use.

Objectivism Is:

The philosophy of Objectivism, founded by the twentieth century philosopher Ayn Rand[2], puts a strong emphasis on reason as a tool of cognition, and on the virtue of rationality as being essential for any productive activity. When Ayn Rand was asked to summarize her philosophy, she answered:

1. Metaphysics: Objective Reality. ('Nature, to be commanded, must be obeyed.')
2. Epistemology: Reason. ('You can't have your cake and eat it too.')
3. Ethics: Self-Interest ('Man is an end in himself.')
4. Politics: Capitalism ('Give me liberty or give me death.'). (Rand 1989, p. 3)

Objectivism focuses on the importance of the individual, and the absolute necessity of understanding reality and basing one’s rational actions on it.

Objectivism is often falsely accused of being nothing but a new and more complex form of hedonism. It is important that before continuing that we address this question, and show that Objectivism is not a form of hedonism.
Hedonism is the ethical doctrine which states that “pleasure is the ultimate good for humans” (Feinburg 2002, p. 781). In practice, hedonism is the doctrine followed by those who base their actions only on the idea that each man must do what will bring him the most happiness, as subjectively determined by his own desires. The hedonist does not sacrifice himself for others’ welfare, but if he sees fit, he may sacrifice others for his own welfare.

In contrast, Objectivism states explicitly that a man must not sacrifice others for his own welfare.

Central to Rand’s ideal of benevolent egoism are the following two principles:

P1: I should never sacrifice myself for the benefit of others.
P2: I should never sacrifice others for the benefit of myself. (Huemer 2001, p. 1)

Objectivism is, in fact, a combination of two principles which had seemed to be mutually exclusive until combined in this form. On the one hand, the Objectivist believes (as do most followers of traditional Western Judeo-Christian religions) that he may not prey upon his fellow rational beings for his own benefit. On the other hand, he believes (as does the hedonist) that he must seek his own highest good, and that he may not allow his fellow rational beings to prey upon him. This set of rational principles is the base of Objectivism, and as we will see, the cause of Objectivism’s close kinship with Austrian economics.

Values as Goals

At first appraisal, there appears to be a conflict between Mises’ value-neutrality (or value–subjectivity) and Rand’s argument for the importance of objectivity. However, on closer observation it is apparent that the difference is in the respective function of the values in question. While both Rand and Mises focus on the acting man, Mises recommends values for the observer of the action as an observer (namely, value-neutrality), whereas Rand recommends values for the actor himself as an actor (namely, objective and life-enhancing values). When Mises advocates value-neutrality, he refers to the idea that the good economist refrains from imposing his own subjective preferences on those acting humans whom he observes. The economist may not observe a tribal shaman and conclude that “a rain dance will not work.” He may simply watch; he may describe; he may explain the shaman’s actions within the scope of economics, saying, “The shaman employs the rain dance as a means to obtain the end of a rainstorm occurring.” For the economist, value-neutrality (understanding that each actor’s values are subjective and that, as an economist, one may not condemn those individual values) is much like the imaginary construct of the Evenly Rotating Economy; it is a necessary methodological tool for use in economic appraisal. It is not a source of facts; it is not meant as a basis for real-world action; it does not affect reality. Rather, “value freedom is a methodological device designed to separate and isolate an economist’s scientific work from the personal preferences of the given economic researcher” (Younkins 2004a, p. 3).

Mises’ value-neutrality in the economic realm does not mean that his ideas cannot be integrated with Objectivism’s strong value-objectivity. Indeed, his definition of value as “the importance that acting man attaches to ultimate ends” (Mises 1963, p. 96) is perfectly complementary to Rand’s definition of value as “that which one acts to gain and/or keep” (Rand 1964, p. 27). Each school of thought uses the concept of “value” to describe the goals which acting man strives towards. “A value is an object of human action” (Merrill 1991, p. 100). Each man’s goals are subjective in the sense that they relate to his specific circumstances, and objective in the sense that they relate to concrete reality.

