Liberal Democracies and Authoritarian Regimes: The Case for Law Enforcement. (Part 3 of 12)

This reference to the distinction of values ​​between the short and the long term also refers to the theory of capital and interest that Eugen v. Böhm-Bawerk and Austrian and Swedish economists who followed him in such developments, such as Ludwig v. Mises, Knut Wicksell, the already named Friedrich Hayek, Ludwig Lachmann, or the British economist John Hicks. Current economic science recognizes the element of time preference in the interest rate, but emphasizes the predominance of the value of money as its main component. In contrast to this, the Austrian and Swedish economists referred to had emphasized a characteristic of homo economicus that brought them closer to the behavioral presuppositions of David Hume: agents prefer the same good in the present than in the future, or, expressed in other terms, for an individual to agree to defer the use of a present good towards a future time, such abstention from consumption must be compensated by an increase in the future value of such good. Thus, if a person lends a certain sum of money and therefore incurs an opportunity cost by abstaining from its consumption, it is because he expects to receive compensatory interest on his waiting in the future. Of course, Böhm-Bawerk’s theory of interest received its timely evaluation by numerous economists, pointing out its weaknesses and subsequent developments by his disciples met with mixed luck – to the point that, for example, Friedrich Hayek declared that he had never undertaken the task of writing the second part of his work The Pure Theory of Capital attentive to the extreme complexity of the theory of interest that inspired him. However, re-expressing David Hume’s legal-political theory in terms of the Austrian and Swedish theory of capital represents an intellectual exercise with a significant heuristic function.

In “natural” terms, an individual will “spontaneously” fulfill a promise if he calculates that the present value of breaching it is less than the future loss of credit with respect to his creditor or the community with which he habitually – a term proper to the Humean empiricism – it interacts. This is consistent with Hume’s own theory of empathy, according to which each individual can understand how his neighbor would feel and judge a certain situation, better if he is someone known than a complete stranger. Thus, the tendency to cheat is less corroborated with those who have the expectation of interacting more than those in whom the interaction will occur in a single play – as illustrated by the best known game theory.

We can thus see how, in the absence of the incentives provided by the coercive powers on the part of the state, the natural tendency to keep promises is better corroborated among acquaintances, with continuous interaction over time, than with strangers with what will have to be done. interact only once. This is what led David Hume, likewise, to reject any theory of the social contract – since, by definition, in the supposed state of nature there would be no one to guarantee its fulfillment – and to consider that, in a primitive stage of the individual and society, the primordial political unit would have to be the family – in fact, the very etymological meaning of this term conveys a “micro-political” connotation.

It will be later Adam Smith who will extend the foundation of a human interaction order beyond the nearby nuclei through his concept of “Great Society,” in which unknown subjects are capable of spontaneously coordinating their respective activities through the signals transmitted by the system. of prices, which indicates the relative modifications in the terms of exchange of complementary and substitute goods, contemporary or deferred in time. However, neither did Adam Smith deny a fundamental function that some mechanism must fulfill in order to emerge and sustain such an extended cooperation order: the application of the norms of peaceful coexistence, which guarantee stability in the possession of goods, the transfer by consent of said possession and the fulfillment of the contracts entered into for the purpose of perfecting said transfers.

Consequently, the problems of law enforcement, which concern the degree of effective compliance with the legal norms that condition human conduct, must represent a major chapter of the political philosophy and theory that characterizes legal institutions and policies as true incentive systems.

[Editor’s note: this is Part 3 in a 12-part essay; you can read Part 2 here or read the essay in its entirety here.]


  1. Public choice and market failure: Jeffrey Friedman on Nancy MacLean Nick Cowen, NOL
  2. The Homo Economicus is “The Body” of the Agent Federico Sosa Valle, NOL
  3. The Left’s Gospel has no Grace Bruno Gonçalves Rosi, NOL
  4. Computational Economics is the Right Perspective Rick Weber, NOL


  1. Understanding Homo Economicus in Deeper Terms Garreth Bloor, Law & Liberty
  2. The Homo Economicus is “The Body” of the Agent Federico Sosa Valle, NOL
  3. Worker ownership: threat or promise? Chris Dillow, Stumbling & Mumbling
  4. Flower Fires Setsuko Adachi, Berfrois

My favorite posts at NOL this year

Last week I promised y’all a post on my favorite reads at NOL this year. I almost always keep my promises, so below is a long-ish list of essays I really enjoyed reading and learning from this year.

