Today, I am going to explain some of the main ideas of libertarian thinkers and Austrian economists. I’ve spent years reading about and studying libertarian philosophy and particularly Austrian Economics. I’ll start by defining both libertarianism and Austrian economics which work hand-in-hand and then I’ll break down key ideas for some of the main thinkers.
I’ll stick mostly with an explanation of The Law by Frederic Bastiat and Principles of Economics by Carl Menger, fundamental texts for each school thought.
Libertarianism contains a broad range of thought and ways to arrive at the same conclusions, but the commonality to all forms of libertarianism is that the central value is liberty. Generally, libertarians believe in non-violence except in the case of defense of a person’s life or property against an aggressor. And they believe that there should be no exceptions to the non-aggression principle even in the case of governments which many libertarians believe is an unjust monopoly on the use of force.
Libertarians often draw from Locke’s idea that there are three fundamental human rights— Life, liberty, and property.
Minarchists believe the sole purpose of government is to defend these unalienable rights and so the government should be as limited as possible.
Anarchists/voluntaryists believe that the government is illegitimate altogether as no one can consent to it and that all interactions should be voluntary without even the threat of the use of force.
Due to their priority on the importance of human liberty and voluntaryism, government policies libertarians favor fall in line with a hands-off approach to the economy, a non-interventionist foreign policy, open borders or private borders, and localized decision-making.
Austrian Economics Definition
Taking a look from an economic viewpoint, Austrian economists argue that a society based on respect for property rights and individual freedom is the best possible society.
The Austrian school of economics began with Carl Menger’s publishing of Principles of Economics in 1871. Menger rejected a dominant view of the day that saw economics as the analytics of data in the state’s service. He argued that economics was not merely about data. It was also about moral principles and individual choice.
More modern Austrian economists following in Menger’s footsteps included Ludwig Von Mises, Friedrich Von Hayek, Murray Rothbard, and Henry Hazlitt. All of these economists believed that voluntary association and free markets brought about the greatest possible human flourishing and criticized government intervention in the economy for interfering with human choice and creating market distortions, especially when it came to central banking.
One primary takeaway from Austrian reading is that no one has enough information to make the correct decisions for someone else, especially when there are billions of people. The best possible world is one made up of billions of individual choices daily which work together to create a natural order which is much preferable to any order someone in their limited mind would try to force on a community, or nation.
Key Ideas from Libertarian Thinkers
One of the initial pillars upon which many Libertarian ideas are founded is the work of Frederic Bastiat. Bastiat finished his work The Law in 1850, just a year before his death and it summarizes much of libertarian philosophy.
Bastiat founded much of his philosophy on the natural rights of life, liberty, and property, which were talked about previously by John Locke. He stressed that life, liberty, and property do not exist because of the law, but rather the law exists to protect them.
Of Life, Liberty, and Property he said, “These are the three basic requirements of life and the preservation of one is completely dependent on the preservation of the other two. For what are our faculties but the extension of our individuality? And what is property but an extension of our faculties.”
Furthermore, Bastiat claimed that the common force cannot be used in a manner contrary to how an individual is lawfully allowed to use force, meaning it can only be used in defense of a person’s life, liberty, or property. However, Bastiat continued, the law has not confined itself to its proper functions and has been made to actively work against its purpose and harm people in doing so.
He claimed the perversion of the law was the victim of two different forces: stupid greed and false philanthropy. It was a natural tendency of man to want to prosper by plundering what is others rather than working hard. In order to stop this natural tendency, the power of the collective force should be used to make plunder more painful and dangerous than labor.
In his 1927 work, Liberalism, Austrian economist Ludwig Von Mises claims that the very nature of government is expansionary.
“There is an inherent tendency in all governmental power to recognize no restraints on its operation and to extend the sphere of its dominion as much as possible,” Mises writes.
However, the collective force actively works against itself by becoming a plunderer, and those who are subject naturally desire to rebel.
When they rebel, Bastiat says “[T]hese plundered classes may propose one of two entirely different purposes when they attempt to attain political power: Either they may wish to stop lawful plunder, or they may wish to share in it.”
More often than not, however, they wish to share in it and create a system of universal plunder. According to Bastiat, there are three possible outcomes:
1. The few plunder the many.
2. Everybody plunders everybody.
3. Nobody plunders anybody.
The third is clearly the best option.