Where Austrian economics is primarily descriptive in nature, Objectivism goes on to prescribe what acting humans ought to value. The Objectivist believes that for each man, his own life is the highest value he may strive toward. Each man makes a basic choice: to live or to die. The man who chooses to live, must (to be rationally consistent) also choose those smaller ends which will further the ultimate value which he has chosen, his own life. “The fact that living entities exist and function necessitates the existence of values and of an ultimate value which for any given living entity is its own life” (Rand 1964, p. 27). Rand’s position on this is the same as that of Aristotle; she holds that value is objective in the sense that there is one ultimate value that correlates with the natural end (“telos,” or goal) of the entity. The ultimate end for a living entity is to continue its existence.

Although this appears at first glace to be a circular argument (“a living entities lives in order to continue its own life”), and hence a pointless claim, one can see after some thought that it is not a meaningless argument, when applied to human beings. Humans can, and in fact often do, act contrary to the furtherance of their own lives. Rand controversially used the term “altruism” to refer to non-life enhancing behavior of a particular sort which she felt to be the most common. Altruism, in the Objectivist sense, is the approach to life which places sacrifice as the highest ideal.

The basic principle of altruism is that man has no right to exist for his own sake, that service to others is the only justification of his existence, and that self-sacrifice is his highest moral duty, virtue and value (Rand 1982, p. 61).
The important thing to remember when discussing the Objectivist concept of altruism is that there is a very strong difference between “altruism” and “benevolence.” The Objectivist does not claim that, for instance, Mother Theresa acted irrationally. Her actions were benevolent: she simply desired the happiness of others as her goal. She did not act to destroy herself – she acted to help others. This is a concept which any economist understands perfectly; no human acts contrary to reason or to the laws of economics when he or she desires the happiness of others. However, the Objectivist believes that when a human acts according to the principles of altruism, he is acting contrary to reason, since he is denying (in deed, if not in word) that his life is his highest value. For the altruist, sacrifice is his highest value; since sacrifice means giving up a higher value in favor of a lesser, then the logical conclusion of altruism is death.

This is why it is important to state the principle that “an ultimate value… for any given living entity is its own life” (Rand 1964, p. 27). Man, of all the animals, has the strange option of choosing to act contrary to his own welfare on a continual basis, or of choosing to live according to principles which will help him achieve his own highest value: his life. Thus we see that for the Objectivist, as well as for the Austrian economist, the term “value,” when used in reference to man, means “goal pursued by a acting being with volitional consciousness” – values are goals, not ethical codes of action.

Interestingly enough, it is not Mises, but his predecessor Carl Menger who agrees more explicitly with Ayn Rand’s value theory. “Menger and Rand agree that the ultimate standard of value is the life of the valuer” (Younkins 2004b, p. 7). Menger specifies in his definition of value that man’s life is its source. Following in the footsteps of Aristotle, he claims that the attempt to provide for the satisfaction of our needs is synonymous with the attempt to provide for our lives and well-being. It is the most important of all human endeavors, since it is the prerequisite and foundation of all others (Menger 1981, p.77).

For Menger, “Man… becomes the ultimate cause as well as the ultimate end in the process of want satisfaction” (Younkins 2004b, p. 1). Without human beings, who are capable of choice and subjective desires, the concept of value is nonsensical. It is the fact that existence exists which makes valuation possible – which makes choice possible – which makes the desire for economic activity and satisfaction of economic wants possible. Without human life there would not be human action; Menger recognizes this and bases his value theory on man much more explicitly than does Mises. It is “life, the process of self-sustaining and self-generated action, which makes the concept of ‘value’ meaningful” (Younkins 2004a, p. 7). Value is necessarily based on life.

The Importance of the Individual and His Volitional Consciousness

Both Austrian economics and Objectivism recognize that only the human individual can hold and act upon the kind of values which are worthy of study.[3] Values cannot be held collectively; neither can the values of two different rational beings be compared to one another. The study of the individual actor is therefore of utmost importance to both the Austrian economist and the Objectivist.

Humans are the only “animals” which are capable of action and rationality; capable of choosing to be or not to be; and capable not only of living, but of choosing how to live. Man may, and generally does, choose life. According to Mises, “To live is for man the outcome of a choice, of a judgment of value;” (Mises 1963, p. 20) or, according to Rand, “Man has to be man by choice…” (Rand 1964 p. 27). It is this unique aspect of mankind which makes the study of human action so fascinating, and so paradoxical.

