The Doom of the Austrians – Part 2

February 23, 2012

I had meant to follow up my earlier post in this series with an analysis of the praxeological approach taken by the Austrian school, but have yet to have the time to properly read Mises. While On Human Action is on my bookshelf awaiting attention, it seems unfair to criticise praxeology without full familiarity with it.

However, Crooked Timber ran a series of posts on David Graeber’s Debt yesterday, and there is much there to consider – and much to leave to one side, such as Graeber’s bizarre insistence the entire international monetary system only exists thanks to the backing of state force. What I’d like to pick up on is, again, his illustration of different models of economic interaction and how they relate to contemporary debate.

Graeber distinguishes between diffuse reciprocity (or as he calls it, ‘communism’), hierarchy, and market exchange. The latter we know and love to a greater or lesser extent, the middle is simply being told what to do with your resources, and the latter is a ‘fuzzier’ version of exchange, in which you don’t exchange anything with anyone for a particular value, but rather distribute your resources to society in expectation that you may, at some point, have your needs looked after in a manner which does not necessarily equate to the value you gave up.

At this point Graeber normally points to primitive tribes to illustrate this model, but I’d like to use an example of something much closer to home with which most people will be familiar. On Wednesday, I brought a box of chocolates into the office for my colleagues, because it had been my birthday two days before. It’s a tradition in the office that the person whose birthday it is supplies the chocolate or cake, which works in reverse to the standard tradition of presents for the birthday-haver.

Now,  my action would be seen as irrational from a market-exchange point of view. I do not receive anything directly in exchange for my submission of chocolates to the office society, nor do I guarantee that the chocolates that others purchase for their birthdays will be of the same quantity or quality as the chocolates I buy. I do not even guarantee that others will buy chocolates; I do not have access to information about my colleagues’ birthdays, and so do not know who is shirking their chocolate-buying responsibilities. However, I am content to enter into this fuzzy exchange, which is not with any one of my colleagues, but rather with all of them. On the Austrian view, this is irrational.

You could go down the Polanyi route and say this is because I’m embedded in social networks, but this is tantamount to saying that social networks make one into a non-rational exchanger. You could talk about game theory, but that rather presumes that there’s a hell of a lot of processing going on inside my head that I don’t have access to, which is something you’d have to prove. Instead, I want to outline why this is a problem for the Austrians, one based on the understanding that Man is rational, and that so is a person, but a human is not.

It is irrational for me to buy chocolates for my colleagues, but it is not irrational for a species to share resources; in doing so it avoids substantial risk. However, describing a species as rational seems odd. Or does it? Is there some process whereby individuals can be selected for the contribution they make to the survival of the species, rather than just the propagation of their own particular genes? We could perhaps call this process ‘evolution’. Such a process would need to include some way to ensure that any one individual was not being short-changed by this sharing of burdens, which we could call a sense of unfairness. You could certainly apply game theory to it, which would perhaps allow us to describe it as ‘rational’ for a very narrow definition of the word.

Therefore, our genes and their expressions in emotion and instinct can be seen as rational if one assumes their goals are the continuation of the species, rather than a particular individual, although one should of course be careful to avoid teleology when talking about such things. However, this presents a problem: the goals of our genes which relate to the survival of the broader species may not relate to our particular goals as an individual. They are expressed to our consciousness as emotion and instinct, and our rational pursuit of our individual goals may come into conflict with the evolutionary goals to which they point. So while we can be rational about our own goals, and our genes as expressed in instincts like reciprocity could be construed as rational from the perspective of the species or society, the package that is our mind and our emotions together – i.e. our entire self – is not.

This is a problem for Austrians, because they assume that man as a rational being will always have a single prioritised goal. But we are not simply individuals, but expressions of a species too, meaning that we are incapable of having that single goal. This is not a conflict of instinct and reason, but of competing rationalities, bound together in a single form. And so, I buy chocolates on my birthday, having been assured by my instincts and similar instincts in my colleagues that this is a good thing to do.

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One Response to “The Doom of the Austrians – Part 2”

  1. Adam said

    Mises would not say that buying gifts for your co-workers are irrational. Its obvious about 80% of the stuff we do is based on a “gift economy”. This isn’t a problem for Libertarians or Austrian Economists.

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