Key ideas: Published in 1949. "Human Action is the core text of the Austrian School [of economics] and the most rigorous and extended defense of the free economy ever written" (Robert Murphy)
HUMAN action is purposeful behavior...
The field of our science is human action, not the psychological events which result in an action. It is precisely this which distinguishes the general theory of human action, praxeology, from psychology.
The theme of psychology is the internal events that result or can result in a definite action. The theme of praxeology is action as such.
Acting man is eager to substitute a more satisfactory state of affairs for a less satisfactory. His mind imagines conditions which suit him better, and his action aims at bringing about this desired state.
The incentive that impels a man to act is always some uneasiness...
But to make a man act, uneasiness and the image of a more satisfactory state alone are not sufficient. A third condition is required: the expectation that purposeful behavior has the power to remove or at least to alleviate the felt uneasiness. In the absence of this condition no action is feasible. Man must yield to the inevitable. He must submit to destiny.
THERE are two main branches of the sciences of human action: praxeology and history.
History is the collection and systematic arrangement of all data of experience concerning human action. It deals with the concrete content of human action. [...] The subject matter of all historical sciences is the past. They cannot teach us anything which would be valid for all human actions, that is, for the future too. The study of history makes a man wise and judicious. But it does not by itself provide any knowledge and skill which could be utilized for handling concrete tasks...
Praxeology is a theoretical and systematic, not a historical, science. Its scope is human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts. Its cognition is purely formal and general without reference to the material content and the particular features of the actual case.
The starting point of praxeology is not a choice of axioms and a decision about methods of procedure, but reflection about the essence of action. There is no action in which the praxeological categories do not appear fully and perfectly...
Praxeology deals with the actions of individual men [...]. First we must realize that all actions are performed by individuals. A collective operates always through the intermediary of one or several individuals whose actions are related to the collective as the secondary source...
Praxeology asks: What happens in acting? What does it mean to say that an individual then and there, today and here, at any time and at any place, acts? What results if he chooses one thing and rejects another?
All the concepts and theorems of praxeology are implied in the category of human action. The first task is to extract and to deduce them, to expound their implications and to define the universal conditions of acting as such... Praxeology—and consequently economics too—is a deductive system. It draws its strength from the starting point of its deductions, from the category of action. No economic theorem can be considered sound that is not solidly fastened upon this foundation by an irrefutable chain of reasoning.
THE result sought by an action is called its end, goal, or aim...
Strictly speaking the end, goal, or aim of any action is always the relief from a felt uneasiness.
A means is what serves to the attainment of any end, goal, or aim.
Means are not in the given universe; in this universe there exist only things. A thing becomes a means when human reason plans to employ it for the attainment of some end and human action really employs it for this purpose.
It is customary nowadays to speak of “social engineering.” Like planning, this term is a synonym for dictatorship and totalitarian tyranny. The idea is to treat human beings in the same way in which the engineer treats the stuff out of which he builds his bridges, roads, and machines. The social engineer's will is to be substituted for the will of the various people he plans to use for the construction of his Utopia.
Mankind is to be divided into two classes: the almighty dictator, on the one hand, and the underlings who are to be reduced to the status of mere pawns in his plans and cogs in his machinery, on the other.
If this were feasible, then of course the social engineer would not have to bother about understanding other people's actions. He would be free to deal with them as technology deals with lumber and iron.
Acting man values things as means for the removal of his uneasiness.
Because every thing can only produce a limited effect, some things are considered scarce and treated as means.
Utility means in this context simply: causal relevance for the removal of felt uneasiness...
For praxeology the term utility is tantamount to importance attached to a thing on account of the belief that it can remove uneasiness.
The valuation of the total stock of two things can differ from the valuation of parts of these stocks.
An isolated man owning seven cows and seven horses may value one horse higher than one cow and may, when faced with the alternative, prefer to give up one cow rather than one horse. But at the same time the same man, when faced with the alternative of choosing between his whole supply of horses and his whole supply of cows, may prefer to keep the cows and to give up the horses.
As the owner of 95 logs he would be prepared to forsake the raincoat in order to get 5 logs more. As the owner of 10 logs he would not abandon the raincoat even for 10 logs. A man whose savings amount to $100 may not be willing to carry out some work for a remuneration of $200. But if his savings were $2,000 and he were extremely anxious to acquire an indivisible good which cannot be bought for less than $2,100, he would be ready to perform this work for $100.