The economist cannot go about his work in the same way that, for instance, a biologist can, for a very interesting reason. The economist cannot create scientific experiments, in the sense that a biologist can, because humans act, and more specifically, because humans learn in a sense that no other animal does. If the economist were to attempt to create a valid scientific experiment (even disregarding such issues as the morality or immorality of using humans as experimental subjects), it would be impossible for him to study humans as they act “naturally,” since humans act differently when they know they are being observed! The economist could not create a repeatable study, since each human is so drastically different from every other human that the observing economist could never build a controlled experiment. Human action itself prohibits the use of “scientific” methods in the observation of such; the very subject of the economist’s study prevents him from using the methods of the traditional, physical sciences.   “There cannot be controlled experiments when we confront the real world of human activity” (Rothbard 1977, p. 58). Austrian economics is the only branch of economics which studies man with the special tool available to study him with: namely, reason. Only man can be studied in a completely rational way, because only man is equipped with reason. This is why the scientist cannot study giraffes by relying on reason alone, but must resort to empirical sources for his work. The scientist who wishes to study human action (the economist), however, can study this subject from the inside out, as it were, since he is himself a man and has an understanding of the motivations of other men.[4] Each man is an individual entity, not to be compared with other men too closely; each man has a subjective scale of values (different from that of his neighbor) and a means-end framework for achieving those values (also different from that of his neighbor.

Central to the method of the Austrian economist is the adherence to methodological individualism, meaning that this form of economic study “deals with the actions of individual men” (Mises 1963, p. 41). Man acts as part of a social whole, and the economist must never forget or ignore that fact, but what the individual actions of individual men are what make up the social whole. Human action cannot be studied in the aggregate; the Austrian economist believes that to make sense of his discipline he must focus on the individual man. “A great deal may be learned about society by studying man; but this process cannot be reversed: nothing can be learned about man by studying society” (Rand 1967, p. 15). The Austrian economist always remembers that man is part of a social whole, but he places the emphasis of his study on the individual actor.

The Importance of Rationality as Tool and Subject of Study

Ludwig von Mises, who was the great champion of Austrian economics in the twentieth century, believed that “the laws of economics are fundamentally logical relationships and not empirical relationships” (Ebeling 1997, xvi.). This means that the uneducated layman, using his natural powers of reason, in principle can deduce the laws of economics from the axiom that “Humans act.” In this sense, economics is more of a philosophical science (akin to mathematics) or social science (akin to psychology) than a physical one (such as biology).

The action axiom “is the fundamental and universal truth that individual men exist and act by making purposive choices among alternatives” (Younkins 2004b, p. 1).   For Mises, the action axiom is the “first principle” of economics, from which all other economic truths can be deduced a priori (meaning, roughly, that once you accept the action axiom, these other truths are self-evident and require no sensory evidence to verify them).
For instance: for Mises, action implies two important things. First, action implies a values scale; an individual, subjective ranking of values, or goals, which the actor in question desires to reach. Secondly, action implies that a means-end framework is held by the actor. That is, the actor has ends which he wishes to reach, and employs certain means to reach them. These ends (or “values”) are subjective; they depend entirely on the desires and preferences of the actor in question. The means which the actor employs to reach his ends are also subjective; whether or not the means actually will assist the actor in achieving his end, he believes that they will, and he is therefore acting rationally. For Mises, to act means “purposeful behavior… or, aiming at ends and goals…” (Mises 1963, p. 11). Action is rational choice in the face of scarcity.
These two truths (that an actor has a values-scale and a means-end framework which he employs to reach those values) are only two of the many things implied by the action axiom. The importance which Mises placed on human rationality is evident; for him, the rational mind is the all-important tool of the economist.

