The Ethics and Methodology of Capitalism
by Neil Parille
The two most prominent schools of thought for those committed to laissez-faire capitalism are Objectivism (the neo-Aristotelian philosophy of Ayn Rand) and the Austrian School of Economics founded by Carl Menger.
An essential difference between these schools is that Objectivism is a full-orbed philosophy which contains an explicit political and ethical justification for capitalism. Austrian Economics, on the other hand, presents itself as an explicitly value-free system of thought. Austrians argue that while capitalist economies will increase wealth and benefit the public at large, any ethical justification for capitalism is not intrinsic to the Austrian method. For example, Ludwig von Mises considered ethics outside the domain of science and made his ethical case (to the extent one could call it that) for capitalism on utilitarian grounds. In addition, Mises was explicitly Kantian in his epistemology and considered his methodology (which he called praxeology) to be based on Kantian assumptions. And while we tend to associate Austrian Economics with laissez-faire capitalism, some Austrians have not been consistent defenders of free enterprise. One thinks of Friedrich von Hayek, whom Rand bitterly opposed.
Nonetheless, Rand praised the economic writings of Mises while noting her disagreements with the philosophical sections of her work. However, as her posthumously published Marginalia indicate, she was in fact downright hostile to his ethical and epistemological theories. Rand believed that Mises’ utilitarianism and Kantianism could not provide the appropriate methodological foundation for economics or provide a philosophical foundation for a free society. In fact (if her Marginalia constitutes her reasoned evaluation of Mises) she considered him a “neo-mystic” because of his Kantian approach. One need not be an expert on Rand’s thought to know that “mystic” was one of the harshest terms in the Randian lexicon. Things went from bad to worse in her eyes with Mises’ American follower Murray Rothbard. Although Rothbard was an Aristotelian whose ethics shared similarities to Rand’s, he helped launch the modern libertarian movement and advocated anarcho-capitalism. Rand’s hostility toward libertarianism has continued in much of the Objectivist movement today, and some of it has spilled over into hostility toward Austrian Economics as such.
The Austrian attitude toward Objectivism is less uniform. Many Austrians appreciate Rand as an important advocate of capitalism and are grateful for her advocacy of Mises’ books, but consider her thought insufficiently rigorous to be considered philosophy. Others, such as George Reisman, have sought to combine Austrian Economics and Objectivism, as in his magisterial work Capitalism.
Professor Edward Younkins thinks its time for a détente if not a rapprochement. By looking back to the Aristotelianism of Carl Menger and forward to a potential synthesis of Rand and Austrianism, he thinks he can break the impasse. If Austrians understand their Mengerian (and therefore Aristotelian) roots better, and if Objectivists do a better job of understanding Austrian methodology, perhaps some of the distrust that has placed these two schools at loggerheads can be broken.
This collection of essays (of which Younkins contributes four) revolves around the theme of the methodological and ethical justification for capitalism. As some of the essays show, much of the dispute between Objectivism and Austrian Economics is based on different terminology. What Austrians mean by “subjective” and what Objectivists mean by “subjective” isn’t always the same. Since subjectivism is the opposite of objectivism, some Objectivists have expressed a certain skepticism toward Austrian Economics from the get go. However, Younkins isn’t advancing the thesis that “we are saying the same thing using different words.” Real differences remain and many of the essays critique opposing positions or attempt reconciliation.
Of particular interest is Barry Smith’s essay on Austrian methodology. Many Randians find Mises’ Kantianism indefensible. Yet, as Smith writes, there are two types of Kantianism, which he labels “reflectionism” and “impositionism.” The impositionist (somewhat similar to the Randian interpretation of Kant) argues that the human mind “imposes” certain categories of thought on the world. The reflectionist, on the other hand, believes that the logical structures of the human mind “reflect” the nature of the real world. The reflectionist approach is more consistent with Aristotelianism; the impositionist with Kantianism. Menger was clearly a reflectionist. Mises, on the other hand, is more difficult to categorize. He explicitly embraces impositionism, but his methodology is reflectionist.
Among other standout essays are Chris Sciabarra’s “The Growing Industry in Rand Scholarship” and Richard C. B. Johnsson’s “Austrian Subjectivism vs. Objectivism”. Sciabarra updates readers on recent works in Objectivism, drawing attention to Roderick Long’s overlooked monograph on Rand title Reason and Value published by The Objectivist Center. Johnsson attempts to reconcile Austrian value theory with Objectivism and shows that even Mises’ views on value may be read in a way more or less consistent with Rand’s.
Philosophers of Capitalism is a timely collection of essays that anyone interested in capitalism, Ayn Rand and Austrian Economics will want to have in his library.
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