Again, Mises adds to Bastiat’s thought, saying “The antiliberal candidate promises special privileges. … Liberalism serves everyone, but it serves no special interest.”
Bastiat defines the law as organized justice. As such, he says “This excludes the idea of using law (force) to organize any human activity whatsoever, whether it be labor, charity, agriculture, commerce, industry, education, art, religion.”
Bastiat also clarifies that libertarians do not oppose something just because they oppose the government forcing it upon people.
He says, “Because we ask so little from the law – only justice – the socialists assume that we reject fraternity, unity, organization, and association. The socialists brand us with the name individualist. But we assure the socialists that we repudiate only forced organization, not natural organization.”
Contrary to the belief of many of his political opponents, Bastiat points out, people are not merely parts of a machine to be moved around at a politician’s will. He cites statements from Rousseau, Robespierre, and others to show that his opponents have this false idea of people that they are incapable of seeking their own improvement without the help of legislators.
“Law is the common force organized to act as an obstacle to injustice,” he says and if it exceeds this limit it will be “lost in an uncharted territory.”
He points out that no one would uprise against a government confined only to stopping injustice.
Some libertarians would go a step further to say that the government can’t exist without infringing upon the right to liberty. These libertarians have valid points, but for today we’ll stay out of it because at the very least all libertarians believe that the government should not go beyond the protection of life, liberty, and property.
Key Ideas from Austrian Economists
Within Libertarian thought, there is a group of notable thinkers known as Austrian Economists whose findings generally fall in line with libertarianism and are foundational for many modern libertarians.
The founder of the Austrian school of economics was Carl Menger. His major work, Principles of Economics, was initially published in Vienna in 1871. In it, he established a theory on what determines the value of goods and how prices are set during exchanges.
Menger rejected the use of “scientific observations merely as unrelated occurrences,” preferring a more caustic approach formulated around the laws of nature and the way people attempt to satisfy their needs in a world with scarce resources.
Menger broke things down in a very granular fashion, building his arguments upon simple truths and extrapolating further truths from these principles.
He first defined a good as anything that can be used to satisfy the desires of men, and also said that there are goods used in direct connection to satisfying these needs called goods of lower order and goods which can be transformed or used to create goods of a lower order, which he called goods of higher order. He established that if the goods are insufficient to meet all human requirements, then it will be impossible for all individuals’ needs and desires to be completely satisfied. This is recognized as the natural state of the world.
“Thus human economy and property have a joint economic origin since both have, as the ultimate reason for their existence, the fact that goods exist whose available quantities are smaller than the requirements of men,” Menger says.
Menger next established a theory of value, which comes to the fact that a good is as valuable as it is important to any given individual.
“The measure of value is entirely subjective in nature, and for this reason a good can have great value to one economizing individual, little value to another, and no value at all to a third, depending upon the differences in their requirements and available amounts,” he states.
This is contrasted with some other economic theories that attempt to measure the value of a good in the labor expended upon it or other inherent value.
Menger says, “Goods on which much labor has been expended often have no value, well others, on which little or no labor was expended, have a very high value. …The determining factor in the value of a good, then, is neither the quantity of labor or other goods necessary for its production nor the quantity necessary for reproduction, but rather the magnitude of importance of those satisfactions with respect to which we are conscious of being dependent on command of the good.”
Menger also taught that these economic laws applied universally to all goods including land and labor. Specifically, he disagreed with a common labor theory that said labor is always worth just above the minimum level of subsistence, saying “It is not always true that every labor service fetches a price, and still less always a particular price.”
He explained that there are labor services with no value to anyone and labor services that have a lot more value to certain individuals, just like with common goods.
After establishing his theory of goods and value, Menger established a theory of exchange and price. He said that men exchange in an attempt to fully satisfy their needs, breaking it down with several examples and models of possible exchanges.
His main thesis was that the price of a good will typically situate itself at the average of what it’s worth to various individuals in need of it. Modeling price formation under a monopoly, Menger showed how a monopolist could sell goods to the highest buyer and then successively lower the price until all his inventory was sold or even withhold valuable goods from the market. While Menger said that monopolies usually call forth competition, provided there are no social barriers in the way, these negative consequences of monopoly would be impossible with competition.
“This procedure is immediately rendered impossible by competition,” Menger explains, “If A1 were to attempt the stepwise exploitation of the social classes of this sort in spite of the competition of A2, and market only small initial quantities of the good, he would probably not be able to raise the price sufficiently to elicit a gain for himself, but would instead only permit his competitor to fill the gaps created by his action and to capture the intended economic gain.”