Objectivism places a similar importance on rationality. For the Objectivist, “Rationality is man’s basic virtue, the source of all his other virtues… The virtue of Rationality means the recognition and acceptance of reason as one’s only source of knowledge, one’s only judge of values and one’s only guide to action… It means a commitment to the reality of one’s own existence” (Rand 1964, p. 20). The Austrian economist goes so far as to claim rationality as the appropriate method for discovery of economic truth; the Objectivist goes further, and asserts that rationality is the appropriate method for discovery of all aspects of reality, in ethics as well as intellectual endeavors. The difference between the two conceptions of reason is that while the Austrian economist bases his methodology on a prioristic reasoning, the Objectivist’s reasoning is more grounded in empirical truth, and the reality of the physical world. Nonetheless, the two disciples are compatible; the Objectivist can quite consistently be an Austrian economist, and vice versa. As Hans Hoppe puts it,
"A priori knowledge must be as much a mental thing as a reflection of the structure of reality, since it is only through actions that the mind comes into contact with reality… Acting is a cognitively guided adjustment of a physical body in a physical reality… a priori knowledge… must indeed correspond to the nature of things. The realistic character of such knowledge would manifest itself not only in the fact that one could not think it to be otherwise, but in the fact that one could not undo its truth." (Hoppe 1995, p. 9).

Knowledge, according to Hoppe, must be based in both reality and the mind, especially knowledge of human action. Economics focuses on human action, and reason, as the tool which man uses to integrate and isolate information received from his senses, is the appropriate tool for this study. Herein lies the connection between the Austrian methodology and the Objectivist worldview.
The Objectivist recognizes that reason, the use of his rational mind, is man’s tool for choosing and striving after his values. “Rationality is a matter of choice – and the alternative [man’s] nature offers him is: rational being or suicidal animal” (Rand 1957, p. 931-932). This ability to choose between life and death, rather than blindly following animal instincts, is what sets man apart in the world. “The ingenuity of man is his noblest and most joyous power” (Rand 1957, p. 682). Man’s individual ability to rationally choose among alternatives, and even create new alternatives when he is unsatisfied with those available, is what makes it necessary, and possible, for him to have values and codes of morality (valid or invalid). It is this ability which makes human action possible. And it is this ability which requires that man discover, and adhere to, a rational code of morality which has a strong foundation in reality and truth.

Reality Is Real – Existence Exists

What Objectivism offers that sets it apart from other philosophical systems is this: Objectivism says that knowledge is achievable – that reality is not only knowable but must be acknowledged. In short, Objectivism accepts and embraces the reality which mainstream philosophy evades. “Objectivism, with its confident assertion that philosophical problems can be solved once and for all – that there are two sides to every question, the right side and the wrong side – is profoundly antithetical to the philosophical tradition of the twentieth century” (Merrill 1991, p. 90). Objectivism holds reality itself as a philosophical standard of value. Values come from reality, and so are not subjective in a broad sense, but only in an individual one. That is to say: good and evil are objective, but the individual good (or “value”) which each man pursues is a subjective choice which he makes for himself. Man’s choice of values is indeed subjective, but the values which he may choose among are not. Once he has chosen his goal, reality imposes on him a standard which dictates how he may or may not reach that goal. “Since values are determined by the nature of reality, it is reality that serves as men’s ultimate arbiter” (Rand 1967, p. 24). Values which a man may strive toward exist in reality before he chooses among them. He may choose to live or to die; life and death exist as possible choices regardless of his decision. He may choose to accept and act upon the choices presented to him by reality or he may choose to deny them and “live” in the non-rational surreality which the philosophers of the twentieth century would have him believe is his only option; insanity and rationality exist as possibilities no matter what he decides. Reality will not change to make way for his subjective whim (if he desires something which is impossible); existence exists. The power of the individual is the power of choice, and of striving towards the chosen values. Reality is necessarily man’s standard of choice as well as his source of values to choose among. It is this unflinching claim on reality as a moral standard which is Objectivism’s distinction in the fields of philosophy and ethics.