My absolute favorite essay of 2016 at NOL was Barry Stocker’s analysis of the attempted coup in Turkey. Dr Stocker has spent a quarter of a century in the Turkish-speaking world and all of his acquired wisdom of the region is on display in the piece. Barry didn’t post much here this year, but I am hoping that, given the geopolitical situation in his neck of the woods (Dr Stocker teaches political philosophy at Istanbul Tech), he’ll be able to provide much more insight into the challenges the region will face in 2017.

Jacques, who has become sidetracked ever since Donald Trump became the GOP nominee, had an excellent post titled “A Muslim Woman and the Sea” that everyone should read. I don’t agree with it, but the quality of his writing almost demands that you read through the entire piece. In it is the peaceful nostalgia for both youth and French Algeria, the almost careless way he describes his surroundings, and the slow, deliberate manner in how he attacks his enemies. It is all on display for you, his audience, to devour at your leisure. Dr Delacroix is a world-class storyteller.

Mark Koyama’s piece on Jewish communities in premodern Europe garnered a lot of praise, but I found his post on medieval China to be much more fascinating. In the post, Dr Koyama summed up his recent paper (co-authored with UCLA Anderson’s Melanie Meng Xue) on literary inquisitions during the Qing era (1644-1912). What they did was tally up the number of times the state dragged scholars and artists to court in order to accuse them of delegitimizing the Qing government. This had the unfortunate (but predictable) effect of discouraging discussion and debate about society in the public sphere, which stifled dissent and emboldened autocratic impulses.

Chhay Lin had a number of great posts here, some of which were picked up by major outlets like RealClearWorld and 3 Quarks Daily, and Notes On Liberty is lucky to have such a cool cat blogging here. My favorite post of his was the one he did on his childhood in a Cambodian refugee camp along the Khmer-Thai border. What an inspiring story! I hope there are more to come in 2017. (Chhay Lin, by the way, splits his time at NOL with SteemIt, so be sure to check him out there).

Zak Woodman had lots of good posts in his debut year (including NOL‘s most-read article), but the two I enjoyed most were his thoughts on empathy in cultural discourse and his Hayekian take on safe spaces. Both pieces took a libertarian line on the freedom of speech, but Mr Woodman’s careful articles, which are as much about being true to the original meaning of some of the 20th century’s best thinkers as they are about libertarianism, suggests that he has a bright future ahead of him as one of the movement’s deeper thinkers (he’s an undergraduate at UM-Ann Arbor). I look forward to his thoughts in 2017.

Bruno Gonçalves Rosi burst on to NOL‘s scene this year with a number of posts (in both English and Brazilian Portuguese). His blistering critiques of socialism were fundamental and – to me, at least – reminiscent of the debates between libertarians and statists here in the United States in the 1970s and 1980s. My favorite of Dr Rosi’s 2016 posts, however, was his reflection of the 2016 Rio Paralympics that took place in the late summer (at least it was late summer here in Texas). Bruno brilliantly applied the Games to the famous argument about inequality between 20th century American philosophers Robert Nozick and John Rawls. I hope the piece was but a glimpse of what’s to come from Dr Rosi, who also has a keen interest in history and international relations.

Lode Cossaer is probably busy with his very intriguing dissertation (“the institutional implications of the tension between universal individual rights and group self governance”), but he did manage to find some time to dip his feet into the blogging pool with a few insightful posts. My favorite was his explanation of Donald Trump’s Carrier move, which was blasted from all sides of the political spectrum (including libertarians) for being a prime example of “crony capitalism.” Cossaer, in his own delightfully contrarian manner, pointed out that there is a trade-off between the rule of law and lower taxes. This trade-off might not be pretty, but it exists regardless of how you feel about it. Lode, in my opinion, is one of very few thinkers out there who can walk the tight-rope between Rothbardian libertarianism and plain ole’ classical liberalism, and he does so ruthlessly and efficiently. I hope we can get more contrarianism, and more insight into Cossaer’s dissertation, in 2017.

