Von Mises, Human Action, and Internet Cats

“Oh, king eh? Very nice. And how’d you get that, eh? By exploiting the workers. By hanging on to outdated imperialist dogma which perpetuates the economic and social differences in our society.” – Monty Python and the Holy Grail

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The Mrs. took this picture when we visited San Francisco to see the renowned economist Ludwig Von Miller. 

Economics has been called “the dismal science,” which, really only contains one lie (hint, economics is “dismal” but economics is not “science”).  Much of the pain and suffering felt throughout the twentieth century, and continuing to today is the result of a clash of economic systems – Marxism and state-sponsored capitalism.  Marxism has huge numbers of supporters, which I could understand if it were the Marx Brothers, but in this case it’s the “starving while the economy burns” type of Marxism.

Capitalism, strangely, is much less popular.  One of the key proponents of an open, market economy was the Denver Bronco® football player, Ludwig Von Miller.

LUDWIG VON MILLER

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Von leads the league in quarterback sacks and in economic theory.

Okay, that’s not really true.  The economist in question was Ludwig Von Mises.  He was Austrian, and is credited with a fairly rigorous study of economic theory, but, like most economists, really sucked at playing defensive end.  Also like most economists, Ludwig takes a good twenty pages of material and stretches it into nearly a thousand pages (more in some editions) of his book “Human Action.”  You know me – I’ll get you a superficial look at the good parts pretty quickly complete with cat illustrations.  There is no way I can recommend that you buy a book where the STUDY GUIDE is nearly 400 pages.

One of the things that economists miss is that people are human, and are not constructs that follow equations in the choices they make.

I recall back in macroeconomics class in college, the Hungarian teacher was attempting to explain the concept of utility, using pizza and beer.  If beer were cheap and pizza were expensive, he reckoned, you’d buy a lot of beer and not much pizza.

I had to nod at that point.

He then pointed at the other end of the graph where beer was expensive and pizza cheap and pointed at me, “Zo, if you ver goink to buy pizzas, at zis prize, how many vood you buy?”

John Wilder:  “One.  That’s all I can eat.”

Professor:  “No, ze equation zays you vill buy twelve!”

I think I got a “B” in that course.

But the thinking was wrong – pizza is no substitute for beer, and people act for reasons that are generally unrelated to false mathematical quandaries on a chalkboard.  Yes, lots of beer.  No, only one pizza.

What About Human Action?

Von Mises looked at the picture differently.  His commentary was that each action taken by a human was an internally consistent, rational act that followed some pretty simple rules.  Ludwig said that there were three necessary preconditions to any Human Action.  And, as a true economist, I will do it with the aid of Pusheen Cat, the wonderful creation of Belton and Duff (LINK):

  • There has to be a vision of a better state. This created the necessary fuel for action.  You have to see a state that’s better than where you are now.  Pizza nearly always meets that goal, unless I’ve just had pizza.

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  • There has to be a path to get to the better state. Even if it involves riding a unicorn.  Or being a unicorn.

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  • There has to be belief that your action will result in the outcome, and that by becoming a unicorn you can get that pizza.

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Otherwise?  Unless you can see a path you won’t do anything.  Especially if you have don’t have a vision of a better state.

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What is satisfied?  You don’t see a better state than the one that you’re in.  Sounds almost like either you’re Self-Actualized (LINK) or you just ate pizza.  Satisfied is a particular condition where you’re okay with everything.  If you look at most advertising (and most social websites (LINK)) you’ll see that companies spend billions of dollars annually to make you dissatisfied with your life, with the big solution being that you can spend your money on their stuff, or in the case of Facebook® you won’t be satisfied unless you see the number of “Likes” that you’d like to see.

And these three conditions for Human Action can come in any order.

It can be Belief-Vision-Path, Path-Vision-Belief, etc.  When I think about some really successful people I know, they got better at their own skills (which makes the path easier) and then finally had their Vision of what they wanted to do, or even just stumbled into their Vision because they found that place they needed to be.  Other people develop the Vision (talkin’ bout you, Elon Musk (LINK)) and follow it through until they’ve created a changed world.

But, John Wilder, is there a Practical Application, or are you Naval Gazing?

But there’s a critical stopping point:  absence of any one of the conditions just stops action dead.

I recall one time I used Von Mises as a business analysis tool at work:

I was in the middle of a project that required cooperation between groups of contractors spread across the country.  The professionals I needed were spread out (literally) among the dozens of states.  And they weren’t producing.  One centralized group was producing about ten times the amount of work per person that the other groups spread all over the continent were producing.  And while being in Arizona might make you lazy, it wouldn’t make you that lazy.

I got on an airplane to go and visit the headquarters of the contractor since walking 500 miles would just take too darn long.  I interviewed the employees working on the project, and, while they understood the project vision, and saw a clear path to get to it (by working on the project) they also didn’t believe that working on my project would help them.  They believed that if they were working on my project, that they’d have to neglect their current customers.  If they neglected their current customers, when my project was over, someone else would be serving their steady customers when they finished my work.

They had belief, all right.  They believed that in helping me finish my project that they’d actually increase their chances of getting fired.  We centralized them for the month, and their management provided personal assurances that they wouldn’t get fired, and they managed to get the work done on time, I got a raise and a hot tub and new khaki pants . . . .

So, Von Mises provided a diagnostic tool for me to evaluate a real-life business situation, save my company over two million dollars, and get me several nice bonuses, since I had a real belief that failing would lead to my career being derailed.

So this Vision-Path-Belief Thing is Always Good?

No.  These three conditions also don’t require that what you’re doing be a good thing.

A heroin addict sees a better state with having heroin, sees a path to rob a house to get money to buy heroin, and believes that their action on the path will get them to that heroin.

Von Mises didn’t judge – just described the conditions required for human action.  People will be what they want – Stanford and marshmallows showed us that (LINK).

What about Marxism?

Marxism (except the Groucho kind) does judge.  It declares that people, at some point, somewhere, will overcome Von Mises’ laws of Human Action and do what’s in the best interest of the collective, regardless of their own best interest – From Each According to His Ability, To Each According To His Needs.  That might work in small groups like families, and kindergarten groups, and maybe even in bigger groups in the short run when the Vision (defeating Hitler and Tojo) is big enough, but besides that?  Not so much.

People work in their own interests.  And that’s okay.  It might be messy, but, in general, it leads to the greatest freedom for the greatest number of people, huge opportunity, and tremendous innovation as people compete to create great stuff so they can have your money.

I’m just glad that Ludwig Von Miller got his strip sack against Karl Marx and made MVP at Super Bowl® 50, all while working on the implications of voluntary economic transactions on the credit cycle!

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Author: John

Nobel-Prize Winning, MacArthur Genius Grant Near Recipient writing to you regularly about Fitness, Wealth, and Wisdom – How to be happy and how to be healthy. Oh, and rich.