It is precisely this adherence to reality which makes Austrian economics unique in its field; the object of economics, for the Austrian, is obtain valid knowledge about the real world and how humans interact with it. As Mises said, “[t]he end of science is to know reality” (Mises 1963, p. 65). The ultimate aim of the observing economist is to think his way to objective and rational truth, in the form of economic laws and theories. Mises defined the subject matter of economics (rather awkwardly) as follows: “The elucidation and the categorical and formal examination of… the regularity of phenomena with regard to the interconnectedness of means and ends… is the subject matter of economics” (Mises 1963, p. 885). In other words, economics is interested in reality; specifically that aspect of reality which is evident in the way that humans use means to achieve ends. Formally observing the regularity of human action in this respect is what the economist does; this is the truth which he searches for. For the economist as well as for the Objectivist, truth “is the recognition of reality; reason, man’s only means of knowledge, is his only means of truth” (Rand 1961, p.126) For the Austrian economist, reason is both his subject of study (specifically, how humans employ reason as one means to achieve their subjectively acquired values) and his means of study (since for Mises, economic thought is aprioristic in nature, and relies solely on the action of reason to reach a logical conclusion or assertion).
Reason and rationality, though, are even more important than this. It is through the proper understanding of reason that both Mises and Rand managed to successfully bridge the so-called mind-body dichotomy which had bothered philosophers for centuries. The relationship between value and reason is what made this possible; value is based implicitly on the relationship between rational man and reality. It is rational valuation which bridges the problematic mind-body gap.

The Mind-Body Dichotomy and Its Answer

The mind-body gap (or dichotomy) is only one of three dichotomies which nineteenth century philosophers grappled with. Ayn Rand argues that all three are invalid. The first is the analytic-synthetic dichotomy, which we will not touch on in this paper; the second is the mind-body dichotomy, which states that man must choose between his mind and/or soul (which serves as the symbol of spiritual things) and his body (which serves as the symbol of material things); and the third is the is-ought problem, which stems directly from the mind-body dichotomy, and which states, essentially, that since one cannot know reality (since there is no connection between the mind and physical reality), then one cannot advocate codes of behavior for oneself or other humans. David Hume is one of the most important philosophers involved in the beginning of this debate; it was he who pointed out that even if one can know reality, such knowledge is not enough to determine moral oughts. An argument along the lines of “man is a living being, therefore one ought not to kill him,” is an invalid argument.   How can one use an argument based on what ‘is’ to determine what one ‘ought’ to do? So goes the argument based on the mind-body/is-ought argument, which Mises and Rand both solved satisfactorily.

The mind-body dichotomy began, historically, with the French philosopher René Descartes. Famous for arguing that a thing must be true, if he was capable of conceiving a clear and distinct idea of it,[5] he wrote that
because, on the one hand, I have a clear and distinct idea of myself, in as far as I am only a thinking and unextended thing, and as, on the other hand, I possess a distinct idea of body, in as far as it is only an extended and unthinking thing, it is certain that ‘I’… that is, my mind, by which I am what I am… is entirely and truly distinct from my body, and may exist without it (Descartes 1974 p. 165).

Descartes believed that since he had a “clear and distinct idea” of his body and his mind existing separately, then mind and body must indeed be two separate substances; and in this logically invalid argument one can see the source of the unnecessary problem which vexed philosophers for centuries to come.

The dichotomy continued to perplex philosophers because they failed to recognize the close relationship between human life and reality. Mises wrote that, in his time, “the relation between reason and experience has long been one of the fundamental philosophical problems” (Mises 1963, p. 39). The advocates of philosophies which are not based on the connection between reason and reality took this distinction to its logical conclusion when, over the centuries, they advocated that man either totally abandon himself to the pursuits of physical pleasure (as, for instance, hedonism recommends) or completely give himself over to the activities of the mind and spirit (it is this last which many forms of spiritual aestheticism occupied themselves with). The mind-body dichotomy “cut man in two, setting one half against the other. [It has] taught him that his body and his consciousness are two enemies engaged in deadly conflict, two antagonists of opposite natures, contradictory claims, incompatible needs, that to benefit one is to injure the other, that his soul belongs to a supernatural realm, but his body is an evil prison holding it in bondage to this earth – and that the good is to defeat his body, to undermine it by years of patient struggle, digging his way to that glorious jail-break which leads into the freedom of the grave” (Rand 1961, p. 138). Rand, as we can see from this quote, was most concerned about the tendency to reject the body in favor of the mind (since, at the time when she wrote, the alternative – rejecting the mind/soul in favor of material excess – was not a common philosophical stand, however common it may have been in everyday life).   If the mind and body are divided in this way, there is indeed a conflict between them. There is only one way to overcome the mind-body problem: the acceptance of a synthesis of rational and empirical fact and the re-acknowledgement of the inseparability of reason and reality.

