The more Matthew John Hayden learns, the less he knows. Almost daily now this writer is at a loss for words in the face of one or another argument on subjects such as whether or not free banking would lead to free market competitors providing the same fractional reserve style money as today. How the Hell should I know the answer to that? George Selgin, embarrassed Austrian extraordinaire, says it would. Antal Fekete, founder of the New School of Austrian Economics in Hungary, says it wouldn’t, but that gold-backed real bills would become widespread. And then there are the incomprehensible but not entirely ridiculous tirades against Austrian economics – and economics – by Anthony Migchels.

It can be dizzying trying to figure out who to listen to, and at times like this it is important to realise the incompleteness of one’s own grasp of ideas. A little humility in the face of one’s own ignorance goes a long way, not only in avoiding the pitfalls of looking like a jerk to others, but also in really keeping an open mind. It’s vital to stay open to suggestion, to listen, and to appreciate, even when there are clear holes in what someone else is saying. This blog has run articles in the past that may not seem in keeping with this aesthetic, and it’s incumbent on this writer to take the time in future to put that right, to endeavour always to say new and interesting things.

The claims that exercise this writer include the claims above about banking, and further some past criticisms from LK’s blog about the soundness of praxeology itself as a method for making and testing economic claims. It is now apparent that desire and all the wants that arise from it are internal to the individual’s mind, making the economist’s mind an excellent starting point for analysing economic phenomena at their source; dissatisfaction in the minds of individuals about their present state of affairs. Nevertheless, from now on, one will be more careful about making long streams of claims. In the near future, expect a string of pearls consisting of one praxeological axiom each working from action upwards. The format will be something like;

1. Human Action – The Ur axiom, that humans are continually desirous of a state of being other than that present obtained, and that they act to attain a better condition in the future. Almost an internalisation of Say’s Law to express inner states rather than speak about goods and demand. The vital truth of this axiom is that overall, demand is not for a thing in particular but rather, first and foremost, for a transition to a future, more satisfying state than that experienced in the present moment.

2. Subjective Value – That last little fact about action informs this second axiomatic truth, that the values, including those placed upon goods and services, are subjective to the individual, and that their individual choices of actions will always reflect this.

3. Ordinal Utility – The options available are not ranked according to some score expressed in, say, utils, but rather ordinally. Always at work here is the dimension of time, because preferences change over time, and how much time is, again, arbitrary. Marginalism means that each unit of a good – say an ice cream – offers less utility than that which preceded it, because the want that it satisfies is ever less and urgent until, say, eating more ice cream becomes downright unpleasant.

4. Time Preference – We want satisfaction now. Whatever our wants, we would satisfy them at once if we could. But the world of scarcity in which we live doesn’t permit that, so we can choose whether or not to defer immediate pleasure for gain later, with our willingness to do this representing low time preference, and unwillingness to do so – consumption now! – representing high time preference. Time is important to Austrians, because it seems to have such a huge role, as several of the following axioms show.

5. Imperfect Knowledge – Subjectivity and scarcity apply to literally everything in the internal lived experience of interacting with the external world. We have imperfect knowledge relevant to our situation geographically, temporally, financially, technologically, and socially. This robs any one individual of sufficient knowledge to make sound decisions about choices whose vital factors are outside the experience of the person doing the choosing; say a bureaucrat or politician.

6. Exchanges – When two human beings enter into an exchange it is precisely because both of the parties to be better off as a result, that is, both expect to profit, making trade mutually unequal. This further extends subjective value, utility theory and time preference, as all three will play into the trading decisions ultimately made, and will be expressed in the finest, most elegant part of human economic behaviour, which follows.

7. Prices – An information system showing where resources should go and in what quantities and proportions. Expressed as a ration between one good and another, with one of the goods usually being some kind of medium of exchange like a precious metal, banknote or warehouse bill.

8. Regression to Money – Process by which something with some other use is discovered over indeterminate time-frames to suffice as a unit of account to be traded in exchange for other things rather than be consumed in its own right.

9. Catallactics – Exchanges in the presence of money are qualitatively different from those explained above because of the use of non-consumable media of exchange, which is to say money. Now, with money prices calculating time preference and ordinal utility is made far easier and trade can proceed far more smoothly because there is no intrinsic problem of coincidence of wants and the awkward debt instruments or foregone exchanges that comes with it.

10. Strategy – The process by which an individual orders their goals and takes thought for what means to employ in their pursuit. Matt McCaffrey has done terrific work in this field already, applying praxeological analysis to The Art of War by Sun Tzu.

11. Bureaucracy – Human action axiom applied to bureaucrats. Simple as. The incentives in front of a bureaucrat are a mutant cousin of those facing an entrepreneur on the basis, not of profit-seeking, but rent-seeking. The flipside is the impact of government regulations (bans, mandates, and inspections) on the choices of entrepreneurs themselves. There is a lot of overlap with the public choice theory of the Chicago school here.

12. Investment – Time preference is supremely important here, as it will determine whether the budding investor wants a quick or slow and steady return on investment. A venture capitalist wants to get in and out swiftly and at least triple their money. This is because VC’s are generally investing in startups and cash out when the venture lists on a stock exchange. On the other hand, a pension-fund manager is likely to seek out lasting, reliable, safe investments with low business failure rates.

13. Employment – This is very interesting, as Eugen von Bohm-Bawerk explains in Capital and Interest. Capitalists do pay workers less than the total revenue those capitalists make from sales of whatever the workers are doing – fishing, manufacturing, selling, whatever. Two points, the worker consent to the reduced pay on the basis of making a steady monthly wage, and the employer offers this because he or she is often hedging against unrealised future revenues.

14. Business Cycles – Low central bank interest rates make money cheap and so credit flows easily to ventures throughout the economy, gradually changing the structure of production until, some time later, a great fraction of the total investment is revealed as untenable. At this point, the boom gives way to a recession, making boom and bust like Yin and Yang.

15. Calculation Problem – This is what a society is left with when prices can’t move freely up and down. Without free prices allocation decisions are impaired and suboptimal. This is best exemplified by socialist regimes like Cuba, Laos and North Korea today, where market price signals as to where to allocate scarce capital have been obliterated by their respective governments in the course of monopolising the means of production.

Between them these 15 axioms should be able to explain the groundwork of Austrian method and claims. That is, they should offer a way to quickly see what the big deal with praxeology is. As to how accurately they can explain Austria theory, or further, actually explain human behaviour, depends on this author doing a lot more homework and being open to criticisms and suggestions, maybe from Conza.

The most attractive thing about this process is the prospect of making praxeology finally look accessible from outside, which it just doesn’t at present. And it should be accessible. It’s the correct methodology for making claims about lasting rules of human behaviour in response to scarcity. Did all this answer the queries at the beginning to this writier’s satisfaction? Not yet.

These axioms are only the basics. More need to be introduced on top of them to provide claims about such finer points as whether or fractional reserve banking could survive in a free banking market, and whether or not we should call decreasing money supply deflation. Hopefully in the very near future it’ll be practical to introduce first-timers to Mises’ lovely method and give every person the tools to see their society for what it really is, and economics for the discipline of individual action that it is.