Vincent has been on a roll this month, and I simply cannot choose any single one of his 2016 posts for recognition. His pêle-mêle comments on the debate between historians and economists over slavery is well-worth reading, especially his insights into how French Canadians are portrayed by economic historians in graduate school, as are his thoughts on the exclusion of Native Americans from data concerning living standards in the past. These posts highlight – better than his more famous posts – the fact that economists, along with political philosophers and anthropologists, are doing way better historical work than are traditional historians. Dr Geloso’s post on fake news as political entrepreneurship did a wonderful job, in my eyes, of highlighting his sheer passion for history and his remarkable ability to turn seemingly boring topics (like “political entrepreneurship”) into hard talking points for today’s relevant policy debates.

Federico is still practicing corporate law in Argentina, so every article he writes at NOL is done so in his free time. For that I am deeply grateful. His early August question, “What sort of meritocracy would a libertarian endorse, if he had to?” was intricately stitched together and exemplifies Federico’s prowess as one of the world’s most novel scholars of Hayekian thought. I also enjoyed, immensely, a careful, probing account of human psychology and our ability to act in this short but rewarding post on homo economicus. I look forward to a 2017 filled with Hayekian insights and critical accounts of social, political, and economic life in Buenos Aires.

Rick spent the year at NOL blogging about whatever the hell he wanted, and we were all rewarded for it. Dr Weber is obviously emerging as important conduit for explaining how “politics” works in democratic societies, and perhaps more importantly how to be a better, happier person within the American system. I hope Rick continues to explore federalism though a public choice lens, but I also suspect, given Dr Weber’s topics of choice this year, that Elinor Ostrom would have been interested in what he has to say as well. 2017 awaits! Here is Rick breaking down Trump’s victory over Clinton. You won’t get a finer explanation for why it happened anywhere else. Oh, and how about a libertarian argument for an FDA?

Michelangelo, who is now a PhD candidate in political science at UC Riverside, won my admiration for his brave post on safe spaces and the election of Donald Trump. While 2017 may be composed of uncertainties, one thing that is known is that Trump will be president of the United States. We need to be wary and vocal (just as we were with Bush II and Obama).  Michelangelo was in top form in his piece “…Why I Don’t Trust the Police,” so much so that it stuck with me throughout the year. It is libertarianism at its finest.

William Rein, a sophomore (“second-year”) at Chico State, has been impressive throughout the year. His thoughts do very well traffic-wise (literally thousands of people read his posts), and it’s all well-deserved, but I thought one of his better pieces was one that was relatively slept on: “Gogol Bordello & Multiculturalism.” Mr Rein points out that Political Correctness is destroying fun, and the election of Donald Trump is merely the latest cultural challenge to PC’s subtle tyranny. William weighed in on the safe spaces concept as well and, together with Zak’s and Michelangelo’s thoughts, a coherent libertarian rationale has formed in response to this cultural phenomenon. If you want to know which clouds young libertarian heads are in, NOL is a great place to be.

Edwin initiated the best debate of the year here at NOL with his post on classical liberalism, cosmopolitanism, and nationalism. Barry replied (in my second-favorite post of his for 2016), and Dr van de Haar responded with a third volley: “Classical Liberalism and the Nation-State.” At the heart of their disagreement was (is?) the concept of sovereignty, and just how much the European Union should have relative to the countries comprising the confederation. Dr Stocker concluded the debate (for 2016, anyway) with a final post once again asserting that Brexit is bad for liberty. For Edwin and Barry, sovereignty and international cooperation are fundamental issues in Europe that are not going away anytime soon. NOL is lucky to have their voices and, like Dr Stocker, I hope Dr van de Haar will be able to provide us with many more fascinating and sometimes contrarian insights in 2017.

Lucas Freire wasn’t able to post much here this year (he is doing postdoc work in South Africa), but his post on economics in the ancient world is well worth reading if you are at all interested in methodology and the social sciences. Dr Freire has continually expressed interest in blogging at NOL, and I am almost certain that 2017 will be his breakout year.