The Objectivist understands that there is no gap between mind and body, or between reason and experience, because it is not possible to consider the one out of the context of the other. It is irrational to drop the context of the argument (or the situation at hand). Man is “an indivisible entity of matter and consciousness” (Rand 1961, p.142). It is simply nonsensical to try to consider a choice between the material world and the world of the mind. “Ideas divorced from consequent action are fraudulent, and that action divorced from ideas is suicidal” (Rand 1961, p.51). Rationality is the tool which man uses to value; values are what guide human action. The empirical world and the intellectual world are simply not divisible. Without one, the other has no purpose.

The Austrian economist, too, understands the necessary relationship between reason and reality. As early as Carl Menger, the first Austrian economist, this dichotomy was resolved: “Menger’s theory explains the inextricable ontological connection between the realm of cognition and the sphere of objective causal processes that results from valuation and economizing” (Younkins 2004a, p. 3). However, it is the work of Hans Hoppe, a contemporary Austrian economist, which really solidified the connection between mind and body. Hoppe explains that the action axiom itself requires that there be a connection between mind and body:
…in substituting the model of the mind of an actor acting by means of a physical body for the traditional rationalist model of an active mind a priori knowledge immediately becomes realistic knowledge (Hoppe 1995, p. 10).
Since Austrian economics and Objectivism have a similar understanding of the relationship between value, rationality, and reality, it is only to be expected that philosophers in both disciplines would reach a solution for the mind-body gap, and consequently, the is-ought problem.

Objectivism holds that there are moral absolutes, and that they are based on the relationship of man to reality. Man’s nature as a human being in the abstract determines what these moral absolutes are – each man, to achieve the goal of happiness, must act in favor of his own rational self-interest, in accordance with these moral principles.   “[Rand’s] theory of rational egoism eliminates the breach between interest and idealism: our happiness is to be achieved by fidelity to moral absolutes that are grounded in man’s nature as a living being” (Kelley 2000, p. 75). The mind-body dichotomy is proven false by the relationship of man’s consciousness to reality. Man needs reality to determine what actions are morally appropriate for him to undertake; his soul cannot survive without his body. “A body with out a soul is a corpse, a soul without a body is a ghost…” (Rand 1961, p. 138). Man is neither corpse nor ghost – man is an acting being of volitional consciousness, existing in a reality which is concrete and necessary.

If, as Mises and Rand argue, it is possible to maintain the connection between the human mind and reality, then it is also possible to specify what political-economic system is demanded by reality; if man’s mind can know reality, then it can identify how he ought to live. By solving the mind-body problem, Mises and Rand discovered how to determine the ‘ought’ from the ‘is.’[6]

Laissez-nous faire!

The ‘ought’ which Rand determined was appropriate for the life of a rational, acting being, is capitalism. Mises qualifies his endorsement of capitalism by pointing out that “All that social policy can do is the remove the outer causes of pain and suffering; it can further a system that feeds the hungry, clothes the naked, and houses the homeless.” (Mises 1997, p. xx) – that is to say, capitalism is only the best alternative if one is in favor of feeding, clothing, and housing the population. If one is in favor of a state of affairs which would end in material comfort, then capitalism is the society which the rational being must favor. According to modern Austrian economist and Objectivist George Reisman, capitalism is a social system based on private ownership of the means of production. It is characterized by the pursuit of material self-interest under freedom and it rests on a foundation of the cultural influence of reason. (Reisman 1996, p.19) Under this setup, the ideal economic system is one without unnecessary government interference of any kind, where the free market treats each individual in the same manner – it judges him by what he brings to market. Capitalism is an inherently peaceful system (since war is punished by economic disincentives), and it rewards citizens of the system for fair interaction with one another. Under capitalism, each citizen’s cry is simply: Laissez-nous faire![7]

