Aug 272005

As a follow-up to the discussion of libertarians, subjectivism, and Von Mises, I thought I’d quote this interesting excerpt from Peter Schwartz’s lecture “Contextual Knowledge“.

The basic theme of his talk is that someone who holds the “right” conclusions but for the wrong reasons (i.e., based on the wrong philosophic foundations) actually holds the wrong ideas, despite any superficial agreement with someone who holds the “same” right ideas for the right reasons (i.e., based on the right philosophy). He devotes the lecture to developing and defending this argument, and I won’t repeat it all here.

During the Q&A period, two people asked him about subjectivism and the Austrian school of economics. I’ve transcribed his responses as faithfully as possible, making only minor editing changes (for clarity, and to eliminating words like “um”). Here is what he said:

That’s a good question. You ask how do I reconcile my disagreement – my rejection of subjectivism philosophically — with the Austrian school of economics which has a lot of good things to say in defense of capitalism but is basically founded philosophically on subjectivism. Well, that’s a good question. And I would distinguish these two things.

To the extent that the Austrian school of economics, or any school of thought, actually derives their views from subjectivism, those views — you can’t do much with those views. Those views don’t mean anything. You can’t validate those views. You can’t justify them. You can’t give logical reasons for them because if they really are dependent on subjectivism, subjectivism means whatever I say is just as good as whatever you say. So who am I to say that, “The law of supply and demand works”; you say, “Well, I don’t think it works.”

The point is that I don’t think they really are subjectivist – philosophically subjectivist — through and through. There are elements of subjectivism that actually undercuts a good deal of what they say. But if you look at even Mises for example, who is openly over and over a champion of subjectivism nominally – he on the other hand constantly upholds individualism, he upholds absolute principles, he upholds the laws of logic, at times let’s say.

Now a subjectivist could do none of this. There’s an internal inconsistency. And I think that Mises and others are correct in their economic views despite their (in spite of their) subjectivist orientation, not because of it. And they’re not consistently applying their philosophy of subjectivism. It’s to the extent that they’re deviating from the logical implications of subjectivism – it’s to that extent that they’re correct and they have very good things to say. And you therefore can incorporate that into a proper philosophic foundation like Objectivism.

To the extent, however, that they do follow the implications of subjectivism, they go off in all kinds of bizarre directions. Dr. Ridpath can give you some good examples of that if you ask him at the break… That’s basically my answer.


Someone like Hayek for example — I do not regard Hayek as a defender of capitalism.

I regard Mises as a defender of capitalism. And the reason is that Hayek consistently applies the philosophy that forms the context for his conclusions.

Mises does not; Mises is mixed. That is, Mises has an explicitly subjectivist philosophy but an implicit rational philosophy to a certain extent. It is that implicit philosophy that he relies on without naming it explicitly as the basis for his views.

So for example, I don’t think it’s conceivable that somebody could be an arch-defender of the individual against government, I don’t see how somebody could be a defender of (or even a definer of) property rights as against state intervention. You could not do that unless you had an implicitly individualistic philosophy, which itself requires an implicitly objective approach to reality. The problem is that he doesn’t explicitly realize it, and he’s torn in a conflict. And the good things about him I think follow from his implicit philosophy and the bad things from his explicit. But I would not say, and I’m glad you raised that question, because I did not mean to say that, “Well yes, he’s a subjectivist but he came up with good things, so it’s ok anyways”.

To the extent that subjectivism forms the context for his conclusions, he is wrong. The point is that it often is *not* the basis for his conclusion even though he mistakenly sometimes thinks it is.

I’ve read very little Hayek and Von Mises, so I can’t comment on Schwartz’s analysis of those two particular cases. But I think he makes some very interesting general points about implicit vs. explicit philosophy, and how someone can therefore be advocating the right ideas if they are derived from a good implicit philosophy, despite a bad explicit philosophy.

  • Adam Fitchett

    A point that a lot of Objectivists seem to miss is that ethical value and economic value are different concepts. Ethics is normative, and ethical values are objective. Economics however is a descriptive science; it is thus correct to say that economic value is subjective, since economic activity depends on the values that people actually do hold, not on the values that they should hold. There is thus no conflict between Objectivist ethics and Carl Menger’s subjective theory of economic value. Menger himself in fact was an Aristotelian, and seems to have upheld a life centred moral viewpoint.

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