Those are my picks and I’m sticking to ’em (with apologies to Rick). Notewriters are free to publish their own lists, of course, and if readers would like to add their own in the ‘comments’ I’d be honored (you can always email me, too). The post I most enjoyed writing this year, by the way (thanks for asking…), was a snarky one questioning the difference between Saudi Arabia and Islamic State. Thanks for everything.

The Homo Economicus is “The Body” of the Agent

The model of the decision-making agent known as homo economicus is a trivial truth, but not a misconception. All agents are supposed to maximize the utility of their resources – that is true in every geography and in every age. But because it is a tautology, it is a mistake to give to the deductions brought about from this sole model the value of a description of a particular reality. As Wittgenstein had pointed out in his Tractatus, the tautologies do not convey any relevant information of any particular world, but of every possible world. The error consists on qualifying a common note to every possible situation as a distinctive characteristic of a particular set of events. To say that every agent acts to maximize his utility is true, but to state that this observation tells us something of a particular world that distinguishes it from every other possible world is the most extended misconception about the use of the model of the rational agent.

In another post, I mentioned the importance of having a body in order to develop a personal identity. In the same line as Hayek’s Sensory Order, the body enables us with the most elementary system of classification that makes our perceptions possible, or – to express it in a more radical empiricist strain – that brings the experience to happen. Upon this system of classification will sediment more abstract layers, or degrees, of systems of classification. Our knowledge is expressed at a level of abstraction that our mind can handle, whereas the law, the market, and the language are examples of phenomena that might achieve increasing degrees of complexity that mark blurred boundaries to our knowledge. The former are named “simple phenomena” and the latter “complex phenomena” in the Hayekian terminology. Our personal identity is continuously developing on that stratus set between the simple and the complex phenomena.

In this sense, we need the conclusions brought about by the rational agent model as the stem upon which lay further strata of increasingly complex analysis. Paradoxically, the more particular the social reality we seek to describe, the more abstract has to be our layer of analysis. Notwithstanding, it would be impossible to us to conceive any image of the social experience if we lack of the fixed point of the rational agent model.

Max Weber’s ideal types could be interpreted as instances of social arrangements based on the rational agent model, which incorporate particular – and abstract – characteristics depending on the historical circumstances under scrutiny. At the bottom of both adventurous capitalism and traditional society, beneath successive strata of different social and institutional designs, we will find an agent who maximizes utility. Perhaps that is why the term “rational capitalism” is so controversial. If rationality concerns subjective reason, then rational capitalism encloses a circular definition.

In this line of ideas, I hope this quick reflection might shed some light upon the old discussion about instrumental rationality and substantive reason. Since the instrumental rationality is common to every possible world, we might look for the substantive reason that gives order to this actual world in the increasing layers of complexity that reach degrees of abstraction that are superior to the subjective reason. Although that does not mean that we will ever be able to find it.

Where did Homo Economicus come from?

Over on my Facebook page, I posted a short criticism of both neoclassical and behavioral economic scholarship on rational choice (drawing from a paper I’m working on exploring that topic). Stated a bit polemically,  though homo economicus has largely been dead in neoclassical theory, his spirit still haunts the work of most modern neoclassical scholars. Likewise, though behavioral economists are trying to dig the grave and put the final nails in the coffin of homo economicus, their nightmares are still plagued with the anxieties of his memory.

This led a former colleague from Hillsdale to ask me where I thought homo economicus came from historically. I wrote the following in response (lightly edited for this post):