All this is in perfect agreement with the rightly formulated law of marginal utility according to which value depends on the utility of the services expected. There is no question of any such thing as a law of increasing utility.
Every individual has only a limited quantity of energy to expend, and every unit of labor can only bring about a limited effect. Otherwise human labor would be available in abundance; it would not be scarce and it would not be considered as a means for the removal of uneasiness and economized as such.
... we must view leisure as any other economic good from the aspect of marginal utility. We must conclude that the first unit of leisurem satisfies a desire more urgently felt than the second one, the second one a more urgent desire than the third one, and so on.
Wages are not paid for labor expended, but for the achievements of labor, which differ widely in quality and quantity.
The production of each particular product requires the employment of workers able to perform the particular kind of labor concerned.
It is absurd to justify the failure to consider this point by reference to the alleged fact that the main demand for and supply of labor concerns unskilled common labor which every healthy man is able to perform, and that skilled labor, the labor of people with particular inborn faculties and special training, is by and large an exception...
Work which various people are able to perform is different because men are born unequal and because the skill and experience they acquire in the course of their lives differentiate their capacities still more.
Freedom and liberty always refer to interhuman relations. A man is free as far as he can live and get on without being at the mercy of arbitrary decisions on the part of other people.[...]
Liberty and freedom are the conditions of man within a contractual society.
There would be no need to dwell upon this obvious fact if the champions of the abolition of liberty had not purposely brought about a semantic confusion.
They realized that it was hopeless for them to fight openly and sincerely for restraint and servitude. The notions liberty and freedom had such prestige that no propaganda could shake their popularity. Since time immemorial in the realm of Western civilization liberty has been considered as the most precious good. What gave to the West its eminence was precisely its concern about liberty, a social ideal foreign to the oriental peoples.
Then social philosophy of the Occident is essentially a philosophy of freedom. The main content of the history of Europe and the communities founded by European emigrants and their descendants in other parts of the world was the struggle for liberty. “Rugged” individualism is the signature of our civilization. No open attack upon the freedom of the individual had any prospect of success.
Thus the advocates of totalitarianism chose other tactics. They reversed the meaning of words. They call true or genuine liberty the condition of the individuals under a system in which they have no right other than to obey orders.
They call themselves true liberals because they strive after such a social order. They call democracy the Russian methods of dictatorial government. They call the labor union methods of violence and coercion “industrial democracy.” They call freedom of the press a state of affairs in which only the government is free to publish books and newspapers.
They define liberty as the opportunity to do the “right” things, and, of course, they arrogate to themselves the determination of what is right and what is not. In their eyes government omnipotence means full liberty. To free the police power from all restraints is the true meaning of their struggle for freedom.
The market economy, say these self-styled liberals, grants liberty only to a parasitic class of exploiters, the bourgeoisie. These scoundrels enjoy the freedom to enslave the masses
"The gain of one man is the damage of another; no man profits but by the loss of others". This dogma was already advanced by certain ancient authors. Among modern writers Montaigne was the first to restate it; we may fairly call it the Montaigne Dogma.
[I]t is entirely wrong with regard to any kind of entrepreneurial profit or loss.
What produces a man's profit in the course of affairs within an unhampered market society is not his fellow citizen's plight and distress, but the fact that he alleviates or entirely removes what causes his fellow citizen's feeling of uneasiness.
What hurts the sick is the plague, not the physician who treats the disease. The doctor's gain is not an outcome of the epidemics, but of the aid he gives to those affected...
It is certainly better for a sick man to be cured by a doctor for a high fee than to lack medical assistance. If it were otherwise, he would not consult the physician...
The statement that one man's boon is the other man's damage is valid with regard to robbery, war, and booty. The robber's plunder is damage of the despoiled victim. But war and commerce are two different things.
The mathematical economist, blinded by the prepossession that economics must be constructed according to the pattern of Newtonian mechanics and is open to treatment by mathematical methods, misconstrues entirely the subject matter of his investigations.
He no longer deals with human action but with a soulless mechanism mysteriously actuated by forces not open to further analysis.