Economics is value-neutral in the sense that the economist does not force his personal, subjective value scale on the acting men he observes. This does not mean, however, that Austrian economics is value-neutral when it comes to recommending a governmental system. The Austrian economist bases his recommendation on the idea that material happiness (feeding the hungry, clothing the naked, housing the homeless, etc.) is the goal of a government, and as a result finds himself compelled to recommend a governmental system which also respects individual rights.[8] Only a government focused on protecting individual liberty and property rights is such a system. Mises tells us that “As far as the government… confines the exercise of its violence and the threat of such violence to the suppression and prevention of anti-social action, there prevails what reasonably and meaningfully can be called liberty” (Mises 1963, p. 281). Liberty is a very simple concept: when a man is free from the initiation of force against him by others, he exists in a state of liberty. “The task of the state consists solely and exclusively in guaranteeing the protection of life, health, liberty, and private property against violent attacks. Everything that goes beyond this is an evil” (Mises 1997, p. 52). This implies that a free society, for Mises, is one in which no man may lawfully initiate the use of force against others.

Objectivism even more explicitly advocates capitalism and a free society based on the principle of non-initiation of force. In order for a moral society to exist, it is necessary to have a system wherein “no man may initiate the use of physical force against others” (Rand 1964, p. 36, emphasis in original). Rand’s solution to the mind-body dichotomy makes it possible for Objectivism to derive “ought” from “is” – that is, to take empirically valid facts about the reality which is, and determine from those facts a moral code for how men should act. This moral code is what the Objectivist bases his argument for a capitalistic free market government on. “The Objectivist ethical code constitutes a valid, verifiable morality, in which the distinction between ‘good’ and ‘bad’ is not arbitrary or intuitive but logically derivable from the facts of reality” (Merrill 1991, p. 106). The only good/bad distinction which Objectivism makes that is relevant to the appropriate-ness of a governmental system is the principle of non-initiation of force.

Capitalism is the only type of society in history which has been based upon this principle. Thus, it is capitalism which is the social incarnation of the Objectivist ethics. “The free market represents the social application of an objective theory of values” (Rand 1967, p. 24). The free market and the principle of non-initiation of force are the logical conclusions (in a societal sense) of the common principles which Objectivism and Austrian economics share.

The Simple Synthesis

It is these shared values which make Objectivism and Austrian economics compatible: their respect for rationality; free choice; subjective and objective values, in their appropriate contexts; reality; and most important in a practical sense, a governmental system which allows for and protects a capitalistic free market. Both Objectivists and Austrian economists understand that human action is the driving force of the universe; that “every day human acts shape the world anew” (Lachman 1997, p. 29).

