Perhaps one of the most important contributions of the theory of liberty in this century has been to show that the consequentialist analysis of costs and benefits is not sufficient to justify a market economy. It is not only that a large part of the economic science developed to date was based on the intellectual error of assuming a static framework of given ends and means, but also that even the much more realistic and fruitful analytical point of view of the Austrian School, based on the creative capacity of the human being and the theoretical study of the dynamic processes of social coordination is, alone, insufficient to serve as a categorical foundation for libertarian ideology. Even if we abandon the static criterion of Paretian efficiency and replace it by another more dynamic criterion based on coordination, the considerations of “efficiency” will never be enough, alone, to convince all those who put considerations related to justice before those related to the different ideas of “efficiency”. In addition, neither does recognition of the effects of social discoordination (“inefficiencies”), which arise, in the long term, from any systematic attempt to coerce the spontaneous processes of human interaction, guarantee the automatic agreement of all those whose time preference is so intense that, in spite of the negative effects of intervention in the medium- and long-term, they place a higher value on its short-term “benefits”.(3)

In short, the development of an ethical foundations for the theory of liberty is indispensable for the following reasons: a) the failure of “social engineering” and, specially, of the consequentialism derived from the neoclassical-Walrasian paradigm which has been the mainstream paradigm in economic science to date; b) because the theoretical analysis of the market processes based on the entrepreneurial capacity of the human being, even though it is much more powerful than the analysis derived from the neoclassical paradigm, is not, alone, sufficient to justify the market economy; c) because, given the situation of ineradicable ignorance of human beings and their constant capacity to create new information, they need a moral framework of principles of behavior that “automatically” indicates the guided behaviors they should follow; and d) because, from a strategic point of view, it is basically moral considerations that drive the reformist behavior of human beings, who are often willing to make significant sacrifices in order to pursue what they consider good and just from the moral point of view. It is much more difficult to ensure this behavior on the grounds of cold calculations of costs and benefits which, moreover, are of very doubtful scientific value.

 

Jesús Huerta de Soto
Professor of Political Economy
King Juan Carlos University of Madrid, Spain

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(3).These are basically the arguments employed by Murray N. Rothard (1982, 201-213) in his critical analysis of the position of Ludwig von Mises.