Menger also created a theory of money and how it came to be. He says that commodities come to be used as money naturally over time as people seek to exchange things that are more widely marketable even if they don’t need them for their own consumption. It may start with cattle being broadly used in exchange, but morphs as people start to accept payment in the most saleable commodity, which is in most cases gold.
Being that money evolves out of necessity into coinage to best facilitate trade, Menger says that although governments have often performed a helpful service in minting coins of standardized value, they have also overstepped their bounds and created false ideas that the nature of money is a result of government will.
Austrian Economist Friedrich Hayek argued in 1974 for a free market monetary system, saying “As a result I am more convinced than ever that if we ever again are going to have a decent money, it will not come from government: it will be issued by private enterprise, because providing the public with good money which it can trust and use can not only be an extremely profitable business; it imposes on the issuer a discipline to which the government has never been and cannot be subject. It is a business which competing enterprise can maintain only if it gives the public as good a money as anybody else.”
Menger’s followers went a step further, saying that voluntary exchanges are how the value of economic goods is calculated and how people properly plan for the future. In Liberalism, Ludwig Von Mises said, “In a socialist society, where all the means of production are owned by the community, and where, consequently, there is no market and no exchange of productive goods and services, there can also be no money prices for goods and services of higher order. Such a social system would thus, of necessity, be lacking in the means for the rational management of business enterprises, viz., economic calculation.”
Various Austrian economists’ used Menger’s theories and method of thinking about economics as the science of individual actions in speaking against government intervention in the economy on many fronts.
In his 1978 book, Economics in One Lesson, Henry Hazlitt argued against subsidies of all kinds. Hazlitt summarized economics with one lesson and even reduced that lesson to one sentence for our takeaway.
He said, “The art of economics consists in looking not merely at the immediate, but at the longer effects of any act or policy; It consists in tracing the consequences of that policy, not merely for one group but for all groups.”
Hazlitt goes on to apply this lesson to a myriad of areas, arguing mainly against the idea that the destruction or theft of one person’s property for the purpose of another can be valuable. Hazlitt says this thought is a result of not fully thinking through the consequences of the action and what the resources could have been used for had they not been redirected.
He uses Bastiat’s illustration of a criminal who throws a brick through a baker’s window. While this is initially taken for the negative it is, some in the crowd watching begin to think that maybe it was good the brick was thrown through the window, because now the baker will have to spend $250 on a new window and will create business for a glazier and without broken windows, the glazier would have less or no business. However, the baker was planning on spending the $250 on a new suit and would have provided the tailor with that business, and instead of having only a functional window and a new suit, he now only has the window.
While one would think it is easy to avoid the broken-window fallacy, Hazlitt says it is the basis of hundreds of economic fallacies, many of which he demonstrates.
Probably the most important of these is the belief that subsidies can in some way create a better market.
Sticking with the takeaway from his initial illustration, Hazlitt says, “One industry can only be expanded only by diverting to it labor, land and capital that would otherwise be employed in other industries.”
Further, he explains that “When the government makes loans or subsidies to businesses, what it does is tax successful private businesses in order to support unsuccessful private businesses.”
The same principles and truths are applied to other government interventions in the market including tariffs and public works.
Ultimately, Austrian Economics is a complete defense of voluntary association and the powers of trade to create a better world that more effectively meets human desires and promotes order.
Libertarian and Austrian thinkers have a lot more to offer, and many important names have gone unmentioned here. These thinkers- Bastiat, Menger, Mises, and Hayek amount to some of the most important thinkers, not just in libertarian thought, but in political philosophy in general. Some honorable mentions include John Locke, Lysander Spooner, and Murray Rothbard. For anyone interested in further reading I’ve linked below to the books mentioned in this post and a couple others that I believe are essential reading in libertarian political thought.
Discussed in this Post:
The Law by Frederic Bastiat
Liberalism by Ludwig Von Mises
Principles of Economics by Carl Menger
Economics in one Lesson by Henry Hazlitt
Other recommended reading:
Anatomy of the State by Murray Rothbard
No Treason: The constitution of No Authority by Lysander Spooner
End the Fed by Ron Paul
2 thoughts on “Key ideas from Libertarian thinkers and Austrian Economists”
Thank you for breaking that down ! Great thoughts and takeaways !
You’re welcome! Glad you liked it!