References
Branden, Nathaniel. (1961) Who Is Ayn Rand?, N.Y., N.Y: Random House.
Callahan, Gene. (2001) Economics For Real People, Auburn, AL: Ludwig von Mises Institute
Descartes, René. (1974) “Meditation VI,” in The Rationalists, trans. John Veitch, R. H. M. Else, and George Montgomery, N. Y.: Anchor Books
Ebeling, Richard M. (1997) “Introduction,” in The Austrian Reader, ed. Richard M. Ebeling, Hillsdale, MI: Hillsdale College Press
Feinberg, Joel. (2002) Reason and Responsibility, Wadsworth
Hoppe, Hans-Herman. (1995) “Economic Science and The Austrian Method,” http://www.mises.org/esandtam/readings.asp
Huemer, Michael. (2001) “Is Benevolent Egoism Coherent?” Unpublished manuscript
Kelley, David. (2000) The Contested Legacy of Ayn Rand, New Brunswick: Transaction Publishers
Lachman, Ludwig M. (1997) “The Significance of the Austrian School of Economics in the History of Ideas,” in The Austrian Reader, ed. Richard M. Ebeling, Hillsdale, MI: Hillsdale College Press
Menger, Carl. (1981) The Principles of Economics. New York : New York University Press
Merrill, Ronald E. (1991) The Ideas of Ayn Rand, LaSalle, IL: Open Court
Mises, Ludwig von (1963) Human Action, San Francisco: Fox & Wilkes
Mises, Ludwig von. (1997) Liberalism: The Classical Tradition. New York: The Foundation for Economic Education\
Rand, Ayn. (1957) Atlas Shrugged, New York: Signet
Rand, Ayn. (1961) For the New Intellectual, New York: Signet
Rand, Ayn. (1967) Capitalism: the Unknown Ideal, New York: Signet
Rand, Ayn. (1964) “The Objectivist Ethics;” in The Virtue of Selfishness, New York: Signet
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Rand, Ayn. (1989) “Introducing Objectivism,” in The Voice of Reason, U.S.A.: Penguin Books
Reisman, George. (1996) Capitalism: A Treatise on Economics, Chicago: Jameson Books.
Rothbard, Murray N. (1997) “Excerpts from Individualism and the Philosophy of the Social Sciences,” in The Austrian Reader, ed. Richard M. Ebeling, Hillsdale, MI: Hillsdale College Press
Rothbard, Murray N. (1972) “The Sociology of the Ayn Rand Cult,” www.lewrockwell.com
Younkins, Edward W. (2004a)“Austrian Economics Can Be Compatible with Objectivist Ethics,” http://www.quebecoiselibre.org/030927-2.ht
Younkins, Edward W. (2004b) “Can the Ideas of Mises and Rand Be Reconciled?” http://solohq.com/Articles/Younkins/Can_the_Ideas_of_Mises_and_Rand_Be_Reconciled.shtml
Younkins, Edward W. (2004c) “Murray Rothbard’s Randian Austrianism”
http://www.solohq.com/Articles/Younkins/Murray_Rothbards_Randian_Austrianism.shtml

[1] There is one major historical conflict between Objectivism and Austrian economics which is worth noting, namely that between Murray Rothbard and what he called “the Ayn Rand cult… which flourished for just ten years in the 1960s.” While the main philosophical difference between Rothbard and Rand was the issue of anarchism (Rand believed that the market for defense was a natural monopoly, whereas Rothbard felt that it was a market open to competition like any other and that it was inappropriate to have a coercive government), Rothbard’s 1972 article “The Sociology of the Ayn Rand Cult” is a poorly defended attack on Rand’s personal character and the characters of her closest friends and associates. Rothbard’s claim that “the structure and implicit creed, the actual functioning, of the Randian movement, was in striking and diametric opposition to the official, exoteric creed of individuality, [and] independence” (“The Sociology of the Ayn Rand Cult 8) is most probably correct, but it does not constitute a strong enough difference between Austrian economics and Objectivism for it to be of any note. The behavior of professed followers of a philosophy is hardly an appropriate method by which to judge the philosophy.

[2] It must be stressed that for the purposes of this paper, I am referring to the philosophy of Objectivism as such, not the actions of Ayn Rand. It is her ideas which are relevant here, not the details of her sensational private life.
[3] When an animal instinctively acts to protect its own life or feed itself it is not, as far as one can observe, acting in a rational manner in the sense that it is choosing between life and death, so it cannot hold values in the sense that a human being can.
[4] It is important to point out that psychology, as a science, falls into neither of these categories. It neither entirely relies on reason as a tool to study human action, nor on the methods of biological science to study human behavior. The special case of psychology must acknowledge but is decidedly out of the scope of this paper.
[5] It is important to realize that Descartes’ argument, although now discredited, is not as simple as it first seems. The nuances of the argument lie in his very specific definition of “clear and distinct idea.”
[6] Mises referred to himself as a utilitarian, but this does not mean that he necessarily endorsed the is-ought dichotomy. A utilitarian merely qualifies his argument with a reference to total happiness. For instance, his argument might read as follows: “If I want to maximize happiness, and X is B, then I ought to Y.”
[7] The expression “laissez-faire capitalism” reputedly comes from an incident at an overly regulated French factory, when a government official asked the factory workers how else the government could assist them, and they replied: “Laissez-nous faire!” (“Leave us alone!”)
[8] While there are definite exceptions to the assertion that Austrians are in favor of capitalism and free markets, notably in such economists as Hans Meyer, it is reasonable for my purposes here to make the generalization that, in a broad sense, Austrians advocate governments based on the principle of non-initiation of force.

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