But if the government finances its spending program by inflation— by an increase in the quantity of money and by credit expansion—it causes a general cash-induced rise in the prices of all commodities and services. If in the course of such an inflation the rise in wage rates sufficiently lags behind the rise in the prices of commodities, institutional unemployment may shrink or disappear altogether.
But what makes it shrink or disappear is precisely the fact that such an outcome is tantamount to a drop in real wage rates.
Lord Keynes considered credit expansion an efficient method for abolition of unemployment; he believed that “gradual and automatic lowering of real wages as a result of rising prices” would not be so strongly resisted by labor as any attempt to lower money wage rates.
However, the success of such a cunning plan would require an unlikely degree of ignorance and stupidity on the part of the wage earners. As long as workers believe that minimum wage rates benefit them, they will not let themselves be cheated by such clever tricks.
Cognizance of these facts provides a key for a correct appraisal of the role which Lord Keynes's doctrines played in the years between the first and second World Wars.
Keynes did not add any new idea to the body of inflationist fallacies, a thousand times refuted by economists. His teachings were even more contradictory and inconsistent than those of his predecessors who, like Silvio Gesell, were dismissed as monetary cranks.
He merely knew how to cloak the plea for inflation and credit expansion in the sophisticated terminology of mathematical economics.
The interventionist writers were at a loss to advance plausible arguments in favor of the policy of reckless spending; they simply could not find a case against the economic theorem concerning institutional unemployment. In this juncture they greeted the “Keynesian Revolution” with the verses of Wordsworth: “Bliss was it in that dawn to be alive, but to be young was very heaven.”
It was, however, a short-run heaven only. We may admit that for the British and American governments in the ‘thirties no way was left other than that of currency devaluation, inflation and credit expansion, unbalanced budgets, and deficit spending. Governments cannot free themselves from the pressure of public opinion. They cannot rebel against the preponderance of generally accepted ideologies, however fallacious.
But this does not excuse the officeholders who could resign rather than carry out policies disastrous for the country. Still less does it excuse authors who tried to provide a would-be scientific justification for the crudest of all popular fallacies, viz., inflationism.
The fundamental error of the interventionists consists in the fact that they ignore the shortage of capital goods. In their eyes the depression is merely caused by a mysterious lack of the people's propensity both to consume and to invest.
While the only real problem is to produce more and to consume less in order to increase the stock of capital goods available, the interventionists want to increase both consumption and investment.
They want the government to embark upon projects which are unprofitable precisely because the factors of production needed for their execution must be withdrawn from other lines of employment in which they would fulfill wants the satisfaction of which the consumers consider more urgent.
They do not realize that such public works must considerably intensify the real evil, the shortage of capital goods.
The masses, the hosts of common men, do not conceive any ideas, sound or unsound. They only choose between the ideologies developed by the intellectual leaders of mankind. But their choice is final and determines the course of events. If they prefer bad doctrines, nothing can prevent disaster...
They [old liberals] blithely assumed that what is reasonable will carry on merely on account of its reasonableness. They never gave a thought to the possibility that public opinion could favor spurious ideologies whose realization would harm welfare and well-being and disintegrate social cooperation....
Capitalism gave the world what it needed, a higher standard of living for a steadily increasing number of people. But the liberals, the pioneers and supporters of capitalism, overlooked one essential point.
A social system, however beneficial, cannot work if it is not supported by public opinion. They did not anticipate the success of the anticapitalistic propaganda.
The development of a profession of economists is an offshoot of interventionism.
The professional economist is the specialist who is instrumental in designing various measures of government interference with business. He is an expert in the field of economic legislation, which today invariably aims at hindering the operation of the unhampered market economy...
There can be no doubt that a class of men who are so preponderant includes extremely talented individuals, even the most eminent men of our age. But the philosophy that guides their activities narrows their horizon. By virtue of their connection with definite parties and pressure groups, eager to acquire special privileges, they become one-sided.
They shut their eyes to the remoter consequences of the policies they are advocating. With them nothing counts but the short-run concerns of the group they are serving.
That Which Is Seen, and That Which Is Not Seen
The ultimate aim of their efforts is to make their clients prosper at the expense of other people. They are intent upon convincing themselves that the fate of mankind coincides with the short-run interests of their group. They try to sell this idea to the public.