It could be argued, in a sense, that the protestant Christian aim to complete moral purity and the Enlightenment aim to make man perfect in knowledge in morality (as embodied in Franklin’s virtue ethics) helped give rise to a culture that would be primed for such a model. Within economics, historically it comes from Bentham’s utilitarianism and Jevon’s mathematical extrapolations from Bentham’s psychology. However, I’d say this comes from a deeper “Cartesian anxiety” in Bernstein’s use of the term to make economic a big-T True, capital-C Certain, capital-S Science just like physics (which Jevon’s himself stated was an aim of his work,[1] and has preoccupied economists since the days of JS Mill). If economic science cannot be said to be completely positive and “scientific” like the natural sciences with absolutely falsifiable propositions and an algorithmic means of theory-choice, it is feared, it must be written off as a pseudo-scientific waste of time or else ideology to justify capitalism. If economics cannot make certain claims to knowledge, it must be solipsist and relativist and, again, be another form of pseudo-science or ideology. If economic models cannot reach definitive mathematical results, then they must be relativistic and a waste of time. This is just another example of the extreme Cartesian/Katian/Platonic (in Rorty’s use of the term) either/or: objectivity OR relativism, science OR nonscience, determinate mathematical solutions OR ideological emotional bickering. Homo economicus was erected as a means to be an epistemic foundation to solve all these anxieties and either/ors.

Of course, as any good Deweyan, I think all these either/ors are nonsense. Their understanding of science, as revealed through the so-called “growth of knowledge” literature in postempiricist philosophy of science (ie., the work of Thomas Kuhn, Lakotos, Karl Popper, Paul Feyerabend, Michael Polanyi, Richard Bernstein, Richard Rorty, etc.) has shown that this positivist conception of science, that is science consists of algorithmic theory choice selected based off correspondence with theory-free, brute “facts” of the “external world,” is woefully inaccurate. Dialogical Aristotelian practical reasoning in the community of scientists plays just as much of a role in formulating a scientific consensus as empirical verification. This does not undermine science’s claims to objectivity or rationality, in fact it puts such claims in more epistemically tenable terms.

Further, the desire to make the social sciences just another extension of the natural science, as Hayek shows in the Counterrevolution of Science, and as even positivists like Milton Freidman argue, is a completely misleading urge that has led to some of the worst follies in modern social theory. Obviously, I cheer the fact that “homo economicus is dead, and we have killed him,” but now that we’ve “out-rationalized the rationalizer of all rationalizers,” we must try to re-evaluate our economic theories and methods to, as Bernstein or Dewey would put it, “reconstruct” our economic science.

In short, immenatizing the eschaton in epistemology and philosophy of science created homo economicus.

For the record, you don’t have to be a radical scientific anti-realist like Feyerabend or Rorty to agree with my analysis here.[2] I myself wax more towards Quine than Rorty in scientific matters. However, the main point of philosophy of science since positivism is the exact type of foundationalist epistemology undergirding modern positivist methodology in the mainstream of the economics profession, and the concept of rationality that is used to buttress it, is a naive view of science, natural or social.

Notably, this critique is largely unrelated to much of the Austrian school. Mises’ own conception of rationality is mostly unrelated to homo economicus as he understands rationality to be purposive action, emphasizing that economists first understand the subjective meaning from the point of view of the economic actor him/herself before declaring any action “irrational.”[3] [4]

What are your thoughts on this? Are neoclassical and behavioral economics both still way too influenced by the spirit of homo economicus, or am I off the mark? Is my analysis of the historical conditions that led to the rise of homo economicus right? Please, discuss in the comments.

[1] Consider this quote from Jevon’s magnum opus Theory of Political Economy “Economics, if it is to be a science at all, must be a mathematical science.”

[2] In fact, I doubt anybody mentioned is really a scientific anti-realist, I agree with Bernstein that Feyerabend is best read as a satirist of the Cartesian anxiety and extreme either/or of relativism and objectivism in philosophy of science and think Rorty’s views are more complex than simple scientific anti-realism, but that’s an unrelated point.

[3] Of course, any critique of epistemic foundationalism would apply to Mises, especially his apriorism; after all, Mises did write a book called “Ultimate Foundations of the Social Sciences” and the Cartesian anxiety is strong with him, especially in his later works. Notably, none of this applies to most of Mises’ students, especially Schutz, Machlup, and Hayek.

[4] For a more detailed discussion of Mises and the Austrians on rationality, see my blog post here or this paper by Mario Rizzo. For a more general discussion of the insights of the type of philosophy of science I’m discussing, see Chapter 2 of Richard Bernstein’s excellent 1983 book Beyond Objectivism and Relativism: Science, Hermeneutics, and Praxis.